economy
New Home Sales Avg. Fastest Sales Pace Since 2008 but China’s Economy and Interest Rates A Concern!
We certainly need no lengthy explanations concerning what’s doing in the new home market. In July new single-family home sales headed up 5.3%, to a 507,000 unit annual rate, and are now up 25.8% over a year ago. These sales cooled off in June, but looking at the past year, new home sales averaged their fastest sales pace since 2008. Consequently, inventories gained by 4,000, yet the months’ supply dropped from 5.3 in June to 5.2 in July. That faster selling pace gives builders a nice opportunity to step up construction activity and inventories. Remember, new home sales are still well below historic levels.
Meanwhile, the Case-Shiller Home Price index edged up 1.0% in June and now stands 4.5% ahead of a year ago. Prices are up in all 20 major metro areas the index tracks. The Federal Housing Finance Agency (FHFA) index of prices for homes financed with conforming mortgages went up 0.2% in June and registered a 4.5% hike over a year ago. For those questioning existing home sales, what Pending Home Sales did in July provided a nice short answer. This measure of contracts signed on existing homes went up 0.5% for the month, following its 1.7% dip in June. That dip means existing home sales may slip in August, but they gained almost 10% the three prior months.
Check this out. The Dow Jones Industrial Average drops almost 600 points Monday, then sinks another 34 Tuesday. Wednesday it shoots UP over 600 points, followed by an almost 400 point hike on Thursday. Friday ends flat after all the tumult, leaving a modest weekly gain for the Dow and the broadly based S&P 500, but a bigger boost for the tech-heavy Nasdaq. What caused this whirlwind of volatility? Analysts put it to investor uncertainty about China’s troubled economy, plus worries over when the Fed might start raising interest rates. The central bankers met at Jackson Hole, but comments from officials were hard to interpret.
U.S. economic data painted the now familiar picture of a plodding recovery. Positive moves included the housing reports covered above and a 2% gain in Durable Goods Orders for July. The best news was the second estimate of GDP for the second quarter, which had the economy growing at a 3.7% annual rate. Personal Income and Spending were up in July, both good reads, and Core PCE Prices went up just 0.1%. This is bad news to the Fed, which wants to see higher inflation before raising rates. University of Michigan Consumer Sentiment slipped in July, but this contrasted sharply with the Consumer Confidence Index, which hit a 6-month high in August!
The week ended with the Dow UP 1.1%, to 16643; the S&P 500 UP 0.9%, to 1989; and the Nasdaq UP 2.6%, to 4828.
Bonds had a mixed week, with investors buying because of worries over China and selling over concerns a Fed rate hike will come soon. The 30YR FNMA 4.0% bond we watch finished the week down .05, at $106.11. National average fixed mortgage rates dipped to their lowest levels since May in Freddie Mac’s Primary Mortgage Market Survey for the week ending August 27. This was put to Chinese financial market instability. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.
DID YOU KNOW?… A recent survey reports that out of 75.3 million millennials, age 18 to 29, 93% want to own a home in the near future.
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Aug 31 – Sep 4
| Date | Time (ET) | Release | For | Consensus | Prior | Impact |
| M Aug 31 |
09:45 | Chicago PMI | Aug | 54.7 | 54.7 | HIGH |
| Tu Sep 1 |
10:00 | ISM Index | Aug | 52.6 | 52.7 | HIGH |
| W Sep 2 |
08:30 | Productivity-Rev. | Q2 | 2.7% | 1.3% | Moderate |
| W Sep 2 |
08:30 | Unit Labor Costs-Rev. | Q2 | -0.8% | 0.5% | Moderate |
| W Sep 2 |
10:30 | Crude Inventories | 8/29 | NA | -5.452M | Moderate |
| W Sep 2 |
14:00 | Fed’s Beige Book | Sep | NA | NA | Moderate |
| Th Sep 3 |
08:30 | Initial Unemployment Claims | 8/29 | 273K | 271K | Moderate |
| Th Sep 3 |
08:30 | Continuing Unemployment Claims | 8/25 | 2.261M | 2.269M | Moderate |
| Th Sep 3 |
08:30 | Trade Balance | Jul | -$43.1B | -$43.8B | Moderate |
| Th Sep 3 |
10:00 | ISM Services | Aug | 58.4 | 60.3 | Moderate |
| F Sep 4 |
08:30 | Average Workweek | Aug | 34.6 | 34.6 | HIGH |
| F Sep 4 |
08:30 | Hourly Earnings | Aug | 0.2% | 0.2% | HIGH |
| F Sep 4 |
08:30 | Nonfarm Payrolls | Aug | 217K | 215K | HIGH |
| F Sep 4 |
08:30 | Unemployment Rate | Aug | 5.2% | 5.3% | HIGH |
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months… A growing minority of economists see a rate hike in September or October, while a slim majority expect it in December. Note: In the lower chart, a 28% probability of change is a 72% certainty the rate will stay the same.
How Interest Rates Affect Your Purchase Price
Homeowners may want to worry more getting a good solid rate, and worry less about getting the cheapest deal possible. @realtorcouture
How Interest Rates Affect Your Purchase Price – When considering buying a home, it’s important that buyers understand how interest rates affect the purchase price. Interest rates play a large role in ultimately determining how much a buyer will pay for a home; it’s not just the sticker price. Read on for more information on how interest rates affect the price of a home from Realtor.com, Investopedia, and Home Guides.
Fixed Rates and Bond Interest
Most fixed mortgage rates are heavily based on the same yields that are tied to 10-Year U.S. Treasury Bonds. Homebuyers can determine current interest rate changes for 30 year fixed mortgage rates by examining yields for 10-Year bonds in the market.
The important thing to remember is that if bond yields increase, so do mortgage rates and vice versa.
The Fed
The U.S. Federal Reserve sets a rate at which it lends money…
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Home Sales Skyrocketing!!
Largest increase in home sales in 5 years. Call me today (847-471-1434) to see how you can be apart of this. The game is changing!
Yesterday, the National Association of Realtors (NAR) released their Existing Home Sales Report. The numbers shocked many analysts as they revealed a 10.4% increaseover the same month last year.
This is the highest number of sales since September 2013. Sales have increased year-over-year for six consecutive months and the 10.4% increase is the highest annual increase since August 2013. March’s sales increase was the largest monthly increase since December 2010.
Lawrence Yun, NAR’s chief economist, explained:
“After a quiet start to the year, sales activity picked up greatly throughout the country in March. The combination of low interest rates and the ongoing stability in the job market is improving buyer confidence and finally releasing some of the sizable pent-up demand that accumulated in recent years.”
Here is a graph showing home sales so far this year:
An increase in sales occurred in every region of the country even…
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Good News for ‘Typical’ Home Buyers
(Above is a map detailing the investment purchases in 2014 by region.)
In a speech delivered earlier this year, Secretary for HUD Julián Castro, called 2015 “A Year of Housing Opportunity”. A recent report by The National Association of Realtors (NAR) revealed that investment home sales decreased 7.4% in 2014 to an estimated 1.02 million.
What does this mean for the ‘typical’ homebuyer?
Lawrence Yun, NAR’s Chief Economist gave some insight:
“Despite strong rental demand in many markets, investment property sales have declined four consecutive years to their lowest share since 2010 as rising home prices and fewer distressed properties coming onto the market have further reduced the number of bargains available to turn into profitable rentals.”
This is great news for the housing market. If fewer properties are being sold to investors, they are instead being sold to American families who are entering the housing market in droves.
Details…
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FOMC Meeting Forecast – The FED
FEDS LOOKING AT RATE HIKES, BUT NOT UNTIL MAYBE JUNE AT THE EARLIEST OR MORE PROABABLY SEPTEMBER. @realtorcouture
Who can forget the last 2014 FED´s meeting, when Janet Yellen talked for the first time of a possible date for rate hike, and talked about the probability of a couple of months, and not before April? During the December meeting, the FED said that it would be “patient” on rates, and said it was unlikely they will change the economic policy at least for a “couple of meetings”, with Chair Janet Yellen clarifying then that a couple of meetings meant not before April. At the time, the Central Bank was confident on the economic outlook, saying that that the “economic activity has been expanding at a solid pace” and market run to price in a rate hike for June.
But as the months went by, persistent softness in the economy, with macroeconomic data printing some horrid numbers, has diminished hopes the Central Bank will act that soon.
On…
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