Tuesday - April 24
New Home Sales jumped in March as the spring buying season got underway, rising 4% from February to an annual rate of 694,000, a four-month high. That was above the 631,000 expected and up from the 667,000 in February (revised higher from the initial reading of 618,000). Sales were up 8.8% from March 2017. The New Home Sales report shows the number of newly constructed homes with a committed sale during the month.
However, there were considerable differences in sales around the country. In the Northeast, sales plunged 54.8%, while sales in the West soared to their highest level since December 2006, up 28.3%. New Home Sales rose 0.8% in the South and fell 2.4% in the Midwest. The median sales price of new houses sold in March 2018 was $337,200. There was a 5.2-month supply of homes for sale on the market, where a 6-month supply is considered healthy.
Home prices were on the rise in February due in part to a limited number of homes for sale on the market. The S&P/Case-Shiller 20-City Home Price Index rose 6.8% year over year from February 2017. On a month-over-month basis, prices were up 0.8% from January. The national index showed a 6.3% rise year over year. David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices says, " With expectations for continued economic growth and further employment gains, the current run of rising prices is likely to continue."
Monday - April 23
The National Association of REALTORS® (NAR) reported on Monday that Existing Home Sales in March rose 1.1 percent from February to an annual rate of 5.60 million annualized units, above the 5.57 million expected. However, sales are down 1.2 percent from March 2017 due in part to continued low inventories and affordability issues. Total housing inventory was at a 3.6-month supply in March, well below the 6-month level that is considered healthy.
Within the Existing Home Sales Report, it showed that the median home price was $250,400, up 5.8 percent from March 2017. Month over month, sales rose in the Northeast and Midwest, while declines were seen in the South and West. Lawrence Yun, the NAR chief economist, said, "The unwelcoming news is that while the healthy economy is generating sustained interest in buying a home this spring, sales are lagging year-ago levels because supply is woefully low and home prices keep climbing above what some would-be buyers can afford."
Freddie Mac reported on Monday that while housing inventory is still tight, it expects the increased construction of new homes to help reduce the pressure on house price appreciation, which is currently at an annual rate of around 7%. Freddie Mac predicts that mortgage rates will average 4.6% in 2018 and 5.1% in 2019. The report went on to reveal that total home sales will hit 6.30 million in 2018 and 6.44 million in 2019. Lastly, total mortgage originations will hit $1.720 trillion in 2018, down from $1.850 trillion in 2017.
Friday - April 20
Wells Fargo has finally come to terms with the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau to the tune of $1 billion. The bank will now put behind the lending abuses to settle the allegations. Wells had enacted a mandatory insurance program in its auto loan business and is on the hook for how it charged certain borrowers for mortgage interest rate lock products. Wells Fargo will now make restitution to customers and make changes to its risk and compliance practices. The new settlement comes after the fake accshowed that housing became less affordable ount scandal in customer names back in 2016.
A recent study by Arch Mortgage Insurance showed that housing became less affordable in the first quarter of 2018 which could make affording a house more difficult than it has been in decades. Arch MI went on to say that U.S. housing affordability worsened by 5% in the first quarter of 2018 and the monthly mortgage payments needed for home purchases could go up another 10% to 15% by the end of the year, making 2018 one of the worst full-year deterioration's in affordability in the past 25 years.
Thursday - April 19
Mortgage rates edged higher in the latest week due in part to declining Bond prices. U.S. Stocks rallied in the past week, which pressured Bond prices lower. Lower Mortgage Bond prices tend to push mortgage rates higher as they have an inverse relationship. Freddie Mac reports that the 30-year fixed-rate mortgage rose five basis points this week to 4.47%, a fresh 2018 high. That rate does carry an average 0.5 point added on top of the rate. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.
The Philadelphia Fed Index was released on Thursday showing a slight increase in its headline number while a few components edged lower during April. The index rose to 23.2 this month from 22.3 in March. Nearly 37% of the manufacturers reported increases in overall activity this month, while 14% reported declines. Within the report it showed that current new orders and shipments remained positive but fell 17 points and 9 points, respectively.
Oil prices are at their highest level since late 2014 after top exporter Saudi Arabia said it would be happy to see crude rise to $80 or even $100 while a recent report this week revealed that U.S. crude oil supplies have declined. West Texas Intermediate oil is at $69/barrel today, up from $26 seen in early 2016. As oil prices rise, so do gas prices at the pumps. The national average price for a regular gallon of gasoline rose to $2.74 today, up from $2.67 a week ago and up from $2.55 a month ago. The Energy Information Administration (EIA) reports that gasoline demand in mid-April was the highest on record and is the highest so far this year. Gas prices are also higher due to the annual switchover to summer grade fuel, which costs a bit more to refine as more crews are put to work to meet demand.
Wednesday - April 18
U.S. Stocks are higher as earning season continues to produce solid numbers. Mortgage Stanley reported that profits and revenues beat expectations in its quarterly earnings report. United Airlines and CSX Corp. beat earnings estimates while IBM reported profit margins fell short of estimates but revenues were higher for the second consecutive quarter after nearly six years of declines. Of the companies in the S&P 500 that have reported earnings, 80% have beat forecasts.
What might become one of the greatest political achievements in our lifetime is the potential denuclearization of North Korea and end of the 60-year war between North and South Korea. The stage appears to be set for a meeting between North Korea's Kim Jong-un and President Trump. Headlines out this morning show that CIA Director and Secretary of State nominee Mike Pompeo, has already met with North Korea's Kim Jong-un to lay the groundwork for such a meeting at a "neutral" site.
The Mortgage Bankers Association reported on Wednesday that its Market Composite Index, a measure of total mortgage loan application volume, rose 4.9% in the latest week. The refinance Index rose 4% while the purchase Index increased 6% from one week earlier. Mortgage rates remained unchanged with the 30-year fixed-rate conforming mortgage ($453,100 or less) steady at 4.66% with points unchanged at 0.46. The survey covers over 75% of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.
Tuesday - April 17
The Commerce Department reported on Tuesday that March Housing Starts rose 1.9% from February to an annual rate of 1.319 million annualized units, above the 1.268 million expected. February was revised higher to 1.295 million from 1.236 million. From March 2017 to March 2018, Housing Starts were up 10.9%. Building Permits, a sign of future construction rose 2.5% month over month to an annual rate of 1.354 million versus the 1.315 million expected.
However, all was not rosy within the report. Single-Family Starts, which account for the biggest share of the housing market, fell 3.7%from February, but rose 5.2% year over year. Housing Starts got a big boost from a 16.1% monthly increase from the multi-dwelling sector. Total Housing Starts saw a substantial gain in the Midwest and a slight increase in the Northeast; the South and West fell modestly.
Fannie Mae released its April 2018 Economic and Housing Outlook yesterday revealing it sees strong economic growth in 2018 persisting even as risks rise. Fannie Mae expects Gross Domestic Product to rise 2.7% in 2018, despite the possible downside risks stemming from future trade policy enactments. In addition, tax refunds and reduced withholdings are expected to boost consumer spending in March and the months ahead. Finally, soft residential investment in the first quarter of 2018 should prove temporary, as home sales resume their slow upward grind; inventory shortages are playing friend to prices but foe to affordability and sales.
Monday - April 16
Homebuilder sentiment edged slightly lower in April though it remains well into positive territory. The National Association of Home Builders (NAHB) reports that its Housing Market Index came in at 69 in April, down from 70 in may and just below the 70 expected. Within the report it showed that the current single-family home sales index fell to 75 from 77. “Ongoing employment gains, rising wages and favorable demographics should spur demand for single-family homes in the months ahead,” explaines NAHB Chief Economist Robert Dietz.
After three straight months of declines, retailers across the nation reported that consumers spent their hard-earned dollars in March. Leading the boost was spending on automobiles and health and personal care items. Retail Sales rose 0.6 percent in March, above the 0.4 percent expected and up from the decline of 0.1 percent in February. Consumer spending makes up two-thirds of U.S. economic activity and is crucial to a healthy economy. The Retail Sales report is a measure of the total receipts of retail stores from samples representing all sizes and kinds of business in retail trade throughout the nation.
U.S. Stocks are rising to begin the week as investors feel that any post-strike fallout from the missile attack on Syria from the U.S., U.K. and France over the weekend will be minor. In addition, Bank of America reported solid earnings after JPMorgan Chase, Citigroup and Wells Fargo reported better-then-expected results on Friday. In addition, New York Fed President Bill Dudley said this morning that Stock market valuations don't look overvalued, which is helping to support higher prices.
Friday - April 13
Consumer Sentiment slipped in early April after having hit a record high in March, due in part to the recent trade tariffs announced by the Trump administration. The Consumer Sentiment Index declined to 97.8 in early April from the March reading of 101.4 and below the 100.5 expected. In addition, the notion of higher interest rates down the road also pushed the index lower. The index measures the attitudes and expectations concerning both present and future economic conditions of 500 consumers.
Boston Fed President Raphael Bostic (non-voter, hawk) said this morning he supports three more rate hikes in 2018 as more tightening is needed. He said that his optimism for the U.S. economy exceeds that of the "quite positive" forecasts from his FOMC colleagues. The Federal Reserve raised the short-term Fed Funds Rate at its March meeting and forecasts two more hikes in 2018. However, if inflation remains low, the Fed may have a tough time raising rates more than two more times this year, despite what Mr. Bostic has said.
Earnings season kicked off this week and there is a growing sense that corporate earnings for the first quarter will be rather strong and guidance may be more upbeat due to tax cuts/reform. JPMorgan Chase, Wells Fargo and Citigroup all posted better-than-expected numbers on Friday while BlackRock Inc., the world's largest asset manager, reported better-than-expected profits on Thursday. Earnings for S&P 500 companies are expected to rise 18.5% from a year ago, which would be the largest gain in seven years, according to Thomson Reuters.
Thursday - April 12
Stocks are higher this morning as the investing community expects a strong earnings season and as the Syria tensions ebb. BlackRock Inc., the world's largest asset manager, reported better-than-expected profits as first quarter earnings season kicks off. Earnings for S&P 500 companies are expected to rise 18.5% from a year ago, which would be the largest gain in seven years, according to Thomson Reuters. The Dow Jones Industrial Average was up 320 points in early Thursday trading.
Economist Elliot Eisenberg Ph.D., recently reported that as house prices relentlessly rise, the percentage of conventional loans this past winter going to borrowers with debt-to-income (DTI) ratios above 45% hit 20%, almost triple what the percentage was 12 months ago, but less than the housing boom peak of 36%. Meanwhile, the share of buyers with DTIs between 46% and 50% is near where it was in 2004-05 but remains well under the 2007 top. I'm slightly concerned." You can subscribe to Mr. Eisenberg's Daily Blog by going to www.econ70.com.
The minutes from the March Federal Open Market Committee meeting were released yesterday revealing that the Federal Reserve is on track for two more hikes to the short-term Fed Funds Rate in 2018. The minutes went on to say that Fed members feel the U.S. economy will continue to grow further and inflation will rise in the coming months. The Federal Reserve forecasts that Gross Domestic Product will rise 2.7% in 2018, up from the 2.5% reported back in December and sees 2.4% in 2019 from the previous forecast of 2.1%.
Wednesday - April 11
The Bureau of Labor Statistics reports that the Consumer Price Index (CPI) fell 0.1% in March, below the expected gain of 0.1%. Lower gas prices at the pumps are to blame for the first decline in 10 months. When stripping out volatile food and energy, the Core CPI was in line at 0.2%. On a year-over-year basis, CPI rose 2.4% while Core CPI rose 2.1%, both 12-month highs. The Consumer Price Index measures the average price level paid by urban consumers (80% of the population) for a fixed basket of goods and services.
Heightened tensions over Syria between Russia and the U.S. are giving Bond prices a modest boost so far this morning. President Trump tweeted that Russia should get ready for a missile strike on Syria after the chemical attack over the weekend. Several Russian officials have threatened to retaliate if the U.S. strikes. U.S. Stocks are lower on the headlines.
Mortgage rates declined slightly in the latest week after climbing since the beginning of 2018. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage with conforming loan balances ($453,100 or less) declined to 4.66% in the latest week from 4.69%. That rate carries at least an average 0.40 point added on top. Within the report it showed that both the refinance and purchase index fell 2%.
Tuesday - April 10
Stocks are surging higher this morning after Chinese President Xi Jinping promised to cut import tariffs, and open the country's economy. Mr. Xi went on to say that China will enforce the legal intellectual property of foreign companies. In economic news, the wholesale inflation reading Producer Price Index (PPI) for March rose 0.3% versus the 0.2% expected while the Core PPI also rose 0.3%, above the 0.2% anticipated. Mortgage Bonds lost a bit of steam on the news but have traded back to unchanged levels. The markets look ahead to tomorrow's more closely watched Consumer Price Index for any signs of mounting inflation pressures.
Fannie Mae released its Home Purchase Sentiment Index (HPSI) on Monday showing that respondents who said now is a good time to purchase a home rose in March from February. Fannie Mae's HPSI rose 2.5 points to 88.3, reversing February's decline. Additionally, the net share who reported that now is a good time to sell a home increased 3 points. The net share who said home prices will go up in the next 12 months decreased three points in March, while the net share of consumers who said mortgage rates will go down over the next 12 months also increased 5 points.
The National Federation of Independent Business (NFIB) reports that its small business optimism index hit 104.7 in March, which is among the highest in survey history, though down from 107.6 in February. Within the survey it showed that a net 20% of small business owners are planning to create jobs, while 28% feel now is a good time to expand. “It has been a remarkable 16 months for small business optimism,” said NFIB President and CEO Juanita Duggan. “This is the first time in 35 years where the fewest number of small business owners have told us that taxes are their number one business problem."
Monday - April 9
Quarterly earnings season ramps up this week with JPMorgan, Wells Fargo and Citigroup reporting on Friday. Wall Street feels that the corporate tax cuts could propel quarterly profits to their highest in seven years. The numbers will have a direct impact on U.S. Stocks this week depending on how companies have performed. It is expected that S&P 500 profits will increase nearly 19% in the first quarter of 2018.
Performance of first-lien mortgages remained largely unchanged during the fourth quarter of 2017 compared with a year earlier, according to the Office of the Comptroller of the Currency’s (OCC) quarterly report on mortgages. The OCC Mortgage Metrics Report, Fourth Quarter 2017, showed 94.5% of mortgages included in the report were current and performing at the end of the quarter, compared to 94.7% a year earlier. The report also showed that foreclosure activity has increased from the previous quarter.
Gas prices at the pumps continued to rise this week as the market continues to purge winter-blend gasoline to make room for summer storage. The national average price for a regular gallon of gasoline is at $2.66, up from $2.53 a month ago. Last year this time the price was $2.38. The highest price ever recorded was $4.11 back on July 17, 2008. Expect modestly higher prices in the coming months as the spring and summer driving seasons get underway.
Friday - April 6
Job growth slowed in March due in part to some harsh weather across the nation. The Bureau of Labor Statistics reports that there were 103,000 jobs created in March, lower than the 175,000 expected. On the surface, it looks like a disappointing report, but as you dig deeper there are positives within the numbers. February Non-Farm Payrolls were revised higher to 326,000 from 313,000 while January was revised lower to 176,000 from 239,000.
The U6 number, or total unemployment, fell to 8% from 8.2% while the Labor Force Participation Rate was steady at 62.9. Average hourly earnings came in at 0.3%, higher than the 0.2% expected while year-over-year wage growth ticked up to 2.7% from 2.6% percent in February. For the first three months of 2018, there was an average 202,000 jobs created, compared to 177,000 in the same period last year. The Unemployment Rate was unchanged at 4.1%.
Thursday - April 5
After climbing since the beginning of the year, mortgage rates edged lower this week giving potential borrowers some relief. Freddie mac reports that the 30-year fixed-rate mortgage fell four basis points this week to 4.40% with an average 0.5 in points and fees added on top of that rate. Freddie Mac says that "though rates are up slightly from a year ago, a robust labor market is helping home purchase demand weather modestly higher rates."
U.S. employers announced large jobs cuts in March after almost a year relatively low planned layoff activity. Outplacement firm Challenger, Gray & Christmas reports that there were 60,357 planned layoffs last month, an increase of 71% from February's 35,369 planned cuts. Last month's total is the highest monthly total since April 2016. John Challenger, Chief Executive Officer of Challenger, Gray & Christmas, Inc. said, "Last month’s plans may indicate that growth could be slowing down, especially as the market continues to tighten.”
The closely watched Jobs Report for March will be released tomorrow and always carries big headline risk for traders and investors. It is estimated that employers added added 175,000 new workers in March after the blowout 313,000 created in February, while the Unemployment Rate is expected to tick lower to 4% from 4.1%. The ADP report earlier this week came in much hotter than expected - so it does set the bar a bit higher for a good number.
Wednesday - April 4
Yesterday, the Trump administration put out a list of 1,300 China products it was considering hitting with tariffs. Then, last night in a swift response, China announced new tariffs on U.S. soybeans, planes, cars, whiskey and chemicals. The headlines have sent Stocks lower though they are off their worst levels. It is worth noting that there is no clear timeline on when these new proposed U.S. and China tariffs would take effect.
The first of two key labor market reports was released this morning showing that private employment growth was solid in March as the sector continues to grow. ADP reports that private employment grew by 241,000 new positions in March, above the 203,000 expected while February was revised to 246,000 from 235,000. Professional and business services led the gains with 44,000 new jobs.
Mortgage rates were unchanged in the latest week as Bond prices remained steady after their big decline that began back in early January. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate conforming mortgage was unchanged in the latest week at 4.69% with points at 0.43. In addition, the MBA reported that the refinance index fell 5% while the purchase index decreased 2%.
Tuesday - April 3
Home prices continued to push higher in February due in part to the ongoing theme of limited housing supply on the markets. CoreLogic reports that home prices, including distressed sales, rose 6.7% from February 2017 to February 2018 and were up 1% month over month from January to February. Looking ahead, CoreLogic forecasts that home prices will rise 4.7% year over year from February 2018 to February 2019.
Home equity hit an all-time high at the end of February due in part to rising home values. Black Knight Financial Services reports that tappable equity rose to $5.4 trillion at the end of February, up 10% from the previous peak in 2005. "Home prices continued their upward trajectory at the national level, the amount of tappable equity available to homeowners with mortgages continued to rise as well,” said Black Knight spokesperson Ben Graboske. “Tappable equity rose by $735 billion over the course of 2017, the largest dollar-value calendar year increase on record."
The closely watched Jobs Report for March will be released Friday morning where it is expected that employers added 175,000 new workers during the month. That expectation comes after the blowout number in January of 313,000 new positions added as the labor market continues to tighten. The 313,000 jobs created was the largest gain since July 2016 and came after a strong report in January where 239,000 Americans found work. What we need to see is a steady uptick in wage growth, which has been somewhat stagnant in past years.
Monday - April 2
The first quarter came to an end last Thursday with the Dow Jones Industrial Average losing 2.5%, while the NASDAQ posted a 2.3% quarterly loss. The closely watched S&P 500 Stock Index fell by 1.2% for the quarter, after coming off a nine-quarter stretch of gains. Trade war fears, tariffs, the notion of higher interest rates, a tech sell-off and plain old profit-taking pushed Stocks lower in the first three months of the year after seeing all-time highs in late January.
Economic activity in the manufacturing sector grew in March reports the Institute for Supply Management (ISM). The ISM Index registered 59.3 last month, down from 60.8 in February and just below the 60 expected. The new orders, production and employment components all decreased modestly during March. A spokesperson from the ISM said that the report indicates strong growth in manufacturing for the 19th consecutive month.A reading above 50 indicates that the manufacturing economy is generally expanding; below 50 indicates that it is generally contracting.
In housing numbers: The U.S. homeownership percentage was 63.4% in 2016, the lowest percentage nationwide since 1965 or 51 years earlier when the rate was just 63.0%. The homeownership percentage rose to 63.9% in 2017. In the fourth quarter of 2017, the rate moved up to 64.2% from 63.9% in the third quarter.