Mortgage Market News

After last week's decline, U.S. Stock markets kicked off the new week on a positive note. The recent push lower in the equity markets were touched off by fears of a hike in the Federal Reserve's short-term Fed Funds Rate. The Fed Funds Rate is the rate in which depository institutions lend balances held at the central bank to other depository lenders on an overnight basis. The Dow Jones Industrial Average fell 394 points, or 2.1% on Friday, the worst day since it fell 611 points after the Br exit vote on June 24.
Target announced it will be hiring 70,000 seasonal workers for the upcoming holiday shopping season. That's about the same number that it hired last year. Target will hold the seasonal hiring events at each of its 1,800 stores on October 14 and 15, while candidates can also apply online. Target has forecasted that holiday sales could fall as much as 2% this compared to last season. Like most retailers, Target gets 30% of their annual sales and profits during the holiday shopping season.
National average gas prices edged higher in the latest week after an uptick in oil prices, but still remain near the low end of the range. The national average price for a regular gallon of gasoline rose $0.06 in the latest week to $2.18. That is below the $2.35 average price seen last year at this time. The highest price recorded was $4.11 back on July 17, 2008. With the busy summer driving season now behind us, combined with the changeover to cheaper-to-produce winter blend gasoline, it is likely that mean prices will move lower over the next several months.
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The holiday shortened week kicked off today as summer trading patterns take hold of the market. This week, economic reports are on the light side, but the closely watched June Jobs Report will be released on Friday. It is expected that U.S. employers added 175,000 new workers last month. The report will be scrutinized by both investors here in the States and abroad as well as the Federal Reserve members when considering future monetary policy.
Small business hiring picked up in June, reaching the highest level it's been in a year. The Paychex IHS Small Business Jobs Index increased 0.21% to 100.81 in June from May, which was the best reading this year. A number above 100 indicates growth. The index is now higher by 0.18% year-over-year after flat to negative readings in the 18 months. With small businesses representing nearly 95% of all employers in the U.S., the Paychex | IHS Small Business Jobs Index serves as an indicator of the overall economy, providing a monthly, up-to-date measure of change in small business employment.
Home prices continue to produce solid gains as evidenced by the positive report from CoreLogic, a leading provider of consumer, financial and property information. CoreLogic reported that home prices, including distressed sales, rose 5.9% from May 2015 to May 2016. Home prices also rose 1.3% from April to May. The housing sector will likely remain a bright spot in the economy with rates at historic lows. CoreLogic forecasts that home prices will rise 5.3% year-over-year in May 2017.
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The Mortgage Bankers Association (MBA) reported on Tuesday that mortgage applications to purchase new homes fell 6% from April, but remain 8% higher than last year this time. The MBA said that despite new home purchase applications being down in May, it expects modest growth in housing starts to be reported later this week as the spring building season continues. The MBA's Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country.
After a slowdown in the beginning of the year, the consumer spending was alive and kicking in April and May for the second straight month of gains. Retail Sales rose 0.5% in May, above the 0.3% expected. Sales at clothing stores, online retailers, restaurants and bars all grew solidly. Retail Sales were up 2.5% from a year ago. Retail Sales measure the total receipts of retail stores from samples representing all sizes and kinds of business in retail trade throughout the nation.
The U.S. Stock markets are on the decline today and have closed lower for three straight trading sessions. Concerns of global instability, the Brexit fears and slowing job growth here in the U.S. are some of the key factors causing the recent sell-off. In addition, the monetary policy statement from this week's Federal Open Market Committee meeting is sending jitters through U.S. markets. The closely watched S&P 500 has decreased 2.2% in the past four trading days. Brexit refers to the possibility that Britain will withdraw from the European Union with a vote on the issue coming on June 3.
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Signed contracts to purchase existing homes soared in April from March, as the housing sector continues to field positive news. April Pending Home Sales jumped 5.1% from the previous month hitting the highest level in 10 years. Estimates were calling for a meager 0.6% gain. The index is up 4.6% from April of 2015. "The ability to sign a contract on a home is slightly exceeding expectations this spring even with the affordability stresses and inventory squeezes affecting buyers in a number of markets," said Lawrence Yun, the National Association of REALTOR'S® chief economist in a release.
Orders placed for goods lasting more than three years, such as washers and dryers, surged in April, reported the Commerce Department on Thursday. The Durable Goods Orders Index rose 3.4% from March to April, well above the 0.6% rise expected. The big driver in the index was a near 65% increase in civilian-aircraft orders. This increase of 3.4% is up three of the last four months, following a 1.9% March increase.
Mortgage rates edged higher this week, though still remain just above the all-time lows. Last week, the Federal Reserve Bank of the U.S. painted a more hawkish picture for future interest rates, meaning that they could move higher sooner, rather than later. Freddie Mac reported that the 30-year fixed conventional mortgage rate ($417,000 or less) rose.
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U.S. Stock markets are plunging today after weak economic data abroad signals that the global economic slowdown has resurfaced. News from China showed a slowdown in its manufacturing sector, while Australia unexpectedly lowered its benchmark interest rate, signaling that the country may be in worse economic shape than expected. In addition, a downgrade to the euro-zone's inflation and Gross Domestic Product by the European Commission are weighing on global equities.
CoreLogic reports that home prices, including distressed sales, rose 6.7% from March 2015 to March 2016, with a 2.1% gain from February to March. Looking ahead, CoreLogic forecasts a 5.3% rise in prices over the next year. CoreLogic's chief economist, Frank Nothaft said, "Low interest rates and increased home building suggest that housing will continue to be a growth driver."
Government-sponsored-entity Freddie Mac reported a net loss of $354 million in the first quarter of 2016 due to lower interest rates and a $600 million loss from widening credit spreads. A credit spread is the difference in yield between two bonds of similar maturity but different credit quality. It was only the second quarterly loss in the past four years, though the losses have come in the past three quarters. And though the company didn't need a capital infusion from the government, it will not make a dividend payment to the Treasury. Freddie Mac and sister Fannie Mae don't make mortgage loans. They buy them from lenders, then package and sell them into securities and sell them to investors.
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A sharp decline in the West sent New Home Sales lower in March. Across the country, sales in the East were unchanged, while sales rose in the Midwest and the South. The Commerce Department reported that March New Home sales fell 1.5% from February to an annual rate of 511,000, below the 521,000 expected. Sales were up 5.4% from March 2015 to March 2016. The New Home Sales report shows the number of newly constructed homes with a committed sale during the month.
The Federal Open Market Committee (FOMC) meeting will take place this week on Tuesday and will end on Wednesday with the 2:00 p.m. ET release of its monetary policy statement. The Fed members will discuss the U.S. economic landscape as well as the economic woes that continue to plague global economies. The highly anticipated meeting will garner much of the attention this week as global investors look to the Federal Reserve for any clues as to when the central bank may raise rates again. There is a near zero percent chance of an interest rate hike at this week's meeting.
Freddie Mac reported on Friday that housing in 2016 is expected to maintain its momentum throughout the year and it expects housing to be an engine of growth. Freddie Mac said construction activity will pick up as we enter the spring and summer months, and rising home values will bolster consumer confidence and help support renewed confidence in the remaining months of this year. In addition, continued prolonged low mortgage rates will also support both the housing and mortgage markets in 2016.
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U.S. investors withdrew $4.5 billion from U.S.-based Stock funds in the latest week, despite the 1% gain in market value over that time period, reports mutual and hedge fund data company Lipper, Inc. So far in 2016, investors have withdrawn $51 billion with just three weeks this year during which funds attracted more than investors withdrew.
Mortgage delinquency rates continue to improve across the U.S. since the housing bubble burst back in early 2008. Black Knight Financial Services reports that in March, the rate of 30-day delinquencies was the lowest since just before 2000 at 1.95% when Black Knight started compiling the data. In addition, the overall home loan delinquency rate, which tracks loans which are 30 or more days past due but not yet in foreclosure, fell to 4.08% in March, the lowest since March 2007.
The regularly scheduled two-day Federal Open Market Committee meeting will kick-off next week on Tuesday with the monetary policy statement being released on Wednesday at 2:00 p.m. ET. There will be no post-statement news conference by Fed Chair Yellen, nor will there be any forecasts associated with the release. Currently Fed Fund Futures show almost a zero percent chance of a hike at the meeting, while June shows just a 21% chance of a hike. Fed Fund Futures now show a 63% chance of a Fed move by December, up from about 50% forecasted at the end of last week.
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The only economic data point released this morning was the better-than-expected Empire Manufacturing Index rising to 9.6 in April, well above the 2.6 expected and above the 0.6 recorded in March. It was a 15-month high for the index, while the March reading was the first positive reading since last July. The report comes after the March Philadelphia Fed Index on manufacturing came in at 12.4, after the -2.8 reading in February. The manufacturing sector, which has been devastated by the strong dollar and the resulting sharp drop in commodity prices and weak exports, is showing signs of a rebound.
Americans attitudes regarding current economic conditions declined in early April as future job prospects weighed, while wage growth has been dismal. The Consumer Sentiment Index fell to 89.7 from the 91 recorded at the end of March and below the 92.0 expected. It was the fourth consecutive monthly decline. "Consumers reported a slowdown in expected wage gains, weakening inflation-adjusted income expectations, and growing concerns that slowing economic growth would reduce the pace of job creation," said Richard Curtin, the chief economist of the survey.
The Federal Housing Finance Agency (FHFA) announced a plan this week for limited reduction of mortgage principal for certain seriously delinquent, underwater borrowers who are still struggling after the housing collapse, to help them avoid foreclosure and stay in their homes. The rollout will help only about 33,000 people with mortgages held by Freddie Mac and Fannie Mae. The FHFA states that the modification will be available to owner-occupant borrowers who are 90 days or more delinquent as of March 1, 2016. In addition, mortgages must have an outstanding unpaid principal balance of $250,000 or less, and the value of the home must be at least 15% less than what is owed on the loan.
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Americans filing for first-time unemployment benefits dropped to the lowest levels since 1973 as the sector continues to improve ... albeit with slow wage growth. Weekly Initial Jobless Claims declined 13,000 in the latest week to 253,000, below the 268,000 expected. The four-week moving average, which irons out seasonal abnormalities, decreased to 265,000 last week from 266,500. The report measures the number of people who are filing or have filed to receive first-time unemployment insurance benefits, as reported weekly by the U.S. Department of Labor.
Consumer inflation was tame in March after an increase in February, despite the uptick in gas prices at the pumps.The March Consumer Price Index (CPI) rose 0.1%, below the 0.3% expected. The Core rate, which strips out volatile food and energy, also rose by 0.1%, below the 0.2% estimated. Gas prices were higher last month, offset by lower costs for clothing, furniture and used cars, while the cost for housing, medical care and cigarettes edged higher. On an annual basis, the headline CPI rose 0.9%, while Core was up 2.2%. Estimates called for CPI to rise 1%, Core 2.3%. CPI measures the average price level paid by urban consumers (80% of population) for a fixed basket of goods and services.
In corporate earnings, Bank of America reported that profits fell 13% in the first quarter, though earnings per share beat estimates, $0.21 versus the $0.20 expected. Revenues were lower than expected. Wells Fargo also reported that profits declined in the first quarter, but the bank saw earnings per share of $0.99 versus the $0.97 expected, while revenues were also higher than expected. Banks are saying that the consumer is healthy, though the banking business is tough.
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A recent report by Black Knight Financial Services showed that rising home prices lifted 1.5 million borrowers from negative to positive equity in 2015. However, there are still nearly 3.2 million homeowners across the nation that still owe more money on their current mortgage than what their homes are currently worth. The average negative equity rate is 6.5%, well improved from the worst levels during the housing market crash.
The Institute for Supply Management (ISM) reported on Tuesday that its ISM Service Index, rose to 54.5 in March, above the 53.5 recorded in February. The service sector has now grown for 74 consecutive months. Both the new orders and employment components saw gains last month. The data is signaling that business conditions are improving, just not at a robust pace that would be normal after a recession. A reading above 50 indicates expansion in the service sector and a reading below 50 indicates contraction.
In a slight blow to the job market, the Labor Department reported that job openings fell by 159,000 at the end of February from the end January. There were 5.445 million openings at the end of February compared to 5.604 million at the end of January. The numbers come from the Job Openings and Labor Turnover Survey (JOLTS). The report is produced monthly by the Labor Department, is closely watched by Fed Chair Yellen and is a key barometer for monetary policy.
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Freddie Mac reported on Thursday that mortgage rates were unchanged this week and remain just above all-time lows. Earlier in the week, Fed Chair Janet Yellen indicated that the central bank should move cautiously in raising the short-term Fed Funds Rate.
Americans filing for first-time unemployment benefits rose this week, but still remain below the 300,000 mark for the longest stretch not seen the early 1970s. Weekly Initial Jobless Claims rose 11,000 in the latest week to 276,000, above the 265,000 expected. The labor market continues to strengthen, easing fears of the U.S. heading into a recession, though wage gains have been dismal. The four-week moving average of claims, which irons out seasonal abnormalities, rose 3,500 to 263,250.
The closely watched Jobs Report for March will be released by the Bureau of Labor Statistics on Friday morning and will be scrutinized by traders and investors around the globe. It is expected that employers added 200,000 new workers in March, which would be below the 242,000 created in February. Within the report it should show that the Unemployment Rate held steady at 4.9%, the lowest level since late 2008.
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Federal Reserve Chair Janet Yellen spoke at the Economic Club of New York yesterday regarding on monetary policy here in the U.S. Ms. Yellen said that given the weak global economy and low inflation in the U.S., the Fed will take a cautious approach to raising interest rates in 2016. Ms. Yellen did say that if economic activity strengthens, the central bank "could readily raise rates to stabilize the economy." Her remarks sparked a rally in global Stock markets which has continued here in the U.S. on Wednesday.
In the first of two job related reports this week, ADP reported that private payrolls in March rose 200,000, just above the 196,000 expected. February was revised lower to 205,000 from 214,000. The data comes ahead of Friday's government Jobs Report for March. Despite a weak global economy, U.S. job creation continues to add jobs at a robust pace. ADP said, small businesses added 86,000 jobs; midsize ones, 75,000, and large companies, 39,000.
The Mortgage Bankers Association (MBA) reports that its Market Composite Index, a measure of total mortgage loan application volume, fell 1% in the latest week. The data comes despite low mortgage rates and an uptick in eligible borrowers. The refinance index decreased 3% from the previous week and now makes up 52.4% of total applications.
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The January Case-Shiller 20-city Home Price Index rose 5.7% year-over-year, in line with estimates and matching December's 5.7% gain. Prices were up 0.8% month-over-month. The low inventory of homes available for sale has been the key reason for price growth, while low mortgage rates and a steady labor market are fueling demand. San Francisco, Seattle and Portland registered the largest gains year-over-year.
In central bank news, yesterday, the Atlanta Federal Reserve Bank reported that its forecast for Q1 2016 Gross Domestic Product will be a meager 0.6% and comes after yesterday's disappointing Personal Income and Spending data. The dismal 0.6% growth forecast is down from the faster pace of 2.3% originally projected. On the flip side, San Francisco Fed President John Williams says the U.S. economy remains on track for gradual rate increases, and fears over the impact of a slowing global economy are overdone.
The Conference Board reported on Tuesday that March Consumer Confidence rose to 96.2 from the 94.0 recorded in February. The uptick was due to consumers feeling more optimistic as a result of the stabilization in the U.S. Stock markets. The survey went on to say that consumers do not see any big improvements in the economy, but also don't see it getting any worse. In addition, consumers' outlooks for the labor market were more favorable.
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Inflation pressures remained tepid in February as measured by the Core Personal Consumption Expenditures (PCE). The Core PCE rose just 0.1% month-over-month in February, below the 0.2% expected and down from the 0.3% recorded in January. The Core PCE, which excludes food and energy, measures prices paid by consumers for goods and services to reveal underlying inflation trends. The Core PCE year-over-year, which is the Fed's favored inflation gauge, rose 1.7%, which is below the 2% targeted by the Federal Reserve.
The Commerce Department also reported today that Personal Incomes rose 0.2% in February, reflecting a 0.1% decline in wages and salaries. Personal Spending rose slightly by 0.1% as consumers cut back on purchases in February. Consumer spending makes up about two-thirds of U.S. economic activity. Due to spending easing behind an uptick in income growth, the savings rate rose to its highest level in more than three years.
Over in the housing sector, February Pending Homes Sales surged 3.5% from January to its highest level in seven months, after a 3% decline in January. A spokesperson from the National Association of REALTORS® , which reports the data, said, "After some volatility this winter, the latest data is encouraging in that a decent number of buyers signed contracts last month, lured by mortgage rates dipping to their lowest levels in nearly a year1 and a modest, seasonal uptick in inventory."
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The U.S. Federal Reserve left its benchmark short-term Fed Funds Rate unchanged yesterday at the 0.375% level, which was expected. The Fed did say that it now feels that there will be two interest rate hikes in 2016, down from the four originally projected. In addition, the Fed went on to say that it lowered its numbers for Gross Domestic Product to 2.2% in 2016 from the 2.4% originally projected. The statement also read that global economic and financial developments continue to pose risks.
Manufacturing data this week has been encouraging for the beaten down sector. Earlier in the week the Empire Manufacturing Index turned positive for the first time since last July, while the Philadelphia region also reported a positive reading today. A stronger dollar coupled with lower commodity prices have been a few reasons behind the decline. The Philly Fed Index rose to 12.4 in March, well above the -1.4 expected and up from the -2.8 in February. Any reading above zero indicates improving conditions.
Americans filing for first-time unemployment benefits rose this week, but still remain below the 300,000 mark for the longest stretch not seen the the early 1970s. Weekly Initial Jobless Claims rose 7,000 in the latest week to 265,000, near inline with estimates. The labor market continues to strengthen easing fears of a U.S. is heading into a recession. A Labor Department analyst said there were no special factors influencing last week's claims data and no states had been estimated.
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The Mortgage Bankers Association (MBA) reported this week that new home purchases soared 24% in February from January, as would be buyers got a jump on the spring buying season. To break it down, conventional loans composed 67.7% of loan applications, FHA loans composed 18.7%, RHS/USDA loans composed 0.8% and VA loans composed 12.8%. An MBA spokesperson said low interest rates and fairly mild weather in February were key ingredients to kicking off the spring buying season.
The Wall Street Journal recently surveyed business, financial and academic economists on the subject of the odds of a recession. The survey found that the odds of a recession in the next 12 months fell slightly, to 20% in this month’s survey from 21% last month. But the 20% is double from what they were last summer. One of those surveyed put the chances of a recession at 50% due to tightening financial conditions. On the other end of the aisle, another participant sees a zero percent chance of the U.S. falling into a recession.
The unofficial beginning of spring will take place this weekend when Americans "spring forward" at 2:00 a.m. Sunday morning. Spring officially arrives on March 20. Nowadays, most of our devices, including computers, smartphones, tablets and the like, will automatically adjust the time for us. However, remember to change the time on your stoves, microwaves and old school-clocks. In addition, it's a good time to change the batteries in your smoke and carbon monoxide detectors. Due to the time change, your commute to work may be darkerr, but your return home will be in daylight.
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The National Association of REALTORS® (NAR) reported on Monday that Pending Home Sales in January fell 2.5% from December. The NAR said that winter storms in parts of the country coupled with overheated home prices were the reasons for the unexpected declines. Pending Home Sales, an indicator of future closed sales, are just 1.4% higher than January of 2015.
"While January's blizzard possibly caused some of the pullback in the Northeast, the recent acceleration in home prices and minimal inventory throughout the country appears to be the primary obstacle holding back would-be buyers," said Lawrence Yun, chief economist for the NAR.
Business activity in the Chicago region fell into contraction territory in February. Chicago PMI fell to 47.6 this month, below the 55.6 in January and below the 52.0 expected. Within the report it showed that new orders and production rates also declined. A reading below 50 signals contraction. When asked what impacts lower oil prices had on activity, 48% of the respondents said that lower prices were boosting business due to lower freight and transportation costs.
Gas prices at the pumps remained low over the weekend with the national average price at $1.74 for regular, up nearly 4 cents in the last week. A petroleum analyst said that the eight-month decline at the pump looks like it's coming to an end. The highest price seen was $4.11 back in July of 2008. The drop in prices has come as oil prices have plunged due to a big surge in supplies of crude oil.
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The National Association of REALTORS ® reported on Tuesday that January Existing Homes Sales edged up 0.4% from December to an annual rate of 5.47 million units, above the 5.30 million expected: this was the highest level since July. In the past year, sales are up 11%, the largest year-over-year gain since the 16.3% annual rise in July 2013. Existing Home Sales is a measure of the selling rate of pre-owned single-family homes.
The Case Shiller 20-city Home Price Index rose 5.7% from the same period last year, inline with expectations. A spokesperson said that while home prices continue to rise, the pace is slowing a bit. From November to January, prices were up 0.8%. The big gains were seen in Portland, San Francisco and Denver. The ongoing positive signs from the labor markets are one of the reasons for making home affordability attractive to consumers, which is gradually pushing prices higher.
The Conference Board reported on Tuesday that Consumer Confidence hit a a seven-month low in February as the recent Stock market losses early in the year continues to weigh on the minds of Americans. Consumer Confidence fell to 92.2 this month, Below the 97.3 expected and down from the 97.8 recorded in January. “Consumers’ short-term outlook grew more pessimistic, with consumers expressing greater apprehension about business conditions, their personal financial situation, and to a lesser degree, labor market prospects,” said Lynn Franco, director of economic indicators at the board.
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The Commerce Department reported that January Housing Starts fell 3.8% from December to an annual rate of 1.099 million units versus the 1.171 million expected, a three-month low. All four major regions across the country saw declines in starts, while a big East Coast snowstorm caused a halt in some late month construction in that area. January Building Permits, a sign of future construction, fell 0.2% from December to 1.202 million units, just above the 1.200 million expected, while December was revised lower to 1.204 million from 1.232 million.
Wholesale inflation, as measured by the Producer Price Index (PPI), rose 0.1% in January, above the -0.2% expected and above the -0.2% recorded in December. On an annual basis, PPI decreased 0.2% after declining 1.0% in December. However, Core PPI, which strips out volatile food and energy, surged 0.4%, well above the 0.0% expected and up 0.8% annually. The one month jump in Core prices does not constitute a pattern and the Fed will more closely watch the Consumer Price Index releasing on Friday. Inflation overall remains tepid with no threat of gathering speed at this time.
Economic growth appears to have slowed in late 2015 and at the start of 2016, perhaps foreshadowing another year of potentially unspectacular economic growth, according to Fannie Mae’s Economic & Strategic Research Group’s February 2016 Economic and Housing Outlook. On the housing front, home price gains are likely to outpace household income growth as the year continues. However, the rise in home prices should help lift underwater mortgages and create a healthier housing market.
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Global Stock markets melted down overnight and the carnage is spilling over here in the U.S. markets. Economic weakness in both Europe and China coupled with big share price losses in European bank shares are a few of the reasons behind the recent decline. Yesterday, Federal Reserve Chair Janet Yellen said that the global economic malaise could be hit by the current turmoil, which added fuel to the decline in the major U.S. Stock indexes.
A recent report from the National Association of REALTORS® (NAR) found that receding housing inventories are constraining the housing market, causing potential buyers to remain on the sidelines. And the NAR said the problem is not going to end anytime soon. Tighter inventories coupled with an uptick in buyers have pushed home prices higher. “Without a significant ramp-up in new home construction and more homeowners listing their homes for sale, buyers are likely to see little relief in the form of slowing price growth in the months ahead,” said Lawrence Yun, NAR chief economist.
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The first of two key labor market reports was released today showing that private employment slowed a bit in January from December, but the final number was better than expectations. ADP reported that private employment grew by 205,000 in January, below the 267,000 recorded in December, which was revised higher from 257,000. Solid growth was seen in service providers, which added 192,000 to the total. The 205,000 jobs created was above the 190,000 expected.
Over in the service sector, the Institute for Supply Management (ISM) reported that its ISM Service Index fell 2.3 points to 53.5 in January as growth in the service sector slowed a bit. A reading above 50 indicates the non-manufacturing sector economy is generally expanding; below 50 indicates the non-manufacturing sector is generally contracting. Within the report it showed that new orders as well as the employment component decreased.
Given the recent mediocre readings in economic data, chances of an interest rate hike from the U.S. Federal Reserve are decreasing. In addition, the Bank of Japan's recent move to a negative interest rate policy, weak economic growth in the fourth quarter, and a fairly dovish statement from the last week's Fed meeting have all lowered the chances even further. Traders now see less than a 30% chance of even one rate hike at any Federal Reserve meetings this year, according to data from the CME Group.
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The Commerce Department reported on Wednesday that December New Home Sales surged 10.8% from November to an annual rate of 544,000 units, above the 506,000 expected. It was third consecutive monthly gain and the third best annual gain since 2008. Sales rose 14.5% in 2015 to 501,000 due to increased confidence in potential home buyers, a strengthening labor market along with low mortgage rates. New Home Sales are based upon the following definition: "A sale of the new house occurs with the signing of a sales contract or the acceptance of a deposit." The house can be in any stage of construction: not yet started, under construction, or already completed.
Shares of Apple Inc. are falling in today's trading after a sobering report on its iPhone sales. The popular smart-phone has seen sales grow at their slowest pace since the introduction to the iPhone in 2007. The company also stated that revenues in the current quarter are expected to decline for the first time in 13 years, signaling the stratospheric growth may be cooling. Apple went on to say that the strong dollar and slowing global growth are the reasons behind the decline in sales. In addition, China, its largest overseas market, has begun to show "signs of economic softness" in the past few months.
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The National Association of REALTORS® reported on Friday that December Existing Home Sales surged nearly 15% from November to an annual rate of 5.46 million units, above the 5.12 million expected. However, the big gains could be because of closing being put off until December due to TRID rules or “Know Before You Owe”. Sales were up 7.7% from a year ago. Existing Home Sales are completed transactions that include single-family homes, townhomes, condominiums and co-ops.
After the recent big losses racked up the U.S. Stock markets, prices rose yesterday and are rising today due in part to oil prices gushing higher. In addition, dovish comments from European Central Bank President Mario Draghi also helped to push prices higher. The closely watched S&P 500 Index has lost a little over 7% to start the year, its worst start to a year on record. To put things into perspective, at the height of the Great Recession in March of 2009, the S&P hit 666 and is now at 1,894.
A massive snowstorm is set to impact nearly 75 million people stretching from the Southeast all the way up to New York City. The storm, labeled Jonas, could dump up to 3 feet of snow in some areas with blizzard warnings throughout the Mid-Atlantic and Northeast states. Washington D.C. could see up to two feet of the white stuff, which has already prompted school closing and government shutdowns. Winds could reach up to 60 miles per hour with coastal storm surges and flooding set to occur.
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After big gains in November, December Housing Starts declined 2.5% from the previous month, raising concerns about the health of the U.S. economy. The Commerce Department reported that Housing Starts came in at an annual pace of 1.149 million units, below the 1.197 million expected. This follows a recent spate of weak economic data. On the bright side, December was the ninth straight month that Housing Starts were above 1 million units, the longest stretch since 2007. For 2015, Housing Starts were up nearly 11%.
Inflation at the consumer level remained tame in December as energy prices continued to decline. The Consumer Price Index (CPI) fell 0.1% after being unchanged in November. The so-called Core CPI, which strips out volatile food and energy prices, rose 0.1%. In the 12 months ending in December, CPI increased 0.7%, the biggest increase in a year, while Core CPI was up 2.1%, the largest gain since July 2012.
The Mortgage Bankers Association reported on Wednesday that its Market Composite Index, a measure of total mortgage loan application volume, rose 9% in the latest week. With mortgage rates just above historical lows, would-be borrowers chose to refinance their homes.
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The foreclosure arena got a little brighter today as RealtyTrac reported that 2015 foreclosure filings fell to their lowest level since 2006. RealtryTrac said that there were nearly 1.1 million properties with foreclosure filings in 2015, the lowest since 2006 with 717,522. In addition, the 103,373 filings in December were down 30% from December 2014. “In 2015 we saw a return to normal, healthy foreclosure activity in many markets even as banks continued to clean up some of the last vestiges of distress left over from the last housing crisis,” said Daren Blomquist, vice president at RealtyTrac.
Banking giant JPMorgan Chase reported solid earnings for the latest quarter, but CEO Jamie Dimon warned that the U.S. economy is likely to worsen after years of growth. Mr. Dimon isn't about to call for a recession and says that the economy "still looks okay," but cites concerns surrounding China's economy and the steep drop in commodity prices. The bank reported earnings-per-share of $1.32, above the $1.25 expected, but this was mainly derived from lower expenses as revenues fell 2% for the year.
Fitch Ratings reported that U.S. home prices are expected to rise by 4.5% this year, though there are some trouble spots, with some regional markets being called overvalued. Fitch went on to say that California and Texas may soften a bit, but "large downturns are unlikely." “U.S. mortgage rates are expected to rise 25 basis points to 50 basis points by year end, which should not affect existing borrower performance in a mostly fixed-rate market but it will encourage lenders to broaden loan eligibility requirements as refinance volumes dry up,” Fitch added
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The Bureau of Labor Statistics (BLS) reported on Tuesday that job openings rose in November, which led to more Americans to leave their current jobs and search for better positions. The BLS reported that this was the most people that left their jobs in more than seven years. In November, the number of job openings waiting to be filled climbed by 82,000 to 5.43 million. The numbers came from the release of the JOLTS (Job Openings and Labor Turnover Survey) report.
The National Federation of Independent Business (NFIB) reported on Tuesday that its Small Business Optimism Index rose slightly in December. Business owners were split as some felt more confident about sales, but at the same time, more pessimistic surrounding general business conditions. The NFIB Small Business Optimism Index gained a modest 0.4% in December to 95.2, which is still below the 42-year average of 98.0.
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Labor market news kicked off 2016 on the bright side as employers added more private jobs than expected in December. Payroll processor ADP reported that private payrolls increased by 257,000 in December, above the 190,000 expected. The warm weather in December was projected to bump gains in the job markets. ADP said large businesses added 97,000 jobs, midsize ones, 65,000, and small businesses, 95,000. The report comes ahead of the government's December Jobs Report, which is due out on Friday morning.
Reports that North Korea has successfully tested a hydrogen bomb along with economic woes out of China, are fueling a Stock sell-off on Wall Street today. Also weighing on Stock prices is that oil has fallen to an 11-year low due to continued buildups in supplies. The closely watched Dow Jones Industrial Average has fallen more than 200 points in today's session and has declined by nearly 800 points or 4.5% since December 29 of last year.
Popular smartphone maker Apple is reportedly slowing iPhone production by 30%, which signals a slowdown in sales later this year. Apple has reduced orders to suppliers leading to layoffs and idle capacity at Apple’s Chinese suppliers. Shares of Apple were down nearly 5% in 2015 and are down 2.2% this year. At the current price of $101, the Stock is well off last year's high of $133.
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The housing sector continues to see solid home price gains due to strong demand and tight supplies, in addition to low mortgage rates. CoreLogic reported on Tuesday that home prices, including distressed sales, rose 0.5% from October to November and are up 6.3% from November 2014 to November 2015. Dr. Frank Nothaft, chief economist for CoreLogic says, "Heading into 2016, home price growth remains in its sweet spot as prices have increased between 5% and 6% on a year-over-year basis for 16 consecutive months."
With the holiday shopping season over, sales figures are out for the period from Black Friday through Christmas Eve. MasterCard reports that total sales grew by a sold 7.9% this season, which excludes automobiles and gas, compared to the 5.5% gain in the same period in 2014. MasterCard went on to say that a delay in the onset of cold weather pushed back purchases of winter coats and winter-related apparel, so there was pent up demand after Black Friday. Consumers also had savings from lower gas prices, which they spent during the season.
After the holiday shopping season is over ... what comes next? The holiday return season. January is typically the month in which those gifts that are unwanted, the wrong size or the wrong color, will now have to be returned and exchanged or refunded. But know before you go: meaning, before you head out to the mall to return or exchange, be sure to know the retailers policies. Most retailers return policies remain pretty generous, but complicated, nonetheless. Go to ConsumerWorld.org for all the up-to-date return policies for retailers.
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The manufacturing sector of the U.S. economy continues in its malaise due to a strong dollar and weak demand from overseas. The national ISM Manufacturing Index slid to 48.2 in December, slightly lower than the 48.6 recorded in November. A reading above 50 indicates expansion in the manufacturing sector, while a reading below 50 indicates contraction. Within the report it showed that the employment component declined, while the new orders index climbed.
Black Knight Financial Services reported on Monday that its Home Price Index report for October showed that prices rose 0.2% from September to October. In addition, home prices rose 5.5% higher in October 2015 from one year prior. It was the 42nd straight month of year-over-year home price appreciation. Black Knight went on to say that October's national home price index of $254,000 now puts prices up nearly 27% since the bottom of the market of 2012.
The U.S. Stock markets are getting off to a rocky start in 2016 as the major indexes plunge due to heightened tensions in the Mideast coupled with weak economic data out of Asia. Stock prices in China fell so hard that it caused the Shanghai Exchange to suspend trading for the session after a 7% decline. Here in the U.S. the closely watched S&P 500 Stock Index is down 2.50% or 52 points, while the Dow Jones Industrial Average plunged 450 points.
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The National Association of REALTORS® (NAR) reported on Tuesday that Existing Home Sales in November fell 10.5% from October to an annual rate of 4.76 million units. It was the sharpest monthly decline since July 2010. A spokesperson from the NAR said that new regulations from TRID, affordability and lower inventories led to the decline. Sales declined around the nation, down 13.9% in the West, 6.2% in the South, 15.4% in the Midwest and 9.2% in the Northeast.
The government reported the final figures on economic growth for the third quarter of 2015 today revealing that Gross Domestic Product (GDP) edged lower to 2% from 3.9% recorded in the second quarter. Growth fell due to a larger trade deficit and a smaller buildup in inventories. So far in 2015, GDP is running at 2.16%. well below the historic rate of 3.3%. If the economy continues on this lackluster pace through December 31, it will have failed to reach 3% growth for the 10th straight year, marking the slowest stretch since the end of WWII.
With the holiday shopping season coming to a close, retailers were looking to the weekend before Christmas to boost sales in what has turned out to be a slow start to the season. This past weekend retailers did have increased store traffic, but they were led by promotions. In many parts of the country, the temperatures have been unseasonably high, which slowed sales of sweaters, winter coats, scarves and the like. So if you are heading out for some last minute shopping, there could be some great deals on winter apparel
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Freddie Mac reports that even in the midst of the Federal Reserve raising the benchmark short-term Fed Funds Rate, mortgage rates may see modest increases, but will stay at historic lows in 2016. Freddie went on to say that home sales will remain strong next year, while refinance activity should somewhat cool. Analysts at sister company Fannie Mae said the current fixed of 3.97% will rise only to 4.1% next year this time.
With millions of young Americans entering the workforce or already working, many are straddled with student loans to pay off. With the Federal Reserve raising short-term interest rates earlier this week, the question many are asking is if their interest rates will go up for their existing loans. The answer is no. Those already with loans will not see the rate go up, for they are fixed rates over the life of the loan. It is possible that borrowers taking out new student loans next year may feel a rate increase. The bulk of student loans are issued by the federal government, so as mentioned, those rates will not increase. However, those with private student loans, which often carry a variable rate, could see rates edge higher.
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The Federal Reserve Bank (the Fed) of the U.S. finally raised its short-term interest rate for the first time in nearly a decade yesterday. There is a misconception amongst consumers that mortgage rates automatically will push higher because of this. The Fed, however, does not control long-term rates, which are actually based based on economic conditions and inflation expectations. On the other hand, consumers will be impacted as the following rates are adjusted higher - short term interest rate loans, credit card rates, HELOC rates, and auto, business and student loans.
Americans filing for first-time unemployment benefits declined in the latest week, signaling ongoing improvement in the labor markets. Weekly Initial Jobless Claims fell 11,000 in the latest week to 271,000, the 41st straight week below the 300,000 level. That is the longest stretch since the early 1970s. The four-week moving average of claims, which irons out seasonal abnormalities, remained unchanged at 270,500. Continuing claims or those who still receive benefits fell 7,000 to 2.24 million.
Fannie Mae released its December 2015 Economic and Housing Outlook this week revealing that economic activity in the fourth quarter appears to be weaker than expected. The report went on to say that real consumer spending is expected to rebound early next year amid a tightening labor market and a renewed decline in gasoline prices, helping to offset persistent economic headwinds. “Home sales will likely remain subdued in the near term, but private residential construction spending started the fourth quarter on a strong note and housing demand is looking up as we head into next year,” said Fannie Mae Chief Economist Doug Duncan.
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The housing sector is ending the year on a high note! The Commerce Department reported on Wednesday that Housing Starts in November rose 10.5% from October to an annualized rate of 1.173 million units, above the 1.135 million expected. The big jump in November nearly erases the 12% decline from September to October. Within the report it revealed that single-family starts were up 7.6 percent from October to the highest level since January 2008. Housing Starts are up nearly 17 percent in November from a year earlier.
Americans are gearing up for the end of year holiday traveling to Grandma's house in a big way. Auto club AAA predicts that year-end holiday travelers will hit over 100 million for the first time ever. AAA reports that 1 in 3 Americans will travel 50 or more miles between December 23 and January 3, which is a 1.4% increase over last year and the seventh consecutive year of travel growth for the holiday period. The auto club cites low gas prices at the pumps and a strengthening economy and labor market for the increase. AAA went on to say that driving will be the most popular way to travel.
The decline in gas prices this year has put some extra money in the pockets of American drivers. It is estimated that drivers saved about $540 in 2015 thanks to the low prices at local gas stations. And if you have two drivers in your household, that would double to $1,100. So, what are people doing with the extra cash? Dining out more. The low gas prices have also helped Americans buy a record number of new vehicles this year. If you think gas prices are low now at an average price for a regular gallon of gas at $2, 2016 may bring even lower prices.
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Inflation at the consumer level was tame in November, but an underlying measure of inflation continues to edge higher. The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) was unchanged last month due to lower gas and food costs. However, when stripping out volatile food and energy, the so-called Core CPI rose 0.2% on higher rental costs and hotel rates. On an annual basis, the Core CPI was up 2% and has been trending higher.
The manufacturing sector of the U.S. economy continued to contract in December due to a strong dollar, a weak global economy and low oil and other commodity prices. The New York State Manufacturing Index registered a -4.6 reading this month, which was better than the -5.9 expected and above the -10.7 recorded in November. Just recently the national manufacturing index, the ISM Index, contracted to 48.6% in November, the lowest level since June 2009.
The National Association of Home Builders (NAHB) reported that builder confidence slipped in December due to recent concerns with the high price of lots and labor. The NAHB Housing Market Index fell 1 point to 61 this month, below the 62 in November and below the 63 expected. “For the past seven months, builder confidence levels have averaged in the low 60s, which is in line with a gradual, consistent recovery,” said NAHB Chief Economist David Crowe. “With job creation, economic growth and growing household formations, we anticipate the housing market to continue to pick up traction as we head into 2016.”
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Oil prices continue to drift lower hitting 11-year lows as a glut of oil supply flows through the global pipelines. West Texas Intermediate oil fell to $34.53 in today's trading. The drop in oil prices has led prices lower at your local gas stations. The national average price for a regular gallon of gasoline is at $2.01, while prices have fallen below $2 a gallon in 41 states. Last year at this time prices at the pumps averaged $2.55, and prices have fallen from the $2.17 seen a month ago. The drop in prices could boost holiday spending, but we will see when the numbers are reported in a few weeks.
The two-day Federal Open Market Committee meeting kicks off on Tuesday and will culminate on Wednesday with the 2:00 p.m. ET release of the monetary policy statement. It is widely expected that the central bank will raise its benchmark Fed Funds Rates by a 1/4 point for the first time in nine years. The Fed has kept the fed Funds Rate near zero percent since 2008 in an effort to promote economic stability and job growth. The Fed Funds Rate is the rate in which financial institutions lend balances held at the Federal Reserve to one another on an overnight basis. The increase could raise interest rates on bank fees, car loans and credit cards.
Be on the lookout for the Grinch in your neighborhood when getting packages delivered from the Post Office, UPS, FedEx and the like this season. U.S. online sales during the season pose a big feast when those packages lay idle at your doorstep. A recent report shows that an estimated 23 million Americans have had packages stolen from their homes and the number is expected to increase as online shopping begins to overtake the traditional brick and mortar stores. So called "Porch Pirates" usually trail a delivery truck and pounce on the merchandise as soon as the driver is out of sight. Delivery companies are now giving alternatives to how they receive their packages. UPS is expanding its UPS Access Point network, which offers package pickup and drop off primarily at neighborhood convenience and grocery stores, dry cleaners and delicatessens to 8,000 U.S. locations and 22,000 worldwide by the end of this year.
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The Mortgage Bankers Association (MBA) reported this week that mortgage applications for new home purchases declined by 6% in November compared with October. The MBA said that there were 37,000 new home sales in November, a decline of 5.1% compared to the 39,000 sold in October. New Home Sales were at an annual pace of 524,000 units in November, an increase of nearly 6% from the October pace of 495,000.
Consumer Sentiment was virtually unchanged in early December, though Americans evaluated economic conditions more favorably. The Consumer Sentiment Index came in at 91.8, just above the 91.6 expected and higher than November's reading of 91.3. A spokesperson said, "The survey recorded persistent strength in personal finances and buying plans, while the largest loss was in how consumers judged prospects for the national economy during the year ahead."
With the holiday shopping season well underway, consumer spending rose modestly in November, signaling that the sales are off to a good start, though less than spectacular. November Retail Sales rose 0.2% to $448 billion last month, up from 0.1% in October. Cheap gasoline prices have depressed overall sales volumes. The Retail Sales report is closely watched by economists each month to gauge spending habits by consumers, it drives 70% of the U.S. economy.
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The number of Americans filing for first-time unemployment benefits continues to hover near lows seen in the early 1970s as the labor market continues to strengthen. As the end of the year approaches, claims tend to have a tendency to be a bit more volatile around the holiday season. The Labor Department reported that Weekly Initial Jobless Claims rose by 13,000 in the latest week to 282,000, the highest level since early July. Claims have now remained below the 300,000 level for 39 straight weeks.
Mortgage rates edged higher in the latest week following an upbeat Jobs Report, though rates still hover just above all-time lows. Freddie Mac reported that the 30-year fixed conventional mortgage rate ($417,000 or less), rose. The 15-year fixed average rate climbed to 3.19% with average points and fees of 0.5. A year ago the 30-year rate was 3.93%, while the 15-year was 3.2%.
A recent survey conducted by the CNBC All-America Economic Survey reveals that just 22% of Americans see the economy improving, a five-point decline from last year this time. The survey could be signaling that consumers may be spending less on holiday shopping this year. Just 13% of those polled plan to spend more; 56% are planning to keep holiday spending at last year's level and 29% said they will reduce spending. The saving grace this year, low prices at the gas pumps, where the average national price is near $2 a gallon.
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Small business owners' optimism turned lower in November, pointing to slower sales and growing inventories as consumers spent more cautiously. The National Federation of Independent Business's Small Business Optimism Index was unchanged in November slipping to 94.8 from 96.1 in October. Within the report it showed that six of the components fell from October, led by a decline in sales. On the bright side, owners continue to hire at a healthy pace with 45% reporting that they are hiring or trying to hire, though many owners are finding it more difficult to find qualified applicants.
The foreclosure sector of the housing market continues to improve as the housing market strengthens. CoreLogic, a consumer, financial and property information and analytics firm reported on Tuesday that completed foreclosures were down 27.1% from a year ago, while foreclosure inventories were down 21.5% compared with a year ago. The share of mortgages in serious delinquency, which is defined as being 90 days or more past due, as well as those in foreclosure or owned by lenders, hit a near-eight-year low of 3.4% in October.
With the holiday shopping season in high gear, Mintel International released a report showing that consumers are planning to spend $805 on holiday merchandise, up slightly from $802 last year. November and December are two of the most critical months of the year for retailers as sales during this period make up 30% of their annual revenues. Retail sales are expected to increase by 3.7% this year, which will hit an estimated $630.5 billion. Retailers cite improving economic and job growth along with low gas prices as a few of the factors contributing to strong sales this season.
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The continued improvement in the U.S. economy could be a signal that short term interest rates will rise at next week's Federal Open Market Committee meeting held on December 15-16. The Federal Reserve Bank of the United States have held short rate close to zero, since the Great Recession began in late 2008. But with an improving economy, the Federal Reserve feels it is now time that interest rates begin to rise. The interest rate in question is the Federal Funds Rate, which is the rate in which banks lend balances at the Federal Reserve to other banks on an overnight basis.
The U.S. Stock markets got off to a rocky start this week as the closely watched Dow Jones Industrial Average was nearly 200-points lower in early trading. Stocks have had a volatile year after solid gains seen in 2014. The Dow is currently down 1% year-to-date after an 8% rise last year. However, the Dow is up from the 6,500 level hit back in March of 2009 to the present level of 17,700.
Popular food chain, Chipotle, continues to endure the aftershocks from its recent E.coli breakout that has now expanded into nine states. The crux of the problem is due to the fact that Chipotle and other restaurants are putting greater focus on fresh unprocessed foods and while it may be good nutrition wise, it raises the risk of foodborne illnesses because cooking kills pathogens that cause illness. Because of this problem, the company expects sales to fall 8-11% this quarter.
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CoreLogic, a consumer, financial and property information and analytics firm, reported that home price gains, including distressed sales, rose 6.8% from October 2014 to October 2015 as the housing recovery marches on. A spokesperson from CoreLogic said, “Many markets experienced a low inventory of homes offered for sale and strong buyer demand, sustaining upward pressure on home prices.” On a month-over-month basis, prices rose 1%, while the numbers for September 2014 to September 2015 were revised down to 5.55% from the 6.4% originally reported. Looking ahead, CoreLogic sees a 5.2 % increase from October 2015 to October 2016.
National manufacturing slipped again in November and fell below the 50.0 mark for the first time since November 2012 and the lowest level since June 2009. A few of the reasons for the decline is low oil prices coupled with a strong dollar. The ISM Index fell to 48.6 last month, below the 50.5 expected and below the 50.1 recorded in October. A reading above 50 indicates that the manufacturing economy is generally expanding; below 50 indicates that it is generally contracting.
A recent poll conducted by Reuters to a group of economists showed sales of existing homes in the U.S. are expected to pick up in 2016, although house price inflation probably will not. However, there are some risks in so far as some potential borrowers may be shut out due to a lack of available credit, low wage growth and higher interest rates. Of the 22 polled, 19 said they see the housing recovery as modest, three called it robust. None said it will be fragile.
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Americans flocked to the malls this past weekend and online to purchase gifts as the holiday shopping season unofficially kicked off with Black Friday. The National Retail Federation (NRF) reported that more than 151 million people said they shopped in stores and/or online during the long weekend. The NRF went on to say that more than 121 million people will purchase items online today, which is known as Cyber Monday, a 5% decrease from last year's 126 million.
The manufacturing sector continues to be a drag on the U.S. economy as evidenced by the recent weak numbers from the New York State region and today's report from the Chicago area. The Chicago Purchasing Managers Index, a measure of business activity, fell to 48.7, below the 55 expected and down from the 56.2 recorded in October. Readings below 50 indicate contraction, above 50, expansion.
The National Association of REALTORS® reports that Pending Home Sales in October increased 0.2%, below the 0.7% expected following two months of declines. The index is up nearly 4% from a year ago and has produced annual gains for 14 straight months. Pending Home Sales measures signed real estate contracts for existing single-family homes, condos and co-ops. Lawrence Yun, NAR chief economist, says pending sales have plateaued this fall as buyers struggle to overcome a scant number of available homes for sale and prices that are rising too fast in some markets.
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Home prices experienced solid gains across the U.S. as the sector continues to improve. The Case Shiller 20-city Index saw home price gains rise 5.5% on an annual basis from September 2014 to September 2015, up from the 5.1% recorded in August on a year-over-year basis. However, the lofty gains could be shutting many buyers out of the market. The national index rose 0.8% from August to September. "Home prices and housing continue to show strength with home prices rising at more than double the rate of inflation,” said David Blitzer, managing director at S&P Dow Jones Indices, which produces the numbers for the Case Shiller report.
The Bureau of Economic Analysis reported on Tuesday that the second reading for economic growth in the third quarter was revised higher from the initial reading, led by a buildup in inventories. Gross Domestic Product rose to 2.1% from the 1.5% originally reported, but well below the 3.9% recorded in the second quarter. Within the numbers it showed that consumer spending edged lower, though it still remains at a brisk pace of 3%. Gross domestic product is the monetary value of all the finished goods and services produced within a country's borders in a specific time period.
Consumer Confidence declined to the lowest levels since September 2014 as Americans were less favorable on the job market. The Conference Board reported that its Consumer Confidence Index fell to 90.4 in November, below the 99.6 expected and down from the 99.1 registered in October. Within the report it said that those anticipating more jobs in the months ahead declined, while those anticipating fewer jobs increased.
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The National Association of REALTORS® (NAR) reported on Monday that Existing Home Sales in October declined 3.5% from September to an annual rate of 5.36 million units, lower than the 5.50 million expected. Year-over-year, sales were up 3.9%. The NAR said that the WestERN region was hit the hardest with a near 9% decline. The median home price for all housing types was $219,600, which is 5.8% above the $207,500 recorded in October 2014. Inventories declined to 4.5%.A spokesperson from the NAR said
Fannie Mae released its November Economic and Housing Outlook revealing that it sees economic growth rising the fourth quarter of 2015 bringing the yearly total to 2.2% with a slight pickup to 2.4% in 2015. Fannie Mae said that solid consumer spending, an increase in construction activity, home sales and home prices appear poised to offset global headwinds. On the housing end, Fannie Mae expects mortgage rates to rise only gradually through next year, and an improving income trend should support affordability.
Fun facts about Thanksgiving. On December 26, 1941, President Franklin D. Roosevelt signed a joint resolution of Congress changing the national day of Thanksgiving from the last Thursday of the month to the fourth Thursday. The first Macy's Thanksgiving parade took place in New York City in 1924. It featured animals from the Central Park Zoo instead of floats; floats didn't join the route until 1927. The average person consumes 3,000 calories during Thanksgiving dinner. With other meals and snacking included, it can add up to around 4,000 and 6,000 calories.
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The San Francisco Federal Reserve Bank reported this week that it doesn't see another housing bubble forming. In its findings, the bank said that home prices have rebounded and are nearly back to the pre-recession peak. The bank said, "However, conditions in the latest boom appear far less precarious than those in the previous episode. The current run-up exhibits a less-pronounced increase in the house price-to-rent ratio and an outright decline in the household mortgage debt-to-income ratio—a pattern that is not suggestive of a credit-fueled bubble."
Research firm CoreLogic reported this week that cash sales accounted for 31.7% of total home sales in August, down from 34.9% in the same month last year. August rose 0.8% from July. Prior to the housing crisis, the cash sales share of total home sales averaged approximately 25%. According to CoreLogic’s report, the cash sales share typically increases month over month in August due to seasonality in the housing market. CoreLogic does see cash sales to return to pre-recession levels in 2017.
Black Friday deals will be coming early this year and could start as early as this weekend. A spokesperson for BlackFriday.com says deals are spread out over a longer time period this year. Amazon, Best Buy and Costco have already begun to roll out deals, but the "doorbuster" prices will be reserved for Thanksgiving night and Friday. Black Friday is the day after Thanksgiving in the United States. Retailers generally see an upward spike in sales and consider this to be the start of the holiday shopping season. It's common for retailers to offer special promotions and to open early to draw in customers.
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Americans filing for first-time unemployment benefits fell in the latest week and now are near levels seen in the early 1970s. The Labor Department reported on Thursday that Weekly Initial Jobless Claims fell 5,000 in the latest week to 271,000, which was in line with expectations. The four week moving average of claims, which irons out seasonal abnormalities, rose by 3,000 to 270,750, the highest in eight weeks, though still a very low number. The low level of claims signals an improving job market, while the economy remains on a steady upward growth pattern.
Manufacturing activity in the Philadelphia region improved marginally in November. The Philadelphia Fed Index rose to 1.9 in November from the -4.5 recorded in October. Within the report it showed that the new orders and shipment components remained negative, while the employment index improved overall, though there was a decline in average work hours. Manufacturing activity has been edging lower throughout the year, due in part to a decline in the energy sector.
In an about-face, UnitedHealth Group Inc. the U.S.'s biggest health insurer, is considering pulling out of Obamacare, a month after the insurer said that it would expand its presence in the program. The insurer is pulling back on marketing efforts for the plans it's selling this year under the Affordable Care Act, and may exit from that market in 2017. UnitedHealth cited the business has proven to be more costly than expected.
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The Commerce Department reported on Wednesday that Housing Starts in October fell 11% to an annual rate of 1.060 million units versus the 1.173 million expected. October’s numbers hit a seven-month low, but starts remained above the one million mark for seven straight months. This is the longest such streak since 2007. On the brighter side, Building Permits, a sign of future construction, rose 4.1% from September. The data signals a sustainable housing market recovery.
Shares of Apple received a boost this morning after investment banking giant Goldman Sachs said Apple's stock could rise 43% in the next 12 months. Goldman Sachs cited that the iPhone Upgrade Program, Apple Music, and upcoming streaming television products could be a game changer for how the market views the tech giant. The price per share of Apple is currently around $116 and could go to $163, said Goldman Sachs.
The Department of Energy (DOE) recently reported that due to warmer temperatures expected this winter, U.S. consumers will most likely pay less to heat their homes this season compared to last year. For those using propane, expect to see a 27% decline or $767 this season. Homes that heat with oil could see a drop of 15% or $362, while natural gas users will see a savings of 5% or $31. "U.S. households in all regions of the country can expect to pay lower heating bills this winter, because temperatures are forecast to be warmer than last winter and that means less demand for heat," said the DOE's Energy Information Administrator Adam Sieminski.
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Business activity in the New York State region declined for the fourth straight month in November, signaling that manufacturing activity remains weak. The New York State Index fell to 10.7 in November, below the -6.0 expected after falling in October. Within the report, it showed that the new orders and shipments components declined, while the employment numbers were also weak.
Just in time for the Thanksgiving drive to Grandma's house, gas prices should slip this week after the price of oil fell to near $40 a barrel in trading in New York City. The national average price for a regular gallon of gasoline hit $2.15 this week, down from $2.21 a week ago and $2.28 a month ago. "Americans are finding the cheapest gas prices for this time of year since 2008," said Mark Jenkins, spokesman of AAA - The auto club group. "Now that oil prices are falling again, pump prices should get even cheaper as we approach the holiday travel season."
The Mortgage Bankers Association (MBA) reports that its Builder Application Survey showed mortgage applications for new home purchases fell by 8% in October from September. The decline was due in part to the new TRID rules that went into effect recently. The survey tracks application volume from mortgage subsidiaries of home builders across the country. Despite the decrease, the MBA's estimate of new single-family housing sales for October was up more than 7% from a year ago.
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Fannie Mae released its Home Purchase Sentiment Index (HPSI) for October showing a slight decrease from September, falling to 83.2 from 83.8. The survey revealed consumers volatile outlook on both household income improvement and mortgage interest rates which kept housing sentiment relatively flat. The HPSI Household Income component declined and the "Good Time to Buy" and "Good Time to Sell" components also decreased, after picking up in September. These dips suggest hesitancy by some consumers to make long-term financial commitments such as buying or selling a home.
Mortgage rates edged higher this week ahead of a possible Federal Reserve interest rate hike next month. Freddie Mac reported that the 30-year fixed conventional mortgage rate rose. Mortgage rates continue to hover just above the all-time lows.
RealtyTrac reported on Thursday that foreclosure filings, which include default notices, scheduled auctions and bank repossessions, rose 6% in October from September. The rise in filings was due primarily to a 12% increase in foreclosure starts, the largest month-over-month increase since August 2011. The RealtyTrac U.S. Foreclosure Market Report provides a count of the total number of properties with at least one foreclosure filing entered into the RealtyTrac database during the month, broken out by the type of filing.
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Research firm CoreLogic reported that there were 55,000 completed foreclosures nationally, down from 67,000 in September 2014, a 17.6% decrease. The report went on to say that there has been a 52.8% decline since the peak of the foreclosure problems when there were 117,438 foreclosures in September 2010. In addition, completed foreclosures jumped 49.5% from August 2015 to September 2015, which was due in part to the result of an annual public auctioning of thousands of tax-foreclosed properties in Wayne County, Michigan.
With the Federal Reserve almost set to raise interest rates (the Fed Funds Rate) next month, consumers could be impacted. If you are buying a home and using an adjustable rate mortgage (ARM) to finance the purchase, those rates will move higher, as ARMs closely follow the Fed Funds Rate. If you are shopping for a home equity loan, those rates will also increase, as will home equity lines of credit. Interest rates on most credit cards and rates on certificates of deposits, money markets, and savings accounts will increase as well.
On the lighter side, with Thanksgiving right around the corner, here are a few facts: Approximately 46 million turkeys are eaten on Thanksgiving every year. The Macy's Thanksgiving parade began in 1924 with only 400 employees. More alcohol is consumed on Thanksgiving than any other holiday of the year. One last fact, while Turkey does contain tryptophan, which could make us feel drowsy, sleepiness is more likely caused by the over-consumption of alcohol and food, especially desserts.
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Government sponsored entities and mortgage service giants Fannie Mae and Freddie Mac reported last week that their benchmark interest rate for the standard mortgage modification program fell below 4% for the first time since the program began in January 2012. The new rate is 3.875% and has been in effect for Freddie Mac since November 5, while Fannie Mae’s will begin on November 13. The program is "designed to help those borrowers who are ineligible for the Home Affordable Modification Program."
The chances of an interest rate hike from the Federal Reserve grew larger after the strong October Jobs Report was released last Friday. The U.S. economy has been gaining strength in the past year and the Federal Reserve may feel that it is time for interest rates to rise, after being near zero percent since late 2008. If rates do rise, responsible buyers will still have easy access to loans and low-rates, however, banks will demand higher interest payments from less-qualified consumers.
Thanksgiving travel will be a bit less costly this season with airline flight costs lower, along with the price of gasoline if traveling to grandma's by car. Thanksgiving flights for the top 10 destinations are down by an average of nine percent from last year. At the gas pumps, prices are down to a national average of $2.20, the lowest average in over a decade. Hotel prices, however, are expected to rise by five percent, so consumers may want to stay with relatives or friends when traveling during Thanksgiving.
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