The Housing Chronicles Blog

Thursday, November 29, 2018

Personal income rose 0.5 percent in October vs. 0.6 percent rise in personal spending

Both personal and disposable income rose 0.5 percent in October, versus a rise of 0.6 percent for personal spending, resulting in the personal savings rate slipping to 6.2 percent.


October Pending Home Sales Index down 2.6 percent from September and 6.7 percent year-on-year

The Pending Home Sales Index  decreased 2.6 percent to 102.1 in October, down from 104.8 in September. Year-over-year contract signings dropped 6.7 percent, making this the tenth straight month of annual decreases.


October PCE Price Index up 0.2 percent from September and 2.0 percent year-on-year

The Fed-preferred October PCE price index increased 0.2 percent from September, and 2.0 percent year-on-year. Excluding food and energy, the PCE price index increased 0.1 percent from September and 1.8 percent year-on-year.


Wednesday, November 28, 2018

Mortgage applications rebound 5.5 percent as fixed rates slip four basis points

The Market Composite Index increased 5.5 percent on a seasonally adjusted basis from one week earlier, with purchase loans up 9.0 percent and refinance activity up 1.0 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.12 percent from 5.16 percent.


October new home sales declined 8.9 percent from September and 12.0 percent year-on-year

Sales of new single-family houses in October 2018 fell 8.9 percent from September and 12.0 percent year-on-year to the lowest rate in nearly three years, or an annualized rate of 544,000 units.  Meanwhile, inventory rose to 7.4 months, the highest level in 7.5 years.


Monday, November 26, 2018

November private sector output index dips to 54.4, but still well in positive territory

The IHS Markit Flash U.S. Composite PMI Output Index registered 54.4 in November, down from
54.9 in October but still well above the 50.0 no-change threshold.


October Leading Economic Index up slightly, but pace of improvement slower

The US Leading Economic Index (LEI) increased slightly in October, but the pace of improvement slowed for the first time since May. Although the index still points to robust economic growth in early 2019, the rapid pace of growth noted for much of 2018 may already have peaked.


Thursday, November 15, 2018

October Home Purchase Sentiment Index dipped 2.0 points to 85.7

The Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased in October, falling 2.0 points to 85.7, continuing its recent downward trend. The decline can be attributed to decreases in five of the six components, including those measuring consumers' home buying and selling attitudes.


October retail sales rebound 0.8 percent from September and 4.6 percent year-on-year

Retail sales rebounded sharply in October, following two months of small declines.  Advance estimates of U.S. retail and food services sales for October 2018 were $511.5 billion, an increase of 0.8 percent from the previous month, and 4.6 percent above October 2017.


Wednesday, November 14, 2018

October CPI jumped up 0.3 percent, rose 2.5 percent year-on-year

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in October, the largest increase in nine months.  Over the last 12 months, the all-items index rose 2.5 percent before seasonal adjustment.


Mortgage applications fall to lowest level since December 2014 in weekly update

The Market Composite Index decreased 4.0 percent on a seasonally adjusted basis from one week earlier to the lowest level since December 2014, with purchase loans falling 5.0 percent and refinance activity down 3.0 percent. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 5.15 percent from 5.11 percent.


Monday, November 12, 2018

CoreLogic: Home price growth slowing, thru September up 5.6 percent year-on-year

According to CoreLogic, national home prices increased 5.6 percent year over year in September 2018, and are forecast to increase 4.7 percent from September 2018 to September 2019. The September HPI gain was the slowest year-over-year gain since January 2017. An analysis of the market by price tiers indicates that lower-priced homes experienced significantly higher gains.


Producer Price index jumped 0.6 percent in October, up 2.9 percent year-on-year

The Producer Price Index for final demand rose 0.6 percent in October, a sharp increase from September (0.2 percent) and August (0.1 percent).On an unadjusted basis, the final demand index increased 2.9 percent for the 12 months ended in October.


Saturday, November 10, 2018

2018 in Review: A Stronger Economy vs. a Slowing Housing Market

About this same time a year ago, I wrote about an economy which was gradually building enough strength to spark inflation, thus impacting costs for suitable land, labor and materials.  Following that, the tax cuts enacted at the beginning of 2018 have certainly turbo-charged an already improving economy, resulting in robust consumer confidence, more job openings than candidates to fill them, and the lowest unemployment rate in nearly 50 years.

For the housing market, however, rising interest rates, lack of inventory and high prices have definitely conspired to slow sales for both new and existing homes.

U.S. GDP growth, which averaged 2.3 percent in 2017, surged to 4.2 percent by the second quarter of 2018, slipping to a still-strong advance estimate of 3.5 percent during the third quarter.  Notably, it was increasing consumer spending during the third quarter which made up for a slowdown in business investment. Still, current forecasts are suggesting this rate of growth to fall below 3.0 percent during the final quarter of the year.

Job growth, which rose by 250,000 in October, averaged 212,500 per month through the first ten months of 2017 (up 18.3 percent from the same period of 2017), with much of that growth noted in the fields of construction, manufacturing, health care and professional services.  In addition, October’s official unemployment rate of 3.7 percent is the lowest reported since mid-1969.

Not surprisingly, as of the end of September, the number of unfilled jobs was nearly 18 percent higher than the number of officially unemployed persons, which is the primary reason we’re starting to see more wage inflation of close to 3.0 percent per year.

Speaking of inflation, the Federal Reserve has been keeping it mostly in check so far in 2018 with three rate hikes, and a fourth planned for December.  However, given that the Producer Price Index – which tracks wholesale input prices – jumped by 0.6 percent in October (or three times what was forecast), the odds for that fourth rate hike have certainly increased.

Still, the Consumer Price Index remains fairly tame, rising by 2.3 percent year-on-year through September versus 2.1 percent in 2017.  Moreover, the annual increase in the Fed-preferred PCE Price Index has been trending lower since the summer months, falling to 2.0 percent by September.

Consumer confidence has also helped prop up the economy in 2018, with the University of Michigan’s widely watched sentiment index remaining at its highest year-to-date level since 2000.  Even stock market volatility, inflation and polarized politics have done little to dent consumer confidence, with consumers feeling flush enough to tap their savings or borrow money to fund their purchases.

Nonetheless, a booming economy with rising inflation and home prices often takes an eventual toll on the housing market.  Although builder confidence remained strong at 68 in October, building permits took a breather in September, slipping slightly from both the previous month and the same month of 2017.  September housing starts also dipped moderately from August, but were up 3.7 percent year-on-year.

Yet it was September’s preliminary new home sales which dropped the most, falling 13.2 percent year-on-year to the lowest level in nearly two years as the months of supply jumped to 7.1 months, the highest since March of 2011.  However, since this data is regularly revised, it’s possible that new home sales have merely flattened out in line with building permits.

In its own survey, the Mortgage Bankers Association showed September new home mortgage applications up 8.2 percent year-over-year, and year-to-date sales for 2018 were still up 3.1 percent versus 2017.

For existing homes, a combination of low inventory for starter homes and higher interest rates helped drive down September sales down 4.1 percent year-on-year, for the lowest annual sales rate since November 2015.

Unsold inventory rose slightly to a 4.4-month supply, up from 4.2 months a year ago, while the median sales price rose 4.2 percent, for the 79th straight month of year-on-year gains. Although September pending home sales did rise slightly from August, they were still down 1.0 percent year-on-year, and have fallen on an annual basis for nine consecutive months.

Another indicator of affordability, the NAHB/Wells Fargo Housing Opportunity Index, fell to 56.4 percent in the third quarter of 2018, for the lowest rate since the same quarter of 2008, and down sharply from the last peak of 77.5 in 1Q 2012.  Consequently, in the months ahead, look for more affordable supply and rising wages to counteract higher interest rates in order to keep the housing market humming.

Friday, November 9, 2018

Fed: Keep interest rates at current levels for now

Information received since the Federal Open Market Committee met in September indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate.  On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent.  In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 2 to 2-1/4 percent.