New Home Sales in November rose 5.2% from October
The Commerce Department reported that New Home Sales in November rose 5.2% from October to an annual rate of 529,000, the highest rate in four months. The 529,000 was above the 573,000 expected and up 16.5% from November 2015. Sales were unchanged in the Northeast and jumped 43.8% in the Midwest, highest since October 2007. Sales declined 3.1% in the South, but rose 7.7% in the West to their highest level since January 2008. The inventory of new homes stands at a 5.1 month supply, just below the 6.0% that is considered a healthy balance between supply and demand.
The final reading on December Consumer Sentiment rose to 98.2 as the euphoria from the presidential election continued to lift the spirits of consumers around the country. The 98.2 was a 14-year high. The survey revealed that an all-time record number of consumers (18%) spontaneously mentioned the expected favorable impact of Trump's policies on the economy. In addition, consumers anticipated that a stronger economy would create more jobs, although expected wage gains were quite meager.
Mortgage rates rose this week after last week's decline but remain at historically low levels.
Mortgage rates rose this week after last week's decline but remain at historically low levels. Freddie Mac reported on Thursday that the 30-year fixed conventional mortgage rate increased to 3.54% from 3.47% with 0.5 in points. Points are fees paid to a lender equal to 1% of the loan amount. Freddie Mac said that last week's edge up in inflation data drove Bond yields higher and Mortgage Bond prices lower, which contributed to the increase in mortgage rates.
Americans filing for first time unemployment benefits continue to hover near multi-decade lows as the sector has improved dramatically since the end of the Great Recession back in mid-2009. The Labor Department reported that Weekly Initial Jobless Claims rose 7,000 to 265,000 in the week ended October 28, which was above the 258,000 expected. Claims have now remained below the 300,000 mark for 87 straight weeks, which is normally associated with a robust job market. The four-week moving average of claims, which strips out volatile food and energy, rose 4,750 to 257,750.
RealtyTrac reports that median home prices rose to all-time highs in the third quarter of 2016, rising above pre-recession levels. The median home price rose to $230,000 in the third quarter, up 10% from last year and 1% above the peak in 2005 of $227,000. Cash sales also declined in the third quarter, falling to 27.4% of total home sales. This is down from 29.2% last year and the lowest level of cash sales since the third quarter of 2007’s 24.3%.
Interest rate hike declined.
Chances of an interest rate hike declined today after dovish comments from Federal Reserve Governor Lael Brainard yesterday. Ms. Brainard's dovish comments dialed back the previous hawkish statements by several Fed members in the past week. Ms. Brainard said that she would like to see a stronger trend in U.S. consumer spending and evidence of rising inflation before the Fed raises rates. The two-day Federal Open Market Committee meeting takes place next week on Tuesday and Wednesday. The probability for a hike to the short-term Fed Funds Rate has dropped to just 11%.
The U.S. Census Bureau reported on Tuesday that household income rose by 5.2% between 2014 and 2015 while the poverty rate decreased by 1.2%. In the same time, the percentage of people without health insurance coverage decreased. Household income was $56,500 in 2015 from the $53,718 recorded in 2014. However, household income in 2015 was 1.6% lower than in 2007, and 2.4% below the peak that occurred in 1999.
Analytics firm CoreLogic reported this morning that completed foreclosures totaled 34,000 in July, down 16.5% from the July 2015 number of 41,000. By comparison, before the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006. On a month-to-month basis, completed foreclosures were down 3.9%. "Loan modifications, foreclosures, and stronger labor markets have each played a role in bringing the foreclosure rate to the lowest level in nine years," said Frank Nothaft, chief economist at CoreLogic.
Applications to purchase and refinance homes fell in the latest week.
Despite three-year lows for mortgage rates, applications to purchase and refinance homes fell in the latest week. The Mortgage Bankers Association (MBA) reported on Wednesday that its Market Composite Index, a measure of total mortgage application volume, fell 2.6% in the latest week. However, they are up 38% from a year ago, when mortgage rates were higher. Within the report it showed that the refinancing index decreased 2%, while the purchase index fell 3%. The MBA also said that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) dropped to its lowest level since May 2013, falling to 3.75% from 3.76% the previous week.
The National Association of REALTORS® reported on Wednesday that May Pending Home Sales fell 3.7% due in part to low inventories of homes for sale on the market. The -3.7% was less than the -.1.4% expected. From May 2015 to May 2016, Pending Home Sales are down 0.2%, the first annual loss since August 2014. Lawrence Yun, NAR chief economist, says pending sales slumped in May across most of the country. “With demand holding firm this spring and homes selling even faster than a year ago, the notable increase in closings in recent months took a dent out of what was available for sale in May and ultimately dragged down contract activity,” he said.
Due to the ongoing fallout from last week's Brexit vote, Fitch Ratings says that mortgage rates could hit all-time lows as the dust settles from the U.K. leaving the Eurozone and the euro currency. Fitch says that the uncertainty surrounding the U.Kk.'s exit, could push investors further into both Treasury and Mortgage Backed Securities. As prices rise for those vehicles rise, interest rates tend to push lower. They work in an inverse relationship. The all-time low seen for the 30-year fixed conventional mortgage rate ($417,000 or less) hit 3.31% in November 2012. If a push below the 3.31% level happens, it would drive many homeowners to refinance their outstanding mortgages, says Fitch.