United Kingdom (UK) voted to leave the European Union
In a historic referendum, the United Kingdom (UK) voted to leave the European Union with 52% voting to leave and 48% voting to stay late last night. The news sent shockwaves throughout global financial markets, while the U.K.'s gilt hit a 30-year low. Here in the U.S., the Dow Jones Industrial Average plunged 500 points, while the U.S. dollar and gold prices surged. Yields on the major Treasury securities in the U.S. have fallen to four-year lows. As a result of the vote, Prime Minister David Cameron of the U.K. has resigned.
CoreLogic recently reported that cash sales made up 33% of total home sales in March, down 2.4% annually. On a monthly basis, cash sales declined 2.8% from February. In the first quarter of 2016, cash ales averaged 34.7%, the lowest start to any year since 2008. In comparison, before the financial crisis began, cash sales averaged 25% of total sales and ballooned to nearly 47% in January 2011.
Consumer Sentiment edged lower in June, signaling the consumer had a slightly lower view of the economy, even prior to Friday's Stock market decline. The Consumer Sentiment Index came in at 93.5 in June, below the 94.0 expected. Within the report it showed that consumers were more bearish on the economy, while inflation expectations rose. After Friday's crash in the Stock markets, consumers will most likely have an even cooler view on the economy going forward.
RealtyTrac reported today
RealtyTrac reported today that despite mortgage rates being just above all-time lows, loan originations fell to their lowest level in two years. In addition, RealtyTrac’s report showed a 20% decrease in refinance originations from 2015 to 2016. On the flip side, purchase originations rose 3% from a year ago, while home equity lines of credit originations rose 10% from 2015. “After a surprisingly strong 2015, the mortgage refi market started running out of steam in the first quarter of 2016 despite lower mortgage interest rates,” said Daren Blomquist, senior vice president at RealtyTrac. RealtryTrac is the nation's leading source for comprehensive housing data.
Mortgage rates edged lower this week after the weaker than expected April jobs data pushed investors into the safe haven of the Bond markets. When Bond prices increase and yields push lower, mortgage rates tend to decrease, and vice versa. Freddie Mac reported that the 30-year fixed conventional mortgage rate fell to a three-year low of 3.57% with 0.5 added on top in points and fees. A year ago the rate was 3.85%.
First-time unemployment benefits surged in the latest week rising to their highest point in a year, which comes after the slowdown in hiring seen in the April Jobs Report. The Labor Department reported that Weekly Initial Jobless Claims rose by 20,000 in the latest week to 294,000, well above the 270,000 expected. Despite the increase, claims have remained below the 300,000 threshold for 62 consecutive weeks, which is associated with a healthy job market. This was the third consecutive weekly increase as companies deal with the recent economic uncertainty.
Mortgage application volumes rose in the latest week
Credit agency Equifax recently reported that despite fears that the new disclosure rules would curtail mortgage lending, originations in 2015 far exceeded 2014. The Equifax National Consumer Credit Trends Report for March 2016 revealed that there were a total of $1.82 trillion new first mortgages in 2015, a near 43% increase from 2014's $1.27 trillion. To break the numbers down even further, the average dollar amount of new first mortgages rose to $236,057 in 2015, up from the $217,390 in 2014.
Mortgage application volumes rose in the latest week as interest rates declined after Fed Chair Janet Yellen advised a cautious approach to raising interest rates in 2016. The Mortgage Bankers Association reports that its Market Composite Index, a measure of total mortgage loan application volume, rose 2.7% in the latest week, led by a surge in refinancing. Refinance volume jumped 7%, while the total refinance share of mortgage activity increased to 54.5%. Thi, however, is still below levels seen last year this time.
The red hot rental market showed signs of a cool down in the first quarter of 2016 after growing like wildfire in the previous seven quarters. Annual rent gains in the first quarter of 2016 were still a somewhat strong 4.1%, but that is below the 5% increase seen in the first quarter of 2015. Rent gains have been the highest in the largest metropolitan markets, but now are starting to cool a bit. Younger workers were priced out of those large metro areas, and subsequently moved to smaller cities, which are now starting to rise.
Global Stock markets melted down overnight
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.
Freddie Mac reported on Thursday that the 30-year fixed conventional rate ($417,000 or less) fell to 3.65% in the latest week with 0.5 in points and fees. The recent turmoil in global Stock markets has pushed investors over to the safe haven of Treasury and Mortgage Backed Securities. When Bond prices rise, it tends to push mortgage rates lower. The average rate on a 15-year fixed-rate mortgage edged lower to 2.95% from 3.01% last week.