Archives for January 2018

Pending Home Sales decline. Stocks rebounding. ADP Private Payrolls beats expectations.

A low supply of homes for sale on the market continued to plague home buyers in December. The National Association of REALTORS® reports that Pending Home Sales in December rose 0.5% from November, which was just below the 0.6% expected. Year-over-year Pending Home Sales are up 0.5%. Sales slowed in all four major regions of the country. Lawrence Yun, NAR chief economist, says, “Buyers throughout the country continue to be hamstrung by record low supply levels that are pushing up prices — especially at the lower end of the market.”

After two straight days of losses, Stocks are higher being buoyed by strong earnings reports and after President Trump delivered a mostly controversy-free State of the Union last night. The president called for a $1.5 billion infrastructure spending bill. U.S. Stocks are on track for their best January in decades. The closely watched S&P 500 is up 5.7%, its best January gain since 1997 fueled by positive economic data, strong earnings and the recent tax cuts.

Private employers added more new workers than expected in January as the job markets continue to grow. ADP Private Payrolls in January rose by 234,000, well above the 190,000 expected while December was revised lower to 242,000 from 250,000. Within the report it revealed that small businesses added 58,000 workers; medium size businesses 91,000; and large companies 85,000. Mark Zandi, chief economist of Moody’s Analytics, said, “The job market juggernaut marches on. Given the strong January job gain, 2018 is on track to be the eighth consecutive year in which the economy creates over 2 million jobs. If it falls short, it is likely because businesses can’t find workers to fill all the open job positions.”

Consumer Sentiment slips. Refinance applications ramped up in December. Tax cuts should hit American’s wallets soon.

Consumer Sentiment edged lower in early January down from the decade high hit back in October. The index fell to 94.4 after the 95.9 recorded in December. However, consumers reported persistent strength in personal finances and buying plans. The report also revealed that 34% of consumers talked of tax reform with 70% of those saying the new tax reform bill would be positive while 18% said negative.

Leading cloud-based platform provider for the mortgage industry, Ellie Mae, reported this week that refinance applications made up 40% of all closed loans in December. The surge in refinancing was due in part to purchases being down in the winter months and would-be borrowers wanting to close before the new tax laws took effect. “As we closed out 2017 we saw an increase in the percentage of refinances due to seasonality as fewer purchases take place in the fourth quarter, and likely homebuyers were taking advantage of the mortgage deductibility limit before it decreased to $750,000 on December 15th,” said Jonathan Corr, president and CEO of Ellie Mae.

The new Tax Cut and Jobs Act bill should see Americans money taxed at lower rates starting February 1. Corporations are steadily increasing wages, giving bonuses, upping 401K contributions and hiring anyone they can. This is all powerful for housing. With consumer confidence already the highest in this century, that number should grow as tax reform actually starts to hit the wallets of America.

Wholesale inflation declines. Mortgage rates edge higher. Walmart raises starting salaries, gives cash bonuses.

Wholesale inflation declined for the first time in nearly 1 1/2 years in December from November amidst decreasing costs for services. The Bureau of Labor Statistics reports that the Producer Price Index (PPI) declined 0.1% in December, well below the 0.4% recorded in November. On an annual basis, the PPI rose 2.6%, after the 3.1% rise seen in November. The more closely watched inflation reading Consumer Price Index will be released Friday morning.

Mortgage rates edged higher this week as Bond prices declined and yields increased. U.S. Stocks continue to push higher pressuring Bond prices lower. When Bond prices decline, mortgage and interest rates tend to rise. Freddie Mac reports that the 30-year fixed-rate mortgage rose 4 basis points to 3.99% with an average 0.5 in points and fees. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.

Retailing giant Walmart announced on Thursday that it will be raising its starting wage rate for hourly employees to $11 an hour after the Tax Cut and Jobs Act was passed in December. In addition, workers that are employed 20-years will receive a one-time cash bonus of $1000, $750 for those employed 15 to 19 years of service, 10 to 14 years $400, five to nine years $300, two to four $250 and workers with less than two years will receive $200. The wage increases are expected to cost Walmart $300 million.

Housing Affordability Remains a Persistent Challenge

Fannie Mae released its Home Purchase Sentiment Index which fell 2 points in December to 85.8, reversing last month’s rise. The net share of respondents who said now is a good time to buy a home declined while the net share who reported that now is a good time to sell a home remained flat. “Entering 2018, housing affordability remains a persistent challenge, particularly in rental markets, where consumer expectations for price increases over the next 12 months reached a new survey high,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.

The holiday shopping season paid off well for retailer Kohl’s as comparable sales grew by nearly 7% during November and December. That is well above the 4.9% gain on overall sales estimated by MasterCard for the holiday shopping season. The uptick in sales was accomplished by handling returns for Amazon, shrinking hundreds of stores instead of closing them while bringing in new brands, such as Under Armour.

The New Year has ushered in the highest gas prices at the pumps since 2014 due in part to higher travel volumes over the holidays coupled with rising oil prices. The national average price for a regular gallon of gasoline is at $2.49, with motorists in the Northeast, South and upper Midwest seeing pump prices rise as much as $0.13 from more than a week or two ago. However, now that holiday traveling season is over, motorists can expect gas prices to trend cheaper this month as gasoline demand eases.

Job growth eases in December.

Friday – January 5

The Labor Department reports that 148,000 new jobs were created in December, below the 188,000 expected, while November was revised higher to 252,000 from the 228,000 originally reported. It was the 87th month in a row for job growth, the longest stretch of growth on record. The Unemployment Rate remained at 4.1%, a 17-year low.

Within the report it showed that average hourly earnings rose 0.3% from November’s 0.2% and increased 2.5% year over year, above the 2.4% annually in November. The U6 number, which measures total unemployment, fell to 8.1% in December, down from 9.1% in December 2016. So, overall, it was a good report.

The service sector of the economy edged lower in December signaling continued growth though at a slightly slower pace. The ISM Service Index fell 1.5 points to 55.9 in December and below the 57.6 expected. Despite the small decline, December was the 96th consecutive month of economic growth in the service sector. A reading above 50 for the index indicates expansion in the service sector, and a reading below 50 signals contraction. Within the report it revealed that the employment component edged higher.

Home prices continue their winning ways.

CoreLogic reports that home prices nationwide, including distressed sales, jumped 7% from November 2016 to November 2017 and increased 1% month over month from October to November. Looking ahead, price gains are expected to cool a bit as CoreLogic sees a 4.2% increase from November 2017 to November 2018. CoreLogic’s chief economist, Frank Nothaft, said, “Growing numbers of first-time homebuyers find limited for-sale inventory for lower-priced homes, leading to both higher rates of price growth for starter homes and further erosion of affordability.”

Online real estate database company Zillow reports that the total value of all U.S. homes in 2017 was $31.8 trillion. The top cities for value were Los Angeles at number one worth $2.7 trillion followed by New York at $2.6 trillion. The $31.8 trillion is more than 1.5 times the Gross Domestic Product (GDP) of the U.S. and approaching three times the size of China’s GDP. In 2017, renters spent a record $485.6 billion with renters in New York and Los Angeles spending the most.

The last week of 2017 saw mortgage rates hit a five-month high though still below the rates seen at the end of 2016 and early 2017. Freddie Mac reported last Thursday that the 30-year fixed-rate mortgage hit 3.99% with an average 0.5 in points and fees. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.