Home prices rose year over year in June, albeit at a slower pace than previous months. Consumer Confidence soars.

Home prices continued to rise in June, but at a slightly slower pace than in the past. The S&P/Case-Shiller 20-City Home Price Index rose 6.3% from June 2017 to June 2018. This was slightly below the 6.4% expected and down from the 6.5% recorded in May. Month over month, prices rose 0.1% from May to June. “We are seeing signs that growth is easing in the housing market … 30-year fixed rate mortgages rose from 4% to 4.5% since January – and the rise in home prices are affecting housing affordability,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices.

Americans attitudes surrounding the U.S. economy and its components soared to levels not seen in 18 years in August. The Conference Board reports that its Consumer Confidence Index increased in August to 133.4, up from 127.9 and above the 126.5 expected. Consumers’ assessment of the business and labor markets rose, which suggests high confidence levels should continue to support healthy consumer spending in the near term.

Freddie Mac released its August forecast on the housing market showing that “ongoing supply and demand imbalances and weakening affordability conditions, particularly in markets out West, are expected to keep a lid on home sales growth through the rest of the year.” Freddie Mac predicts that the 30-year fixed-rate mortgage will average 4.6% in 2018. The report also showed that total home sales are to increase modestly this year to 6.14 million while home price growth will rise 6%. In addition, total originations are forecasted at $1.655 trillion, down 8.4% from 2017.

Retailers benefit from strong U.S. economy. House prices continue to rise. Fed Chair Powell says strong economic growth to continue.

The U.S. economy has been growing at a strong pace in 2018 with second quarter Gross Domestic Product at a robust 4.1%. This week, Target CEO said, “We’re currently benefiting from a very strong consumer environment, perhaps the strongest I’ve seen in my career.” Retailers have recently reported the strongest sales in over a decade. Consumer spending makes up two-thirds of economic activity and as Americans spend money, economic growth should continue.

The Federal Housing Finance Agency reports that home prices rose 1.1% in the second quarter of 2018 in its House Price Index (HPI), as low inventories continue to push prices higher. House prices were up 6.5% from the second quarter of 2017 to the second quarter of 2018. On a monthly basis, prices were up 0.2% from May to June. The HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac.

Fed Chair Powell spoke at the Fed sponsored Jackson Hole Economic Symposium today, which was eagerly anticipated this week. Mr. Powell said that gradual rate hikes seem appropriate and he expects strong economic growth to continue. The Federal Reserve will do whatever it takes on inflation but there are no clear signs of it accelerating above its target range of 2%. Mr. Powell went on to say that the U.S. economy does not seem to be showing signs of overheating. Most people who want jobs can find them.

Toll Brothers reports strong earnings. U.S. Stocks in the midst of longest bull-market run in history.

Luxury homebuilder Toll Brothers reported strong earnings and forecasted solid guidance going forward in yesterday’s corporate earnings release. Rising orders along with a healthy economy sent completed sales up 18% from a year earlier. The company reported earnings per share of $1.26, well above the $1.03 expected. Douglas C. Yearley, Jr., Toll Brothers’ chief executive officer said, “Our double-digit growth in revenues, contracts and backlog and our strong earnings reflect the health of the new home industry in general and our unique position in the luxury market.”

U.S. Stocks are in the midst of the longest-ever bull market in American history. Fueled by tax cuts, solid economic growth, relatively low interest rates, strong corporate earnings and sky-high consumer confidence, the current bull-market that began on March 9, 2009, has lasted nine years, five months and 13 days … the longest stretch ever. The closely watched S&P 500 Stock Index is just six points below its all-time closing high of 2,872, hit back on January 26.

Percentage of closed purchase loans held steady in July. Consumer Sentiment edges lower. CEO pay rates skyrocket.

Ellie Mae released its Origination Insight Report for July this week showing that the percentage of closed purchase loans held steady at 71% of total loans closed in July for the second straight month. Ellie Mae reports the average 30-year interest rate for all loans edged higher to 4.91% from 4.90% in June and a new Origination Insight Report high. “The purchase market remained solid in July and as we see inventories rise, we might begin to see a transition to a buyer’s market,” said Jonathan Corr, president and CEO of Ellie Mae. “The summer home buying season is still in full swing and while interest rates have risen, we expect to see a continued increase in purchase percentages.”

Consumer sentiment edged lower in early August and slipped to its lowest level since September 2017 concentrated in the bottom third of the income distribution. The Consumer Sentiment Index in August fell to 95.3, below the 97.8 expected and down from 97.9 in July. Consumers said that buying conditions for large households durable items fell to the lowest levels in four years. Home buying conditions were viewed less favorably in early August than anytime in the past 10 years, with home prices judged less favorably than anytime since 2006.

The pay rates between top chief executive officers and the average worker continued to widen in 2017. There was a 17% increase for the top guy with an average of $18.9 million a year compared with hardly a budge in wages for the average worker. The $18.9 million includes salaries, bonuses, restricted stock grants and other forms of compensation. The average worker pay grew by 0.2%.

Small business optimism at record high levels. Home Depot reports blowout earnings. Strong economic growth forecast for 2018.

Small business owners continue to express optimism due in part to a strong U.S. economy. The NFIB Small Business Optimism Index rose to its second highest level in the survey’s 45-year history to 107.9 in July, just a whisker away from its record-high of 108 set back in July 1983. Small businesses are one of the backbones of the U.S. economy and employ millions of Americans. “Small business owners are leading this economy and expressing optimism rivaling the highest levels in history,” said NFIB President and CEO Juanita Duggan. “Expansion continues to be a priority for small businesses who show no signs of slowing as they anticipate more sales and better business conditions.”

The world’s largest home improvement center, Home Depot, posted blowout earnings in its latest quarter due in part to strong home-improvement activity and a robust U.S. economy in the second quarter. Home Depot reported earnings per share of $3.05 versus the $2.84 expected while revenues came in at $30.46 billion, above the $30.03 billion expected. A slow start to the spring season, due to cooler weather pushed shoppers to purchase their spring gardening needs in the second quarter. The company has raised its earnings forecast for the full year.

The Congressional Budget office (CBO) reports that economic growth will be strong in 2018 but will ease in 2019 as fiscal stimulus eases. The CBO predicts that Gross Domestic Product will grow 3.1% in 2018, above the 2.2% recorded in 2017 due to increased government spending, reduction in taxes, and faster growth in private investment. The CBO went on to say that in 2019, the pace of GDP growth slows to 2.4% in the agency’s forecast as growth in business investment and government purchases slows.

Housing affordability at a 10-year low. Consumer inflation tame in July from June. Gas prices at the pumps steady.

Rising home prices and mortgage rates pushed housing affordability to lows not seen in a decade in the second quarter of 2018, reports the National Association of Home Builders. From the beginning of April to the end of June, 57.1% of all new and existing home were affordable, down from 61.6% in the first quarter. The national median home price rose from $252,000 in the first quarter of 2018 to $265,000 in the second quarter, the highest quarterly median price in the history of the Housing Opportunity Index. At the same time, average mortgage rates surged by more than 30 basis points in the second quarter to 4.67% from 4.34% in the first quarter.

Consumer inflation remained tame in July from June but year-over-year core consumer inflation rose the most in 10 years. The Consumer Price Index (CPI) rose 0.2% in July from June in line with estimates as rising shelter costs offset a drop in energy prices. Over the past 12 months, CPI rose 2.9%, unchanged. However, the Core CPI, which strips out food and energy, rose 2.4%, the highest rate since September 2008. But inflation remains on the tame side with no evidence of a spike higher in the coming months.

Gas prices at the pumps remained unchanged today from last week, despite lower oil prices. Motorists are still paying the highest August prices since 2014. The national average price for a regular gallon of gas is $2.87, the same from a month ago but up $0.50 from last year this time. Motorists should see lower prices by mid-September as the summer driving season winds down in a few weeks.

Home price gains solid in June. Mortgage credit availability increased in July. Buying a home considered most stressful event for consumers.

Home price gains remained strong in June. CoreLogic reports that home prices, including distressed sales, rose 6.8% from June 2017 to June 2018 and increased 0.7% month over month from May to June. Over the next year, gains are expected to slow as further increases in home prices and home loan rates could erode affordability and dampen sales and home-price growth. CoreLogic forecasts a 5.1% increase from June 2018 to June 2019 while month-over-month home prices are expected to be unchanged from June to July of this year.

Mortgage credit availability continued to increase in July for the third month in a row fueled by an increase in conventional credit supply. The Mortgage Bankers Association’s Mortgage Credit Availability Index rose 1.7% in July after gains in both May and June. From a year ago, the index has increased 2.8%. The MCAI is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.).

A recent survey revealed that buying a home can be exhausting, confusing and complicated. Homes.com reports that in a survey of 2,000 Americans, 40% say that purchasing a home can be the most stressful event in modern life while another 44% said they felt nervous throughout the whole home buying process. In addition, about 33% of those surveyed admitted to shedding tears at some point during the process. “At the end of the day, buying a home is often the largest purchase the average American will experience in their lives,” said David Hoegerman, Homes.com senior manager of content.

Home prices rise. Home affordability declining. Consumer Confidence strong

Home prices rose steadily across the nation in May though affordability issues may come into play in the months ahead. The S&P CoreLogic Case-Shiller 20-City Home Price Index rose 6.5% from May 2017 to May 2018. This was in line with expectations and just below the 6.7% recorded in April (revised from 6.6 percent). On a monthly basis, home prices were up 0.7% from April to May.
David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices says, “Home prices continue to rack up gains two to three times greater than the inflation rate.” In addition, “Affordability – a measure based on income, mortgage rates and home prices – has gotten consistently worse over the last 18 months. All these indicators suggest that the combination of rising home prices and rising mortgage rates are beginning to affect the housing market.”
Consumer Confidence rose in July to its second highest level in 2018 with consumers feeling that economic growth is still strong. The Consumer Confidence Index rose to 127.4 in July, above 127.1 in June. Within the report it showed that those stating business conditions are “good” increased, while those saying business conditions are “bad” declined. Consumers’ assessments of the labor market were also more favorable. Those claiming jobs are “plentiful” increased, while those claiming jobs are “hard to get” were virtually unchanged.

Gross Domestic Product surges. Economic data ramps up next week. Gas prices at the pump unchanged.

Economic growth surged in the second quarter of 2018 due in part to a big rise in consumer spending. The Bureau of Economic Analysis reported that Gross Domestic Product rose 4.1% from the 2.2% recorded in the first quarter, which was revised up from 2%. The 4.1% was in line with expectations. Within the report, it showed that consumer spending jumped 4 percent in the second quarter from the dismal 0.5% from the first quarter. Overall, it was a solid report. Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period. It is considered the broadest measure of economic activity.

The investing community will have all eyes and ears glued to economic data next week as well as the Fed’s monetary policy statement being released on Wednesday. The week’s economic data includes reports on housing, manufacturing, consumer confidence, inflation and the granddaddy of all reports … the Jobs Report for July. The Jobs Report includes Non-Farm Payrolls and the Unemployment Rate. The two-day Federal Open Market Committee meeting kicks off on Tuesday and ends Wednesday with the 2:00 p.m. ET release of the Fed statement.

Gas prices at the pumps remained unchanged from last week as we are now well into the summer driving season. The national average price for a regular gallon of gasoline is at $2.85 today, unchanged from last week and up from $2.28 a year ago. Prices should begin to ease a bit sometime in September when Americans get back from vacations, school begins and when motorists tend to drive less.

Home prices push higher. Median home prices at record highs. Higher shares of Google lifts Stocks.

A shortage of homes for sale on the market continued to drive home prices higher in May, reports the Federal Housing Finance Agency (FHFA). The FHFA’s House Price Index (HPI) rose 0.2% in May from April, +6.4% from May 2017 to May 2018. The FHFA monthly HPI is calculated using home sales price information from mortgages sold to or guaranteed by Fannie Mae and Freddie Mac.

RE/MAX reports that home prices surged in June to a fresh record high, while inventories shrank. The national median home sale price in June was $258,500, a new record for the nine years that RE/MAX has tracked the housing market. As far as the amount of homes for sale on the market, 42 of the 54 metro areas reported a decline to a 2.7-month supply, an 8.8% drop from a year earlier and the lowest inventory number ever recorded for June. “Lack of inventory has become a theme for the year,” said RE/MAX CEO Adam Contos. “Having fewer homes to choose from poses a challenge for buyers, who need to be ready to act decisively and quickly.”

U.S. Stocks are rallying in response to a strong corporate earnings season. Google reported better-than-expected earnings yesterday, which is lifting all Stocks and FAANG (Facebook, Apple, Amazon, Netflix, Google) shares this morning. Of the 90 companies in the S&P 500 that have reported earnings so far, 82% have exceeded expectations. The U.S. economy is humming. In addition, Consumer Confidence is near all-time highs while small business optimism is at peak levels.