Shelter Six:  Long-Term Economic Outlook Favorable

February 25, 2019 by · Leave a Comment 

The bad news.  Existing Home Sales declined in January for the 6th straight month, were 11% lower than a year ago, and down to the lowest level since November 2015.

The reason why.  Home Sales have been affected over the last few months by one-time events like the government shutdown, stock market volatility, and the election that should all be things of the past.

Good inventory news.  Inventory is finally on the rise climbing for the 4th straight month and 6.4% higher than a year ago.

Favorable outlook.  The longer-term outlook with home sales is favorable as employment is strong, incomes are rising, interest rates are holding steady, and more Millennials are buying.

A major international concern has been trade tensions between the U.S. and China.  The U.S. was scheduled to increase tariffs on Chinese goods 10-25% on Saturday.

After a weekend of “substantial progress”, however, President Trump has agreed to postpone raising tariffs in hopes of negotiating a more comprehensive trade agreement.

Rate Update

There were few surprises in the world of economic news last week and mortgage rates have stayed virtually unchanged throughout all of February.

This Week

Housing Starts are due out on Tuesday, Pending Home Sales on Wednesday, GDP on Thursday, and ISM National Manufacturing Index and Core PCE Price Index on Friday.

Shelter Six:  Inflation Flat but Retail Sales Down

February 18, 2019 by · Leave a Comment 

Inflation still not a threat.  The most recent major inflation data came in very close to expected levels and had little impact on mortgage rates.

Retail Sales way down.  Consumer spending accounts for about 70% of all economic activity in the U.S., so Retail Sales figures are a key indicator.

December Retail Sales figures were delayed due to the government shutdown, but finally came out last week and were much less than anticipated with the biggest drop since 2009.

First American’s Real House Price Index (RHPI) measures home price changes adjusted for consumers’ home-buying power as impacted by income and interest rate changes.

The RHPI indicated that 2018 U.S. home prices were up a whopping 15.3% from November 2017 to November 2018.

While unadjusted house prices are now 1.8% above the housing boom peak in 2006, the RHPI indicates that real house prices are actually 35.3% below the 2006 peak.

Rate Update

The last-minute compromise bill to avert another government shutdown put upward pressure on mortgage rates but was offset by the weak Retail Sales figures and, as a result, mortgage rates ended last week unchanged.

This Week

It’s a very light week for economic data.  The minutes from the January 30 Fed meeting are due out on Wednesday with both Durable Orders and Existing Home Sales due out on Thursday.

Shelter Six:  GDP Forecasts Solid for U.S. but Down in Europe

February 11, 2019 by · Leave a Comment 

1. Although the 2019 forecast for U.S. GDP remains around 2.5%, global GDP has emerged as a key economic concern early in the new year.

2. Last week, 2019 GDP forecasts were sharply reduced for Europe (1.9% to 1.3%), Germany (1.8% to 1.1%), and the UK (1.7% to 1.2%).

3. A major concern over the next month will be ongoing trade negotiations with China, which appear to be progressing very slowly.  U.S. tariffs are set to increase again on March 1.

4. Another major concern is the British exit from the EU (Brexit), which is scheduled to occur on March 31 and the terms of the departure still have not been finalized.

5. Encouraging news to report, Fannie Mae’s January National Housing Survey showed more people believe it is a good time to buy a home.

6. The survey showed home buyer purchase sentiment rebounding nicely after a drop in December as respondents reported higher incomes and less concern about job loss.

Rate Update

Mortgage rates trickled down a little last week and are now lower than the same date a year ago for the first time since early 2018 with the Conventional 30 Year Fixed-Rate now below 4.5% for the best-qualified borrowers.

This Week

The JOLTS Report is due out on Tuesday, the Consumer Price Index (CPI) on Wednesday, and Retail Sales on Thursday.

Shelter Six:  Many Now Projecting Fewer Rate Hikes in 2019

February 4, 2019 by · Leave a Comment 

1. As expected, the Fed did not increase short-term rates last week. Not expected, however, were comments from Fed members that point to fewer Fed rate hikes in 2019.

2. The Fed is now also considering selling fewer Treasuries and mortgage-back securities than previously indicated, which would go a long way in helping keep mortgage rates low.

3. Friday’s Employment figures were very strong once again with 304K jobs added in January.  What seemed like a stellar report, however, turned out to be a bit of an illusion.

4. The Employment figures were skewed due to distortions from the government shutdown and unusual weather. The report was solid but not quite as strong as it first appeared.

5. The government shutdown, which lasted from December 22 to January 25, continues to cause delays in the release of some key economic data.

6. The economic reports are produced by government agencies, which continue to play catch up and release the data as they are able.

Rate Update

Mortgage rates fell slightly last week mostly on the heels of a Federal Reserve meeting that implied there will be fewer Fed rate hikes in the future than anticipated.

This Week

The ISM National Services Index is due out on Tuesday. As government agencies continue to catch up, there may be other unplanned economic reports released during the week, too.