Shelter Six:  New Consensus that No More Rate Hikes Needed in 2019

March 25, 2019 by · Leave a Comment 

Comments from Federal Reserve Members after last week’s Fed meeting surprised many as the new consensus is that no more short-term rate hikes will be needed this year.

The Fed also surprised by announcing that it will slow the pace of its bond repurchase program and end it altogether in September.

Fed officials also modestly lowered the outlook for U.S. economic growth in 2019 from 2.3% to 2.1%.

February Existing Home Sales jumped 12% from January, far more than expected.

February’s inventory of homes for sale was at a 3.5-month supply, 3% higher than a year ago but still below the 6-month healthy balance between buyers and sellers.

February’s median existing-home price was 4% higher than a year ago.

Rate Update

Big announcements from the Fed along with a lower outlook for global economic growth contributed to mortgage rates dropping sharply last week to the lowest levels in over a year.

This Week

Housing starts will be released on Tuesday, Pending Home Sales on Thursday, and both New Home Sales and Core PCE Price Index on Friday.

Shelter Six:  Three Straight Years of More Buyers Than Renters

March 18, 2019 by · Leave a Comment 

A vote passed last week extending the Brexit departure date from March 29 to June 30, but there continues to be great uncertainty around if and when the UK will leave the EU.

Last week’s inflation news was very positive as the latest Consumer Price Index figures increased less than expected.

According to the U.S. Census Bureau, there were 1.6M owner-occupied households formed in 2018, the largest annual increase since 2004.

After a nine-year stretch from 2007 to 2016 where the number of new renters exceeded the number of new buyers each year, we have now had three straight years of more buyers!

The surge in new buyers has fortunately led to a spike in the homeownership rate to 64.8% in the 4th Quarter of 2018, up from the low point of 62.9% in the 2nd Quarter of 2016.

With appreciation moderating, mortgage rates declining, and wage growth strengthening, the MBA’s latest projection is for purchase origination volume to increase 4% per year in both 2019 and 2020.

Rate Update

Mortgage markets remain jittery around the uncertainty of Brexit.  Along with last week’s weaker-than-expected inflation data, this led to rates falling to the low point in over a year.

This Week

It will be a light week for economic data.  The big story will be the Fed meeting on Wednesday.  The most significant economic report will be Existing Home Sales on Friday.

Shelter Six:  Wages Continue to Rise

March 11, 2019 by · Leave a Comment 

February Wage Growth reached the highest level since April 2009 as average hourly earnings were up 3.2% from January and 3.4% from a year ago.  Rising incomes are always good for home sales.

The Unemployment Rate declined from 4% to 3.8%, with much of the reduction due to workers returning to the workforce after the end of the government shutdown.

The economy added just 20K jobs in February, well less than expected with much of the shortfall attributed to poor weather across the country.

The Chief Economist for Freddie Mac, Len Kiefer, recently shared his viewpoint that although home prices have risen greatly, we are not in a housing bubble similar to 2008.

Kiefer emphasized that the market is not driven by the speculative mortgage products that existed in 2008 nor is today’s mortgage default potential very high.

Kiefer predicts the economy will experience modest growth in ‘19, mortgage rates will gradually rise capping at 5%, and home prices will moderate substantially over the next few years.

Rate Update

Mortgage rates slipped last week on news that the European Central Bank sharply reduced the economic outlook for Europe while announcing some new stimulus programs.

This Week

Retail Sales will be released on Monday, the Consumer Price Index on Tuesday, and Durable Orders on Wednesday.  Investors also will be watching for signs of progress in the trade talks between the U.S. and China.

Shelter Six:  National Homeownership Rate Up to 64.8%

March 4, 2019 by · Leave a Comment 

Housing demand continues to be strong.  For the third straight year, there was growth in homeownership and 2018 ended up being the strongest year for owner household formation since 2004.

National Homeownership Rate up.  The Census Bureau reported last week that the national homeownership rate rose in the 4th Quarter to 64.8%, the highest level since 2014.

The largest gains came from the 35-44 age group (up 1.2% to 61.1%) and the under 35 age group (up .5% to 36.5%).

GDP continues to be strong and was up more than expected over the 4th Quarter (2.6%), with unexpected strength seen in business investment and exports.

2018 GDP ended the year at a solid 2.9%, the highest level since 2015.  2019 forecasts are for slower growth (2.5%) as the tax cut stimulus fades and the economy struggles overseas.

Negotiations with China progress.  The U.S.’s plan to increase tariffs on Chinese goods on March 1 was postponed last week as talks with China continue.

Rate Update

Stronger than expected economic growth data along with progress in trade negotiations with China put upward pressure on mortgage rates last week.

This Week

The ISM National Services Index is due out on Tuesday with the Employment Report due out on Friday.