Last week’s economic news came from a variety of sources. Most significant was the Fed’s Federal Open Market Committee statement after its meeting ended Wednesday. The statement indicated that the Fed saw moderate economic growth. FOMC did not taper its purchase of MBS and Treasury securities.
The FOMC statement announced the committee’s intention to closely monitor economic and financial developments ”in the coming months,” which suggested that the FOMC is taking a wait-and-see position on reducing its $85 billion monthly asset purchases.
Mortgage Rates, Jobless Claims Fall
The Fed’s asset purchase program, also known as quantitative easing, was implanted in 2012 with a goal of stabilizing mortgage rates and other long-term interest rates.
The National Association of REALTORS® reported that pending home sales fell by 5.60 percent in September. Uncertainty over the FOMC’s decision concerning tapering its asset purchases during its September meeting and concerns over a then potential government shutdown.
These were noted as primary reasons for the drop in pending home sales, which are measured by signed real estate contracts. Pending Home Sales are used for estimating future closings and mortgage loan activity.
Tuesday’s economic reports included the Case-Shiller Home Price Indices for August. Home prices increased by 12.80 percent year-over-year in August as compared to 12.30 percent year-over-year for August 2012. August’s reading shows a dampened pace of rising home prices.
The Conference Board, a research organization, reported that consumer confidence fell from a reading of 80.2 in September to 71.2 in October. A reading of 75.00 was expected, but consumer confidence crashed as the government shutdown and its consequences diminished consumer and investor confidence.
According to ADP, a payroll administration firm, private-sector payrolls came in well shy of the expected 150,000 new jobs with a reading of 130,000 jobs. October’s reading was also lower than September’s reading of 145,000 new jobs.
Weekly jobless claims brought good news; new jobless claims came in at 340,000 and fell by 10,000 new claims from the previous week’s 350,000 new jobless claims. Expectations had been for 335,000 new jobless claims.
Freddie Mac reported that average mortgage rates fell. The rate for a 30-year fixed rate mortgage dropped by three basis points to 4.10 percent, with discount points down from 0.80 percent to 0.70 percent.
The average rate for a 15-year mortgage fell by four basis points to 3.20 percent, with an uptick in discount points from 0.60 percent to 0.70 percent. The rate for a 5/1 adjustable rate mortgage dropped by four basis points to 2.96 percent with discount points unchanged at 0.40 percent.
What‘s Coming Up
There is no housing or mortgage economic news scheduled this week other than Freddie Mac’s PMMS due on Thursday.
Reporting for this week includes Leading Economic Indicators, Weekly Jobless Claims, Non-farm Payrolls and the National Unemployment Rate will be posted. The University of Michigan’s Consumer Sentiment Index will be released Friday.
This week’s economic reports are expected provide a general gauge of the economy and information about how consumers are responding to recent economic events and news.
Last week’s economic news was dominated by the Federal Reserve’s decision not to taper its $85 billion in monthly securities purchases.
Fed Chairman Ben Bernanke noted in a scheduled statement after the Federal Open Market Committee meeting that economic conditions were not yet adequately improved to withstand any decrease in the federal quantitative easing program.
The Fed also reaffirmed that the target federal funds rate would remain at 0.00 to 0.25 percent until the national unemployment rate reached 6.50 percent and inflation reaches 2.00 percent.
The national unemployment rate was 7.30 percent and the Fed projects that inflation will remain under 2.00 percent through 2015.
In both the FOMC statement and his press conference, Chairman Bernanke repeatedly emphasized that the Fed would take no action to reduce QE until the economy strengthens. No automatic reduction of QE purchases would take place without full consideration of the nation’s economy.
The QE program is intended to keep long-term interest rates low, and the announcement that QE would not be tapered brought mortgage rates down after they had increased by more than one percent since May.
The National Association of Home Builders/Wells Fargo Housing Market Index for September revealed that home builder confidence in housing market conditions remained stable at 58; a reading of 59 was expected. Readings over 50 indicate that more builders are confident about market conditions than not.
Housing starts for August did not reflect the high level of builder confidence and fell short of expectations at 891,000. Expected housing starts were estimated at 921,000. There was good news in that August’s reading surpassed the July reading of 883 housing starts. Building permits for August also dropped to 918,000 against expectations of 955,000 and July’s reading of 954,000 building permits.
Higher labor and materials costs and concerns over tight mortgage credit and rising mortgage rates likely contributed to the lower than expected readings for housing starts and building permits.
The average rate for a 15-year fixed rate mortgage fell by five basis points from 3.59 percent to 3.54 percent with discount points unchanged at 0.70 percent.
The average rate for 5/1 adjustable rate mortgage was lower by 11 basis points to 3.11 percent. Discount points were unchanged at 0.50 percent. This provides a break for home buyers who’ve been faced with rising mortgage rates and home prices amidst a shortage of available homes in many areas.
Freddie Mac will release its weekly summary of average mortgage rates and weekly jobless claims will also be released Thursday. The week will end with consumer related data including personal income and consumer spending for August along with the University of Michigan’s consumer sentiment index for September.
Last week wasn’t kind to stock market investors, but weekly jobless claims fell to an unexpected low of 320,000 new jobless claims filed, the lowest level in nearly six years.
Here is a review of the major events of the week.
Monday: The federal budget for July shows an increase in its deficit to -$98 billion, a deficit increase of $28 billion over June’s figure of -$70 billion. The good news is that the deficit for the first 10 months of the fiscal year is $38 billion less than during the same period of the prior fiscal year.
Thursday: Thursday was a busy day for economic news. The weekly jobless claims report came in lower than expected with 320,000 new jobless claims filed. This was lower than the expected.
While this is a strong sign for the economy that would typically boost stock prices, the markets fell. Analysts cite a good news/bad news scenario in describing what happened. The good news was that jobless claims fell to a new low, but the bad news is that investors feared that this may give the Fed a signal to begin tapering its quantitative easing (QE) program.
The Fed is expected to begin tapering its monthly purchases of $85 billion in treasury securities and mortgage-backed securities as early as next month. The QE purchases are intended to help hold down long term interest rates including mortgage rates.
The fall in stock prices on Thursday and Friday suggested that fear of the Fed ending QE is more compelling than the lowest number of new jobless claims since October 2007.
Freddie Mac reported that the average rate for a 30-year fixed rate mortgage remained unchanged at 4.40 percent with 0.7 percent in discount points. The average rate for a 15-year fixed rate mortgage ticked upward by one basis point from 3.43 to 3.44 percent.
Discount points fell from 0.70 percent the prior week to 0.60 percent last week.
The average rate for a 5/1 adjustable rate mortgage (ARM) rose from 3.19 to 3.23 percent with discount points unchanged at 0.50 percent. The 5/1 ARM provides an alternative to higher fixed rates for borrowers seeking lower mortgage rates and payments.
Friday: Included Housing Starts for July, which came in at 896,000 as compared to expectations of 915, 00 0 and June’s figure of 846,000 housing starts. Building permits issued in July came in at 943,000, and surpassed June’s reading of 918,000 building permits.
Increasing home values, buyer demand and a short supply of available homes were seen as motivating factors for builders to construct more homes.
This week’s schedule of economic news is set to include the Chicago Fed’s National Activity Index on Tuesday. The FOMC minutes will be released on Wednesday along with Existing Home Sales.
Thursday will bring Weekly Jobless Claims, Freddie Mac’s survey of mortgage rates and the FHFA home price index. Friday will finish the week with a New Home Sales report.
Last week brought a mixed bag of economic news, but most notably, average mortgage rates fell.
New home sales surpassed expectations and consumer sentiment rose for July; these readings among others suggest that the economy continued to improve and that consumer confidence in the economy improved as well.
Monday: Existing home sales in June were reported at 5.08 million on a seasonally-adjusted annual basis. While this fell short of expectations of 5.25 million existing homes sold, the expectation was based on the original reading of 5.18 million existing homes sold for May; this was later revised to 5.14 million homes existing homes sold in May.
Tuesday: FHFA reported that May prices for homes with mortgages held by Fannie Mae or Freddie Mac remained consistent with April’s reading of a 7.30 percent increase on a seasonally adjusted annual basis. Home prices rose by 0.70 percent in May as compared to April’s revised reading of 0.50 percent.
Wednesday: The U.S. Census Bureau revealed that June sales of new homes came in at 497,000, which surpassed both expectations of 483,000 new homes sold and May’s reading of 449,000 new homes sold.
Thursday: Freddie Mac reported that mortgage rates fell last week; the average rate for a 30-year fixed rate mortgage fell by six basis points to 3.31 percent with 0.8 percent in discount points.
The average rate for a 15-year mortgage was 3.39 percent with discount points of 0.8 percent as compared to last week’s report of 3.41 percent. Average rates for a 5/1 adjustable rate mortgage dropped by one basis point from 3.17 percent to 3.16 percent; discount points moved from 0.60 percent to 0.70 percent.
In other economic news, June’s report for Durable Goods Orders nearly doubled to 4.20 percent over expectations of 2.30 percent.
Friday: Consumer Sentiment for July rose to 85.1 as compared to expectations of 84.0 and June’s reading of 83.90 percent. That consumers continued gaining confidence in the economy could indicate that more would-be home buyers will become active homebuyers seeking to buy amidst a short inventory of available homes.
This Week’s Busy Economic Calendar
Readings for several significant economic and housing related indicators will be released this week.
Pending Home Sales are due out today; Tuesday brings the Case-Shiller Home Price Index and the Consumer Confidence Index. Wednesday’s news includes the ADP report (useful for tracking private sector job growth) and an FOMC statement after its meeting ends.
Fed Chairman Ben Bernanke is also scheduled to give a press conference Wednesday. As always, any remarks concerning projected changes to the Fed’s quantitative easing program (QE) could impact financial markets and mortgage rates.
On Thursday, construction spending data will be released in addition to Freddie Mac’s weekly report on average mortgage rates.
Friday’s news includes several employment-related reports. The monthly Non-Farm Payrolls and Unemployment report will be released; collectively these two reports are frequently called the Jobs Report.
Data on personal income and consumer spending will round out the week’s economic news.
Last week’s economic news was a mixed bag with retail sales and housing starts coming in lower than expected, but home builder confidence in housing markets increased.
Weekly jobless claims fell, and Fed Chair Ben Bernanke testified before the Senate, saying that falling gold prices were an indication of increasing confidence in the economy, but that it was “way too soon” to say when the Fed’s quantitative easing program would be reduced.
Monday: Retail sales for June came in lower than expected at 0.4 percent. Economists estimated a reading of 0.9 percent based on May’s reading of 0.5 percent.
Tuesday: June’s Consumer Price Index (CPI) came in as expected at 0.5 percent against May’s reading of 0.1 percent. The NAHB/Wells Fargo Housing Market Index (HMI) for July gained five points for a reading of 57, which exceeded expectations of a reading of 52. Builders cited a short supply of existing homes and falling materials prices as factors contributing to June’s stronger reading.
Wednesday: Housing starts in June fell to a seasonally-adjusted annual rate of 836,000 against expectations of 950,000 and May’s revised reading of 928,000. Regional weather and a surplus of unused building permits were seen as contributing to fewer housing starts in June; analysts did not see the dip in housing starts as a sign of softening housing markets.
Thursday: Fed Chair Ben Bernanke testified before the Senate as noted above and was careful to emphasize that economic data received after the last FOMC meeting indicated that it is “way too soon” for the Fed to change its monthly volume of Treasury bonds and MBS purchases. This is good news for mortgage markets, and possibly for mortgage rates, which fell this week.
Freddie Mac reported that average rates for a 30-year fixed rate mortgage fell by 14 basis points to 4.37 percent; average rates for a 15-year fixed rate mortgage fell by 12 basis points to 3.41 percent; these rates include average discount points of 0.7 percent. The average rate for a 5/1 ARM was 3.17 percent with discount points of 0.6 percent. The 5/1 ARM provides an affordable alternative to rising fixed mortgage rates.
Friday: No significant economic news noted.
What’s Coming Up
This week’s schedule includes Existing Home Sales on Monday; on Tuesday, the FHFA releases its Home Prices report. New Home Sales will be released on Wednesday; Thursday brings weekly jobless claims and the Durable Goods report. The week will finish with the Consumer Sentiment report on Friday.