Mortgage Rates

Last week’s economic news included readings on Case-Shiller home prices, construction spending, and consumer sentiment. Labor sector readings on private and public employment and the national unemployment rate were also released. Weekly readings on mortgage rates and new jobless claims were also released.

Case–Shiller: Home Price Growth Approaches Record

Home price growth approached a record set in 2006 in August, but analysts said that affordability and the shortage of homes for sale could signal slower growth ahead. David M. Blitzer, Chairman of the S&P Index Committee, said that while home prices appeared to be “unstoppable,” signs of slowing momentum could signal the end of rapid home price growth.

Case-Shiller’s national home price index reported a seasonally-adjusted annual growth rate of 6.10 percent as compared to July’s corresponding reading of 5.90 percent. The 20-City Index reading was 1.80 percent short of the record set in 2006. Seattle, Washington led home price growth with a reading of 13.20 percent year-over-year. Las Vegas, Nevada held second place with a seasonally-adjusted annual growth rate of 8.60 percent and San Diego, California held third place in the 20-City Index with a reading of 7.80 percent.

While the West continued to post highest home price gains, some home price gains are leveling out. San Francisco, California, which posted double digit home price growth in recent years, posted 6.10 percent growth year-over-year and a negative reading of -0.10 percent in August as compared to July.

September construction spending rose due to public works projects and housing construction. This was good news as a shortage of available homes has daunted real estate sales in past months. Building more homes is the only solution to the ongoing shortage of homes for sale. Construction spending 4ose0.30 percent in September as compared to an expected reading of no change, which was based on August’s reading of 0.10 percent.

Mortgage Rates Little Changed, New Jobless Claims Fall

Freddie Mac reported no change in the average rate of 3.94 percent. Average rates for a 15-year mortgage and a 5/1 adjustable rate mortgage were each two basis points higher at 3.27 percent and 3.23 percent respectively. Average discount points were 0.50 percent for all three mortgage types. The President is expected to announce the appointment of a new Federal Reserve Chair this week, which could impact interest rates either way.

First-time jobless claims were lower last week with 229,000 claims filed as compared to expectations of 235,000 new claims filed and the prior week’s reading of 234,000 new jobless claims. Private-sector employment grew by 235,000 jobs in October as compared to September’s reading of 110,000 new private-sector jobs.

The Commerce Department reported 261,000 new public and private-sector jobs in October. Analysts expected 325,000 new jobs, but September’s reading was adjusted to 18,000 new public and private sector jobs added. The national unemployment rate dipped to 4.10 percent as compared to an expected reading of 4.10 percent and September’s reading of 4.20 percent.

Consumer confidence grew to an index reading of 125.9 in October as compared to analysts’ expected reading of 121.3 and the prior month’s reading of 119.5.

Last week’s economic news included readings on new and pending home sales and weekly reports on mortgage rates and new jobless claims.

New Home Sales Exceed Expectations; No Growth for Pending Sales

September sales of new homes reached a 10-year high with a seasonally-adjusted annual rate of 667,000 new homes sold. Analysts said that high demand drove September sales past the expected rate of 555,000 sales and August’s reading of 561,000 sales of new homes. September’s reading was 19.9 percent higher than for August and was 17 percent higher year-over-year. September’s reading was 8.60 percent higher for year-to-date sales of new homes. This news may encourage builders to ramp up new home construction, but the widespread damage caused by hurricanes and fires will account for rebuilding thousands of previously-owned homes in the coming months.

The national average price for a new home was $319,700 as compared to $314,700 year-over-year. Real estate professionals said that it would take five months to sell all new homes currently available.

Pending home sales did not change from August to September. The Commerce Department reported no change from August’s reading of – 2.80 percent. Low inventories of pre-owned homes and affordability concerns may have sidelined would-be buyers as competition for available homes and home prices rose.

Regional results for pending sales were mixed. The Northeast region reported 1.20 percent growth in pending home sales, while the Midwest reported 1.40 percent growth and the West topped regional pending sales rates with 1.90 percent growth. The Southern region posted -2.30 percent fewer pending sales; hurricanes likely accounted for fewer contracts signed in September. Year-over-year pending home sales were lower in all regions.

Weekly Mortgage Rates, New Jobless Claims Rise

Mortgage rates rose across the board last week. Freddie Mac reported that averaged rates for a fixed rate mortgage rose by six basis points for 30-year and 15-year mortgages. The average rate for a 30-year fixed rate mortgage was 3.94 percent; the average rate for a 15-year fixed rate mortgage was 3.25 percent. The average rate for a 5/1 adjustable rate mortgage rose four basis points to 3.21 percent. Discount points averaged 0.50 percent for fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

New jobless claims rose to 233,000 claims, which matched expectations and exceed the prior week’s reading of 223,000 first time claims, which was a 44-year low. The jump in first-time claims is not due to layoffs as employers report shortages of skilled candidates to fill job openings.

What‘s Ahead

This week’s scheduled economic news includes readings on Case-Shiller home prices, construction spending and labor sector readings on private and public-sector employment. The national unemployment rate will be released along with weekly readings on mortgage rates and new jobless claims.

Last week’s economic reports included minutes of the Fed’s Federal Open Market Committee meeting held in September along with releases on inflation and weekly reports on mortgage rates and new jobless claims.

FOMC Meeting Minutes Indicate December Rate Hike is No Sure Thing

According to minutes for the September 19 and 20 meeting of the Federal Reserve’s Federal Open Market Committee, the Fed has adopted a wait-and-see posture concerning a possible rate hike at December’s meeting. Although analysts previously indicated that additional rate hikes were expected by the end of 2017, the Fed chose not to raise the federal funds rate in September.

Hurricanes Harvey and Irma Impact Industrial Production

Hurricane damage was expected to slow industrial production in the short term. The impact of hurricane damage in Texas and Fl0rdia are expected to be short term, but the full impact of the two hurricanes had not been fully assessed at the time of the FOMC meeting.

Labor and real GDP readings rose, but the year-over-year reading for inflation was lower than the two percent inflation rate set by the Fed as a positive economic indicator. The Fed’s dual mandate also includes achieving maximum employment as measured by the national unemployment rate. The Fed originally set a goal of 6.50 percent unemployment in the immediate aftermath of the recession, but the national unemployment rate has exceeded expectations and currently hovers near 4.30 percent. Strong labor markets help propel renters into housing markets as they have more confidence in maintaining long-term employment.

Mortgage Rates, New Jobless Claims

Mortgage rates rose last week. Freddie Mac reported an average rate of 3.91 percent, which was six basis points higher than for the previous week. Rates for a fifteen-year fixed rate mortgage also rose by six basis points to 3.21 percent. The average rate for a 5/1 adjustable rate mortgage dipped two basis points to 3.16 percent. Discount points averaged 0.50 percent for fixed rates and 0.40 percent for a 5/1 adjustable rate mortgage.

New jobless claims fell to 243,000 as compared to expectations of 258,000 claims and the prior week’s reading of 260,000 first-time jobless claims filed.

What‘s Ahead

This week’s scheduled economic readings include the National Association of Home Builders Housing Market Index, Commerce Department reports on housing starts and building permits issued. Weekly readings on mortgage rates and new unemployment claims will also be released.