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S&P Case-Schiller Indices Report Record Rise in Home Prices

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S&P Case-Schiller Indices Report Record Rise in Home PricesHome prices continued to rise at record rates in May according to S&P Case-Shiller Home Price Indices. National home prices rose by 16.60 percent year-over-year in May as compared to 14.80 percent year-over-year price growth in April. The 10-City Home Price Index reported home prices rose 16.40 percent year-over-year and 1.90 percent month-to-month.

20-City Home Price Index Reports 17 Percent Home Price Growth Year-Over-Year

S&P Case-Shiller’s 20-City Home Price Index reported month-to-month home price growth of two percent in May as year-over-year home price gains rose from April’s reading of 15 percent to 17 percent year-over-year home price growth.

All cities participating in the 20-City Home Price Index reported home price gains in May. Three cities held their positions with top rates of home price growth. Phoenix Arizona held first place with year-over-year home price growth of 25.90 percent; San Diego, California reported 24.70 percent home price growth. Seattle Washington held third place with 23.40 percent year-over-year home price growth in May.

Home Price Growth Expected to Slow as Buyers Drop Out of Market

Craig Lazarra, managing director and global head of index investment strategy at S&P down Jones Indices said he found himself “running out of superlatives to describe the record increases in home prices.” Analysts credited homebuyer relocation from urban areas to less populated suburban and rural areas for driving up prices. The pandemic initially drove this trend and continues to do so today. Other factors pushing home prices higher included high demand for homes exceeding homes available. As millennials reach their prime-home buying years, demand for homes will increase. Low mortgage rates also encouraged would-be home buyers into the housing market.

High demand for homes drives home prices up, but slower sales suggest that buyers are reaching a tipping point with affordability. Fewer buyers will raise the inventory of available homes and cause home prices to fall. First-time and moderate-income buyers continue to face affordability constraints in many areas, but home prices likely won’t fall significantly in the near term.

In related news, the Federal Housing Finance Agency reported similar readings for single-family homes owned or financed by Fannie Mae and Freddie Mac. Home prices rose 1.70 percent from April to May and 18.00 percent year-over-year in May. Readings from FHFA include seasonally-adjusted purchase-only data;  refinance transactions were not included.

What’s Ahead For Mortgage Rates This Week – July 26, 2021

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What's Ahead For Mortgage Rates This Week - July 26, 2021Last week’s economic reporting included readings from the National Association of Home Builders Housing Market Index, data on sales of new and previously-owned homes, and weekly reports on mortgage rates and jobless claims.

NAHB: Affordability, Shortages of Labor and Materials Impacting U.S. Housing Markets

Housing market conditions are changing according to July’s Housing Market Index produced by the National Association of Home Builders. Although the HMI reading declined by one point in July, ongoing trends including labor shortages, higher prices for building materials, and affordability impacted builder confidence in overall market conditions. July’s index reading was 80 as compared to June’s reading of 81 and the expected reading of 82. Housing Market Index readings over 50 indicate that most builders surveyed were confident about housing market conditions.

Component readings of July’s Housing Market Index included builder confidence in current market conditions, which fell one point to 86;  builder confidence in housing market conditions for the next six months rose two points to 81. Builder confidence in prospective buyer traffic in single-family housing developments fell six points to an index reading of 65. Buyer traffic readings often fell below 50 before the pandemic.

Regional builder confidence readings for housing market conditions were mixed in July. The Northeastern region’s reading was four points lower at an index reading of 75. The Midwest index reading was one point lower at 71. The builder confidence reading in the South was unchanged at 85 and the West’s builder confidence reading dropped two points to 87.

Previously-Owned Home Sales Rise in June

The National Association of Realtors® reported a seasonally adjusted annual pace of 5.86 million sales of previously-owned homes in June. Analysts expected a reading of 5.93 million sales; May’s reading for existing home sales showed an annual pace of  5.78 million homes sold.

Demand for homes since the pandemic started is driven by home buyer demand for homes in less congested suburban and rural areas. Although demand for homes encourages home builders, it also increases home prices when multiple buyers submit purchase offers on each available home. This drives home prices higher and sidelines first-time and moderate-income buyers. High-demand areas are also experiencing more cash offers, which creates difficulties for buyers needing to finance a home purchase.

Housing Starts Rise in July as Building Permits Issued Fall

U.S. housing starts rose in June according to the Census Bureau. 1.64 million starts were reported on a seasonally adjusted annual basis. 1.59 million starts were expected based on 1.55 million starts reported in May. Building permits fell to 1.60 permits issued in June; analysts expected building permits issued in June to match May’s reading of 1.68 million building permits issued.

Mortgage Rates and Jobless Claims

Freddie Mac reported lower rates for fixed-rate mortgages with 30-year fixed rates averaging 10 basis points lower at 2.78 percent. Rates for 15-year fixed-rate mortgages were also 10 basis points lower and averaged 2.12 percent. Rates for 5/1 adjustable mortgages rose two basis points on average to 2.49 percent. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

419,000 new jobless claims were filed last week as compared to 368, 000 initial jobless claims filed in the previous week. 3.24 million continuing jobless claims were filed as compared to 3.27 million ongoing jobless claims filed in the previous week.

What’s Ahead

This week’s scheduled economic reporting includes readings on home prices from S&P Case-Shiller Home Price Indices, data on pending home sales and new home sales will be released along with the post-meeting statement of the Fed’s Federal Open Market Committee. Fed Chair Jerome Powell is scheduled to give a press conference after the FOMC statement is released. Weekly readings on mortgage rates and jobless claims will be published along with the University of Michigan’s Consumer Sentiment Index.

What’s Ahead For Mortgage Rates This Week – July 19, 2021

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What's Ahead For Mortgage Rates This Week - July 19, 2021Last week’s scheduled economic reports included readings on inflation, Fed Chair Jerome Powell’s testimony before the House Financial Services Committee, and the University of Michigan’s Consumer Sentiment Index. Weekly readings on mortgage rates and jobless claims were also released.

Consumer Price Index: June Inflation Grows at Fastest Pace Since 2008

June’s Consumer Price Index showed the fastest pace of inflationary growth in 13 years; inflation grew by 5.40 percent on a seasonally-adjusted annual basis. Used car sales accounted for one-third of the growth, but prices also rose for clothes, food, energy, and travel/hospitality. The year-over-year inflation rate for May was 5.00 percent.

Inflation grew by 0.90 percent month-to-month, which exceeded analyst’s expectations of 0.50 percent growth and 0.60 percent growth in May. The Core Consumer Price Index, which excludes volatile food and energy sectors also grew by 0.90 percent in June as compared to a month-to-month reading of 0.70 percent in May. Analysts expressed concern that the rapid pace of inflation may not slow as quickly as the Federal Reserve predicted.

Fed Chair Jerome Powell Testifies Before House Financial Services Panel

Fed Chair Jerome Powell maintained the Federal Reserve’s earlier prediction that the pace of inflation would ease, but not immediately: “Inflation has increased notably and will likely remain elevated in coming months before moderating.”Mr.Powell said that inflationary growth has come in at a faster pace than the Fed was hoping to see.

Chair Powell identified three factors contributing to current inflationary growth. Weak inflationary growth during the pandemic will drop out of the year-over-year calculation; Production and supply chain constraints have led to sharp price increases after the pandemic. The third factor is a surge in demand for services as the economy reopens.

The Fed Chair said that “it’s a pretty narrow group of things that are producing these high readings.”

Mortgage Rates, Jobless Claims Fall

Freddie Mac reported mixed mortgage rates last week as the rate for 30-year fixed-rate mortgages averaged 2.88 percent and were two basis points lower. Rates for 15-year fixed-rate mortgages rose by two basis points to an average of 2.22 percent. Rates for 5/1 adjustable rate mortgages fell by five basis points to 2.47 percent on average; Discount points averaged 0.70 percent for 30-year fixed-rate mortgages and 0.60 percent for 15-yar fixed-rate mortgages. Discount points for 5/1 adjustable rate mortgages averaged 0.30 percent.

New jobless claims fell to 360,000 initial claims filed from the previous week’s reading of 386,000 claims filed. Data for continuing jobless claims were not updated last week.

The University of Michigan reported no change in its Consumer Sentiment Index for July with an index reading of 85.5. Analysts expected a reading of 86.3.

What’s Ahead

This week’s scheduled economic reporting includes readings from the National Association of Home Builders Housing Market Index, reports on housing starts and building permits, and data on existing home sales. Weekly readings on mortgage rates and jobless claims will also be released.

What’s Ahead For Mortgage Rates This Week – July 12, 2021

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What's Ahead For Mortgage Rates This Week - July 12, 2021Last week’s scheduled economic reporting included readings from the Fed’s Federal Open Market Committee, news on changing FHA home loan requirements for borrowers with student loans, and reporting on job openings. Weekly reports on mortgage rates and jobless claims were also released.

FOMC Minutes Show Fed’s Reluctance to Raise Target Rate

The Federal Open Market Committee of the Federal Reserve released minutes of its meeting held via teleconferencing on June 15 and 16. The Committee resumed its consideration of creating “domestic and foreign repurchase agencies that would have a backdrop role in fostering implementation and support of monetary policy and smooth functioning of markets,” but no decisions were made.

 FOMC members did not change the current federal funds rate range of  0.00 to 0.25 percent and did not anticipate changing the Fed’s key interest rate range until the end of 2023. Lower jobs growth and higher inflation than expected in the near term influenced the current decision to hold on raising the Fed’s key rate, but the Committee predicted that near-term inflation will subside in the medium term.

FHA Changes Home Loan Policy on Borrowers with Student Loans

The Federal Housing Administration (FHA) announced changes to its home loan lending requirements for borrowers with student loans; the changes become effective by August 16 or sooner if lenders prefer. The changes in calculations used for determining debt-to-income ratios for borrowers with student loans will help more borrowers fall within the maximum debt-to-income ratio of 43 percent currently permitted by FHA regulations.

Mortgage Rates Fall; Jobless Claims Mixed

Freddie Mac reported record low mortgage rates last week as demand for homes continued to outstrip supplies of available homes. Steep increases in home prices continued to create affordability issues for first-time and moderate-income homebuyers.

The average rate for 30-year fixed-rate mortgages fell by eight basis points to 2.90 percent; rates for 15-year fixed-rate mortgages averaged 2.20 percent and were six basis points lower. Rates for 5/1 adjustable rate mortgages averaged 2.52 percent and were two basis points lower. Discount points averaged 0.60 percent for 30-year fixed-rate loans and 0.70 percent for 15-year fixed-rate loans. Discount points for 5/1 adjustable rate mortgages averaged 0.20 percent.

Initial jobless claims rose to 373,000 first-time claims filed as compared to 371,000 initial claims filed in the previous week. Continuing jobless claims fell to 3.34 million ongoing claims filed from the previous week’s reading of 3.48 million ongoing jobless claims filed.

Job openings held steady at 9.20 million job openings; employers continued searching for workers for open positions.

What’s Ahead

This week’s scheduled economic reporting includes readings on inflation, retail sales, and consumer sentiment.  Weekly readings on mortgage rates and jobless claims will also be released.

 

What’s Ahead For Mortgage Rates This Week – July 5, 2021

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What's Ahead For Mortgage Rates This Week - July 5, 2021Last week’s economic reports included readings from S&P Case-Shiller Home Price Indices and data on pending home sales. Readings on job growth and und unemployment were also released along with weekly reports on mortgage rates and jobless claims.

S&P Case-Shiller: April Home Price Gains Reach Record Highs

Craig Lazzara, managing director and global head of investment strategy for S&P Dow Jones Indices, said that April’s year-over-year national home price growth rate of 14.60 percent was “ truly extraordinary.” All cities included in the 20-City Home Price Index posted higher home prices;  five cities including Charlotte, North Carolina, Cleveland, Ohio, and Dallas, Texas posted their highest home price gains ever along with Denver, Colorado, and Seattle, Washington.  

Phoenix, Arizona, San Diego, California, and Seattle, Washington continued to hold the top three positions for annual home price growth in the 20-City Home Price Index.

Realtors Report Increase in Pending Home Sales

Pending home sales rose by eight percent in May as compared to April. Analysts expected a one percent decrease in pending sales. Lawrence Yun, the chief economist at the National Association of Realtors®, said “May’s strong increase in transactions, as well as a sudden erosion in home affordability, was indeed a surprise. The housing market is attracting buyers b due to the decline in mortgage rates and an uptick in listings.”

Mortgage Rates, Jobless Claims Show Mixed Results

Freddie Mac reported lower average rates for fixed-rate mortgages. Rates for 30-year fixed-rate mortgages fell by four basis points to 2.98 percent; rates for 15-year fixed-rate mortgages fell by eight basis points to 2.26 percent. The average rate for 5/1 adjustable rate mortgages rose by one basis point to 2.54 percent. Discount points averaged 0.60 percent for 30-year fixed-rate mortgages and 0.70 percent for 15-yar fixed-rate mortgages. Discount points for 5/1 adjustable rate mortgages averaged0.30 percent.

First-time jobless claims fell to 364,000 initial claims filed from the prior week’s reading of 415,000 new claims filed. Continuing jobless claims increased with 3.47 million ongoing claims filed. ADP reported 692,000 private-sector jobs added in June; The federal Non-Farm payrolls report posted 850,000 public and private-sector jobs added as compared to 583,000 jobs added in May. The national unemployment rate ticked up to 5.90 percent in June from May’s reading of 5.80 percent unemployed.  

What’s Ahead

This week’s scheduled economic reports include the minutes from the most recent meeting of the Fed’s Federal Open Market Committee and the Labor Department’s report on job openings. Weekly readings on mortgage rates and jobless claims will also be released.

What’s Ahead For Mortgage Rates This Week – June 28, 2021

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What's Ahead For Mortgage Rates This Week - June 28, 2021Last week’s economic reports included readings on sales of new and previously-owned homes.  Weekly readings on mortgage rates and jobless claims were also released.

New Home Sales Fall in May

New home sales dropped to their lowest reading in a year in May with 769,000 new single-family homes sold on a  seasonally adjusted annual basis.  May’s reading was 5.90 percent lower than April’s reading of 817,000 sales but was 9.20 percent higher year-over-year.

May’s decline in new home sales was caused by a 14.50 percent decrease in sales in the South; Sales rose by 33 percent in the Northeast and 4.80 percent in the West. The sales pace for new homes in the Midwest was unchanged.

Multiple factors caused fewer new home sales during what is typically a busy home-buying season. Rising costs of lumber, along with high demand for homes and affordability challenges presented obstacles to first-time and moderate-income buyers in recent months, but lumber prices fell in May. High demand for homes created opportunities for cash buyers who sidestepped making purchase offers contingent on mortgage approvals.

Analysts said that falling lumber prices will eventually provide relief for homebuyers, but short inventories of available homes coupled with high home prices continued to sideline first-time and moderate-income buyers. The median price for new homes rose to $374,000 as compared to $369,000 in April. Real estate pros reported a 5.1 month supply of available homes in May, which was the highest reading in a year.

Existing Home Sales Lower in May as Market Slows

Sales of previously-owned homes also fell in May; this was likely due to low inventories of available homes and the covid induced home-buying frenzy easing. Would-be home buyers have also left the market due to affordability challenges.

Lawrence Yun, chief economist for the National Association of Realtors® said: “Home sales fell moderately in May and are now approaching pre-pandemic activity.” Mr. Yun identified low inventories of available homes and affordability as the main obstacles facing prospective home buyers.

Mortgage Rates Rise; Jobless Claims Fall

Freddie Mac reported higher mortgage rates last week; average mortgage rates surpassed three percent for the first time in 10 weeks. Rates for 30-year fixed-rate mortgages rose nine basis points to 3.02 percent; the average rate for 15-year fixed-rate mortgages rose 10 basis points to 2.34 percent. Rates for 5/1 adjustable rate mortgages averaged 2.53 percent and were one basis point higher. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages.

New jobless claims fell to 411,000 claims filed last week as compared to the prior week’s reading of 418,000 first-time claims filed. Continuing jobless claims also fell with 3.39 million ongoing claims filed as compared to the prior week’s reading of 3.53 million continuing claims filed. 

What’s Ahead

This week’s scheduled economic news includes readings from Case-Shiller Home Price Indices, and reports on pending home sales, construction spending, and consumer confidence. Weekly readings on mortgage rates and jobless claims will also be published.