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Commentary
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Big Picture ~ August 3, 2018
The news this week was more big-picture economics than housing related, with both a Federal Reserve Open Market Committee (FOMC) meeting and the first estimate of the 2nd quarter GDP making headlines. The GDP, at 4.1% was good news after a fairly lackluster first quarter with growth just revised from 2.0 to 2.2%. Consumer spending was the star, up 4.0% and contributing 2.7 percentage points to the total rate. Spending on services kicked up 1.5 points. Residential investment (primarily spending on new single and multifamily construction, remodeling, and brokerage fees) was again a drag on overall GDP, but less so than in the first quarter when it was down 3.4%. This time it only lost 1.1%. The FOMC’s preferred measure of inflation, the Core PCE, increased 2.0% compared to 2.2% in the first quarter. The Fed wasn’t expected to raise rates this time, but this slight cooling gave them another excuse to stay on schedule. The fed funds rate will remain at the 1.75-2.0% range for a while longer. More Listings, Less Crunch?
Housing news was totally lacking. S&P CoreLogic Case-Shiller home prices were monotonously consistent. The National Index for May had an annual gain of 6.4% for the second straight month and the monthly gain was slightly higher than in April at 1%. Seattle, Las Vegas, and San Francisco continue to lead, all with double digit annual increases.
Case-Shiller’s David Blitzer sounded a bit of an alarm in his commentary, saying the slowing rate of home sales “suggest that the combination of rising home prices and rising mortgage rates are beginning to affect the housing market.”
And right on cue, the National Association of Realtors (NAR) announced that June was the sixth straight month that pending home sales trailed those a year earlier. Sales did tick up for the second month in a row, increasing 0.9% from May, but NAR’s Pending Home Sales Index lags June 2017 by 2.5%. Contract signings increased in all four regions; they were up 0.7% in the West, but all four are running behind the 2017 numbers as well.
NAR Chief Economist Lawrence Yun said the 4.3% increase in listings noted last week in the existing home sale report meant it was a little easier for buyers to find a home in June. He added, “The good news is that the increase in listings last month may mean the worst of the supply crunch is over.” Several large metro areas saw big jumps in their inventories, including Portland, Oregon (24%), Seattle (19%), and San Jose (15%).
We’ll keep an eye out to see if this is the beginning of a trend. |
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Key Indicators
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Gold (Monex)
$1,217.00/ounce down
Crude Oil (Brent)
$74.25/brl up
U.S. Dollar to…
Euro 0.8615 up
Japanese Yen 111.4800 up Chinese Yuan 6.8403 up Canadian Dollar 1.3032 down
Mexican Peso 18.7290 up 6-mo T-Bill Yield 2.22%
Up 2 bps 10-yr T-Note Yield 3.00%
Up 6 bps 11th Dist Cost of Funds 7/31
0.934 up 49 bps Freddie Mac 30-Year
Avg Rate 8/2
4.60% up 6 bps MBA – Mortgage Applications Index
Week ending 7/27
Overall
Down 2.6% [Prior week down 0.2%]
Purchase Money Loans
Down 3.0% [Prior week down 1.0%]
Refinancing Loans
Down 2.0%
[Prior week up 1.0%] Jobless Claims 7/28
218,000 new claims [Prior week 217,000] 4-week moving avg 214,500 down GDP Q2
Up 4.1%
[Prior up 2.2% rev]
Pending Home Sales Jun
Up 0.9%
[Prior down 0.5%]
106.9
S&P Case-Shiller 20-City
Composite Prices May
Up 0.7% MoM NSA
Up 6.5% YoY
©Copyright 2018 by Right Side Marketing
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Published on 2018-08-07 14:28:24
