After watching what has taken place this week with the stock market through Thursday, I don’t believe there is a single person outside of the Fed that really has any idea on what will happen with rates at the monetary policy meeting in September.
In the first half of this week almost everyone would have bet the house that the Fed would not do anything with rates on account of the stock market tanking. Then comes Wednesday and Thursday and the market sets a two day record for the greatest rise. At this point all investors can do is watch the economic data that comes out between now and the September Fed meeting and guess.
Quite a bit of data was released this week regarding the housing. On Tuesday there were three reports starting with the FHFA House Price Index. The FHFA HPI showed that home prices were beginning to soften. The index rose only 0.2 percent which is continuing the trend of slowing home price growth. The difference in prices between last year and this year is 5.6 percent which shows the spread is thinning.
The S&P Case-Shiller Home Price Index reiterated the story of softening home prices. The Case-Shiller Index showed prices remained virtually flat with a 0.1 percent decline for the month of June. Most analysts were expecting an increase of 0.1 percent. The index also shows that home prices are 5.0 percent higher than the same time last year. That is unchanged from May further indicating that home price appreciation has begun to stagnate.
A bright spot in the housing reports for the week came from the new homes sales data. For the month of July new home sales jumped 5.4 percent to an annual pace of 507,000. The strength in new homes sales is reducing inventory. Prior to this report the supply was estimated at 5.3 months. The latest data shows that available inventory is now down by 1/10th of 1 percent to 5.2 months. The strongest part of the new home data is that sales are up 26 percent from the same time last year.
The final housing report for the week was released on Thursday morning. Pending homes sales came in at the lower end of analyst’s expectations. The pending sale data show an increase of 0.5 percent for the month of July. Most experts were predicting an increase of 1.0 percent. Surprisingly the Northeast led the way with an increase of 4.0 percent although this region is the smallest of the four regions. The West dipped 1.4 percent while the Midwest remained unchanged and the South climbed 0.6 percent.
According to the Mortgage Bankers Association loan applications for purchase and refinances did not change much. For the week ending August 21st, purchase apps increased 2.0 percent and refinance applications declined 1.0 percent.
There are a number of major housing reports due out next week:
· Tuesday September 1st – ISM Manufacturing Index & Construction Spending
· Wednesday September 2nd - MBA Applications & ADP Employment Report
· Thursday September 3rd - First Time Jobless Claims
· Friday September 4th – National Employment Situation
As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (707) 455-7070.