Weekly Information 8/27

Mortgage interest rates were mostly flat on the week despite generally weaker than expected economic data. Of note, July Existing Home Sales fell 27.2% to its lowest level since June of 1995 on expectations that sales would fall by 13.0%. Year over year, sales were down 25.5% and there is now a 12.5 month supply of existing homes. July New Home Sales were expected to increase by 3.0%. Instead, sales fell by 12.4%. There is now a 9.1 month supply of new homes. July Durable Goods Orders increased by only 0.3% on expectations that orders would increase by 3.0%. Excluding transportation orders, durable goods orders fell by 3.8% on expectations that they would increase by 0.5%. The University of Michigan Consumer Sentiment Index was slightly weaker than expected, reported at 68.9 on expectations of 70.0. On a positive note, weekly jobless claims fell by 31k on expectations that they would only fall by 15k.

Everybody Calm Down. Armageddon Is NOT Upon Us!

by Steve Harney on August 26, 2010

The new housing numbers have definitely been a major news story over the last 48 hours. The Dow dropped over 100 points on the announcement of July’s existing sales numbers. The cries of a double-dip sound like the screams of Chicken Little: ‘The sky is falling! The sky is falling!’ Pundits are claiming real estate will never be looked at the same again. We asked Steve Harney to comment on what the report actual means to the housing recovery. As always, he was more than willing to share his insights. – The KCM Crew
I want to start by saying that Armageddon is not upon us. Was NAR’s Existing Home Sales Report tough to read? Yes. Were there any surprises in the report? Just one: the fact that prices have remained stable. And that was good news.
All the panic and gut-wrenching revolves around two numbers:
The lack of sales in July
The months’ supply of inventory now available
Neither number was a surprise to anyone truly following the real estate market. Right here in this blog, the KCM Crew has been claiming for the last nine months that sales in 2010 will be approximately what they were in 2009. The tax credit moved many purchases forward as buyers wanted to be in contract before the April 30 deadline. That push forward of demand created a false sense of hope that a major market comeback was taking place in the spring. It also created this current vacuum of demand during the summer.
Just as we should have realized that the great market of the spring could not be sustained, we must now realize that plummeting sales numbers will not continue. It may take one or two months for the impact of the tax credit to fully dissipate. After that, we will see a more normal buyer demand throughout the fall and winter. We must not forget that people decide to move every day. Prices are great, interest rates are at historic lows and the assortment of properties for sale is fabulous. Buyers will buy!!
In regard to the months’ supply of homes for sale, we must remember one basic principle: prices will come down if demand is constant and inventory increases. Houses will sell over the next twelve months, approximately 5 million of them. There may be more than double that amount trying to sell however. Which ones will sell? Those that are priced correctly for the current market. Your price must be compelling in order to make your home attractive to today’s buyers who have a tremendous selection of homes from which to choose.
As the year moves forward, it is my belief that months’ inventory will remain in double digit numbers. That means that prices will continue to soften.
What does this mean to you?
You definitely will be able to sell your home and move on with your life. If that’s the goal, you will do better financially if you do it sooner rather than later.

Weekly Information 8/13

Mortgage interest rates improved slightly this past week largely driven by the FOMC policy statement. The statement indicated that the economic recovery has slowed and is likely to be “more modest in the near term than had been anticipated”. As a result the Fed said that it will reinvest principal payments from the $1.25 Trillion in Mortgage Backed Securities that it holds back into longer-term Treasury securities. This is referred to as quantitative easing, which hopefully will help keep rates low on longer term debt in the near term. Economic data of note included weekly jobless claims, which increased on expectations that they would fall. July Retail Sales were in line with expectations. The July Consumer Price Index (CPI) increased slightly more than expectations. Year over year, though, CPI is up only 1.2% indicating very little inflation. The Treasury auctioned $74 billion in debt this past week. Overall, the auctions were met with strong demand.

Weekly Information 8/6

Mortgage interest rates improved slightly this past week on mixed economic data. Today’s employment report for July was weaker than expected. Non-farm payrolls were expected to fall by 70k. As reported, payrolls fell by 131k. Private jobs were expected to increase by 100k. As reported, private jobs increased by 71k. Unemployment remained unchanged at 9.5%. Yesterday, weekly jobless claims increased by 19k on expectations that they would fall by 2k. Labor markets continue to be weak. Other economic reports weaker than expected included June Factory Orders and June Pending Home Sales. Economic reports better than expected included June Construction Spending, the July ISM Manufacturing Index, and the ISM Services Sector Index. The increase in construction spending, though, was largely driven by government spending.

Today’s release of July employment data has vastly greater political consequences than economic or financial. Those consequences extend beyond elected officials to policy makers at the Fed, and inside the administration and out. Net of all the moving parts (census workers) and revisions (June minus 152,000), job creation is flat. A minor up-trend in private-sector jobs has been offset by newly down-trending state and local government employment. Confirming overall stuck-in-mire: weekly claims for unemployment insurance rose to 479,000, a four-month high. The economy does have some forward momentum: the twin ISM reports for July, manufacturing and services, came in at 55.5 and 54.3 respectively. The trouble is at home: July personal income and spending were unchanged from June. Flat.

New Home Sales Climb in June

The housing slump caused by the end of the tax credits may be over, with sales of new homes rising 24 percent in June compared to May to an annual rate of 330,000, the U.S. Commerce Department reported Tuesday.Nevertheless, sales were at their second-lowest rate since 1963 – May’s were the lowest.“The future is going to be dependent on job growth. There’s no demand because confidence is weak and employment is weak,” says Eric Green, chief market economist at TD Securities Inc. in New York.
Source: Bloomberg, Courtney Schlisserman (07/26/2010)