Housing data was plentiful today with both good news and not so good news. Home prices continue to move higher as evidenced by the 12.2% year-over-year gain in the Case/Shiller 20-city Composite Home Price Index. It was the biggest annual gain since March of 2006. From April to May, prices rose 2.4% for the 20-city index.
Over in the foreclosure front, Corelogic reports that completed foreclosures dropped by nearly 20% from June of 2012 (68,000) to June of 2013 (55,000). The 55,000 in June was slightly higher than the 53,000 recorded in May. Since the beginning of this year, foreclosure inventories have declined by 14%. A completed foreclosure occurs when a property is auctioned and results in the purchase of the home at auction by either a third party, such as an investor, or by the lender.
The homeownership rate in the U.S. has now fallen back to levels not seen in two decades and is well below its record high of 69.2% hit back in 2004, currently at 65.1%. During the recent housing crisis, more than 7 million Americans were ripped from their homes after the bubble burst and busted. The rate is expected to fall to 64% due to foreclosures as people enter the rental markets.
The National Association of Realtors (NAR) reported this morning that Pending Home Sales in June declined by 0.4% versus the -1.7% expected. The NAR said that higher home loan rates put a crimp in sales in June. The index hit a six year high in May. Pending Home Sales is a contract that has been signed, but that has not closed.
The trading week kicked off this morning and was met with quiet trading in the absence of any major economic data points other than Pending Home Sales. The rest of the week’s economic calendar offers a plethora of data, which includes, Gross Domestic Product, housing data, the Federal Open Market Committee meeting and culminates on Friday with Non-farm Payrolls.
The regularly scheduled Federal Open Market Committee meeting will begin on Tuesday where members will discuss monetary policy and interest rates and ends with a policy statement on Wednesday at 2:00pm ET. There will be no press conference or economic projections associated with this meeting. The talks will most likely center around whether or not the current Quantitative Easing program will continue through this year or end before the year ends possibly sometime in the fall.
The Dow Jones Industrial Average (15,548) and the S&P 500 Index (1,689) both hit record high closing levels yesterday after Federal Reserve Chairman reaffirmed midweek that the current stimulus program dubbed QE III will be in place for the foreseeable future. The program is geared towards boosting the economy, promoting job growth and keeping interest rates at low levels.
The jobless rate rose in 28 states across the nation in June and declined in just 11 as reported by the Labor Department today. This news is disappointing given that the jobs picture has been positive lately, but compared June of 2012, 37 states showed lower unemployment.
In corporate earning news, software giant Microsoft reported profits of $5 billion in the latest quarter with 66 cents earnings per share, below the 75 cents expected. Search engine behemoth Google earned $9.56 a share below the $10.78 expected while General Electric edged out estimates of 35 cents reported a 36 cent profit.
The sweltering heat across the nation have now impacted nearly 130 million people as the Midwest and the Northeast continue to be gripped by brutal temperatures. A massive dome of high pressure has been the cause, but it is supposed to break somewhat over the weekend.
Fed Chairman Bernanke’s speech to the House Financial Services Committee was released this morning saying that that the Fed’s asset purchases are by no means on a preset course. Mr. Bernanke went on to say that Bond buying could be reduced at faster pace, a slower pace, or even increased for a time, depending on outlook and they could begin later this year.
Housing Starts declined by nearly 10% in June from May to 836,000 units annualized and below 958,000 expected to the lowest level since August 2012. The drop was attributed towards a big decrease in apartments. Building Permits, a sign of future construction, fell by 7.7% to 911,000 and below the 1 million expected.
Mortgage application volume continues to decline as the Mortgage Bankers Association reported today that its Market Composite Index, a measure of loan application volume, fell by 2.6% in the latest week. The refi index declined by 4.2% while the purchase index rose marginally by 0.5%. The slowdown in application volume could be attributed towards the recent rise in home loan rates.
Higher gasoline prices and a surge in sales of automobiles led Retail Sales higher in June, but the gains were offset by a decline in home improvement stores, bars and restaurants and department stores. Retail Sales rose by 0.4%, lower than the 0.7% expected and down from the 0.5% gain in May. Retail Sales account for 30% of consumer spending. When stripping out autos, sales were unchanged last month.
Manufacturing activity in the New York State region rose in early July as the index rose to 9.46 from 7.8 in June and above the 3.6 expected. However, within the report it showed that the employment component indicated little positive momentum.
In corporate earnings news, Citigroup reported that earnings jumped 42% in the second quarter as the banking giant cut costs and expanded its international presence. The bank earned $1.34 a share, exceeding the $1.19 that was expected and up from the $1 a share in the same quarter last year.
On the lighter side, Twinkies have made their long awaited return today to store shelves after being off the market for about a year. The maker of the long time treat, Hostess, went bankrupt last year due to problems with management and a stand-off with its second biggest union. Twinkies have made their new debut to Wal-Mart to 3,000 of the retail giant’s stores on Sunday.
The Labor Department reported that Americans filing for first time unemployment benefits rose by 16K in the latest week to 360K, highest level since the week ended May 11. A year ago this time, claims were at 363K. The higher number is due in part to the July 4 holiday, the annual retooling at automakers where they shut down for a few weeks and temporary layoffs related to the end of the regular school year. The four-week moving average of new claims, which smoothes out any seasonal abnormalities, were up by 6,000 to 351,750.
Freddie Mac reported today that the 30-year fixed conventional home loan rate rose to 4.51%, but to obtain that rate a potential borrow would have to pay 0.8 in points and fees. This is up from 4.29% last week and up from 3.65% a year ago. Home loan rates have been rising since the May 1 lows, due to ongoing talk that the Fed will pull back on its stimulus programs geared towards holding rates low.
Don’t look now, but gas prices at the pump could be spiking in the next several days due to rising oil prices. The current national average is at $3.51, up 3 cents since Tuesday. Gas prices were higher a month ago at $3.63…unrest in the middle east and the summer driving season will push prices up in the coming weeks. In addition, inventories in the U.S. dropped for a second week.
The Mortgage Bankers Association reported this morning that its Market Composite Index, a measure of loan application volume, fell by 4% in the latest week as home loan rates hit their highest levels in two years. The refi index fell 4% while the purchase index declined by 3%. Home loan rates have been rising since mid-May on comments from the Fed Chairman Ben Bernanke saying that it expects to wind down the pace of its Bond buying program later this year if the economy continues to improve.
Debt collectors across the nation received bulletins on Wednesday from the Consumer Financial Protection Bureau (CFPB) reminding them that they will be held accountable for unlawful practices when trying to collect debts. Unlawful conduct includes: -threatening action that the debt collector doesn’t have the authority to pursue -fairly representing the character, amount or legal status of the debt -misrepresenting that a consumer’s debt would be waived or forgiven -failing to properly post payments or credit to a consumer’s account with payments
Americans who are collecting unemployment benefits are going to see a cutback in their weekly checks beginning this month. The average weekly unemployment check has fallen by $43 due to the effects of the sequester federal spending cuts. The job markets have been improving in 2013, but many of the jobs that have been created are from the service sector and part time workers have reached an all-time high.
Small business owners weren’t feeling too optimistic in June. Uncertainty surrounding the endless stream of delays and capitulations of certain provisions of the new healthcare laws and as economic growth was revised down for the first quarter of the year. In addition, the growth forecast for the second quarter is not looking good. The National Federation of Independent Business’s monthly economic index fell nearly a point while six of the ten components fell.
Over in the housing sector, CoreLogic reported this morning that the foreclosure front is on the mend. Foreclosure inventories have dropped by 29% from May of 2012 to May of 2013 and down 3.3% from April to May. In addition, serious delinquent mortgages are at the lowest level since December 2008. Corelogic went on to say that completed foreclosures fell 27% compared to May of 2012, but were up 3.5% from April to May. Corelogic said that it “continues to see a sharp drop in foreclosures around the nation and with it a decrease in the size of shadow inventory.”
One of the reasons for the tightening of inventories in key markets around the country has been due to large institutional investors buying up single family homes and turning them into rental properties. The increase in investor buying has been one of the key factors that has been driving home prices higher this year. In April, investors accounted for 10% of the homes sold in the nation’s 100 busiest real estate markets.
In its monthly National Housing Survey, Fannie Mae reported that home prices may enter the purchase market sooner rather than later as people feel that mortgage rates and home prices to rise. Within the survey it showed that those who feel that mortgage rates will go up in the next 12 months rose by 11% to 57%, the highest level in the three-year history of the survey.
As the housing market continues to recover, delinquencies around the country have fallen 43% from the peak levels of 2010 as reported by Lender Processing Service (LPS). In addition, the number of borrowers who are underwater on their current mortgage has declined by 47% from Q1 2012 to Q1 2013. In addition, LPS reported that originations were up 1.8% in April from March to 835,000 new loans originated.
There are no economic data points set to be released today and the rest of the week’s economic calendar is on the light side this week. Stocks are starting the week to the upside ahead of the start of quarterly corporate earnings season begins today. The big event this week will be the minutes from the June 19 Federal Reserve meeting. The members most likely discussed the ongoing stimulus program dubbed QE III and how long the Federal Reserve will continue to stimulate the U.S. economy.
Alpha Mortgage would like to wish everyone a fun & safe 4th of July Holiday!