In this week’s economic review, existing homes sales dropped to a two-year low in the South, home prices cooled at the end of summer, and mortgage rates continued to fall.
Housing Market Index
According to September’s Housing Market Index, home builder optimism is easing with a 3-point drop to 64. This matches July’s reading, the weakest month of the year. While the southern region did drop 4 points, the decline is small considering the hurricane devastation of August and early September. Overall, weakness was highly centered in the Midwest region, which dropped 6 points to a level of 59. The West leads the pack with a 2-point gain and a level of 79.
Buyer traffic continued to hold under the breakeven point, down 1 point to 47. Both six-month sales and current sales are down 4 points.
Housing starts in August made a surprising gain despite Hurricane Harvey, up to a 1.180 million annualized rate. While starts fell 7.9 percent in the South, single-family starts were up 1.6 million overall.
Existing Home Sales
Home sales for August were impacted by the hurricane, posting a 1.7 percent monthly decline with an annualized rate of 5.350 million, at the low end of the consensus range. Sales fell by 5.7 percent in the South but the West also posted a decline of nearly 5 percent.
Year-over-year single-family home sales are barely holding on to the plus column with just a 0.2 percent increase from 2016. Prices are at a year-over-year gain of 5.6 percent. Though prices are hampering affordability, August marked the second straight month of weakened home prices, down 1.8 percent to a median of $253,500. Inventory has held at a tight 4.2-month supply for a fourth month in a row.
As told by the August existing home sales report, home prices are cooling with the FHFA House Price Index posting just a 0.2 percent gain in July. The year-over-year rate was pulled down 0.2 percent to 6.3 percent. Despite the slowdown, home prices remain strong overall.
As expected, the Federal Reserve announced their decision to keep interest rates as-is (1.00 to 1.25 percent) on Wednesday. The Fed did announce, though, that they would be starting the reduction process of their $4.5 trillion balance sheet. In December 2016, the Fed stated they would not initiate that process until “normalization of the level of the federal funds rate is well under way.”
With two more Fed meetings in 2017, the expectation of an interest rate hike before the end of the year has increased to a 60 percent probability, according to Forbes.
This week in the economy:
- Mortgage rates remained at yearly lows as of September 21st. The 30-year fixed rate fell 4 basis points to 3.83% with 0.5 points, according to Freddie Mac.
- Despite low rates purchase applications decreased by 11 percent in the week of September 15th. The refinancing index also declined by 9 percent in the week with both drops erasing the prior week’s gains.
- Initial jobless claims surprisingly fell for a second week in a row, down 23,000 in the week of September 16 to a level of 259,000. The 4-week average is up 6,000 to 268,750.
- The Bloomberg Consumer Comfort Index eased for a third straight week in the week of September 17. The index fell 1.3 points to a still-strong 50.6 level, considering the impact of Harvey and Irma.
The economic calendar for the week of September 25th, 2017:
- Tuesday – New Home Sales, Consumer Confidence, S&P Corelogic Case-Shiller HPI
- Wednesday – MBA Mortgage Applications, Pending Home Sales Index
- Thursday – Jobless Claims, Bloomberg Consumer Comfort Index, GDP
- Friday – Consumer Sentiment
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