May 9, 2017
The first week of the month is always busy with data announcements because the employment data is released on the first Friday of the month. But this month we started out firing on all cylinders because we had a meeting of the Federal Reserve's Open Market Committee the same week, plus April was a short month and some end of the month data was pushed into May. This included personal income and spending, which are key economic indicators.
So how did we make out with all of this data and activity? Personal income and spending came in lower than forecast. The fact that personal spending did not rise at all was certainly of concern because stagnant consumer spending was a major factor contributing to the disappointing preliminary estimate for economic growth in the first quarter, which was released the previous Friday. Spending will likely need to increase for economic growth to pick up.
The announcement from the Fed came on Wednesday and, as expected, there was no action on interest rates. The announcement indicated that the Fed was comfortable with previous statements regarding future activity, despite the slow rate of growth in the first quarter. The Fed did not have the ability to see the employment numbers for April when they met and the release showed that jobs increased by 211,000, slightly more than forecast, though the job creation was partially offset by a downward revision of the previous month's numbers. The unemployment rate fell to 4.4%, which puts us very close to what economists consider full employment, but does not consider those who are working part time or out of the workforce, which gives us some room to grow before inflation sets in. Wages grew by 0.3%, which was right on forecast. These numbers would support the Fed raising rates in June; however, there will be another jobs report released before they meet again.
Rates on 30-year fixed loans were steady last week as the markets waited on the jobs data. For the week ending May 4, Freddie Mac announced that 30-year fixed rates fell one tick to 4.02% from 4.03% the week before. The average for 15-year loans remained at 3.27%, and the average for five-year adjustables moved up one tick to 3.13%. A year ago, 30-year fixed rates averaged 3.61%. Attributed to Sean Becketti, chief economist, Freddie Mac -- "The 10-year Treasury yield remained relatively flat this week, as did the 30-year fixed rate which fell 1 basis point to 4.02 percent. Markets have been erring on the side of caution following a weak advance estimate for first-quarter GDP and the FOMC's broadly expected decision to leave rates unchanged." Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
Updated May 5, 2017
|6-month Treasury Security
|1-year Treasury Security
|3-year Treasury Security
|5-year Treasury Security
|10-year Treasury Security
|| 1.780% (Apr)
|| 0.732% (Apr)
|11th District Cost of Funds
|| 0.583% (Mar)
|| 4.00% (Apr)
| The spring home-buying market is shaping up to be one of the most competitive in recent memory, and is even tougher for first-time homebuyers, i.e. Millennials. The market as a whole continues to struggle with low housing inventory, but a recent report from Trulia shows the dwindling inventory is especially acute for starter homes or even trade ups, while the number of premium homes actually increased. A major reason many Millennials are delaying homeownership is because about 38% have subprime credit, according to TransUnion’s consumer credit database. In that case, there are several steps Millennials can take toward improving their credit scores. TransUnion Vice President Heather Battison passed along these tips that Millennials should consider when preparing to buy a home:
- Check your credit early: TransUnion recommends all homebuyers check their credit report three to six months before shopping for a home to allow time to build credit if needed.
- Talk to your landlord: Renting Millennials should ask their landlord to report existing rent payments to TransUnion and the other bureaus to demonstrate positive payment history.
- Get pre-approved: Knowing the loan size a financial institution is willing to approve can prevent people from falling in love with homes they can’t afford.
- Have a contingency budget: There are a lot of financial unknowns when buying a home so it’s important for homebuyers to have money set aside for any surprises upon move-in. Source: TransUnion
Sales of newly built single-family homes increased for the third consecutive month, posting a strong showing to the spring selling season, the Commerce Department reported. Single-family new-home sales rose 5.8 percent in March to a seasonally adjusted annual rate of 621,000 units. “The March sales numbers are the second highest on record since the Great Recession, which is especially encouraging considering the poor weather conditions throughout many parts of the country,” says Robert Dietz, chief economist of the National Association of Home Builders. “With tight existing-home inventory, rising household formations, and continued job creation, we can expect further growth in new-home sales moving forward.” In March, the inventory of new homes for sale was 268,000, a 5.2-month supply at the current sales pace, the Commerce Department reports. The median price of a new home sold in March was $315,100. "This month's increase in new-home sales is aligned with solid builder confidence and shows that the spring homebuying season is off to a strong start," says Granger MacDonald, NAHB chairman. "However, builders are concerned that ongoing increases in building material costs will hurt housing affordability." MacDonald says the association is concerned about an announcement from the U.S. Commerce Department proposing a 20 percent countervailing duty on Canadian lumber imports. Thirty-three percent of the lumber used in the U.S. last year was imported with the bulk of it coming from Canada, the NAHB reports. Source: NAHB