The Home Buyer's Korner

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July 6th, 2015

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What Home Buyers Need to Know for the Week of July 6th, 2015

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Last week’s news related to housing came from the S&P Case-Shiller Home Price Index reports for April, the Commerce Department’s Pending Home Sales report, as well as Construction Spending. Other news effecting housing was the Non-Farm Payrolls, the ADP Employment report and Consumer Confidence. And as usual, Freddie Mac released its mortgage rate summary and we received the weekly unemployment claims report.

The Case-Shiller 20-City Home Price Index reported home prices slowed slightly in April. The index which monitors price fluctuation in 20 of the top major metropolitan area across the country indicates that home prices rose 4.2 percent for the 12 months ending in April and weaker than the 4.3 percent increase reported in March.

It’s worth noting that according to the 20-City Index, home prices rose 1.10 percent from March to April and were bolstered by the onset of the spring selling season, as well as some signs that first time home buyers who have been absent from the housing market in large numbers may be returning.

More good news came for the Department of Commerce who reported that Pending Home Sales increased to their highest level in nine years during the month of May. Year over year pending home sales were 10.40 percent higher than in May 2014. Housing analysts consider pending home sales as a good indicator of future closings and mortgage originations over the next 60 days. However, those of us in real estate need to be aware that new closing regulations come into effect on August 1 that could affect future closings, so make sure you’re aware of the changes and your home buyers and seller aren’t inconvenienced.

Both private sector and government Construction Spending was up in May and welcomed news for the sector. Spending increased 0.8 percent and an 8.2 percent year over year increase. Additionally, 2015 is looking up with construction spending 5.9 percent higher year over year for the timeframe ending in May.

We also saw some additional favorable signs deep in the report. Within the private sector numbers lays residential construction spending  and we saw a 0.3 percent increase over April’s level or in dollars that’s and adjusted annual rate of $359.9 billion or 1.5 percent increase over April pace.

Public sector construction also got a boost last month with a 0.7 year over year increase. While public sector construction isn’t directly connected to the housing sector it is connected to jobs and jobs stability turns would-be home buyers into home owners. The report suggests that manufacturers are expanding their businesses and that could mean more jobs in the future. Stagnant wages and would be home buyers concerned about job security have been kept on the sidelines, but an improving hiring reports and hopefully some future wage increases would help to stimulate housing.

Freddie Mac’s Weekly Mortgage Market Survey indicated another increase in average mortgage rates with the average rate for a 30 year fixed rate mortgage increasing six basis points to 4.08 percent. The average rate for a 15-year fixed rate mortgage rose by three basis points to 3.24 percent and the average rate for a 5/2 adjustable rate mortgage rose by one point to 2.99 percent. Discount points for a 30-year fixed rate mortgage dropped from 0.70 percent to 0.60 percent and were unchanged for 16-year fixed rate mortgages at 0.60 percent and 0.40 percent for a 5/1 adjustable rate mortgage.

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The Bureau of Labor Statistics reported that Non-farm Payrolls dropped to last month to 223,000 new jobs being added as compared to employment analysts’ expectations of 225,000 and May’s jobs added of 254,000. The ADP employment report, which tracks private-sector hiring, fared better with 237,000 new jobs posted as compared to 203,000 new private sector jobs added in May.

New jobless claims reached a five week high with a reading of 281,000 and expectations were for 275,000. The previous week’s reading was 271,000 filed. The four week rolling average of new claims filed showed an increase of 1000 more claims filed for a reading of 274,750. Although we don’t like seeing any increases in job claims, we continue to be well below the benchmark of 300,000 for the 17th consecutive week.

The Bureau of Labor Statistics also reported last week that the National Unemployment Rate was lower at 5.30 percent as compared to an expected reading of 5.40 percent and May’s reading of 5.50 percent. The decease isn’t necessarily good news however, due to a labor force participation rate at a dismal 62.6 percent but June’s national unemployment rate was the lowest reading since 2008. Furthermore, while the country may be on the path to full recovery, many job gains have been part-time and low wage employment opportunities shows continued soft data in the report.

What’s Ahead for the Week?

The week’s focus will be on the FOMC Minutes that will be released on Wednesday and as usual we’ll get Weekly Jobless Claims and Freddie Mac’s Mortgage Rate Survey this Thursday.

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