What’s Ahead for the Week of August 25, 2014
Last week we received economic news related to housing from The National Association of Home Builders (NAHB) Wells Fargo Housing Market Index for August, which rose by two points to 55, and was its highest reading in seven months. Components of the NAHB HMI include builder surveys on conditions related to upcoming sales of new homes, which rose by two points for a reading of 55. Builder sentiment concerning present sales conditions, also rose by two points to 58. Builder views on prospective buyer traffic rose from 39 to 42.
Readings above 50 indicate that more builders viewed housing market conditions as positive as negative.
NAHB cited job growth and low mortgage rates as conditions driving higher builder confidence in market conditions.
The Commerce Department reported housing starts and building permits rose in July. Housing starts increased to 1.09 million from June’s reading of 945,000 and exceeded expectations of 975,000. This reading certainly reflects higher builder confidence and should contribute to an easing demand for housing overall, as new homes expand the inventory of available homes.
Single family homes accounts for about 75 percent of new home construction. July’s reading was 656,000 single family housing starts on an annual basis.
Regionally, housing starts:
- declined by 25 percent in the Midwest,
- rose by 44 percent in the Northeast,
- rose by 29 percent in the South,
- rose by 18.60 percent in the West.
Building permits issued in July rose to an annual rate of 1.05 million, which was an increase of 8.10 percent over June’s reading of 973,000 permits. Permits for single family homes increased by 0.90 percent to a reading of 640,000 annually.
July’s readings for housing starts and building permits are in line with overall economic growth and suggest that housing markets should continue to improve in the coming months, as the supply of new homes increases.
The National Association of REALTORS® reported that existing home sales rose to 5.15 million on a seasonally adjusted annual basis; against predictions of 5.00 million existing homes sold and June’s reading of 5.05 million sales of previously owned homes.
Freddie Mac’s weekly survey of mortgage rates revealed the average rate for a 30-year fixed rate mortgage dropped by two basis points to 4.10 percent with discount point lower at 0.50 percent. The rate for a 15-year mortgage dropped by one basis point to 3.24 percent with discount points unchanged at 0.60 percent. The average rate for a 5/1 adjustable rate mortgage dropped by two basis points to 2.95 percent with discount points unchanged at 0.50 percent.
The Federal Open Market Committee (FOMC) of the Federal Reserve released minutes from its July meeting. Highlights included the committee’s 9-1 vote in favor of continuing the slow pace of reducing economic stimulus and the committee intends to keep the federal funds rate below normal levels for “some time.”
Previous FOMC statements have rottenly indicated the Fed’s intention to maintain low short-term interest rates after its asset purchases under QE3 end in October.
Weekly jobless claims fell to 298,000, lower than expectations of 300,000 claims and the prior week’s reading of 312,000 claims.
What’s Ahead for the Week
This week’s events in housing include New & Existing Home Sales, the Case-Shiller Home Price Index and FHFA House Price Index. We’ll also be seeing reports on the Consumer Confidence Index and the University of Michigan Consumer Sentiment Index.