Mortgage applications decreased 2.6% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 26, 2018. The Market Composite Index, a measure of mortgage loan application volume, decreased 2.6% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 12% compared with the previous week. The Refinance Index decreased 3% from the previous week. The seasonally adjusted Purchase Index decreased 3% from one week earlier. The unadjusted Purchase Index increased 15% compared with the previous week and was 10% higher than the same week one year ago. The refinance share of mortgage activity decreased to 47.8% of total applications, its lowest level since August 2017, from 49.4% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.7% of total applications. The FHA share of total applications decreased to 10.7% from 11.4% the week prior. The VA share of total applications decreased to 10.1% from 10.9% the week prior. The USDA share of total applications remained unchanged at 0.8%. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to its highest level since March 2017, 4.41%, from 4.36%, with points increasing to 0.56 from 0.54 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate increased from last week.
Companies add 234,000 jobs in January, buttressing Trump claim
US companies added 234,000 jobs in January, a report from ADP Research Institute said Wednesday, a day after President Donald Trump touted labor market strength in his first official State of the Union address. Economists surveyed by Thomson Reuters had projected that private payrolls would grow by 185,000. “Since the election, we have created 2.4 million new jobs, including 200,000 new jobs in manufacturing alone,” Trump said Tuesday. The ADP report was published two days before the Labor Department’s payrolls report, which includes data from both the public and private sectors. In addition to pointing to labor market strength, Trump also said in his address that business confidence is high and that the stock market has gained $8 trillion in value. “They are having their best year in their 20-year history,” Trump said in his address. “They are handing out raises.”
Pending Home Sales Tick Up 0.5% in December
Pending home sales were up slightly in December for the third consecutive month, according to the National Association of Realtors®. In 2018, existing-home sales and price growth are forecast to moderate, primarily because of the new tax law’s expected impact in high-cost housing markets. The Pending Home Sales Index moved higher 0.5% to 110.1 in December from an upwardly revised 109.6 in November. With last month’s modest increase, the index is now 0.5% above a year ago. Lawrence Yun, NAR chief economist, says pending sales edged up in December and reached their highest level since last March (111.3). “Another month of modest increases in contract activity is evidence that the housing market has a small trace of momentum at the start of 2018,” he said. “Jobs are plentiful, wages are finally climbing and the prospect of higher mortgage rates are perhaps encouraging more aspiring buyers to begin their search now.” Added Yun, “Sadly, these positive indicators may not lead to a stronger sales pace. Buyers throughout the country continue to be hamstrung by record low supply levels that are pushing up prices — especially at the lower end of the market.” The uninterrupted supply and demand imbalances throughout the country fueled price appreciation to 5.8% in 2017, which was the sixth straight year of gains at or above 5%1. While tight inventories are still expected to put upward pressure on prices in most areas this year, Yun expects overall price growth to shrink, with some states even experiencing a decline, because of the negative effect the changes to the mortgage interest deduction and state and local deductions under the new tax law. See NAR’s 2018 state forecast for a look at home price projections: http://economistsoutlook.blogs.realtor.org/2018/01/09/tax-reform-impact-and-home-price-outlook/.
“In the short term, the larger paychecks most households will see from the tax cuts may give prospective buyers the ability to save for a larger down payment this year, and the healthy labor economy and job market will continue to boost demand,” said Yun. “However, there’s no doubt the nation’s most expensive markets with high property taxes are going to be adversely impacted by the tax law.” Added Yun, “Just how severe is still uncertain, but with homeownership now less incentivized in the tax code, sellers in the upper end of the market may have to adjust their price expectations if they want to trade down or move to less expensive areas. This could in turn lead to both a decrease in sales and home values.” After expanding 1.1% in 2017 to 5.51 million, Yun does anticipate a slight increase (0.5%) in existing sales this year (5.54 million). Single-family housing starts are forecast to jump 13.3% to 961,000, which will push new home sales up 15.3% to 701,000 (608,000 in 2016). The PHSI in the Northeast dipped 5.1% to 93.9 in December, and is now 2.7% below a year ago. In the Midwest the index decreased 0.3% to 105.0 in December, but is still 0.3% higher than December 2016. Pending home sales in the South grew 2.6% to an index of 126.9 in December and are now 4.0% higher than last December. The index in the West rose 1.5% in December to 101.7, but is still 3.1% below a year ago.
Oil prices fall for 3rd day as US inventory build-up weighs
Oil fell for a third day on Wednesday, but remained on track for its biggest gain in January in five years, in spite of data that showed US crude stocks rose more than expected last week and a broader selloff in other commodities, stocks and bonds. Brent crude, the global benchmark, was down 49 cents at $68.43 a barrel by 1015 GMT, after touching a two-week low earlier in the day. US West Texas Intermediate (WTI) futures were down 39 cents at $64.11. On Tuesday, US crude fell 1.6% to close at $64.50 a barrel, far outpacing a 0.6% drop in the price of Brent. “The extent of the latest pullback in oil prices has taken many by surprise. Whether this weakness will be short-lived or are we witnessing the precursor to a violent downside correction remains to be seen,” PVM Oil Associates strategist Stephen Brennock said. “Still, what is apparent is that positives are increasingly in short supply for skittish buyers and the early-year optimism is hanging by a thread.” Prices of WTI and Brent are still on track for a fifth month of gains and Brent is set for its largest percentage increase in the month of January since 2013, with a rise of 2.7%. But as prices have risen, US producers have increased their rig count. Energy companies added 12 oil rigs last week, the biggest weekly increase since March. “The rig count will only continue to rise and the US system will only become more efficient,” said Matt Stanley, a fuel broker at Freight Services International in Dubai. “I see a correction on the horizon down towards $60 before the inevitable OPEC minister comes out and talks about new cuts,” he added.
Statement from NAHB Chairman Randy Noel on President Trump’s State of the Union Address
Randy Noel, chairman of the National Association of Home Builders and a custom home builder from LaPlace, La., issued the following statement regarding President Trump’s State of the Union address: “President Trump said ‘America is a nation of builders’ and the nation’s home builders wholeheartedly agree. The president knows that housing and homeownership are critical to a strong and prosperous nation. We commend him for working tirelessly to reduce unnecessary regulations that hurt small business owners and impede a more robust housing recovery. And we strongly support the president’s call for more vocational schools to train young workers and prepare them for careers in the construction trades and other industries. Moreover, the landmark tax reform law championed by President Trump will keep housing and the economy moving forward and put more money into the pockets of middle class households. And that’s good for housing. NAHB looks forward to working with the White House to continue to promote policies that will spur job and economic growth and promote homeownership and rental housing opportunities for all Americans.”