Thoughts to Ponder and The Market Update June 5

 

Thoughts to Ponder . . .

• If you don’t cut the cake in pieces and just eat the whole cake, then you only had one piece.
• What do I do for a living? I breathe in and out.
• What’s the best thing about living in Switzerland? The flag is a big plus.

 

And Now on to The Market Update . . .

Home prices continue to move higher and are starting to play a bigger role in the current economy.

• The most recent Case-Shiller’s adjusted 20-city index for the month of May jumped 0.9 percent.
• This is slightly higher than expectations and continues to point to positive momentum for the housing market.
• The big news in the report is the unadjusted rate of growth leaped a much higher-than-expected 1.0 percent.
• Growth compared to the same time last year is up by 5.9 percent.

 

When you combine this latest report with the strong data from last week regarding the FHFA report and existing home sales data, everything seems to be pointing to housing appreciation at 6.0 percent per year.

• Home appreciation is once again creating growth in wealth for homeowners.
• This will likely continue to drive the economy.
• A recent article in the Wall Street Journal discussed how cash-out refinancing is beginning to grow again.

 

On the flip side of housing, the latest data on pending homes sales for the Spring market is not quite as strong.

• Pending home sales declined for the second straight month, down by 1.3 percent for the month of April.
• The index is at 109.8 which is 3.3 percent lower than where the market was a year ago.

 

The pending home sales index keeps track of contract signings for home resales.

• The latest report is showing weakness that will likely show up in May and June’s final home sale data.
• Mortgage lenders around the country, as well as real estate professionals, have indicated that there continues to be a lot of pent up demand for housing.
• The challenge is that extremely limited inventory is keeping contract signings lower than what would be expected for the Spring buying season.

 

Reflecting the challenge with buyers locating homes and getting accepted offers is showing up in the latest Mortgage Bankers Association report on loan applications.

• Purchase applications in the week ending May 26^th dropped by 1.0 percent.
• This is the third consecutive week of declines placing the unadjusted purchase index only 7 percent higher than a year ago.
• Refinancing applications dropped 6 percent for the same week.
• This is in stark contrast to the prior week’s jump of 11 percent.
• In the current lending environment refinances represent 43.2 percent of mortgage activity.
• The biggest concern about the mortgage trend is that mortgage rates have declined, however loan activity is not growing.

 

With the growth in home equity, and the latest strong consumer confidence data, many experts are optimistic that the housing market will remain steady and possibly turn stronger in the coming months.

• May’s consumer confidence index came in at an unusually strong reading of 117.9.
• Typically, a strong reading transfers into positive movement in housing and mortgage finance.

 

This week’s potential market moving reports:

• Monday June 5^th – Factory Orders, ISM Non-Mfg Index, Labor Market Conditions
• Tuesday June 6^th – JOLTS Report
• Wednesday June 7^th – MBA Mortgage Applications
• Thursday June 8^th – First Time Jobless Claims, Bloomberg Consumer Comfort Index
• Friday June 9^th – Wholesale Trade