IN THIS ISSUE
Last Week in Review: August New Home Sales and second quarter Gross Domestic Product surged, while sales of existing homes in August disappointed.
Forecast for the Week: The highly anticipated Jobs Report rounds out a week full of economic indicators.
LAST WEEK IN REVIEW
"Sing with me, sing for the year, sing for the laughter, sing for the tear." Aerosmith. While year-over-year housing data sings of a strengthening market, some monthly results are true tearjerkers.
August Existing Home Sales, as reported by the National Association of REALTORS®, declined 4.8 percent from July to an annual rate of 5.31 million. This was below the 5.50 million expected. The disappointing drop comes after three straight monthly gains. Year-over-year sales, however, have risen for 11 consecutive months and are 6.2 percent above a year ago.
August New Home Sales surged to the highest rate since early 2008 and were up nearly 22 percent from August 2014. July's numbers also were revised higher, signaling continued strength in the U.S. housing market.
Second quarter Gross Domestic Product (GDP) data was also a reason to sing. Economic growth far outpaced growth in the first quarter, led by consumer and business spending. The final GDP reading rose 3.9 percent, above expectations and well above the anemic 0.6 percent registered in the first quarter. GDP measures the total output of goods and services produced in the U.S., and is the broadest measure of economic activity.
The Fed’s commitment to raise rates in 2015 was again emphasized when on Thursday Janet Yellen stated, “Most FOMC participants, including myself, currently anticipate these conditions will likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter.”
The Fed will continue to monitor all of these economic factors over the next month as it prepares for another discussion on whether or not to raise its benchmark Fed Funds Rate at the end of October. The Fed Funds Rate is the rate at which banks lend money to each other overnight. While an increase in the Fed Funds Rate does not directly impact home loan rates, home loan rates may increase once the Fed takes action, depending on the market and overall economy.
For now, average fixed rate home loan rates remain below 4%, and near historic lows. If you have any questions at all about rates, the mortgage market or housing, please let me know.
FORECAST FOR THE WEEK
The week is full of key economic data on housing, manufacturing and inflation, all leading up to the highly anticipated September Jobs Report on Friday.
- Monday kicks off with Personal Income and Personal Spending as well as the inflation reading Personal Consumption Expenditures (PCE).
- Housing data will be released Monday and Tuesday with Pending Home Sales followed by the S&P/Case-Shiller Home Price Index.
- Also on Tuesday, Consumer Confidence will be reported.
- The ADP National Employment Report will be released Wednesday.
- Manufacturing numbers will come from the Chicago PMI on Wednesday followed by the national ISM Index on Thursday.
- As usual, weekly Initial Jobless Claims will also be reported on Thursday.
- Finally, the week closes with the September Jobs Report on Friday, which includes the closely watched Non-farm Payrolls and Unemployment Rate.
By: Michael Borodinsky
Vice President/Regional Builder Branch Manager | Caliber Home Loans
Call Michael: 732-382-2654
Email Michael: Michael.Borodinsky@caliberhomeloans.com
Follow Michael on Twitter: @mikeborodinksy