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Housing Rebounds, GDP Disappoints

06/01/2015

IN THIS ISSUE

Last Week in Review: New Home Sales rebounded in April, while the latest Gross Domestic Product reading showed the economy struggled in the first quarter.

Forecast for the Week: Look for key reports on inflation, manufacturing and the labor sector.

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LAST WEEK IN REVIEW

"You like to-may-to, I like to-mah-to ... let's call the whole thing off." Shall We Dance. Americans aren't calling off anything when it comes to real estate this spring. Read on for all the latest housing news and more.

Sales of newly constructed homes rebounded in April, up from the dip in March, as the spring buying season got underway. New Home Sales rose by 6.8 percent to an annual rate of 517,000, which was above the 510,000 expected. Since April 2014, sales are up a whopping 26 percent! The median price for a newly constructed home in April was $297,300, up 8.3 percent from a year ago.

Also of note, April Pending Home Sales increased 3.4 percent from March, while the S&P/Case-Shiller Home Price Index rose by 5 percent on an annual basis in March.

The news was less positive when it came the economy overall. The second reading of first quarter Gross Domestic Product came in at -0.7 percent, worse than the original reading of 0.2 percent. GDP is the broadest measure of U.S. economic strength, and is measured by the total value of all goods and services produced in a calendar year. In 2014, GDP grew by 2.4 percent, a decent number. The Federal Reserve expects GDP to grow by 2.5 percent for 2015, but the first quarter's figures are not helping to meet this goal.

Freddie Mac released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates moving higher amid positive housing data and pushing fixed mortgage rates to their highest level of the year.

  • 30-year fixed-rate mortgage (FRM) averaged 3.87 percent with an average 0.6 point for the week ending May 28, 2015, up from last week when it averaged 3.84 percent. A year ago at this time, the 30-year FRM averaged 4.12 percent.
  • 15-year FRM this week averaged 3.11 percent with an average 0.5 point, up from last week when it averaged 3.05 percent. A year ago at this time, the 15-year FRM averaged 3.21 percent.

One benefit from Friday’s poor GDP reading is that it helped home loan rates decline slightly by weeks end. With uncertainty continuing in Greece as it struggles to make a series of large debt payments, Mortgage Bonds and home loan rates could possibly see a benefit from safe haven trading in the coming weeks.

While market volatility is likely to continue, home loan rates still remain near historic lows and now is a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients. I can be reached at michael.borodinsky@caliberhomeloans.com.

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FORECAST FOR THE WEEK

Friday's Jobs Report for May ends a week filled with key reports.

  • The packed economic calendar kicks off on Monday with Personal Income, Personal Spending and Personal Consumption Expenditures (the Fed's favorite measure of inflation).
  • Also on Monday, look for manufacturing news via the ISM Index. The ISM Services Index will be released on Wednesday.
  • Additional reports on Wednesday include the Fed's Beige Book and the ADP National Employment Report.
  • Thursday brings Productivity for the first quarter and Weekly Initial Jobless Claims.
  • Friday is the big day with the May Jobs Report, which includes Non-farm Payrolls, Hourly Earnings and the Unemployment Rate.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

When you see these Bond prices moving higher, it means home loan rates are improving—and when they are moving lower, home loan rates are getting worse.

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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

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