Weekly analysis of the economic data released during the past week, and how current economic conditions are affecting the real estate market.
Mortgage purchase applications were up 5.5 percent for the week ending November 5th. Purchase applications do not take into consideration cash buyers who according to the August REALTORS® Confidence Index make up as much as 28 percent of transactions. Mortgage purchase applications were down 14.6 percent from the same week a year ago. Refinances, which made up 81.7 percent of mortgage activity, rose 6.0 percent as mortgage rates remained at 4.28 percent on a 30-year fixed mortgage.
Jobless claims data (out a day early due to Veterans’ Day) showed initial claims falling 24,000 to 435,000 for the week ending November 6th. This is positive news as the number of initial claims fell to the lowest level in four months.
The U.S. trade gap fell to $44 billion dollars in September, with exports rising and imports falling. A separate report showed import prices increased 0.9 percent in October, with oil and commodity prices moving higher.
The average 30-year fixed rate mortgage hit a record low of 4.17% last week as reported by Freddie Mac. The 10-year Treasury note reached a yield of 2.54% in October, its lowest level since January of 2009 when it hit 2.52%, but increased 17 basis points between November 4th and the 10th to 2.65% following the Federal Reserve’s announced Treasury purchase program. The 30-year Treasury bond reached a yield of 3.77% in September before tracking up to 3.87% in October and jumped 20 basis points between the 4th and 10th of NovemberRealtyTrac reported a 4% decline in foreclosure notifications in October compared to a month earlier. That group cited legal issues surrounding the signatures on legal documents at banks as the reason for the decline. The spread between the 30-year fixed and the 10-year Treasury widened this spring and summer as Treasury rates tumbled on bad economic news. As the economy improves and inflation concerns rise, yields on Treasury instruments will increase and rates on long-term mortgage rates will follow suit.The robo-signing scandal has raised concerns about the legal process surrounding foreclosures and how it will impact bank books. However, the foreclosure rate is likely to rise once the loans in question have been reviewed and the banks reform their process for filing foreclosure documents.
Consumers feel better in November than they did in October. Preliminary consumer sentiment results show an increase in the index from 67.7 in October to 69.3. The University of Michigan and Thomson Reuters released the preliminary results of their Survey of Consumer Sentiment for November today. The final November results will be released at the beginning of December. Consumers are feeling brighter about the future and also feeling somewhat better about their present situation. Looking at the two sub-indexes that make up Consumer Sentiment, the index for expectations rose for the second consecutive month while the index for current conditions rose from 61.9 to 62.7.While all indexes remain below pre-crisis levels, improvements in these measures are typically associated with increased consumer spending. In Consumer Confidence and Elections, we discussed how past elections have been followed by increased consumer confidence. Final data near the end of this month and beginning of next confirm whether this election was like others in improving the outlook of consumers, but indications are that it was. If so, perhaps the holiday season and coming new year will be marked by more cheer than previously anticipated.