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Week In Review – June 22, 2018

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Week In Review

Volume 24, Number 21

Reginald J. Smith, Community Development Manager – Bank of Kansas CityReginald J. Smith

Economic Highlights for Week Ending June 22, 2018

 

MONDAY, June 18th

What’s next for housing?  According to the NAHB housing market index, homebuilder optimism cooled a bit in June however remains near its highest levels in nearly a decade.  The index dropped 2 points this month to a reading of 68.  Both sales subcomponents of the index dropped a point but at a level of 75 for current sales assessments and 76 for sales six months from now, optimism remains solid for new home sales.  Foot traffic through model homes also fell a point to 50 which is borderline positive for prospective buyer interest.  The new home market has been moving higher, both sales and permits, though indications including prices have been pointing to slowing growth.

 

TUESDAY, June 19th

New residential construction starts rose 5.0% in May to an annual rate of 1.350 million after a revised April rate of 1.286 million.  With the gain, housing starts are now 20.3% above their May 2017 level.  Single-family housing starts rose 3.9% last month to a strong pace of 936k while multifamily jumped 11.3% to an annual rate of 404k.  Housing permit issuance, which is often used as a proxy for future building activity, fell 4.6% in May to 1.301 million.  Weakness includes single-family homes, down 2.2% to an 844,000 rate, and once again multi-family units which are down 8.8% to a 457,000 rate.  Despite the decline last month, permit issuance remain 8.0% higher than in May 2017.  Total housing permits are lower than the current pace of new starts so construction activity is likely to slow over the next several months.UFSC Week In Review

 

WEDNESDAY, June 20th

The MBA mortgage applications index rose 5.1% for the week ending June 15.  The refinance index jumped 6.1% on the week as the purchase index increased 4.3%.  Contract mortgage interest rates were unchanged last week with the average rate for a 30-year fixed for conforming loans ($453,100 or less) remaining at 4.83%.

Existing home sales fell 0.4% in May to an annual pace of 5.43 million following a decline of 2.7% in April to an annual rate of 5.45 million.  Existing home sales are trending lower, down 3.0% from their May 2017 rate.  Regionally, sales dropped moderately in all regions of the country except for the Northeast where they gained 4.6%.  The inventory of homes available for sale rose 2.8% on the month to 1.850 million which represents just a 4.1-month supply at the current sales pace.  However, inventories remained down a sharp 6.1% on the year.  Clearly, such low supply on the market is constraining sales and lifting prices.  House prices continued to move higher over the past year as the median price for an existing home gained 4.9% in May to $264,800. NAR chief economist, Lawrence Yun said that a solid economy and job market should be generating a much stronger sales pace than what has been seen so far this year.  Incredibly low supply continues to be the primary impediment to more sales, but there’s no question the combination of higher prices and mortgage rates are pinching the budgets of prospective buyers, and ultimately keeping some from reaching the market.

 

THURSDAY, June 21st

Initial claims for unemployment insurance were unchanged last week at 218k.  The four-week moving average slipped by 4,000 to 221,000.  Jobless claims remain very low and are consistent with a low unemployment rate and strong job growth.

The Federal Housing Finance Agency Purchase-Only House Price Index rose 6.4% in April on a year-ago basis, which is somewhat slower than March’s increase.  The housing market remains tight because of steady demand and limited inventories. House price gains are broad-based with all regions posting gains on a year-ago basis.

 

FRIDAY, June 22nd

Stock Market Close for the Week


Index

Latest

A Week Ago

Change



DJIA
24,580.89
25,090.48
-509.59 or -2.03%


NASDAQ
7,692.82
7,746.38
-53.56 or -0.69%


WEEK IN ADVANCE

After a week of mostly housing market related data, reports in the coming week wrap up the sector for the month. Watch for new home sales and pending home sales, both on next week’s calendar.


Key Interest Rates

Latest

6 Mos Ago

1 Yr Ago



Prime Rate
5.00%
4.25%
4.00%


Fed Discount
2.50%
2.00%
1.75%


Fed Funds
1.90%
1.41%
1.16%


11th District COF
0.895%
0.737%
0.645%


10-Year Note
2.89%
2.46%
2.16%


30-Year Treasury Bond
3.04%
2.82%
2.74%


30 -Yr Fixed (FHLMC)
4.57%
3.94%
3.90%


15 -Yr Fixed (FHLMC)
4.04%
3.38%
3.17%

6-Mo Libor (FNMA)
2.24375%
1.66800%
1.41878%

Sources: IBC’ s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco

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