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Week In Review – October 27, 2017

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Week In Review

UFSC Week In ReviewVolume 23, Number 39

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

Economic Highlights for the Week

Ending October 27, 2017

 

MONDAY, October 23rd

The Federal Housing Finance Agency Purchase-Only House Price Index rose 6.6% in August on a year-ago basis, which is somewhat faster than the previous months increase.  The combination of steady demand and limited inventories continues to fuel fast house price appreciation.  Gains are far-reaching across all regions on a year-ago basis, with the Pacific Census division leading the way.  Meanwhile, house prices in the Middle Atlantic, New England and West North Central divisions lag.

 

TUESDAY, October 24th

New home sales surged 18.9% in September to an annualized pace of 667k.  The gain more than makes up for declines in new home sales in the last couple of months. New home sales are now 17.0% above their September 2016 rate of 570k.  Regionally, new home sales were up in all areas of the country with outsized gains in the Northeast and South and more moderate gains in the Midwest and West.  The inventory of new homes available for sale were unchanged on the month at 279k however, the months supply dropped to 5.0 months from 6.0 months previously because of strength in the current sales pace.  Inventories remain quite lean. Both strong demand and tight supply led house price appreciation higher last month.  Underscoring the strength of the data is strength in prices as sellers were not giving discounts.

The median price rose a very steep 5.2% last month to $319,700. And prices may have further to run as the year-on-year gain was only 1.6%.  Hurricanes Harvey and Irma do not appear to have had a negative impact on new-home sales last month. The outlook is positive for new home sales strength to continue through the rest of this year.

 

WEDNESDAY, October 25th

The MBA mortgage applications index fell 4.6% for the week ending October 20.  The refinance index fell by 3%, while the purchase index was 6.1% lower.  Yet without seasonal adjustments, which included the Columbus Day holiday in the prior week, purchase applications were up 4,0 percent on the week, improving the year-on-year gain by 1.0 percentage point to a very solid 10.0 percent in what is a positive signal for underlying home sales.  Contract mortgage interest rate moved higher last week with the 30-year fixed for conforming mortgages up 4 bps to 4.18%.

 

THURSDAY, October 26th

Jobless claims rose 10k to 233k for the week ending October 21.  This was the first rise in initial claims in four weeks. Despite recent volatility in initial claims for unemployment insurance benefits, the labor market is in good health and layoffs remain low.  The pending home sales index which tracks the number of signed sales contracts and is considered a leading indicator of existing home sales was unchanged at a level of 106.0 in September.  The index is stuck at 106.0, having moved down from a peak in November last year of 112.3.  This suggests that existing home sales will also be flat over the next couple of months.

 

FRIDAY, October 27th

The economy grew at a 3.0% annual rate in the third quarter according to the advance estimate of GDP.  This follows a growth rate of 3.1% in Q2.  Consumer spending growth slowed and inventory accumulation increased, making its first meaningful contribution to growth this year.  Fixed investment and trade also made positive contributions.  Hurricane impacts were not quantified in this report. Residential investment was one of the few weaknesses, falling at a 6.0% pace.  The rise in inventories would be a concern if demand was softening, but demand is steady and any inventory overhang is likely to be drawn down during the fourth quarter.  Final sales, which exclude inventories, came in at a respectable 2.3%.  This is a solid report that points to steady momentum going into the fourth quarter.

 

Stock Market Close for the Week


Index

Latest

A Week Ago

Change



DJIA
23,434.19
23,328.63
+105.56 or +0.45%


NASDAQ
6,701.26
6,629.05
+72.21 or +1.09%


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
4.25%
4.00%
3.50%


Fed Discount
1.75%
1.50%
1.00%


Fed Funds
1.16%
0.91%
0.41%


11th District COF
0.732%
0.591%
0.703%


10-Year Note
2.41%
2.31%
1.81%


30-Year Treasury Bond
2.92%
2.96%
2.55%


30 -Yr Fixed (FHLMC)
3.94%
4.03%
3.47%


15 -Yr Fixed (FHLMC)
3.25%
3.27%
2.78%

6-Mo Libor (FNMA)
1.50600%
1.42322%
1.23972%

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