January 25, 2016

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Last week we received economic reports from The National Association of Realtors®, on Existing Home Sales and the National Association of Home Builders on Housing Starts, and  as well as other scheduled reports on new jobless claims and mortgage rates.

The National Association of Realtors® reported that sales of Existing Home Sales rose to 5.46 million sales on an annual seasonally adjusted basis in December and surpassed most expectations of 5.21 million sales and November’s reading of 4.76 million sales.

Most housing analysis agree that November’s low reading was due in part by new mortgage rules regarding new settlement disclosure requirements, which delayed some closings and pushed them into December.

This percentage of available previously owned homes are the lowest inventory since January 2005, and high demand for homes and a short supply continued to keep would be home buyers out of the market.  The home supply of pre-owned homes on the market for December came in at 3.90 months, and much less than needed for a balanced supply to demand ratio, putting even more pressure for price increases. The national average price of a pre-owned home rose 7.60 percent in December to $224,100.

New Home Starts

Annual Housing Starts dipped in December to 1.15 million against expectation of 1.23 million and November’s reading of 1.18 million. Home Builders, however, constructed more homes in 2015 and at their highest rate since the recession, but we still have a long way to go before they reach pre-recession levels.

While December’s reading fell short of expectations, building permits issued increased 12 percent and housing starts increased nearly 11 percent year-over-year. Home builders continue to cite shortages in land and labor as a major obstacle and housing starts are seen as a partial solution to the overall shortage (new and existing) of available homes.

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Freddie Mac’s survey of mortgage lenders reported that mortgage rates fell again last week. The average rate for a 30-year fixed rate mortgage dropped 11 basis points to 3.81 percent; the rate for a 15-year fixed rate mortgage fell by nine basis points to an average of 3.10 percent. The average rate for a 5/1 adjustable rate mortgage dropped 10 basis points to 2.91 percent. Discount points averaged 0.60, 0.50 and 0.40 percent respectively. Last week’s turbulence, which you might have noticed in global stock markets were certainly a contributing factor to lower mortgage rates.

New jobless claims rose to a seven week high at 293,000 new claims, as compared to expectations of 279,000 new claims and the prior week’s reading of 283,000.  The four-week rolling average jumped by 6.500 new claims to an average of 285,000.  Layoffs of temporary holiday workers were cited as contributing to higher first-time claims, and we want to keep a close eye on these numbers in the coming weeks.

What’s Ahead for the Week?

We’ll get New and Pending Home Sales, Case-Shiller Home Price Indexes, FOMC Statement, Consumer Confidence and Sentiment, as well as scheduled reports on mortgage rates and new jobless claims.

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