Report: Consumer Sentiment Highest in 14 Months

Author: Tory Barringer September 12, 2014 Share on facebookShare on twitterShare on emailShare on pinterest_shareMore Sharing Services1

Consumer sentiment ticked up in September to its highest point in more than a year, according to an early reading.

The Thomson Reuters/University of Michigan'sIndex of Consumer Sentiment edged up more than two points in a preliminary September reading, putting it at a 14-month high of 84.6.

The increase in the headline index was driven by a more than four-point improvement in the gauge of consumer expectations, which rose to 75.6.

On the other hand, the Current Conditions Index fell more a point to 98.5. According to Paul Diggle, U.S. economist for Capital Economics, the small decline "could reflect the weaker pace of payroll growth in August or even the slowdown in some measures of housing market activity."

The UMich survey was released the same day as Deloitte's latest Consumer Spending Index, a measure of consumer cash flow used to predict future spending. According to the company, that index jumped up last month to 3.96.

"A notable decrease in initial unemployment insurance claims helped push the Index up," said Daniel Bachman, senior U.S. economist at Deloitte. "An improving labor market can be a boon to consumer confidence. If these trends continue, there is a strong likelihood that we could see an acceleration of economic growth in the latter part of the year."

Diggle agreed, observing that at its current level, consumer confidence is consistent with annualized spending growth of as much as 3 percent for the third quarter.

"That relationship is far from perfect and we don't think consumption will be quite that strong, but between 1.5 percent and 2.0 percent now looks eminently possible," he said.

Investors Skeptical of Fed Rate Increase Forecast

Author: Tory Barringer September 9, 2014 Share on facebookShare on twitterShare on emailShare on pinterest_shareMore Sharing Services5

A new survey from the Federal Reserve Bank of San Francisco finds investors aren't buying in to the central bank's projections of interest rate increases in the coming years.

In a study published September 8, analysts for the San Francisco Fed say their model — based on investor activity—forecasts a federal funds rate of 0.75 percent at the end of 2015 and 2.13 percent the following year.

In their latest economic projections from June, the members of the Federal Open Market Committee (FOMC) projected a median federal funds rate of 1 percent at year-end 2015 and 2.5 percent at the end of 2016.

Based on their own modeling, the analysts say investors put the probability of the federal funds rate hitting the FOMC's target next year at 31 percent, with 2016's projected rate having a 27 percent probability.

"Our analysis shows that, on balance, the public seems to expect more accommodative policy than FOMC participants," the researchers concluded.

The investor model also features a smaller range between the upper and lower forecasts than the predictions offered by Fed policymakers, "suggesting the public also may be less uncertain about their projections," they added.

The San Francisco Fed's report comes one week before the FOMC announces its next economic policy move—and before Fed Chair Janet Yellen is scheduled to give her own hints at the central bank's timeline.

Yellen and many of her colleagues have stressed a slow, thoughtful approach so as not to disturb the economic recovery. However, the fact that investors apparently anticipate an even slower run-up in rates could indicate their failing optimism in the economy's projected growth over the coming years.

Index Shows Employment Growth Slow But Steady

Author: Tory Barringer September 8, 2014 Share on facebookShare on twitterShare on emailShare on pinterest_shareMore Sharing Services7

Following the recent Bureau of Labor Statistics report of ongoing—albeit disappointing—employment growth in August, another indicator of labor market trends shows continued steady improvement.

On September 8, The Conference Board released its Employment Trends Index (ETI) for August, reporting a slight increase from July to a reading of 121.29.

Compared to a year ago, August's ETI was up 6.4 percent, reflecting strong gains made earlier this year as monthly payroll growth topped 200,000 for six straight months.

"The strong increase in the Employment Trends Index in recent months signals robust job growth through the fall," said Gad Levanon, director of macroeconomic research at the Conference Board, adding that August's lower-than-expected employment numbers "seem to be a one-month deviation from a stronger trend."

August's increase was driven by improvements in seven of the eight indicators used to calculate the index, the group reported, with the percentage of firms unable to fill positions right now contributing the most.

The index was also boosted by a drop in the percentage of Americans who say jobs are currently hard to get, which fell marginally to 30.6 percent in the Conference Board's latest Consumer Confidence Index.

Also measured in the group's monthly report are government data on initial jobless claims, the number of employees hired for temporary help, and job openings, all of which are reported by the government.

The one indicator not included in August's improvement was the government's weekly estimate of initial jobless claims, which hovered around the 300,000 mark throughout August.

Freddie Mac: Mortgage Rates Stay Level

Author: Tory Barringer September 5, 2014 Share on facebookShare on twitterShare on emailShare on pinterest_shareMore Sharing Service10

Mortgage interest rates stayed fairly level this week, settling in ahead of the Bureau of Labor Statistics August jobs report, which was released September 5.

Freddie Mac released on September 4 the results of its latest Primary Mortgage Market Survey, showing the average 30-year fixed-rate mortgage (FRM) coming in at 4.10 percent (0.5 point) for a third straight week, the lowest level seen so far this year.

The 15-year fixed average was down slightly, dropping 1 basis point to 3.24 percent (0.5 point).

It was a similar story for adjustable rates, with the 5-year adjustable-rate mortgage (ARM) averaged a rate of 2.97 percent (0.5 point), unchanged from last week, and the 1-year ARM averaging 2.40 percent (0.4 point), up from 2.39 percent previously.

The numbers coming from Bankrate.com's weekly survey were similar, with the 30-year fixed average moving up a point to 4.24 percent and the 15-year fixed moving down a point to 3.37 percent. The 5/1 ARM moved slightly more, dropping 7 basis points to 3.25 percent.

While it's been a tame summer for mortgage rate movements, analysts at Bankrate say it's only a matter of time before that steadiness ends, especially as economic improvements spur policymakers at the Federal Reserve to stop holding interest rates down as much.

"If we get another upbeat jobs report this week, the bond market could begin to realize that higher interest rates are an eventuality, leading mortgage rates higher," they said in a release.

As for what will happen next week, expert opinions are split between an increase and no meaningful change.

"[W]hen rates do rise, they won't go up gradually, like a gently sloping hill. They'll march upward in steps, like a flight of stairs," said Holden Lewis, assistant managing editor at Bankrate. "That first step might be a doozy. It might happen in the coming week (doubtful) or months from now."

Power Shift Could Result in Home Sales Spike

Author: Tory Barringer September 1, 2014 Share on facebookShare on twitterShare on emailShare on pinterest_shareMore Sharing Services46

The balance of power in the housing market is continuing its tilt back to buyers—and that could spell a surge in home sales in the coming months.

In the brokerage's latest Real-Time Housing Market Tracker, Redfin Chief Economist Nela Richardson notes two ongoing trends indicating a shift to a more balanced market as the nation heads into fall: a slowdown in home price growth and a transfer in pricing power away from sellers.

For July, Redfin recorded a 0.3 percent monthly decline in the median sales price of homes sold in the major metros the company tracks, marking the first time in five months that price growth was essentially flat, Richardson said.

"We ... expect prices to continue to flatten, and to potentially decline month over month in September or October,” she added. “If that happens, it will be the first three-month price decline since the fall 2012."

What's more, Redfin recorded a substantial annual decline in the number of homes selling above their list price: 20.1 percent compared to 26.8 percent a year ago.

That decline is happening at a time when more sellers are bringing their listing prices down to compete with a widening inventory.

"Sellers are finally catching on that it's not a seller's market anymore," said Jeremy Cunningham, a Redfin agent in Virginia.

Redfin reported price drops are most common in markets where inventory and home price appreciation have improved most over the year. For example, in Denver—the metro with the largest percentage of listing price drops—the median sales price has jumped 15 year-over-year compared with the national average of 5.5 percent.

The company's agents have also reported seeing more negotiation between buyers and sellers at the beginning of the sales process and post-inspection, meaning buyers feel they have more room to work out a deal.

"When a buyer sees a price drop, she takes it as 'blood in the water' and wonders what's wrong with the house and wants to negotiate for an even lower price," Boston-based agent Adam Welling said.

Given these changes and promising—albeit uneven—growth in housing inventory, Richardson anticipates housing market activity this fall to be the strongest in five years.

"We continue to see strong buyer demand as we head into fall. The number of tours and offers across Redfin markets continue to accelerate from July and into August," Richardson said. "This is a good indication that buyers are continuing their home searches."

Not everyone shares Richardson's optimism. In its most recent market forecast, Fannie Mae toned down its expectations for housing's contribution to the economy this year. While most of the revision was based on a poor showing in the year's first half, chief economist Doug Duncan offered a subdued outlook for the next year.

"[O]n the demand side, there appears to be a conservatism among consumers and their willingness to take on big-ticket purchases, such as homes," Duncan said in the company's report. "We currently estimate that 2014 will finish lower in total sales figures than 2013—and that 2015, while stronger than 2013 and 2014, will not be the breakout year some are expecting."

Home Price Appreciation Decelerates Annually

Author: Tory Barringer September 2, 2014 Share on facebookShare on twitterShare on emailShare on pinterest_shareMore Sharing Services7

Home price growth accelerated in July on a month-over-month basis even as annual increases continued to slip, according to a market report.

CoreLogic's Home Price Index (HPI) rose 1.2 percent from June to July, the company reported, lifting slightly from June's 1.0 percent monthly gain. The improvement includes both distressed and non-distressed sales.

Compared to a year prior, July's index was up 7.4 percent, barely down from 7.5 percent in June. As of the July report, the national HPI has risen year-over-year for 29 straight months.

At the state level, Michigan ranked highest in appreciation over the last year with an index gain of 11.4 percent. Also ranking among the top were Maine (10.6 percent), Nevada (10.6 percent), Hawaii (10.5 percent), and California (10.5 percent).

"While home prices have clearly moderated nationwide since the spring, the geographic drivers of price increases are shifting," said Sam Khater, deputy chief economist for CoreLogic. "Entering this year, price increases were led by western and southern states, but over the last few months northeastern and Midwestern states are migrating to the forefront of home price rankings."

Eleven states as well as the District of Columbia have hit new index highs: Alaska, Colorado, Iowa, Louisiana, Nebraska, North Dakota, Oklahoma, South Dakota, Tennessee, Texas, and Vermont.

At the state level, only one state posted depreciation over the last year: Arkansas, which reported a 0.9 percent drop in its own index.

Taking out REO and short sales, the national HPI improved 6.8 percent over the year and 1.1 percent month-to-month. All states posted annual appreciation without distressed sales.

Looking a year out, CoreLogic predicts home prices, including distressed sales, will bump up another 0.6 percent month-over-month in August—a considerable slowdown—and 5.7 percent by next July.

Foreclosure Sales Hit Seven-Year Low in Q2

Author: Brian Honea August 22, 2014 Share on facebookShare on twitterShare on emailShare on pinterest_shareMore Sharing Services67

Foreclosure sales are way down nationwide for the second quarter of 2014 with close to 115,000 reported, according to HOPE NOW's Q2 2014 data released earlier in the week. It was the lowest number of foreclosure sales reported for any quarter since HOPE NOW began tracking foreclosure data in 2007.

The HOPE NOW data indicates that foreclosure sales were down 9 percent from Q1, when 126,318 were reported. Year-over-year, foreclosure sales dropped 27 percent from Q2 2013's total of 157,633. This number has not declined each quarter since Q2 2013, however; for Q3 2013, the number of foreclosures increased 5.5 percent up to 166,809, and then dropped each subsequent quarter.

Foreclosure starts are down 8 percent quarter-over-quarter, falling from close to 217,000 in Q1 to about 200,000 in Q2, according to HOPE NOW. Year-over-year, the number of foreclosure starts in Q2 experienced a significant decline of 38 percent from an estimated 323,000 in Q2 2013. Though foreclosure starts have declined significantly both quarter-over-quarter and year-over-year since Q2 2013, they actually increased from May to June in 2014. In May, 66,521foreclosure starts were reported compared to 69,394 in June, a change of 4 percent.

The number of borrowers more than 60 days delinquent on their payments has declined each quarter since Q2 2013, according to HOPE NOW. The Q2 2014 total was about 1.88 million, down 5 percent from 1.99 million in Q1and down almost 15 percent from 2.21 million in Q2.

HOPE NOW research reports that more borrowers are turning to non-foreclosure solutions, such as permanent loan modifications, short sales, and deeds in lieu, to avoid foreclosing. Nearly 421,000 borrowers took advantage of various foreclosure alternatives, nearly four times the number of foreclosure sales.