Review of Key Economic Indicators Released in November 2017 that Affect the Mortgage Industry

Brief Review of Key Economic Data Released in November 2017 that Affect the Mortgage Industry.

 

2017 is rapidly coming to a close, but there was a lot of good news in November for the Mortgage Industry. There are major changes are coming to the CFPB and Federal Reserve. Black Friday and Cyber Monday sales are reported to be a record as the holiday buying season starts. The GDP and Employment data show healthy increases for the Economy. Congress is getting close to finalizing the new tax bill. And to top it off – the Convention Loan Limits were raised. The Maximum Mortgage for a Single Family Residence is now  $453,100. Here is a quick review of key Economic Indicators and Data released in November 2017 that are important to Mortgage Professionals.

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November Economic Indicators and Data in Review

Recapping Key Economic Data released in November that affects the Mortgage & Real Estate business:

  • Fed Chair Janet Yellen submitted her resignation to President Trump.
  • Jerome Powell has been appointed the new Fed Chair (He is a current Fed Governor).
  • Richard Cordray resigned as CFPG Director and was replaced by Mick Mulvaney.
  • The Economy added 261,000 new jobs during October.
  • 3rd quarter GDP clocked in at a 3.3% annualized growth rate.

 

Interest Rates and Fed Watch November 2017

The last FOMC Meeting of the year starts on Tuesday, December 12. Fed Chair Janet Yellen submitted her resignation and will be replaced by Jerome Powell (a current Fed Governor) as soon as he clears the Senate confirmation hearings. Don’t expect much of a change in Fed policy and direction under Powell. He shares a lot of the same views as Yellen and has a record of usually voting along the same lines. Yellen is a Democrat and Powell is a Republican but their Economic views and thinking are very similar. The Fed Minutes from October show the Fed is still concerned with low Inflation but satisfied with GDP growth. Most Economists expect the Fed to raise rates this month and Fed Watchers are placing odds of a 3rd rate hike in December at 97%.

222 Fed Target

  • Inflation                       2.0% CPI for the last 12 months
  • Wage Growth              2.4% for the last 12 months
  • GDP Growth               2.3% annualized rate for the last 12 months (3rd Quarter = 3.3%)

 

Housing Market Data November 2017

Home Sales have struggled most of the year but picked up as New and Existing Home Sales surged in the final months of 2017. The percentage of 1st Time Buyers increased during October. Why the increase? Jobs and wages have been healthy all year boosting confidence. If you are making money and feel secure in your job, you are more likely to take the leap into home ownership. But it’s getting harder to find a home. As the data shows, inventory of homes for sale continues to decline and is down 10.4% in the last 12 months. Hopefully, new home construction will continue to help fill the gap.

 

Economic Indicators for the Housing Market November 2017

  • Existing Home Sales (closed deals in October) rose 2.0% to an annual rate of 5,480,000 homes. The median price for all types of homes is now $247,000 – up 5.5% from a year ago. The median Single Family Home price is $248,300 and $236,800 for a condo. First Time Buyers were 32%, Investors 13%, Cash Buyers 20%. Homes were on the market an average of 34 days. There are now 1,800,000 homes for sale – down 10.4% from a year ago.
  • New Home Sales (signed contracts in October) rose 6.2% to a seasonally adjusted annual rate of 685,000 units. The median price of a new home is $312,800, and the average sales price rose to $400,200. Inventory of New Homes for sale is 282,000 – a 5 month supply.  
  • Pending Home Sales Index (signed contracts in October) rose 3.5% to 109.3 from 106.0.  The index is now down 0.6% in the last 12 months.
  • Housing Starts (excavation began in October) rose 13.7% to a seasonally adjusted annual rate of 1,129,000 units but still down 2.9% YoY. Single Family Housing Starts rose 5.3% to an annual pace of 877,000 units. Multifamily Starts rose 37.4%.
  • Building Permits (issued in October) rose 5.9% to an annual rate of 1,297,000. Single Family permits rose 1.9% to 839,000 units, and Multifamily permits rose 13.4% to 415,000 units. 
  • New Home Sales, Housing Starts, and Building Permits are notoriously volatile indicators. They carry a lot of statistical uncertainty from constant revisions, changes to the seasonal adjustment formula, and are heavily influenced by weather.
  • S&P/Case-Shiller Home Price Index rose 0.5% in September. The 20 City Composite index is up 6.2% in the last 12 months.
  • FHFA Home Price Index rose 0.3% during September, now up 6.3% year over year.  

 

Labor Market Economic Indicators November 2017

The last Jobs Report released on November 3rd showed the Economy added 261,000 new jobs during October. In Janet Yellen’s final appearance before Congress, she said that 17 million jobs have been created in the last 8 years. The addition of these new jobs brings the Unemployment Rate down to its lowest point since 2006. This was a great report heading into the holiday buying season. More people working means more people in stores spending money.  

  • The Economy added 261,000 new jobs in October.  
  • The Unemployment Rate dropped to 4.1% from 4.24% during October.  
  • The Labor Force Participation Rate decreased to 62.7% from 63.1% in October.   
  • The Average Wage was little changed during October pegging wage growth at 2.4% YoY.  

 

Inflation Economic Indicators November 2017

Consumer prices nudged up slightly in October, but wholesale prices surged. PPI is a good predictor of Consumer prices since price increases will eventually be passed to Consumers.  Energy prices jumped after the hurricanes but have eased back 0.1%. In the past 12 months, gas prices have increased 10.8%. Many Economists are predicting Inflation to hover at 2.0% for the next 2 years – which is right where the Fed wants it. As usual, medical care and shelter lead the pack on price increases both increasing 0.3%.  

  • CPI rose 0.1%, now up 2.0% in the last 12 months.
  • Core CPI (ex-food & energy) rose 0.2%, now up 1.8% in the last 12 months.
  • PPI rose 0.4%, now up 2.8% in the last 12 months.
  • Core PPI (ex-food & energy) rose 0.4%, up 2.4% in the last 12 months.

 

GDP Economic Indicators November 2017

The 2nd guesstimate for 3rd Quarter 2017 GDP showed the Economy grew at a 3.3% annualized rate (3.2% expected). Combine this number with the 2nd quarter GDP reading, and what you get is the strongest 6-month growth spurt for the Economy since 2014. Much of the growth is due to the hurricane impact and the need for rebuilding. Higher exports and a buildup of inventories also help nudge GDP higher. Expect the hurricane effect to continue to boost GDP throughout 2018.  Remember that each quarter has 3 revisions for GDP. It’s a moving target, so all the revisions are more like guesstimates.

 

Consumer Economic Indicators November 2017

Retail Sales had a modest increase of 0.2% in October – but auto sales jumped 0.7%. This was expected as people replace the 500,000 cars that were damaged/destroyed by the hurricanes. Retail Sales data in autumn is typically soft because many Consumers hold off big purchases waiting for Black Friday deals. Sales of building materials and gasoline were up while furniture and electronics were down.

  • Retail Sales rose 0.2% in October. For the year Retail Sales are up 4.4% year over year.
  • The Consumer Sentiment Index fell to 98.5 from 100.7 in October.    
  • Consumer Confidence rose to 129.5 from 125.9 – the highest level since 2000.       

 

International & Misc 

  • Keystone Pipeline closed after a spill driving up oil prices.
  • North Korea launched another test missile.
  • ISIS is believed to be responsible for a Mosque attack in Egypt that killed over 300.

 

This Economic Commentary is written to be a succinct summary of the major Economic Indicators and Economic Data that influence the Mortgage and Real Estate Industries. It is written for Mortgage Professionals that need to stay current on Economic Information but don’t have hours to research and analyze Economic Data. Feel free to share this with a friend or colleague in the Mortgage or Real Estate business. If you would like this Economic Calendar and Commentary emailed to you at the beginning of each month, click here.

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Mark Paoletti, MPaoletti@MortgageElements.com

 

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