Key Economic Data Mortgage Professionals Need to Know from April 2018
To view or download the May 2018 Economic Calendar click here.
This newsletter is geared to Mortgage Professionals, so the information is concentrated on the Key Economic Data that has the most impact on the Mortgage Business. However, the dynamics of oil in the US and Global Economies – and the Mortgage Business – can’t be understated. When the price of oil goes up, Consumers have less disposable income to spend on other things. When it goes down, Consumers have more money to spend on other things – like homes. Brent crude oil hit $74/barrel this month which is 50% higher than last June. If the trend continues, high oil prices will slow down Economic Growth – it always does. It’s also interesting to watch who is buying oil. China has been importing record amounts of oil. In January, China imported a record 287,000,000 barrels, and again in March a second high of 276,000,000 barrels. Are the Chinese stocking up because they expect oil prices to increase or is it the trade tensions with the US? It could be both or just a coincidence. I’ll be watching it throughout the year, but for now here is a quick review of other Key Economic Data and Indicators from April 2018 that are important to the Mortgage Industry and Mortgage Professionals.
April Economic Indicators and Data in Review
- The May FOMC Meeting just ended with the Fed leaving interest rates unchanged.
- 10 Year Treasury Security briefly rose above 3.0% for the first time since 2013.
- Inflation Data for March was mixed – the monthly CPI was down while the PPI was up.
- Average Hourly Wages are up 2.7% in the last 12 months.
Interest Rates and Fed Watch
The Fed just wrapped up its May FOMC Meeting and left Fed Funds rate unchanged. The Fed Announcement said they see “strong” job gains, business investment, and Consumer spending. The Fed is also monitoring Inflation and expect it to run close to its 2.0% target. This latest announcement concurs with the March FOMC Meeting Minutes. The Fed is slightly concerned about a trade war but not the stock market’s recent volatility. So at this point, it looks like the Fed is sticking to its initial plan of 3 interest rate increases in 2018. Fed Watchers did not expect a rate hike at this meeting since the Fed seldom does back to back increases – but be prepared for one at the June 12 – 13 FOMC Meeting. Currently, the Probability of a rate hike in June is running at 100%.
222 Fed Target
- Inflation 2.4% CPI for the last 12 months
- Wage Growth 2.7% for the last 12 months
- GDP Growth 2.9% annualized rate for the last 12 months
Housing Market Data released in April 2018
Good News Bad News for Housing Markets. If you are in the Mortgage Business, you already know the bad news – not enough homes for sale. Buyers are getting into bidding wars, and many potential homebuyers are just giving up. The good news is that builders are slowly ramping up construction as Building Permits, Housing Starts, and New Home Sales all posted positive Economic data in April. The data shows that builders are constructing 700,000 to 800,000 new living units a year. That number should be 1,000,000 units per year to keep up with anticipated demand. What’s keeping the pace of New Home construction down? Regulations, labor shortage, available land, and the cost of buildable land.
Economic Indicators for the Housing Market Released in April 2018
- Existing Home Sales (closed deals in March) rose 1.1% to an annual rate of 5,600,000 homes, but down 1.2% in the last 12 months. The median price for all types of homes is now $250,400 – up 5.8% from a year ago. The median Single Family Home price is $252,100 and $236,100 for a condo. First Time Buyers were 30%, Investors 15%, Cash Buyers 20%. Homes were on the market an average of 30 days, and 50% were on the market for less than a month. Currently, 1,670,000 homes are for sale – down 7.2% from a year ago.
- New Home Sales (signed contracts in March) rose 4.0% to a seasonally adjusted annual rate of 694,000 units. Year over year New Home Sales are up 8.8%.The median price of a new home is $337,200, and the average sales price is $369,900. Inventory of New Homes for sale is 301,000 – a 5.2 month supply.
- Pending Home Sales Index (signed contracts in March) rose 0.4% to 107.6 from 107.2.
- Housing Starts (excavation began in March) rose 1.9% to a seasonally adjusted annual rate of 1,319,000 units – now up 10.9% YoY. Single Family Housing Starts fell 3.7% to an annual pace of 867,000 units – up 5.2% YoY. Multifamily Starts jumped 16.1% to 439,000 units.
- Building Permits (issued in March) rose 2.5% to an annual rate of 1,354,000. Single Family permits fell 5.5% to 840,000 units, and Multifamily permits rose 22.9% to 473,000 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 0.8% in February. The 20 City Composite index is up 6.8% in the last 12 months.
- FHFA Home Price Index rose 0.6% in February, now up 7.2% year over year.
Labor Market Economic Indicators Released in April 2018
The Jobs Report showed the Economy added 103,000 new jobs during March (190,000 expected). This is a disappointing data point, but one month does not make a trend. While cold weather may have played a role in the low numbers, the overall trend in the Labor Market is very positive. Who was hiring? Manufacturing jobs up 22,000, Leisure/Hospitality jobs up 5,000, Healthcare/Education jobs up 25,000, Government jobs up 1,000, Construction jobs down 15,000, Retail jobs down 4,000. We’ll see what data the next Jobs Report this Friday will reveal.
- The Economy added 103,000 new jobs in March.
- The Unemployment Rate held steady at 4.1% (the 6th straight month).
- The Labor Force Participation Rate fell to 62.9% from 63.0%.
- The Average Hourly Wage rose 0.3% in March, up 2.7% in the last 12 months.
Inflation Economic Indicators Released in April 2018
Inflation data was mixed this month with an unexpected drop in the CPI of 0.1%. The drop in Consumer Prices was mainly due to a brief temporary drop in gas prices. The Fed expects Inflation to increase as the year progresses and they are committed to keeping Inflation in their target range. What was up and what was down? Energy prices down 2.8%, gasoline down 4.9%, clothing down 0.6%, used cars down 0.3%, new cars flat, food up 0.1%, shelter cost up 0.4%, rents up 0.3%, medical care up 0.5%, lodging up 2.6%, appliances up 1.2%.
- CPI fell 0.1%, now up 2.4% in the last 12 months.
- Core CPI (ex-food & energy) rose 0.2%, now up 2.1% in the last 12 months.
- PPI rose 0.1%, now up 3.0% in the last 12 months.
- Core PPI (ex-food & energy) rose 0.3%, up 2.7% in the last 12 months.
GDP Economic Data Released in April 2018
The first guesstimate for 1st Quarter 2018 GDP showed the Economy grew at a 2.3% annualized rate (2.0% expected). This data covers US Economic growth during the winter months which is typically low due to cold weather and the holiday hangover. The Year-over-Year (YoY) GDP growth in the last 12 months clocked in at 2.9%. Still very strong data for US GDP. Remember that each quarter has 3 revisions for GDP, so all the revisions are more like moving targets or guesstimates.
Consumer Economic Indicators Released in April 2018
Good news for car sales. Vehicle Sales jumped 2.0%. Car sales have been weak for the last 6 months but had an unexpected gain to an annual rate of 17,400,000 vehicles – about 500,000 more than expected. Bigger paychecks from the new tax cuts could be one reason Consumers are spending money. Consumers also bought furniture, health, and personal care items. Sales of building materials were down 0.6%, but that can be attributed to the weather.
- Retail Sales rose 0.6% in March. For the year, Retail Sales are up 4.5%.
- Personal Spending rose 0.4% in February, and 4.4% in the last 12 months.
- Consumer Confidence rose to 128.7 from 127.7 – still close to a 17 year high.
Energy, International, and Misc
- Mideast Tensions are heating up after the US (along with British and French forces) bombed Syria in retaliation for their use of chemical weapons against rebels.
- Oil prices are up due to escalated tensions in the Mideast – now about $74/barrel.
- President Trump hosted his first State Dinner with French President Macron.
- North Korea’s Kim Jong Un met with South Korean President Moon. This is the first time a North Korean leader has entered the south since 1953.
This Economic Commentary is written to be a succinct summary of the key 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.
To view or download the May 2018 Economic Calendar click here.
The view or download the Economic Calendar for the entire year of 2018, click here.
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Mark Paoletti, MPaoletti@MortgageElements.com