Purchase applications for home mortgages fell a seasonally adjusted 6 percent in the week of November 11th, as mortgage rates sharp increases took a toll on application activity. The rise in rates had an even greater impact on refinancing where applications fell by 11 percent from the week prior. The weekly decline put the Purchase Index just 3 percent above the level a year ago, down 8 percentage points from the week prior.
Housing Market Index
The housing market index remained unchanged this month at a level of 63, far above the neutral level of 50. Current sales and future sales are at 69, but are being offset by lack of traffic which is only at a level of 47 and reflects cyclical lack of interest from first time buyers. The West continues to lead the data at 76 while the Northeast trials at 47. Though mortgage rates are jumping they are not holding down optimism in the housing sector.
Consumer Price Index
Energy spike in October and housing costs continue to show lift, but other than that there are few factors of building pressure in the consumer price report. The headline CPI did rise a significant looking 0.4 percent in the month but reflects a 3.5 percent jump in energy and a 0.4 percent rise in housing. The core, which excludes both energy as well as food, inched only 0.1 percent higher with the closely watched yearly rate dipping 1 tenth to 2.1 percent. Food costs were unchanged in the month and medical care which has previously been showing pressure was also unchanged.
Housing starts surged 25.5 percent in October to a 1.323 million annualized rate. This is the best rate of the cycle, since August 2007 with the monthly percentage gain the strongest since 1982. The jump reflects a 10.7 percent rise to an 869,000 rate for the report’s key component, single family homes, following an 8.4 percent surge in September. And multi-family homes snapped back from September’s 39 percent decline, rising 69 percent in October to 454,000. There is less strength in permits which did rise 0.3 percent to a 1.229 million rate. Single family permits are up 2.7 percent in the data to offset a 3.3 percent dip for multi-family homes.
Initial claims were down 19,000 in the week of November 12th to a far lower than expected rate of 235,000. The week of November 12th was also the sample week for the monthly employment report and a comparison with the October sample week shows a very substantial 26,000 decrease in the headline level but a small increase in the 4-week average; the 4-week average at 253,500 for the latest reading vs. 252,000 in the October sample week. Continuing claims, in the lagging data for the week of November 5th are also substantially lower. Continuing claims are down 66,000 and below 20 million at 1.977 million. Readings throughout this report are at or near historic lows, indicating that employers are holding tightly to their employees.
Mortgage rates this week had their worst week in more than 3 years. A Republican victory for the presidency was supposed to usher in better mortgage rates; however, the opposite has happened. This week, Freddie Mac’s weekly survey of over 100 mortgage lenders revealed rates were way higher after the historic election cycle. The conventional 30-year fixed rate mortgage increased by 37 basis points from last week’s reading of 3.57% to a nationwide average of 3.94%. This marks the 17th worst week in history for rates with data going all the way back to 1971. It is also the biggest single week jump since June of 2013, when the Federal Reserve announced it would slow its purchases of mortgage backed securities. Lower demand on these bonds caused rates to spike.