Construction had been a highlight of the US economy, but less so with November’s report where it fell 0.4% far below predictions at +0.7%. The year on year gain for construction spending is at 10.5%, the lowest since April of last year. There was a processing error in the government data that revised previous months all the way back to January of last year. It cut October’s initial 1.0% gain down 7 tenths to 0.3%. Prior residential component’s strength has been cut back. Still residential spending rose 0.3% for second month in a row following September’s very solid 1.2% gain. Spending on new single family homes has been rising strongly with a year on year rate of plus 9.3%. Spending on multi-family homes did fall in November but has been thriving in the prior months up 24.5%. Spending on nonresidential construction has also been solid, though, down in November from October, but still with a year on year rate at +13.6%.
Mortgage application activity fell sharply in the two weeks ended January 1, even when adjusted for the holidays .Total mortgage applications decreased by 27% on a seasonally adjusted basis. They were down 15% for home purchases, but still 22% higher compared to a year ago. Refinancing was down 37%. This downturn was likely due to the rush on home loans at the beginning of December, before the Federal Reserve increased its funds rate. All of the demand being pulled forward made for a steep drop after the FOMC announcement. Mortgage rates were steady in the period with an average increase of 1 basis point to 4.20%. Weekly data can be unstable during the shortened holiday weeks making these results difficult to read.
US HOMES EXCEED LAST DECADE’S PEAK
After 8 year home values hit a new record. US home values rose through the summer and fall months and have now surpassed the home valuations set in early 2007. The Home Price Index, published by the Federal Housing Finance Agency (FHFA) shows US property values up another 0.5% in October. This marks the 23rd consecutive month during in which home values have climbed nationwide, with a year on year increase of 6.1%. The rise in home valuation is spurring US home sales, too. Homes are expected to get more expensive in 2016 and current mortgage rates are expected to increase. This is creating an urgency to buy homes. The home price index is benchmarked to a value of 100 which is meant to represent the US housing market as it existed in 19 91, the year in which the index was created. In October 2015 the Home Price Index climbed to 227.5 a 0.5% increase from the month prior and a 6.1% increase from a year ago. It’s also the highest published reading of all time on a non-adjusted basis, surpassing last decade’s peak set in April of 2007. This rebound suggests that the housing market has made a full recovery from the economic downturn of last decade.