New homes sales data for July was released on Tuesday, showing a 5.4% gain in the month to a 507,000 annual pace, with year-over-year sales up an impressive 26%. Median price also showed improvement, rising 3.0% in July to $285,900, but the year-over-year gain was less than expected, rising only 2.0%. Pending home sales for July came in at the low end of expectations, but still had a respectable gain of 0.5%, pointing to moderate growth ahead for existing home sales. Although prices are not hugely impressive, the supply of new homes is low, as are current mortgage rates, which continues to encourage builders to enter the market. The housing market, though not standout, continues to be a source of strength for the economy.
Curious how real estate has been doing here on the Central Coast? Check out our Central Coast and San Luis Obispo real estate updates for the first 6 months of the year HERE.
Unemployment continues to put forth very low numbers, with initial jobless claims down 6,000 in the August 22 week to 271,000. The 4-week average for initial claims rose very slightly to 272,500, but still remains lower than the month-ago comparison. Continuing claims for the week of August 15 actually rose 13,000 to 2.269 million, but its 4-week average dropped 1,000 to 2.265 million.
Consumer confidence continues to improve, with the consumer confidence index up more than 10 points in August to 101.5. Only 21.9% of people surveyed described jobs a currently hard to get, down 6.5% from July’s survey. This pushed the current situations component up more than 11 points in the month to 115.1, which points to future consumer power. The expectations component was also very strong, rising more than 10 points to 92.5, which reflects improving expectations for the employment outlook, as well as a positive outlook for income.
Gross Domestic Product, the broadest measure of aggregate economic activity which encompasses every sector of the economy, for the second-quarter showed a big bounce, up at a revised annualized growth rate of 3.7%. The initial estimate for second-quarter GDP was 2.3%. This report points to better-than-expected momentum going into the current quarter. Consumer demand was strong with personal consumption expenditures at a 3.1% rate led by an 8.2% rate for durables, a gain that was tied to vehicle spending. The economy’s acceleration is now much more respectable from the first quarter when growth, at only 0.6%, was depressed by heavy weather and special factors. Splitting the difference, first-half growth came in a bit over 2% which is right in line with the similar performance of 2014 when first-quarter growth, again depressed by severe weather, fell 2.1% followed by a 4.6% surge in the second quarter. The impact of this report on Fed policy for September’s FOMC is likely to be minimal. Focus at the upcoming meeting will be on the state of the global financial markets and, very importantly, the strength of this week’s employment report for August.
All loan programs displayed rate decreases over the past week, with the exception of the Jumbo, which remained unchanged. Many loan programs returned to rates that were the same or very close to the rate levels displayed 2 weeks prior. One such loan program was the 30-year fixed, which displayed the smallest rate decrease, down 3.1 basis points from August 18. Rates remain below year-ago levels, with the 30-year fixed at a rate of 3.875% (3.915% APR) vs. 4.250% (4.253% APR) a year ago.
Sean Becketti, chief economist for Freddie Mac, commented that decreasing rates are likely a result of the ongoing volatility in Chinese markets:
“Events in China generated eye-catching volatility in equity markets worldwide over the past week. Interest rates also rocked up and down — although to a lesser extent than equities — as investors alternated between flights to quality and bargain hunting among beaten-down stocks…
Given the recent volatility, mortgage rates could change up or down significantly by the time this report is released. There are indications though that the unsettled state of global markets will make the Fed think twice before taking any action on short-term interest rates in September. If that’s the case, the 30-year mortgage rate may remain subdued in the short-to-medium term, providing support for continued strength in the housing sector. Just this week, new home sales were reported to be up 26 percent year over year.”
Contact the Mortgage Experts for your home purchase or refinance! With our 21-Day Processing method, you can make a stronger purchase offer, reduce stress, and save money! Give us a call at 805.543.LOAN to discuss your mortgage options and to get a free rate quote.