CCL Market Update: Retail Sales, Housing Statistics, Fed Rate Hike Predictions, Mortgage Rates

Retail sales for March showed improvement compared to previous months, likely due to improvements in weather conditions. March retail sales increased by 0.9% after dropping 0.5% in February. The Beige Book reported that 5 of the 12 Districts saw moderate expansion, with some improvement in retail and auto sales, as well as in the labor and real estate markets. The report noted that Districts generally reported stable or modestly increasing overall price levels.

Jobless claims have increased slightly over the past week. Claims in the April 11 week rose by 12,000 to a level of 294,000, up from 282,000 in the previous week. This produced little change in the 4-week average, which rose slightly to 282,750. This is still nearly 25,000 below levels from a month ago, and points to improvement for the upcoming April employment report. The unemployment rate for insured workers remains unchanged at 1.7% for the third week straight.

Data for housing is pointing to strength in the spring market. The Housing Market Index is up 4 points to 56 so far in April, compared to 52 in March. The expectations component of the index came in strong at 64 for April, a reflection of strong optimism among homebuyers. Present sales are up to 61, an increase of 3 points since March, which hints at increasing strength for new home sales this month. Buyer traffic also increased this month to 41, up from the recent low of 37 in March. The buyer traffic component continues to be stunted by the lack of first-time buyers in the market.
Housing starts are beginning to rebound, but at a sluggish pace. March starts went up a monthly 2.0% after dropping a monthly 15.3% in February, and housing permits saw a decrease of 5.7% after February’s 4.0% gain.

Foreclosures increased by 20% to a total of 122,060 for the month of March, according to a report from RealtyTrac. This increase pushed overall foreclosure activity up 4% from year-ago levels, creating the first annual rise since September 2010. RealtyTrac Vice President Daren Blomquist noted, “The March increase in continued cleanup of distress still lingering from the previous housing crisis; not the beginning of a new crisis by any means… We would expect to see more noise in the numbers over the next few months as National foreclosure activity makes its way back to more stable patterns by the end of this year.”

A huge number of economists have changed their predictions for when the Federal Reserve will raise rates. 71% of economists now predict that a rate hike will not occur until September after the Fed’s late-summer meeting, up from last month’s level of 32%. Only 12% of economists continue to predict a June rate hike, down from 45% in March. This is a reaction to the Fed’s recently lowered expectations for economic growth. Back in December, the Fed estimated 3% growth for 2015, but they are now estimating 2.3% to 2.7% growth after their March 17-18 meeting.

Mortgage Rates

According to Freddie Mac’s weekly survey, average mortgage rates are largely unchanged within the past week. Rates remain near their 2015 lows: The 30-year fixed average reported April 16 came in at 3.67%, up only 1 basis-point from the previous week, and only 8 basis-points above the 2015 lowest rate. The average 30-year fixed from the same time last year was 4.27%.

Freddie Mac deputy chief economist Len Kiefer commented on the most recent survey results, saying, “Mortgage rates were little changed following a light week of economic reports and remaining low at the spring homebuying season. Of the few releases, the advance estimate of retail sales rebounded 0.9 percent in March though slightly below market expectations. Meanwhile, the National Association of Home Builders/Wells Fargo Housing Market Index jumped 4 points to 56 in April, suggesting home builders are optimistic and the housing market will continue to strengthen in 2015.”

Local mortgage rates for most loan programs saw little to no change over the past week. The high balance, manufactured conventional, and manufactured FHA all decreased by nearly 1/8 of a point, and the 30-year fixed and FHA 203k programs decreased by 33 and 21 basis points, respectively. The remaining loan programs remained unchanged and the 30-year FHA program has had no APR change since March 3!

As rates remain low, now is a great time to consider a home purchase or refinance! Give us a call at 805.543.LOAN for a free, customized rate quote.