Happy holidays! Did you join the queues for Black Friday? Perhaps you did not: a survey released by Prosper Insights & Analytics for the National Retail Federal projects that sales were down 11 percent this weekend over the previous year.
We have seen push back against this conclusion. Today’s consumers are savvier with their purchases, using internet connectivity to price compare or bypass the in-person experience altogether. Target, as an example, said that digital sales on Thanksgiving rose 40% over the previous year.
Most likely, the survey’s results reflect the diffusion of demand throughout the entire holiday season. First we had Black Friday, and then Black Friday began at midnight, and then stores added “early bird” specials on Thanksgiving Thursday, and then Cyber Monday offered online sales. All the while, we have been given the tools to compare prices and seek out discounts. Put another way: consumers may feel less pressure to do their in-person shopping at the behest of the companies (Black Friday), and instead pursue deals on their own terms, throughout the holiday season, both digitally and in person.
U.S. economic data points to a strong season for retail. Falling gas prices have freed up disposable income. Payrolls are on pace to add the most jobs since 1999. Stock indexes like the S&P 500 and the Dow Jones Industrial Average continue to set record high levels. The U.S. economy grew more than expected during the third quarter, and the most recent upward revision put GDP at 3.9%.
We will wait for more retail data before drawing any conclusions.
Here are a few recent pieces of data about the housing market:
- Distressed saturation has dropped to 16.8% of listings across the nation.
- Real estate investor activity is down.
- Mortgage activity is running at its lowest level in 13 years.
- First-time buyer activity remains historically low, at 29% compared to a healthy expectation of 40%.
Dr. Alex Villacorta vice president of research and analytics at Clear Capitol, had a telling quote in a recent HousingWire.com article, “Think of home price growth since the housing collapse as a bouncing ball, where each successive bounce causes some energy to be lost and eventually movement stalls.”
The visualization is a good one; the housing market has bounced back and forth to find its medium. After an intense flurry of active demand, Villacorta suggests that we could be nearing a stalling point.
Even as the market shows signs of slowing, help may be on the horizon. Fannie Mae and Freddie Mac have released clarification on new mortgage guidelines that will penalize lenders for their mistakes. As they can lend with more confidence, it is expected that lenders will begin to slacken their qualification standards, thus granting more people access to affordable mortgage financing.
Another thing to consider: these analysts talk about the “normal” housing market, but we have just gone through about 10 years of abnormality. First, fast, easy credit skewed the demand curve and allowed more people to qualify for home purchase. Then, the housing crash occurred, credit dried up, and folks lost their homes. Distressed sales flooded the market and home prices sank. During the recovery, low home prices and the lowest mortgage rates in history helped expand affordability, and sparked a period of intense demand. Today, with homes priced appropriately and mortgage rates slightly higher, we are finally in a position to reestablish some sort of new “normal.”
Mortgage Rate Update
The 30-year fixed rate has taken a friendly Thanksgiving dip. From the beginning of November, the 30-year fixed rate is over one point lower in cost.
We wrote this in last week’s Mortgage Rate Report to explain the downward trend (subscribe for the bimonthly update by emailing Rylan@CentralCoastLending.com the text “Rate Subscribe”):
Even with the positive news, there is still a large amount of uncertainty floating around, and as we know, uncertainty and volatility are good for mortgage rates. The world’s leading economies – Japan, China, and the Eurozone – have all shown signs of slowdown (and Japan is in an outright recession). Even here at home, where the news is generally good, there is some amount of concern.
“Things are pretty solid,” said Dan Podesto, co-owner of Central Coast Lending. “But there is a lack of a driver. For the longest time it was the dot-coms, and then it was technology. There is a sense that we are waiting for the next big thing.”
With uncertainty around the world, a cautious feeling at home (despite positive data), and low inflation, mortgage rates are given the perfect environment to drop.
Take advantage of the low rates! Give us a call at 805.543.LOAN for free, in-depth analysis of your unique financial situation, and learn how you can benefit from mortgage financing.