Last Week in Review: Strong Personal Spending Numbers
Personal spending rose by 0.9%, according to the latest data released, higher than the 0.7% estimate. This was big news, as pending has been depressed ever since the financial crisis.
Housing starts measure the number of units of privately owned housing undertaken in a given period. This includes single-family and multiple family homes.
The federal government has taken numerous steps to reduce foreclosures, starting with loan modification programs. In the first quarter of 2015, foreclosures fell to 2.22% of outstanding loans.
Foreclosure completions decreased by 1,000 units to 40,000 in April, according to CoreLogic. Completions are down 19.8% year-over-year. That said, 39,000 is still a relatively elevated number.
After the Federal Open Market Committee meeting last week, real estate investors have a lot to look forward to this week.
Mortgage purchase applications rose 9.7% in the week ending June 5—even as global bond markets sold off. The spring selling season is over for the builders.
Job growth matters the most to homebuilders. In fact, on a conference call, the CEO of KB Home remarked that jobs were more important than interest rates.
Historically, real estate prices have correlated tightly with wage growth. That relationship broke down in the late 1990s as wages grew at the rate of inflation and real estate prices began posting double-digit gains.
The jobs report sent bonds reeling, with the ten-year yield picking up ten basis points in yield. While the report probably doesn’t bring a June rate hike into play, it is certainly looking like September is a good possibility.
The week after the jobs report is usually pretty data light, and this week is no exception. REITs are still dealing with the bond market fallout from the strong jobs report last Friday.
March’s home sales were revised to 484,000 homes. On a year-over-year basis, new home sales are up by 26.1%.
Toll Brothers has exposure to some of the hottest markets, while avoiding some of the more downbeat markets like the most of the Midwest and parts of the Deep South.
For 2Q15, Toll Brothers’ earnings were $67.9 million, or $0.37 per share, up from its net income of $65.1 million, or $0.35 per share, a year ago.
One of the side effects of the housing bust is the exodus of skilled construction workers from the sector. Many construction workers found jobs in trucking and the energy sector.
Part of the reason for the expected acceleration is due to new properties being offered in New York City, where foreign demand for US dollar–denominated assets continues to be strong.
We’re starting to see the effects of increasing home prices on housing demand, although the luxury end seems to be doing better than everything else. So far, the increase in interest rates is not affecting demand.
The Federal Housing Finance Agency House Price Index only looks at houses with mortgages guaranteed by Fannie Mae and Freddie Mac.
Housing starts and building permits are considered leading indicators for the housing market. Building permits indicate future demand for housing.
An April 2015 report shows that existing home sales fell by 3.3% to an annual rate of 5.04 million units from an upwardly revised 5.21 million rate in March 2015.
In May, the NAHB–Wells Fargo Housing Market Index was 54, a two-point decrease from 56 in April. Homebuilder sentiment peaked in September, gave up, and then returned to elevated levels.
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