Friday Market Update for the Week of July 30th 2021

Happy Friday, Brian Manning here with the weekly update. Let’s see. So Monday this week we got new home sales. New home sales for the month of June we’re down 6.6%. You watch the news and they’re just like, oh my gosh, the world is ending. 6.6 decline, but most builders are saying the primary reason they’ve seen the decline is because they can’t keep up with demand. In fact, DR Horton came out and said they’re going to be cutting back on sales because they can’t keep up with the demand. So not a horrible thing to see for the decline in new home sales, but there you go.

Tuesday we got Case Shiller. So Case Shiller measures appreciation on a national level. On a month over month basis for the month of May houses appreciated at 2.1%. But what’s really crazy is, on a year over year basis, houses appreciated 16.6%, I still think it’s a little hot, I wouldn’t mind seeing it cool down a little bit but 16.6% appreciation is unbelievable. Wednesday of this week and every Wednesday, we get the Mortgage Bankers Association giving us feedback on new applications. And this is new purchase application. So yes, new purchase applications were down on a week over week or month over month basis, but you know, something that people don’t pay attention to or mention is all cash sales. So if you have new purchase applications down a little bit, all cash sales are actually up 7% right now. So I wouldn’t say it’s horrible seeing a slight decline in mortgage applications when you have such an increase from 16% to 23% of all transactions being all cash. You know, there’s just a lot of talk about bubble questions right now. And I don’t know if anybody ever watched the movie The Big Short, but you remember that scene in there when the stripper is talking and the stripper is like “I have five houses, I bought them all working here”, alright 2008 was totally different than what we have right now. We had someone in The Big Short that bought five houses, got 100% financing paid, no money down, verified no income, didn’t state any income loans, everything that we’ve been doing ever since that housing crash has been totally different. So I would not say I feel like we’re in bubble range. But certainly there’s definitely a lot of talk about it.

Thursday, we had a recap from the Federal Reserve. Federal Reserve just finishing up a two day meeting and giving us feedback on what their plans are, they’re still a little ambiguous of what they want to do. Right now. they’re still purchasing mortgage backed securities and treasuries, they are purchasing just an exceptional amount of these and they’re reinvesting every single month as well. They said they don’t plan to taper probably until next year. And they also said that when they do taper, that they won’t taper disproportionately, meaning they won’t taper, you know, mortgage backed securities before US Treasuries. I’m not sure I fully believe them, I’m actually not really sure they know exactly what’s going on. We’ll have to wait and see. But there you go. We also got second quarter GDP reading. So analysts expectations for the second quarter GDP was that it would be up 9.2%. GDP ended up being up 6.5%. You know, alone 6.5% is usually a good number, but it was certainly an analysts miss, and you know, we had talked about this several months ago. We had said hey, keep an eye on GDP, as stimulus checks are going out there and people are spending stimulus checks it’s going to have a boost on the economy, it’s going to increase GDP but when the stimulus money goes away and people stop spending it, you are going to see a slight impact on GDP. So you know, it kind of looks like what we saw here. We were trying to keep up with GDP before. Analysts expectations were for a higher GDP, it came back lower than expected and I wouldn’t be surprised if it’s because you’re seeing the stimulus money kind of working its way being spent through the economy.

Today, we got the PCE, that’s the personal consumption expenditure. This is the Federal Reserve’s favorite gauge for measuring inflation. On a month over month basis, we’re really looking at just the core rate, because the core rate strips out volatile items such as food and energy, on a month over month basis for the month of June. PCE was up 4/10%, on a year over year basis, we’ve gone from 3.4% to 3.5%. So if you remember, it’s like last week, we got the CPI report. These are both gauges of inflation and you know people that pay attention to this will say, well, hey, why is the PCE a lower number of inflation compared to the CPI? The primary reason is going to be housing. So in the PCE, what we got today, only 12% of this component is based on housing, right? If rents are going up, and cost of housing are going up, 12% of the component in the PCE is based on housing, whereas the CPI, the consumer price index that we watch as well to gauge inflation, 24% is a component of housing and the CPI. So you definitely have a lot more housing in the CPI report. And we just think probably CPI is more accurate because housing is something that we’re all dealing with, it’s something we all pay for. So as you have housing costs going up, factoring that in and having a little heavier weight in the CPI report we think is a little bit more accurate.

I’m around all weekend. If you have any questions, let me know. I’d love to help you. Mortgage rates are phenomenal still. We’re helping people buy houses in amazing rates, refinance,  take cash out, remove PMI, so many different reasons. There’s still values in refinancing. If you have any questions, give us a call, text us. Happy Friday. Have a great day!