Housing/Real Estate Market 

CA single-family home sales get a boost from low interest rates, and median home price reaches a new all-time high: Home sales in California increased 1.6% increase from a year ago in August 2019. However,sales growth remains subdued and listings inventory in fact decreased for the second consecutive month. Meanwhile, the median home price jumped by 3.6% from12 months ago reaching a record high of $617,410.

Case-Shiller home price index continued to grow at a slower pace:The 20-city index was flat in July on a monthly basis and only increased by about 2% from last year, which represented the slowest rate of home-price appreciation since 2012. Nationally, home prices are nearly 15% higher than the previous peak set back in 2006 and 58% above the lowest point set in February of 2012.

Pending home sales rise 1.6% in August, yet another sign that low mortgage rates boosted the market: Led by gains in the western states,the index measuring signed contracts to purchase homes rose 1.6% after having a decline the month prior and improved 2.5% from last year. This suggest that we can expect slightly more sales activity in the coming months, as contract signing precedes the closing of a sale.

New-home sales beat expectations and rise 7.1%: The sale of new-homes in August reached a 713,000-unit pace, lead by sales in the South and West regions of the U.S. and are now running 6.4% ahead of their pace on a year-to-date basis. Inventory, however, is falling, which will likely put upward pressure on new home prices.

Home-builder confidence grows and matches highest reading in a year: The NAHB monthly confidence index increased to 68 in September.Home-builder confidence has steadily improved in 2019 likely as a result of mortgage rates have continued to drop to nearly three-year-low levels. A confidence index improving above 50, can be an indication of future home-building activity.

Home-building activity soars 12%, the fastest pace since 2007:As home-builder confidence grew, housing starts increased 12% to an annual rate of 1.36 million in August and housing permits to build new homes increased by8% to a seasonally-adjusted pace of 1.42 million—the fastest pace for both in more than a decade. The 30% increase in the construction of multi-family properties was the main factor behind the overall growth of housing starts.Single-family also had its strongest growth rate this year.

Existing-home sales nationally rise 1.3% in August, as low interest rates provide buyers a bargain for their mortgage: NAR reported a seasonally-adjusted annual pace of 5.49 million existing-home sales in August,which was up from 5.42 million in July. This represented a 1.3% increase in sales from July and 2.6% increase from August of last year. On the other hand,total inventory of homes on the market has fallen 2.6% from last year and as a result of demand and less supply, the median price increased 4.7% from a year ago to $278,200. 

Macro Economy

Consumer confidence sinks to 3-month low: Americans are still confident in the economy, but the trade fight with China continues to create uncertainty. The index fell from 134.2 to 125.1 in September. The decline puts the index at the lowest level since June and it’s well off the post-recession peak of 137.9 set almost a year ago.

Consumer spending barely rises in August: American cut back on spending and saved more of their earnings, likely due to rising concerns about their economic future. Consumer spending rose 0.1%, marking the smallest gain in 6 months, even as incomes rose 0.4% for the 5th time during the same time period and savings rate climbed 8.1%.

Q2 GDP revision shows no change: The economy grew a modest 2% in Q2. The economy has all the fundamentals to continue growing and adding more months to the longest economic expansion in U.S. history. However, the biggest drag on growth is the ongoing trade fight with China, which has made businesses worrisome and some of that uncertainty seems to be spilling over to consumers.

Durable goods orders get boos from Pentagon, but business investment still weak: While orders for long-lasting or durable goods rose slightly in August by 0.2%, most of the increase was military-related.Manufacturers have cut back on investment and production with exports stagnating as a result of growing concerns with China’s dispute on tariffs. This has led to a decrease of business investment for the second month in a row pointing toa slowing U.S. economy.

Weekly jobless claims rise slightly: Despite softer economy, labor market remains strong and layoffs still show little sign of rising. The number of people who applied for unemployment benefits rose slightly by 3,000 to 213,000, but the level of new claims continues near a50-year low.

Industrial production recorded largest gain in a year:The U.S. industrial production went up by 0.6% in August and July’s reading was revised up from its prior estimate of -0.2% to -0.1%, reflecting a smaller decline. However, much of this month’s increase was due to a surge in mining output and utilities. However, it remains to be seen whether this high level of production can be sustained as the global economy lags and the trade war with China lingers.  

Real Estate Finance

Mortgage rates decrease: The 30-year fixed-rate mortgage (FRM) decreased to 3.64%from 3.73% the week prior. Rates dipped even lower than they were this same time last year at 4.72% and move again closer to 3-year low levels. While September has been the most volatile month since March for the 30-year FRM, the low rate environment and low unemployment created a good mix to boost up home sales as well as construction.

Mortgage applications decrease, likely due to the previous2-week jump in rates: Mortgage loan applications decreased 10.1% from one week earlier as rates in recent weeks begun to move up. The refinance index also showed a decreased of 15% and even though it still remains 104% higher than it was this same time last year, the gap got smaller. Purchase applications after seeing a positive gain, have now decreased 3% from the previous week, but remain 9% higher than last year.