BY MARK PAOLETTI | SPECIAL TO NATIONAL MORTGAGE PROFESSIONAL
The Mortgage Economic Review is a monthly summary of key economic indicators, data, and events pertinent to Mortgage and Real Estate Professionals.
AT A GLANCE - Key Economic Data And Events During October 2021
- Interest Rates: Rates drifted higher mid-month then fell back. The 10-Year Treasury yield rose to 1.75% but fell to 1.56% on October 29.
- Housing: Home Prices are showing signs of decelerating - still up 19% in the past year.
- Labor: Disappointing Job creation, lower Unemployment, and good Wage growth. The Economy added only 194,000 new jobs, and the Unemployment Rate dropped to 4.8%.
- Inflation: Inflation rose slightly with CPI up 0.4% (+5.4% YoY), PPI up 0.5% (+8.6% YoY).
- The Economy: US GDP grew at only a 2.0% annualized rate during the 3rd Quarter of 2021.
- Consumers: Retail Sales rose 0.7% as Consumer Confidence bounced back.
- Stock Markets closed the month at record highs: Dow 35,819, Nasdaq 15,498, S&P 4,605.
- President Biden's Infrastructure Bill was whittled down to $1.85 T from $3.5 T.
Interest Rates And Fed Watch
There was not a lot of Fed activity to report on in October. All eyes are on the November 3rd FOMC meeting. Fed Watchers expect the Fed to announce plans to start tapering their purchase of MBS and Treasury Securities. Expectations are that the Fed will reduce bond purchases from $120B per month down to $100B per month. The yield on 30 year Treasury Bonds moderated lower in October. Analysts expect the Fed to keep the Fed Funds Rate at current levels through most of 2022.
- 10 Year Treasury Security Yield: rose to 1.56% (Oct 29) from 1.52% (Sep 30).
- 30 Year Fixed Mortgage rose to 3.14% (Oct 29) from 3.01% (Sep 30).
- 15 Year Fixed Mortgage rose to 2.37% (Oct 29) from 2.28% (Sep 30).
- 5/1 ARM Mortgage rose to 2.56% (Oct 29) from 2.48% (Sep 30).
Housing Market Data Released In October 2021
The latest Home Price data indicates price appreciation is beginning to decelerate. Prices are still rising, but at a slower pace. Economists disagree on future Home Prices. Some predict Home Price appreciation to continue at the current pace - up another 16% by the end of 2022. A few Doom & Gloomers are predicting a crash in Home Prices like in 2007. Most Economists expect prices to continue to rise in the 3.0% - 5.0% range thru 2022. Some Economists cautiously believe that if Mortgage Rates rise modestly, to 4.0%, Home Prices could pull back as much as 10%.
- Existing Home Sales (closed deals in September) rose 7.0% to an annual rate of 6,290,000 homes, down 2.3% in the last 12 months. The median price for all types of homes is $352,800 - up 13.3% from a year ago. The median Single-Family Home price is $359,700 and $279,900 for a Condo. Homes were on the market for an average of 17 days, and 86% were on the market for less than a month. Currently, 1,270,000 homes are for sale, down 13.0% from 1,460,000 units a year ago.
- New Home Sales (signed contracts in September) rose 14.0% to a seasonally adjusted annual rate of 800,000 homes - down 17.6% YoY. The median New Home price rose to $408,800 from $401,500 the prior month. The average price rose to $451,700 from $443,200 the prior month. There are 379,000 New Homes for sale, which is a 5.7 month supply.
- Pending Home Sales Index (signed contracts in September) fell 2.3% to 116.7 from 119.5 the previous month, down 8.0% YoY.
- Building Permits (issued in September) fell 7.7% to a seasonally adjusted annual rate of 1,589,000 units - unchanged YoY. Single-Family Permits fell 0.9% to an annual pace of 1,041,000 homes, down 7.1% YoY.
- Housing Starts (excavation began in September) fell 1.6% to an annual adjusted rate of 1,555,000, up 7.4% YoY. Single-Family Starts were unchanged from August at 1,080,000 units, up 2.3% YoY.
- Housing Completions (completed in September) fell 4.6% to an annual adjusted rate of 1,240,000 units - down 13.0% YoY. Single-Family Completions were unchanged at 953,000 homes - up 2.1% YoY.
- S&P/Case-Shiller 20 City Home Price Index rose 0.9% in August, up 19.7% YoY.
- FHFA Home Price Index rose 1.0% in August, now up 18.5% YoY.
Labor Market Economic Data Released In October 2021
The Economy created 194,000 new jobs in September, disappointing Economists that expected 500,000 new jobs. However, Private Sector Job Growth was 317,000 as Government payroll shrunk by 123,000 (317,000 - 123,000 = 194,000). Plus, the July and August numbers were revised up an additional 169,000 jobs. If you do the math, there were 486,000 more new Private Sector Jobs created (169,000 + 317,000 = 486,000). So the numbers aren't that bad. Of the 317,000 new jobs, Hospitality accounted for 74,000, Construction jobs up 22,000, Manufacturing jobs up 26,000. Meanwhile, there are currently 10,400,000 Job Openings in the US. There were 22,000,000 jobs lost during the Covid lockdown in March 2020. Of those 22,000,000 workers, roughly 17,000,000 have become re-employed - with 5,000,000 still unemployed.
- The Economy created 194,000 New Jobs during September.
- The Unemployment Rate fell to 4.8% in September from 5.2% in August.
- The Labor Force Participation Rate dropped to 61.6% from 61.7% the previous month.
- The Average Hourly Wage rose 0.6% in September, now up 4.6% YoY.
- Job Openings fell to 10,400,000 in August from 10,900,000 in July.
Inflation Economic Data Released In October 2021
Inflation moderated slightly in September. The CPI was up 0.4% for the month and 5.4% YoY.
That's high but not bad, considering we're still in Pandemic Recovery Mode. Three components continue to drive Inflation: Energy, Food, and Shelter. Shelter prices are up 0.4% (3.2% YoY). Energy prices jumped 1.3% (24.8% YoY). Gasoline prices up a whopping 1.2% in a month (42.1% YoY). Food prices up another 0.9% in September (4.6% YoY). Have you seen the cost of a Rib-eye in the store? Used Car prices, which were in the stratosphere the last 6 months, are falling back to earth, down 0.7% in September, but still up 24.4% in the last 12 months. We're not alone with inflation problems; China’s PPI is up 10.7% in the past 12 months - worse than the US.
- CPI rose 0.4%, up 5.4% YoY | Core CPI rose 0.2%, up 4.0% YoY
- PPI rose 0.5 %, up 8.6% YoY | Core PPI rose 0.2%, up 6.8% YoY
- PCE rose 0.3%, up 4.4% YoY | Core PCE rose 0.2%, up 3.6% YoY
GDP Economic Data Released In October 2021
We got a first look at 3rd Quarter GDP, and it wasn't pretty. The first estimate of the 3rd Quarter 2021 GDP showed the US Economy grew at a 2.0% annualized rate. In the last 12 months, the Economy grew 4.9%. This is much lower than last quarter's 6.7% growth and way below Economists' expectations of 5.8%. This is disappointing and confirmed fears that Supply Chain Problems were much worse and had a greater negative impact on Economic growth than expected. Our Economy is 70% Consumer-driven. When consumers can't find goods on the shelves - Economic growth suffers. However, demand for goods is high, and the consumer is still sitting on a pile of cash. When Supply Chain issues are resolved, expect consumer spending and GDP to shoot back up.
- GDP Growth 3Q2021 (1st estimate): 2.0% annualized growth rate
- US GDP Output: 3Q2021: $23.2T | 2Q2021: $22.7T | 1Q2021: $22.0T | 4Q2020: $21.5T
Consumer Economic Data Released In October 2021
Retail Sales data for September was up a healthy 0.7% despite logistical problems. Imagine what that number would be without supply chain issues. Retail Sales is 19% above the pre-pandemic highs. Consumers have cash and are in a spending mood. Expect them to stay that way through the Holiday Buying Season and possibly into the winter months. Currently, two possible constraints could hold down consumption: Stocking the shelves and energy prices. The more money people spend on energy this winter, the less money they have to spend on other things. Watch energy prices and logistical issues in the next few months.
- Retail Sales rose 0.7% during September, now up 13.9% in the last 12 months.
- Consumer Confidence Index rose 3.6% to 113.8 from 109.3 the previous month.
- Consumer Sentiment Index (U of M ) fell to 71.7 from a revised 72.8 the previous month.
Energy, International, And Things You May Have Missed
Oil prices rose to over $86/barrel then fell back after oil production increased.
- West Texas Intermediate crude rose to $84/barrel (Oct 29) from $75/barrel (Sep 30).
- North Sea Brent crude rose to $84/barrel (Oct 29)from $79/barrel (Sep 30).
- Natural Gas fell slightly to $5.62/MMBtu from a 7 year high of $6.25/MMBtu in September.
- Supply Chain problems are exacerbated by California laws prohibiting older trucks (environmental issues) and independent truck drivers from operating in the state.
- President Joe Biden said the United States would defend Taiwan if it was attached by China.
- China launched a Hypersonic missile that caught US security analysts off guard.
The Mortgage Economic Review is a concise summary of Key Economic Data that influences the Mortgage and Real Estate Industries. It's a quick read that keeps busy Professionals updated on important Economic Information. Feel free to share this with friends and colleagues in the Mortgage and Real Estate business. To have the Mortgage Economic Review emailed to you each month, click here.
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Mark Paoletti, MortgageElements.com
The Mortgage Economic Review is for informational and educational purposes only and should not be construed as investment, legal, financial, or mortgage advice. The information is gathered from sources believed to be credible; some are opinion-based and editorial in nature. Mortgage Elements Inc does not guarantee or warrant its accuracy or completeness, and there is no guarantee it is without errors. This newsletter is created for use by Mortgage and Real Estate Professionals and is not an advertisement to extend credit or solicit mortgage originations. © Copyright 2021 Mark Paoletti, Mortgage Elements Inc, All Rights Reserved.
