Week of October 25, 2021 in Review

Thanks to our awesome friend Tammie Crainich at LoanDepot we were able to get this update on the market!

News regarding new home sales, home appreciation and inflation all made headlines. But what does the data really mean?

Sales of new homes surged in September, rising 14% from August at an 800,000 annualized pace. This was stronger than expectations and the highest reading since March. However, on an annual basis, sales were 18% lower when compared to September of last year – but there is more to this story as noted below. Meanwhile, Pending Home Sales, which measure signed contracts on existing homes, fell 2.3% in September after an 8% gain in August.

The ongoing high level of demand for homes around the country continues to help prices appreciate. The Case-Shiller Home Price Index showed that home prices rose 1.2% in August and 20% year over year. The Federal Housing Finance Agency (FHFA), which measures home price appreciation on single-family homes with conforming loan amounts, also reported that home prices rose 1% in August and 18.5% when compared to August of last year. While these are certainly still strong levels of appreciation, there are signs that appreciation may be moderating. Don’t miss the explanation below.

The latest Personal Consumption Expenditures (PCE) report showed that consumer inflation was up 0.3% in September. Year over year the index rose from 4.2% to 4.4%, which is the hottest reading in 30 years. Core PCE, which strips out volatile food and energy prices and is the Fed’s real focus, was up 0.2% in September while the year over year reading remained at 3.6%.

Rising inflation is always critical to monitor because it can have a big impact on Mortgage Bonds and home loan rates, which are tied to them. While the annual Core PCE figures may appear to suggest that consumer inflation is holding steady, it’s important to look further into the data. Read on for additional analysis about this.

The unemployment picture continues to improve, as the number of people filing for benefits for the first time and on a continuing basis both declined to their lowest levels since before the pandemic began. Extended Benefits and the federal COVID plans all showed declines in the latest week as well. There are now 2.8 million people in total receiving benefits, which is down by almost 450,000 from the previous week.

Lastly, the first look at Gross Domestic Product (GDP) for the third quarter showed annualized growth of 2%, which was below the estimate of 2.6% but better than the 0.5% estimate from the Atlanta Fed. Real final sales fell 0.1%, which means that most of the gain came from inventory build and this added 2% to GDP. Personal spending was up 1.6%, driven by spending on services, as goods spending fell. Remember that GDP was 6.7% annualized in the second quarter so this third quarter reading reflects a big revision lower on full year GDP.