Fed, Economy, Rates Steady (SCC & SMC)
January 29, 2021 — Although equity markets seem to be having a bit of a rough (or at last interesting) time of it lately, the overall economy seems to be on a pretty level stance, propped up as it is from all angles. With more stimulus seeping into the overall economy and arguments about the next and perhaps larger round in process, an already-performing economy may be set to perform a little more strongly as we work our way toward spring.
Certainly, the economy will do better once the pandemic is damped down. A wide swath of the leisure, hospitality and entertainment sectors of the economy simply can’t fully function while the virus rages. The only question is “how soon?” and for that, there simply isn’t one clear answer available. Meanwhile, the economy that is functioning did so at a pretty solid level in the fourth quarter of 2020, and that despite increasing sickness and tightening of restrictions in a number of hard-hit locales.
As far as inflation goes, there was no concerning acceleration in December, with PCE inflation rising 0.4% for the month and core PCE 0.3%. Annualized, headline PCE is running at a 1.3% clip while core PCE a 1.5% clip. Both remain well below the Fed’s desired level, but are a touch firmer than they have been in recent months. We think that inflation will firm more in the months ahead, but since the Fed won’t be paying any mind to it until core PCE is above 2% for some time there’s no real reason to expect monetary policy implications. Market-based rates (such as mortgages) however are a different story, and will tick up a bit if price pressure prove persistent.
Sales of new homes have cooled from their heady pace of a few months ago, but some seasonal slowing as the holidays kick in isn’t uncommon at all. The Census Bureau reported that 842,000 (annualized) homes were sold in December, up 1.6% from a (downwardly) revised 842,000 in November. No worries, though, since sales are still some 16.5% above December 2019 levels, so it’s not as though the market has slowed appreciably — more like settling back to a more sustainable pace. The supply of new homes available to buy at the present rate of sale rose 0.1 to 4.3 months (302,000 units built and ready for sale) and prices of new homes sold were 2% higher compared to November (about 8% higher than last year during the same month). With spring soon on its way, sales of new homes will likely flare higher again as is the normal seasonal case.
Existing home sales may level off for a bit, though. The National Association of Realtors Pending Home Sales Index was down by 0.3% in December, a fourth consecutive decline. As this is indicative of signed contracts, it’s not surprising to see a softening as during the holidays, as fewer homes are available to buy (inventory levels are presently record thin) and fewer homebuyers are out and about looking at the homes that are available. The PHSI is more than 21% higher this year than a comparable month a year ago, and looking forward, spring’s coming, and it may be that we’ll have a more normal spring housing season this year.
Applications for mortgage credit declined by 4.1% in the week ending January 22, said the Mortgage Bankers Association. Applications for purchase-money mortgages declined by 4% for the week, but have been mostly positive over the last month or so. Applications for refinancing were off by 5% for the week (and 4.7% the week prior), but that’s to be expected since mortgage rates saw a bump mid-month, which has been softly fading since. A small decline in rates last week and a small decline in rates this week have moved mortgage rates to the middle of a recent range.
For further details and a city-by-city breakdown statistics, go to https://avi.rereport.com/market_reports.
For a focused review of current and historical market trends go to https://avi.rereport.com/market_reports and click “change’’ see below
Real Estate Related Articles
January 4, 2021
December 29, 2020
October 22, 2020
October 8, 2020
By Wolf Richter
California homeowners interested in building accessory dwelling units on their property just caught a break, potentially shaving off thousands of dollars in fees and permits.
In a move proponents say will help ease the Bay Area’s housing crisis, Gov. Jerry Brown on Tuesday signed Senate Bill 1069, making the so-called “granny units” easier and less expensive to build throughout the state.
Helpful resource for home owners
Many new home owners or owners who consider remodeling or rebuilding their homes should take advantage of their county Tax Assessor web site. These web site and their respective city building departments web site typically have vest information regarding the process for applying for permits, the impact on their taxes and many other resources that home owners should be aware are available for them.
For the San Mateo County Tax Assessor office visit https://www.smcare.org/default.asp
For Santa Clara County Tax Assessor visit https://www.sccassessor.org/index.php
The Silicon Valley 150 Index Corner
The Silicon Valley’s Real estate market is a derivative of the local economy–it prospers and withers depending on how well the local innovation-based sector performs. The San Jose Mercury News tracks the performances of the largest 150 publicly traded companies headquartered in Silicon Valley through an index called the SV150, which may be found at www.mercurynews.com. Stocks are valued based on several criteria, but one of the more important criteria is a company’s future earnings. Therefore, I see the SV150 as a leading indicator for Silicon Valley’s real estate market.
S&P CoreLogic Case-Shiller Index Shows Annual Home Price Gains Climbed to 9.5% in November
JANUARY 26, 2021 – S&P Dow Jones Indices today released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released today for November 2020 show that home prices continue to increase across the U.S. More than 27 years of history are available for these data series, and can be accessed in full by going to click here