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5/27 - 5/31

Case Shiller Home Price Index

Mortgage Applications

Home price gains continue – The Case Shiller Home Price Index, which ​is the “gold standard” for appreciation, showed that home prices rose ​0.3% in March, rising to another all-time high. The 0.3% gain is the ​seasonally adjusted number, which takes into account the typically ​stronger appreciation seen during this time of the year. The non-​seasonally adjusted figure rose 1.3% in the month alone.

Prices are now up 6.5% YoY, unchanged from the previous report. This ​was another strong report, showing that buying a home still proves to ​be one of the best investments.

The MBA released their Mortgage Application data for last week, showing that ​purchases decreased 1% last week. Purchases are now down 10% from this time ​last year.

Refinances fell 14% last week and are up 12% from last year, influenced by the ​move lower in rates. Refinance activity made up 34% of applications, which was a ​big jump the previous week. Interest rates rose from 7.01% to 7.05%, the first rise ​in four weeks. Rates are almost at the same level they were this time last year.

FHFA House Price Index

The FHFA (Federal Housing Finance Agency) released their House Price Index, which ​measures home price appreciation on single-family homes with conforming loan amounts. ​Different than Case Shiller, it does not include cash buyers or jumbo loans. The FHFA ​reported that home prices rose 0.1% in March and are up 6.7% YoY, down from 7% in the ​previous report.

Earlier this morning, Minneapolis Fed President Neel Kashkari, said, "Many more months of ​positive inflation data, I think, to give me confidence that it’s appropriate to dial back.”

Kashkari told CNBC that the central bank could potentially even hike rates if inflation fails to ​come down further.

Q1 GDP (Second Reading)

The second reading on Q1 GDP showed that the US economy grew by 1.3%, ​which is a slowdown from the 1.6% estimate in the first reading. Even with ​the emergency like spending our government is doing, we are still only ​seeing 1.3% annualized growth, which is weak…image if we were not ​spending like we are.

Within the GPD report there is also a quarterly reading on PCE prices, ​ahead of tomorrow’s monthly reading, which is more real time and ​important. Both the headline and core readings were one tenth below ​estimates, which helped Bonds to rally.

Pending Home Sales

Pending Home Sales, which measures signed contracts on existing homes, ​fell 0.7% in April, which was lower than the 0.6% decline expected. The ​level of sales took a big turn after a strong March reading. We are seeing ​a clear response to higher rates in April, but rates made a nice ​improvement throughout most of May, which could lead to higher sales ​figures in the next report. On a year over year basis, sales are down 7.4%.

Apartment List National Rent Report

The Apartment List National Rent Report for May showed that new rents rose 0.5%. ​Normally during this time of year rental prices will accelerate through June before ​reversing lower. Year over year, new rents are still down 0.8% and have been ​negative since last August.

Something that may continue to keep new rental increases lower is the higher ​national vacancy rate at 6.7%, which should continue to remain elevated with all of ​the multifamily new construction comes to market.

We hope at some point the inflation reports we receive captures the lower rental ​costs.

Initial Jobless Claims

Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, rose 3,000 to 219,000. The four-week moving average, which clears ​up some of the noise, is up to 223,000, the most since last September.

Continuing Claims, or those that continue to receive benefits after their initial claims, rose 4,000 to 1.791M, near the highest levels since November 2021 and still ​pointing to the fact that after someone is laid off, it’s much harder to find a job. Both of these figures were pretty stable from the previous week.

Personal Consumption Expenditures (PCE)

Personal Consumption Expenditures (PCE), showed that Headline or all-in inflation rose 0.3% for the month, which was in line with estimates. Year over year inflation remained ​stable at 2.7%. Energy costs rose 1.2% during the month, which contributed to the headline reading.

The core rate, which strips out food and energy costs and is the main focus of the Fed, rose 0.2% last month, which was one tenth beneath expectations. When looking at the ​decimals, the actual reading was 0.249%, which when rounded reads 0.2%. But because of the decimals, the year over year Core inflation reading remained at 2.8%, while it ​was expected to decline to 2.7%. That is also rounded – the actual year over year figure was 2.75%...so there was some improvement from the previous 2.813% figure, but not ​much.

The market seems to be liking the cooler monthly reading, as well as the lower consumer spending figures, only showing a 0.2% increase in April, which was beneath estimates ​and a big moderation from 0.8% in the prior month. The savings rate remained at 3.6%, the lowest level since November 2022.This is more evidence that the consumer is feeling ​pressure. Recently, Core Retail Sales were negative and Durable Goods Orders flatlined. If we continue to see this trend, it could lead to a slowdown in the economy.

Bottom line – We are seeing very little inflation progress, but it’s not heating up and moving higher. Modeling out where inflation may go the rest of the year, using modest 0.2% ​readings, Core inflation will actually move higher to 3% because the replacement figures from 2023 become quite low. Of course, there is a chance that the readings come in ​under 0.2%, which would change things, but we are not seeing evidence of that yet…And there is also a chance that the readings come in hotter that 0.2%, which would make ​the picture look even worse. As we have been saying, inflation progress is not going to give the Fed the confidence they need to cut rates and it will have to come from the ​unemployment rate rising.

CoreLogic Loan Performance Insights

CoreLogic reported that loan performance in January and those 30-days or more declined from 2.8% to 2.6% in March.

Those 90+ days delinquent rose from 0.9% to 1.1%, while those in foreclosure stayed just off the lowest level on record at 0.3%. While the 90+ day reading rose, it’s still at a ​good level, but it’s something to keep an eye on.