Vital Statistics:
Stocks are up this morning on no real news. Bonds and MBS are down small.
Microsoft had an outage overnight which is affecting banking, aviation and many other services. It is affecting European stock exchanges and the financial system, so originators might see some effects in things like underwriting and funding.
The Index of Leading Economic Indicators contracted again in June, albeit at a slower pace from May. Over the first half of 2024, the LEI contracted by 1.9%, a moderation from the 2.4% pace we saw in the second half of 2023.
“The US LEI continued to trend down in June, but the contraction was smaller than in the past three months,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “The decline continued to be fueled by gloomy consumer expectations, weak new orders, negative interest rate spread, and an increased number of initial claims for unemployment. However, due to the smaller month-on-month rate of decline, the LEI’s long-term growth has become less negative, pointing to a slow recovery. Taken together, June’s data suggest that economic activity is likely to continue to lose momentum in the months ahead. We currently forecast that cooling consumer spending will push US GDP growth down to around 1 percent (annualized) in Q3 of this year.”
Housing affordability is getting a little better due to falling mortgage rates, but we are still close to all-time lows. A person with a $3,000 budget can afford a $450,000 home at current mortgage rates, which is a little better than it was in April when affordability was worse. The typical monthly mortgage payment fell by $115 since then. We are seeing an increase in home supply, which is welcome relief to buyers as well.
Now that it’s looking increasingly likely the Fed will cut interest rates by the end of the year, some house hunters believe mortgage rates will fall more and are waiting for that to happen before they buy,” said Chen Zhao, Redfin’s economic research lead. “But they may be waiting in vain; it’s unlikely mortgage rates will drop much lower in the next few months, as markets are already pricing in the expectation of a rate cut in September, followed by several more at the end of 2024 and into 2025. In fact, now may be the right time for house hunters to get serious about making offers before prices increase even more and they lose some power. Plus, there are more homes to choose from, and many listings are growing stale, giving buyers an opportunity to negotiate.”
