New home sales for June declined 8.1% from May and are back to 1982 levels.
Even though MoM new home sales are down 8.1%, the average price of a new home is up 3.53%.
Well, THIS chart isn’t a good sign!
Speaking of bad signs, at the signpost ahead, the next stop is “The Twilight Zone.”
Ray Bradbury’s masterpiece “Something Wicked This Way Comes” is about a mysterious circus that comes to a small town with evil intent. Much like the vaunted jobs recovery.
Initial jobless claims fell to 302,000, a level not seen since 2006. That is indeed good news!
But the Something Wicked part of the story is that average hourly wage growth YoY is down almost 50% since 2007 (and is currently at an anemic 2% rate, lower than the inflation rate. Average hourly wage earnings YoY are down 50% since 2007. And real median household income is lower than it was in 2007 and is back at 1995 levels.
REAL average hourly earnings YoY is now negative and has not been above 1.3% growth since 2009.
Yes, something wicked has ridden into town.
Mortgage applications increased 2.4% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 18, 2014.
The non-seasonally adjusted Purchase Index increased 0.82% from one week earlier, and remain 15.1% lower than the same time last year.
And the Purchase Index is down 69% since its peak on May 6, 2005.
The seasonally adjusted Purchase Index increased 0.3% from one week earlier. The residential mortgage Purchase Index remains in the black hole because of fewer qualified borrowers who can meet DTI requirements.
And remember that REAL average hourly wage growth has gone negative for the first time since 2012. And real average hourly wage growth hasn’t exceed 1.3% since 2010. This is SLOW growth.
The Refinance Index increased 4% from the previous week. You have to look hard to see it on a chart.
You can see mortgage Refi Waves, usually after The Federal Reserve lowers their Fed Funds Target to stimulate the economy. However, it has seeming run out of gas after such a prolonged period of low rates.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained unchanged at 4.33%, with points increasing to 0.23 from 0.20 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
Wells Fargo continues to be the dominant mortgage lender in Q1 2014 with total volume larger than their #2 and #3 competitors combined (Chase and Quicken Loans).
As Dean Martin used to sing, “Ain’t that a kick in the head.”
Real average hourly and weekly earnings just experienced their first negative YoY growth since 2012.
In fact, there hasn’t been YoY growth in real hourly earnings above 2% since October 2009.
It is hard to mount a vibrant economic and housing recovery when real average hourly wage earnings are consistently below 1%.
Sales of previously owned U.S. homes climbed in June to an eight-month high. Sales increased 2.6% to a 5.04 million annual rate last month.
The bad news? Existing home sales are 2.4% lower than the same time last year. And EHS remain 30.5% below their peak in 2005.
Once again, the culprit is lower real median household income as well as average hourly wage earnings growth (YoY) which is 50% lower than in 2007.
The Congressional Budget Office (CBO) released its July 2014 report on the long-term budget outlook for the USA.
And a nauseating report it is too. Federal spending is projected to grow faster that Federal revenues despite the project increase in individual income taxes as a percentage of GDP.
Federal Spending on the Major Health Care Programs, Social Security and Interest on the Federal debt are expected to crowd-out other non-interest government spending.
According to US Debt Clock, taxpayer share of unfunded liabilities is $1.05 MILLION EACH.
That is why younger people in the USA are “born to be in debt.”
Liberty Street Economics (aka, New York Federal Reserve) has an interesting study that was just released.
After 2007, the proportion of people between 27 and 30 years old with secured mortgage debt has tumbled. And is worse if they have student loans outstanding.
This trend is similar to the pattern we see in mortgage purchase applications.
As I discussed earlier today, auto loans are on an uptick (but not mortgages).
Here is a fascinating chart from Meta Brown, Sydnee Caldwell, and Sarah Sutherland at the NY Fed. Though not surprising. Credit scores for those with student loans are lower that credit score for those without student loans. Remember, debt burden negatively impacts your credit score.
So, there you have it. The surge in student loans had a negative impact on mortgage lending. And lower real median household income and a 50% decline in hourly wage earnings growth (YoY) isn’t helping.