Housing/Real Estate Market 

Favorable rates underlies homebuying optimism: Fannie Mae’s HPSI remained mostly flat in December, increasing 0.2 points to 91.7. The survey also showed that 50% of Americans believed prices will go up over the next 12 months, and favorable mortgage rate expectations are also behind the year-over-year increases.

Macro Economy

U.S. trade deficit sinks 8% in November to 3-year low: The trade deficit fell sharply for the second month in a row to $43.1 billion, the lowest level in 3 years and is now on the verge of its first annual decline since 2013. Most of the drop came as a result of a decline in Chinese imports and the reemergence of the U.S. as an energy superpower.

Non-manufacturing Index grew to 4-month high: The service sector accelerated at the end of 2019. The ISM non-manufacturing index grew to 55% in December from 53.9% the month prior. Though it remains below its post-recession peak of 60.8%, the level remains in expansion territory. Still, only 11 of 17 industries showed signs of expansion compared with 16 sectors at this time last year.

Factory orders fell 0.7% in November: U.S. factory orders fell for the 3^rd time in the last 4 months and durable goods orders were revised to show a steeper decline than initially reported. Meanwhile, orders for nondurable goods rose a modest 0.6% and shipments were up for 2 consecutive months now. Overall, factory orders continue to struggle to post consistent growth.

Wholesale inventories slipped by 0.1% from November: Stocks at auto wholesalers, apparel, machinery, furniture and computer equipment saw a slight decrease in December. Growth in inventories tend to signal businesses expectations for future sales and while inventories slipped at the end of 2019, but the component of wholesale inventories that goes into the calculation of GDP edged up 0.1%.

Consumer credit grew in November, but at a slower pace: Americans continued borrowing, but much less so than the previous month. Total consumer credit increased $12.5 billion or 3.6% annual growth rate but was down from a 5.5% growth rate the prior month. Slightly less credit-card borrowing was offset by faster growth in auto and student loans.

U.S. unemployment rate held steady at 3.5% in December 2019: The number of unemployed people decreased by 58,000 to 5.75 million, while employment rose by 267,000 to 158.80 million, keeping the unemployment rate at the lowest level it’s been since 1969. The economy also added 145,000 jobs to nonfarm payrolls last month, and U.S. jobless claims fell for the 4^th week in a row.

Real Estate Finance

Mortgage rates drop at beginning of 2020: The 30-year fixed-rate mortgage (FRM) dropped to 3.64% from 3.72% the week prior. The FRM is 75 a basis points lower than the average of 4.45% recorded a year ago.

Mortgage applications decreased over 2-week period: Mortgage applications decreased 1.5% from two weeks earlier even though new purchase applications increased 5%, as refinancing decreased 8%.

Past Market Minutes
January 6, 2020 - CA real estate market continues uptrend, national existing home sales fell
December 9, 2019 - Construction spending fell, labor markets remain in growth mode
December 2, 2019 - Home prices rose faster in smaller cities, consumer confidence fell

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