Last week’s economic news included readings on construction spending, the Fed’s Federal Open Market Committee statement, and a press conference by Federal Reserve chairman Jerome Powell. Labor data on public and private sector jobs and the national unemployment rate were reported along with weekly readings on mortgage rates and jobless claims.

Residential Developments Lead September Construction Spending

High demand for homes continued to fuel home construction, but public and non-residential construction spending was slower according to the Commerce Department. Residential construction spending rose by 2.70 percent on a seasonally-adjusted annual basis while public construction spending decreased by -1.70 percent and non-residential construction spending dropped by -1.60 percent.

Changing priorities for home buyers including accommodations for work-from-home spaces and moving away from congested urban areas drove demand for  single-family homes. Commercial and public construction was sidelined as concerns over municipal spending and less revenue sidelined business and public construction spending. A new wave of COVID-19 cases also dampened commercial and public construction plans.

FOMC Statement and Fed Chair’s Press Conference

The Federal Open Market Committee of the Federal Reserve said it would leave the target Federal Funds range unchanged at 0.00 to 0.25 percent to promote access to business and personal credit. Factors contributing to the Committee’s decision included observations that demand for goods and services decreased and lower oil prices held down inflation. Committee members expected the spread of COVID-19 to impact the economy, employment, and inflation in the near term. The virus is expected to pose serious risks to economic forecasts over the medium term.

Fed Chair Jerome Powell said that the economy continued to recover from its low in the second quarter, but the pace of economic improvement has since slowed. Travel and hospitality sectors were hard-hit due to requirements for social distancing and wearing masks; Chair Powell emphasized that following public health guidelines was the only way that the COVID-19 virus could be controlled.

Mortgage Rates Mixed as Jobless Claims Fall

Freddie Mac reported mixed movement for average mortgage rates with rates for 30-year fixed-rate mortgages three basis points lower at 2.78 percent. Rates for 15-year fixed-rate mortgages averaged 2.32 percent and were unchanged. Rates for 5/1 adjustable rate mortgages averaged 2.89 percent and were one basis point higher. Discount points averaged 0.70 percent for 30-year fixed-rate mortgages, 0.60 percent for 15-year fixed-rate mortgages, and averaged 0.30 percent for 5/1 adjustable rate mortgages.

Initial jobless claims fell to 751,000 last week as compared to the prior week’s reading of 758,000 first-time claims filed. Continuing jobless claims were also lower last week with 7.38 million continuing claims filed as compared to the prior week’s reading of 7.81 million ongoing claims filed.

Public and Private  Sector Job Growth Slows in October

ADP reported 365,000 private-sector jobs added in October as compared to 753,000 jobs added in September. The Commerce Department reported 638,000 public and private sector jobs added in October as compared to the prior month’s reading of 672,000 public and private sector jobs added. The National Unemployment rate was also lower at 6.90 percent, which was lower than the expected reading of 7.60 percent and the previous month’s reading of 7.90 percent.

What’s Ahead

This week’s scheduled economic releases include readings on inflation and consumer sentiment. Weekly updates on mortgage rates and jobless claims will also be released.

Last week’s economic reporting included home price data from Case-Shiller Home Price Indices along with readings on pending home sales, new home sales, and consumer sentiment. Weekly reports on mortgage rates and jobless claims were also released.

Case-Shiller: August Home Prices Rise at Fastest Pace in Two Years

Home prices rose at a seasonally-adjusted annual pace of 5.70 percent in August according to Case-Shiller’s National Home Price Index. U.S. home prices rose by 4.80 percent in July

The Case-Shiller 20-City Home Price Index showed 5.20 percent year-over-year home price growth in August.

Phoenix, Arizona, held first place in home price growth for the 15^th consecutive month. Seattle, Washington followed with 8.50 percent year-over-year growth in home prices. San Diego, California reported 7.60 percent year-over-year growth in home prices.

New and Pending Home Sales Fall in September

New homes sold at a pace of 959,000 sales on a seasonally adjusted annual basis in September.  Analysts expected a sales pace of 1.033 million sales based on August’s pace of 994,000 sales. Sales fell with the end of the peak home-buying season and may have also slowed due to rising COVID-19 cases. Demand for homes has been high as buyers’ shifting priorities were expected to cause more families to relocate to less congested suburbs. Pending home sales fell by 2.20 percent in September according to the National Association of Realtors®. Signed sales contracts were 20.50 percent higher year over year.

Mortgage Rates, Jobless Claims Fall

Freddie Mac reported little change in average mortgage rates last week. Rates for 30-year fixed-rate mortgages rose by one basis point to 2.81 percent. Rates for 15-year fixed-rate mortgages averaged 2.32 percent and were one basis point higher than for the prior week. Mortgage rates for 5/1 adjustable rate mortgages also rose by one basis point on average. Discount points averaged 0.70 percent for 30-year fixed-rate mortgages, 0.60 percent for 15-year fixed-rate mortgages, and 0.30 percent for 5/1 adjustable rate mortgages.

Initial jobless claims fell last week to 751,000 new claims filed. Analysts expected 770,000 new claims filed based on the prior week’s reading of  791,000 new claims filed. Ongoing jobless claims also fell last week with 7.76 million ongoing claims filed as compared to the prior week’s reading of 8.47 million continuing jobless claims filed.

The University of Michigan’s Consumer Sentiment Index rose to an index reading of 81.8 in October as compared to September’s reading of 80.4 and an expected index reading of 81.2.

What’s Ahead

This week’s scheduled economic reports include a statement and press conference by the Fed’s Federal Open Market Committee. Construction spending data and labor sector readings on public and private sector jobs and the national unemployment rate will also be released along with weekly readings on mortgage rates and jobless claims.

Home prices rose at their fastest rate in two years according to Case-Shiller Home Price Indices. The National Home Price Index for August showed 5.70 percent home price growth year-over-year as compared to 4.80 percent growth reported in July.

The Case-Shiller 20-City Home Price Index showed that home prices rose to a 5.70 percent year-over-year pace from July’s growth rate of 4.10 percent. Phoenix, Arizona held the top home price growth rate for the 15^th consecutive month with year-over-year home price growth of 9.90 percent. Seattle, Washington held second place with 8.50 percent growth in home prices. San Diego, California took third place with 7.60 percent year-over-year home price growth.

According to the 20-City Home Price Index, 19 of 20 cities reported growth in home prices. Detroit, MI has not reported home price information in recent months. Analysts said that low mortgage rates, short supplies of available homes, and changing consumer preferences drove home prices higher. The COVID pandemic caused homeowners and buyers to change preferences for home location, square footage, and amenities as working from home, school closures, and avoiding crowded urban areas adjusted family priorities.

Craig Lazzara, global head of index investment strategies for S&P Dow Jones Indices, said “If future reports continue in this vein,[positive index readings], we may be able to conclude that the COVID-related deceleration is far behind us.” It’s also possible that seasonal weather conditions and resurging COVID cases could slow home sales and home price growth.

Federal Housing Finance AgencyReports Highest Home Price Growth Rate Since 2006

August readings reported by FHFA also showed higher home prices. The agency, which oversees mortgage giants Fannie Mae and Freddie Mac, reported year-over-year home price growth of 1.50 percent from July to August; home prices for homes mortgaged or owned by Fannie Mae and Freddie Mac rose by eight percent annually. 

FHFA home price data is tracked nationally by census divisions, states, and metro areas. Information is also available by county and zip code.