Is a new Trader Joes or WholeFoods moving into your neighborhood? Then you are in luck! Not only is it great to shop at them, but data reveals they can boos your homes value!
You may have heard about the Starbucks Effect, a discovery revealed in the New York Times best seller “Zillow Talk” that shows where the coffee chain offers the biggest boost for home values. Co-authors Spencer Rascoff, Zillow Group CEO, and Chief Economist Stan Humphries didn’t stop there.
In the new paperback edition of “Zillow Talk: Rewriting the Rules of Real Estate,” a bonus chapter reveals a similar phenomenon with specialty grocery stores. Between 1997 and 2014, homes near Trader Joe’s and Whole Foods were consistently worth more than the median U.S. home. By the end of 2014, homes within a mile of either store were worth more than twice as much as the median home in the rest of the country.
What Happened to Rates Last Week?
Mortgage backed securities (FNMA 3.00 MBS) lost -60 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher from the prior week. It was our third straight week of declines in MBS (higher rates).
Domestically, there was very little in terms of economic releases or Treasury auctions that had any real influence on MBS pricing and therefore rates. Our Treasury Department auctioned off 10 year notes and 30 year bonds, both went off at a much higher rate than the auctions in February. It didn’t move the needle on mortgage rates but it means that we just rolled over a portion of our deficit at higher rates.
Texas Tea, Black Gold: WTI Oil prices continued the single biggest factor in pricing for the week as WTI Oil moved from a low of $36.09 on Monday to a high of $39.02 on Friday. That is a $3 swing in pricing. Why is this such a big factor in MBS pricing? Because it is a proxy for future inflation and therefore future Fed rate hikes. In February, WTI Oil hit $26.11. If Oil hits $45 in the next couple of months, then that would be a 73% increase! And that certainly can have a major influence on Fed policy.
Wholesale Inventories: Were much stronger than expected, coming in at +0.3% vs est of -0.2%. This is the first reading for January and will cause many to upwardly revised their 1st QTR GDP estimates.
Jobs, Jobs, Jobs: The Labor Market Conditions Index dropped from -0.9 in January down to -2.4 in February. This is based upon 19 labor market indicators that are already out in the market place. Makes you wonder how this is weighted given the strength in just above every other labor indicator.
Consumer Credit: Consumers added another $10.5 billion in debt in January but that is less than market expectations of $16.5B and is a much slower pace than December’s $21.3B. When you strip out auto and student loans and focus on revolving (Credit card) debt (as a proxy for Retail Sales), it slipped $1.1B. This is showing weakness in the consumer sector.
Across the Pond:
ECB: The European Central Bank took the following action last week:
– Increased the amount of their monthly asset purchase volumes from the current level of 60 billion euros to 80 billion euros. This will run until March 2017 but can be extended if conditions warrant it.
– They lowered their key interest rate from 0.05% down to 0.00%
– They lowered their deposit rate from -0.3% down to -0.4%
– They lowered both of their growth and inflation forecasts for 2016 through 2018
During the live press conference, President Mario Draghi said that he saw no reason for further rate cuts.
What to Watch Out For This Week:
Date Time (ET) Economic Release Actual Market Expects Prior 15-Mar 8:30 AM Retail Sales – -0.10% 0.20% 15-Mar 8:30 AM Retail Sales ex-auto – -0.20% 0.10% 15-Mar 8:30 AM PPI – -0.20% 0.10% 15-Mar 8:30 AM Core PPI – 0.10% 0.40% 15-Mar 8:30 AM Empire Manufacturing – -9.5 -16.6 15-Mar 10:00 AM Business Inventories – 0.00% 0.10% 15-Mar 10:00 AM NAHB Housing Market Index – 59 58 15-Mar 4:00 PM Net Long-Term TIC Flows – NA -$29.4B 16-Mar 7:00 AM MBA Mortgage Index – NA 0.20% 16-Mar 8:30 AM CPI – -0.20% 0.00% 16-Mar 8:30 AM Core CPI – 0.10% 0.30% 16-Mar 8:30 AM Housing Starts – 1137K 1099K 16-Mar 8:30 AM Building Permits – 1204K 1202K 16-Mar 9:15 AM Industrial Production – -0.30% 0.90% 16-Mar 9:15 AM Capacity Utilization – 76.90% 77.10% 16-Mar 10:30 AM Crude Inventories – NA 3.88M 16-Mar 2:00 PM FOMC Rate Decision – 0.38% 0.38% 17-Mar 8:30 AM Initial Claims – 266K 259K 17-Mar 8:30 AM Continuing Claims – NA 2225K 17-Mar 8:30 AM Philadelphia Fed – -1.4 -2.8 17-Mar 8:30 AM Current Account Balance – -$116.0B -$124.1B 17-Mar 10:00 AM Leading Indicators – 0.20% -0.20% 17-Mar 10:30 AM Natural Gas Inventories – NA -57 bcf 18-Mar 10:00 AM Mich Sentiment – 92.2 91.7