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Afternoon Note

Housing Stalls

By Charles Payne, CEO & Principal Analyst
5/23/2018 1:50 PM
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Weekly Petroleum

Crude oil inventories, for the week ended May 18, increased by 5.8 million barrels from the previous week.  Crude oil imports averaged 8.2 million barrels per day (bpd), up 558,000 from the previous week.  The four-week average for crude imports was 7.9 million barrels per day (bpd), 3.5% lower than the same period a year ago.  Exports decline to 1.7 million bpd from the previous week’s record high of 2.6 million bpd.  Analysts were expecting a draw of 1.6 million barrels with the Memorial Day holiday approaching. 

Gasoline inventories increased by 1.9 million barrels and refiners were running at 91.8% of capacity.   Exports declined, and imports increased while inventories rose, making for a bearish tone.  WTI crude initially sold down to $71.31 from $72.05 before recovering to $71.80.

New Home Sales

New home purchases declined in April from March. 

Sales of the number of homes in the $300,000-399,999 price range declined 42% 

Prices of input materials have raised 4.2% from year ago levels.  Concrete products and plastic construction products rose 4.9%; steel pipe and tube increased 11.7% and lumber and plywood prices were 11.0% higher. 

Slowing demand combined with rising input costs will be a challenge for home builders.  Although slowing demand will allow builders time to whittle away at their backlogs. The number of lots sold but no building has started on yet increased in April to a five-month high.

Mortgage Applications

Mortgage applications fell 2.6% for the week ended May 18, after falling 2.7% in the previous week.  This is the fifth consecutive week of declines in applications.   Applications to purchase a home declined 2% and refinances dropped by 3.7%.  The refinance index hit its lowest level since December 2000. The average 30-year mortgage rate also increased by 9 basis points to 4.86%. 

Conclusion: Rising interest rates coupled with increasing home prices has potential buyers stepping back from purchasing a home.


 

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