Another day passes in shutdown. Markets again held up well with minimal falls on Wall St and bonds relatively unchanged. The US dollar was weaker and gold rebounded. Meanwhile, data was mediocre with the ADP employment report, which bears a rough resemblance to the official report (which will not be out this week owing to the shutdown), was fairly weak:
Private sector employment increased by 166,000 jobs from August to September, according to the September ADP National Employment Report®. … August’s job gain was revised down from 176,000 to 159,000. Mark Zandi, chief economist of Moody’s Analytics, said, “The job market appears to have softened in recent months. Fiscal austerity has begun to take a toll on job creation. The run-up in interest rates may also be doing some damage to jobs in the financial services industry. While job growth has slowed, there remains a general resilience in the market. Job creation continues to be consistent with a slowly declining unemployment rate.”
Meanwhile, the softening in mortgage activity goes on. From the Mortgage Banker’s Association:
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The Market Composite Index, a measure of mortgage loan application volume, decreased 0.4 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The Refinance Index increased 3 percent from the previous week. The seasonally adjusted Purchase Index decreased 6 percent from one week earlier. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 3 percent lower than the same week one year ago.
The refinance share of mortgage activity increased to 63 percent of total applications, the highest level since August 2013, from 61 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6 percent of total applications.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.49 percent, the lowest rate since June 2013, from 4.62 percent, with points decreasing to 0.34 from 0.41 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 4.53 percent, the lowest rate since June 2013, from 4.66 percent, with points decreasing to 0.22 from 0.29 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
Meanwhile, one of the lesser know pillars of the US housing recovery – the private equity splurge – is also fraying. From Bloomie:
Carlyle Group LP (CG), the private-equity firm with more than a third of its $2.3 billion U.S. real estate fund in apartments, is reducing holdings of multifamily housing as rent growth slows from a post-recession surge.
The company is considering apartment sales as rising construction reduces multifamily shortages and price gains for rental properties make them less attractive for private-equity firms that seek returns of 20 percent or more, said Robert Stuckey, the Washington-based firm’s head of U.S. real estate investing. Carlyle has invested or committed about $800 million of equity in 61 multifamily properties since the start of 2011, he said.
“We went from an unusually high-growth market to a market that is growing and attractive but more stable,” Stuckey said in an interview. “Our capital was useful at the front edge of the recovery.”
A decent slab of Australian private equity has been involved in this. From private individuals to funds like that at Dixon Advisory. I don’t see a great unravelling here but the slowing is getting more obvious and with it the prospects of a taper are also getting more distant.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
