This weekend, we put up the holiday lights at my house. Next, it’ll be time to put up the tree. We’re starting to get into the spirit of the season.
A lot of the economic data out last week was looking pretty rosy itself. I’d love to get back to thinking about holiday cookies as soon as possible, so let’s jump right into the economic data.
New Home Sales
New home sales were up 6.2% in September to a seasonally-adjusted annualized rate of 685,000. September’s crazy high gains were pushed down a little bit, but still show a 14.2% gain from August.
Despite supply rising 4,000 to 282,000, supply relative to sales fell to 4.9 months from 5.2 months. Part of this may have had to do with the fact that sales prices were down 3.7% to $312,800. New home prices are up 3.3% on the year.
Sales are up 30% on the month in the Northeast. However, the small region still only accounts for 56,000 sales, despite being up 65% on the year. Sales in the Midwest were up 18% on October and have risen 16.2% on the year. The West had 167,000 sales after they rose 6.4% on the month and 14.0% on the year. The South matched this annual increase, up 1.3% in October. Nationwide, new home sales are up 18.7% on the year.
International Trade in Goods
The U.S. goods gap increased by $3.9 billion to $68.3 billion. This was much higher than expected. Exports fell 1.0% and imports were up 1.5%.
On the export side, both products and capital goods declined. In imports, there were increases in the number of industrial supplies and consumer goods being brought into the country. Inventories also declined for both wholesalers and retailers, down 0.4% and 0.1%, respectively.
FHFA House Price Index
The first of two major home price indexes released last Tuesday, the FHFA’s data showed that prices rose 0.3% in September. Home prices are up 6.3% on the year. The gains are a bit softer than analysts expected.
The West North Central region had the highest monthly gain, up 0.9%. The East South Central region of the country was the only region to show declines, down 0.4%. The Pacific leads the way in terms of yearly gains, up 8.7%.
S&P Corelogic Case-Shiller HPI
In the second of the two major home price indexes, the Case-Shiller index shows that home prices were up 0.5% on a seasonally adjusted basis in September. They rose 0.4% overall on the month and 6.2% since September of last year.
Looking across the 20-city index, Atlanta, San Francisco and Las Vegas all had monthly gains of 1% or higher. Seattle home prices lead the way for the year, up 13.0% and the only area in double figures.
Consumer confidence was up 3.6 points in November to 129.5, a high not seen in 17 years. Only 16.9% of those surveyed view jobs as hard to get. More people are also optimistic about the jobs outlook, with the number of optimists up 4% to 12.6%. Meanwhile, only 11.0% of people are pessimistic.
When it comes to stocks, 46.0% of people see stocks rising over the next year while only 19.0% see them falling. Additionally, 20.1% of people see their incomes rising next year, with 7.6% believing incomes will fall.
In terms of buying plans, cars saw a drop, but plans to buy houses were up. In one potential negative for future buying plans, inflation expectations were down 0.2% to 4.5%, pretty low for this report.
MBA Mortgage Applications
Purchase applications were up 2.0%, but it wasn’t enough to overcome an 8.0% drop in refinancing applications. Applications were down 3.1% overall last week.
The average rate on a 30-year-fixed conforming mortgage was flat at 4.20%.
Gross Domestic Product (GDP)
GDP rose at the expected 3.3% rate on a seasonally adjusted basis in a preliminary reading for the third quarter. Nonresidential investment and inventory grew a little more than in the last estimate. Meanwhile, residential investment and net exports both fell, but at a lower rate than before.
Consumer spending did fall a bit, coming in at 2.3%. The main reason for this was a slight downward revision and durable goods category, which was still up 8.1%, as people had to replace cars after hurricane season. Finally, the building of inventories is seen as businesses getting ready for the holiday shopping season.
In terms of inflation, it’s rising at 2.1% on a seasonally adjusted basis for the quarter, according to this index.
Pending Home Sales Index
The number of existing homes under contract for sale in the month of October increased by 3.5% to an index level of 109.3. Pending sales and the South appear to be bouncing back after the hurricanes, up 7.4%. It’s the strongest region in terms of pending sales on the year.
The outlook for future sales of existing homes is looking pretty good with sales of new homes being up and consumer confidence on the rise.
Jobless claims were mixed this week. Initial claims were down 2,000 to 238,000. The four-week average did rise 2,250 to 242,250.
Continuing claims were up 42,000 to 1.957 million. The four-week average rose 18,250 to 1.911 million.
Personal Income and Outlays
Personal incomes were up 0.4% in the month of October, while consumer spending was up 0.3%. Prices rose 0.1% overall and 0.2% in core categories. On a yearly basis, inflation in these areas are up 1.6% and 1.4% respectively. This is far from the 2% annual target Federal Reserve officials would like to see to encourage people to buy things now.
Digging deeper into the data, wages and salaries were up a softer-than-expected 0.3%. Spending increases are also a little weak. Durable goods orders were down as fewer people bought cars after coming off a spike in September due to replacement of hurricane-damaged vehicles. The data does show that Americans are saving 3.2% of their income, up 0.2% from September.
ISM Manufacturing Index
This key Manufacturing Index dropped 0.5 points to 58.2 in November, but that was only because delivery times sped up a bit. Manufacturing is especially strong right now.
Exports are up 0.6 points to 64.0. Backlogs are at 55.0, which means growth and more hiring. Production is up 2.9 points to 63.9. Employment is rising steadily at 59.7. That being said, input costs are still very high at 65.5.
Fixed mortgage rates were lower last week. It’s important to note that this Freddie Mac data was collected before a late-week interest rate search as GDP was revised upward and Federal Reserve Chair Janet Yellen said the economy is broadly expanding.
That being said, mortgage rates are still very low in comparison to historical averages. It remains a great time to lock your rate.
First, the average rate on a 30-year fixed mortgage was down two basis points to 3.90% last week, with 0.5 points in fees paid at closing. At the same time last year, the average rate was 4.08%.
In shorter terms, 15-year fixed mortgages were down two basis points to 3.30%, with 0.5 points paid. Last year at this time, the 15-year rate was 3.34%.
Finally, the average rate on a 5-year hybrid treasury-indexed adjustable rate mortgage (ARM) was up 10 basis points to 3.32%, with 0.3 points paid. The average rate on the 5-year ARM was 3.15% a year ago.
Stocks closed lower on Friday. Ongoing developments in the investigation of Russian involvement in the election spooked the markets a bit.
With that said, in early trading this morning, things seem to have reversed course as the market is optimistic after the Senate passed its version of a tax reform bill.
The Dow Jones industrial average was down 40.76 points Friday, closing at 24,231.59, still up 2.86% on the week. The S&P 500 finished at 2,642.22, down 5.36 points on the day, but up 1.53% for the week. Alone in having a down week, the Nasdaq fell 0.60% on the week after being down 26.39 points to finish the week at 6,847.59.
The Week Ahead
Tuesday, December 5
International Trade (8:30 a.m. ET) – International trade is composed of merchandise (tangible goods) and services. It’s available by export, import and trade balance for six principal end-use commodity categories and for more than 100 principal Standard International Trade Classification system commodity groupings.
Wednesday, December 6
MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications to mortgage lenders. This is a leading indicator for single-family home sales and housing construction.
Thursday, December 7
Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals filing for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The four-week moving average of new claims smooths out weekly volatility.
Friday, December 8
Employment Situation (8:30 a.m. ET) – The employment situation report measures unemployment in the labor force as well as the sentiments of workers about the job market.
In contrast to last week, there’s not much volume in terms of data this week. However, the jobs report is an important measure of how the economy is doing. It always has the potential to create some market movement. We’ll be keeping an eye on it.
If mortgage and economic data aren’t your thing, we have plenty of home, money and life content to share with you if you subscribe to the Zing Blog below. If you went a little overboard with the Black Friday and Cyber Monday shopping, we’ve got some tips on how to get your holiday budget back on track. Have a great week!
If so, subscribe now for tips on home, money, and life delivered straight to your inbox.