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  4. Economic Growth Exceeds All Expectations – Market Update

I hope everyone had a good weekend. Did you see that big superhero blockbuster yet? I didn’t, so please no spoilers in the comments.

One thing that did spoil us a little bit last week? Gross domestic product (GDP), a key measure of overall economic growth, came in a lot better than expected. Let’s get into it.

Headline News

Existing Home Sales

Existing home sales were down 4.9% on the month to 5.21 million on a seasonally-adjusted annualized basis in March after being up a revised 11.2% in February. On the year, sales were down 5.4%.

Analysts point out that the 3-month moving average in this category is up 1.4% to 5.207 million, which is the best it’s been since November. Still, when you compare to the peak of the market post-recession, which occurred in December 2017 at 5.563 million, current numbers don’t look so good.

Better news comes from the fact that there is more supply coming to the market, up 3.1% to 1.68 million. Relative to sales, supply is still tight at 3.9 months, but this is better than the 3.6-month figures seen in February. The median price for an existing home was also up 3.7% to come in at $259,400. However, this is only up 3.8% on the year, so it’s something to keep an eye on.

FHFA House Price Index

House prices did rise 0.3% in February, albeit slower than the expected 0.4% pace. Prices are up 4.9% on the year. This is similar to recent slowing in Case-Shiller data, which will come out this week.

The Pacific region was only up 0.2% on the month and 3.7% on the year. While the Mountain states were down 0.5% in February and are up 6.5% in the year, down from a 9% pace of growth.

New Home Sales

While existing home sales fell, new home sales were up 4.53% in the month of March to come in at a seasonally-adjusted annualized rate of 692,000. One of the theories for the momentum credits recent low mortgage rates for the uptick.

At the same time, builders do appear to be cutting consumers a break on prices as the median price of a new home fell 0.3% to $302,700 last month. This is down 9.7% on the year.

Supply was down 0.3% to 344,000 units in March. Relative to sales, there’s 6 months of supply left in the market compared to 6.3 months in February. Sales were up 3% on the year.

The report does highlight performance in a couple of regions. In the West, sales were up 11,000 from the prior month, but they’re still down 4.3% in yearly comparisons. Meanwhile, the West was up 14,000 at 401,000 and is very strong at a 9.3% yearly gain.

MBA Mortgage Applications

Mortgage rates, which are still low, have nonetheless popped back up over the last several weeks. Because of this, overall applications were down 7.3% over the last week as applications to refinance were down 11% and purchase applications were down 4%.

The average rate on a 30-year fixed conforming mortgage was up two basis points to 4.46%.

Durable Goods Orders

New orders of durable goods were up 2.7% in March, beating all consensus expectations. When transportation orders were taken out, these were up 0.4%, while there was a 1.3% increase in orders of core capital goods.

Transportation did lead the way, with a 60% uptick in the number of commercial aircraft ordered. While the aircraft order number does tend to swing quite wildly, there was a 2.1% uptick in orders of motor vehicles as well. The increase in core capital goods orders does point to an uptick in business investment. However, that gain is unlikely to show up in GDP reports in their near future because shipments of core capital goods were down 0.2%. At the same time, unfilled orders in the category were up 0.2%, which is a good thing for future prospects in the category as it points to growth.

Total shipments were up 0.3% which matches the gain for total inventories.

Jobless Claims

Well, this is weird. While no special factors were cited by the Labor Department, the number of jobless claims suddenly ballooned up to 230,000, an increase of 37,000 from the previous week. This pushed the 4-week average up 4,500 to come in at 206,000. Although it wasn’t cited, it’s worth noting that last week’s numbers may have been impacted by the Easter holiday.

Continuing claims were only up 1,000 to come in at 1.655 million. Meanwhile, the 4-week moving average was down 25,000, settling at about 1.688 million.


In an estimate for the first quarter, GDP grew at a rate of 3.2% on a seasonally-adjusted basis. Net exports are deeply underwater given the nation’s trade deficit, but it’s not as bad as it could be and added 1.03% to the overall growth number.

Inventories were up quite a bit and this also contributed 0.65% to overall growth. Consumer spending was up 1.2%, and a modest number that contributed 0.82% to overall growth. However, spending on durable goods was down quite a bit and subtracted 0.38% from growth.

Residential investment hasn’t been great and is currently on pace to be down 2.8% on the year, subtracting 0.11% from overall growth. However, business investment was up 2.7% for a 0.38% contribution. Additionally, government purchases were up 2.4%, which contributed 0.41 points to overall growth in the quarter.

The Federal Reserve keeps a close eye and inflation, which grew at 1.3% in core categories according to this reading and 0.9% overall for the quarter.

Consumer Sentiment

Consumer sentiment was up 0.3 points in the final reading of April to come in at 97.2. Expectations saw a noticeable increase in the latest reading to come and 87.4, which is still down 1.4 points from March. Meanwhile, current conditions were down quite a bit from the midmonth reading as they came in at 112.3, down a point from March.

Meanwhile, inflation expectations really refuse to move upward. Over the next year, they remain flat at 2.5%. In the next five years, the outlook actually moved down 0.2% to come in at 2.3%.

Mortgage Rates

Fixed mortgage rates appear to be steadily rising, however slowly. It’s a good time to lock your rate because they’re still pretty low.

According to Freddie Mac, the average rate for a 30-year fixed mortgage was up three basis points to 4.2% with 0.5 points paid in fees. This is down from 4.58% a year ago.

Looking at shorter terms, the average rate on a 15-year fixed mortgage was up two basis points to come in at 3.64% with 0.5 points. The rate last year was 4.02%.

Meanwhile, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) with 0.4 points paid was 3.77% last week, down a single basis point and up only slightly from the 3.74% at the same time last year.

Stock Market

The GDP report showed strong overall economic growth, and both the S&P 500 and Nasdaq finished Friday at record highs. This was enough to keep the optimism going despite Exxon Mobil and Intel disappointing investors with their quarterly reports.

The Dow Jones Industrial Average was up 81.25 points Friday to close at 26,543.33, down 0.06% on the week. Meanwhile, the S&P 500 was up 1.2% on the week and 13.71 points on the day, finishing at 2,939.88. Finally, the Nasdaq finished at 8,146.4, up 27.72 points on the day and rising 1.85% on the week.

The Week Ahead

Monday, April 29

Personal Income and Outlays (8:30 a.m. ET) – This is a measurement of how much consumers are taking in as well as their corresponding spending. This also gives insight into how much is being saved. In what this writer is pretty sure is the last of the catch-up reports from the government shutdown, both February and March data are being released.

Tuesday, April 30

S&P Case-Shiller HPI (9:00 a.m. ET) – The S&P Case-Shiller home price index tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S.

Consumer Confidence (10:00 a.m. ET) – The Conference Board surveys consumers on their feelings about current and future business and employment conditions as well as their future spending plans.

Wednesday, May 1

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.

ISM Manufacturing Index (10:00 a.m. ET) – This index measures the general direction of manufacturing within the U.S. The qualitative survey of purchasing managers looks at production, new orders, order backlogs, inventories and supplier deliveries, among other factors.

Thursday, May 2

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 4-week moving average of new claims smooths out weekly volatility.

Friday, May 3

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.

International Trade in Goods (8:30 a.m. ET) – The Bureau of Economic Analysis has begun breaking out the goods from the remaining international trade numbers to get an idea of import and export estimates for GDP calculations.

It’s a busy week. In addition to the manufacturing and jobs reports, the Federal Reserve will conclude a meeting about short-term interest rates Wednesday. If anything comes out of that that’s likely to affect mortgages or the economy one way or the other, we’ll let you know the details in next week’s Market Update.

In the meantime, I know this article can be about as dry as the desert every week. I really do my best, but there’s only so much spice to economic data. The good news is, we’ve got plenty of home, money and life content to share with you if you subscribe to the Zing Blog below. Check out this article from Molly Grace on how to decide what to keep and what to toss as we head fully into Spring cleaning season. Have a great week!

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