I hope everyone enjoyed Thanksgiving! I watched a lot of movies, including my first viewing this season of “Christmas Vacation.” Much like the Jelly of the Month Club, the U.S.-China trade negotiations are the gift that keeps on giving, at least in terms of market news, but more on that later.
Speaking of gifts, we know you’re out there hunting those Cyber Monday deals today. It so happens we have one our own. Today, you can give yourself the gift of a great deal on a new mortgage. We’ll have more on how you can take your mortgage to the next level later, but for now, let’s break down the economic data released last week because there was a lot of it.
International Trade In Goods
The international trade deficit in goods in October fell $4 billion to $70.5 billion. Imports were down $5 billion to $201.8 billion, but exports were also down $900 million to $135.3 billion.
Exports are typically thought of as the good side of the ledger, so let’s go over these first. Foods, feeds and beverages were down 0.7% in October as compared to September. Industrial supplies were down 3%. It’s important to note that this category can fluctuate quite a bit because oil and petroleum products are in this category, so think about fluctuations in gas prices. Meanwhile, capital goods exports were up 1%. That’s a good sign for global investment. Automotive vehicles were down 0.8% on the month and have gone down 5.2% on the year. Consumer goods imports are up 1.3% on the year despite falling 2.4% in October.
On the import side, foods, feeds and beverages were down 2.9% on the month, but have gone up 0.7% on the year. Imports of industrial supplies and then 16.2% on the year after being down 1.9% in October. Capital goods exports were up 0.5% in another good sign for business investment. They’re still down 1.1% on the year. Automotive vehicle imports are down 8.6% on the year after falling 5.9% in October. Finally, consumer goods imports were down 4.8% on the month and 7.8% on the year.
FHFA House Price Index
In September, home prices were up 0.62% overall and 0.17% on a seasonally-adjusted basis.
Things were uneven, so let’s break down the regional data. Prices were up 0.27% on a seasonally-adjusted basis in the East North Central region and up 1.88% in the East South Central region. In the Mid-Atlantic, prices were up 0.59% Meanwhile, the Mountain region saw prices rise 0.5%. Prices were up 0.11% in New England and 0.07% in the Pacific. In the South Atlantic, prices rose 1.29%. In the West North Central region, prices were up 0.62%. West South Central homeowners saw home prices rise 0.2% on a seasonally-adjusted basis.
S&P CoreLogic Case-Shiller HPI
In the competing Case-Shiller index, prices are up 0.07% on the month and 3.2% on the year as of September.
The only market to see a drop in September was San Francisco, which is down on the month as well as the year. Every other city in the 20-city index saw an increase. The state of Idaho leads the way in price appreciation, up 11.6%, with Illinois trailing everywhere else, up only 1.9% on the year.
Consumer confidence declined slightly, falling to 125.5, from 126.1. The assessment of current conditions was down nearly seven full points to 166.9. Expectations were up a little over three points to 97.9.
Let’s start on the downside and close on the positive note. The number of consumers who see business conditions being good was up a bit to 40.2%, but more people also think business conditions are bad, rising 2.8% to 13.8%. Only 44.8% of people see jobs as plentiful, which is down from 47.7%. More people also think jobs are hard to get as this is up more than a point to 12.7%.
The expectation side of things provided more reason for a brighter outlook. The only downside was business conditions, which more consumer is expected to get worse and fewer expected to improve. On the labor side, fewer people expect more jobs in the market in the next 6 months, now down to 15.7%. On the other hand, there are also fewer people who expect less jobs to be available, down to 13.2% from 18%. More people also saw a raise in the future than saw a decline coming in their income.
New Home Sales
The number of new homes sold in October was 733,000, down 0.7% on the month, but up 31.6% from October of last year.
Sales were down 18.2% overall in the Northeast and the South saw a 3.3% decline in sales. Meanwhile, there was a 7.1% uptick in sales in the West to go with a 4.2% increase in the Midwest.
On the supply side, total supply in the U.S. was up 0.3% to 322,000. This pushed total supply up to 5.8 months from 5.7 months in September based on the current pace of sales. The average price of a new home was up almost 4.5% on the month to $383,300.
MBA Mortgage Applications
Overall mortgage applications were up 1.5% on the week. Meanwhile, both refinance and purchase applications were up 4% on the week. Consumers have been taking advantage of low rates overall as refinance applications are up 55% compared to the same time a year ago and purchases are up a whopping 314%.
The average interest rate on a conforming 30-year fixed mortgage with a 20% down payment and 0.3 points paid in fees was down two basis points to 3.97% last week.
Durable Goods Orders
New orders of durable goods were up 0.6% to $248.7 billion in October. This percentage increase also held even as transportation was removed. However, taking out defense spending, new orders were up 0.1% on the month.
Looking at categories, fabricated metal products led the way in terms of increases, up 1.8% to $34.1 billion. Orders and capital goods were up $2.2 billion to $73.3 billion, an increase of 3.2%. Meanwhile, inventories were up 0.3% to $432.2 billion while unfilled orders were up 0.1% to almost 1.165 trillion. Shipments of durable goods were pretty much flat at $251.6 billion.
Taking a look at some key categories, orders of primary metals were down 1.4% on the month. Meanwhile, machinery orders were up 1.3%. Motor vehicle orders were down 1.9% on the month while orders of computers and related products were up 2.4%.
Gross Domestic Product (GDP)
The U.S. economy grew at an annual rate of 2.1% in the second estimate of the third quarter. This is up from an initial estimate of 1.9% last month. In the GDP measurement, inflation was up 2.1% when food and energy were taken out and 1.5% overall. Real income was measured to be up 2.4% as compared to 0.9% in the second quarter.
Orders of durable goods contributed 0.57% to Q3 GDP in the latest estimates. Meanwhile, household expenses contributed 0.81% including a 0.24% from housing and utilities. Nonresidential fixed investment was down 0.36% in the quarter. On the residential side, overall investment was up 0.18%. Overall government spending was up 0.28% on the quarter including a 0.22% contribution from the federal government.
The number of jobless claims initially reported this week fell 15,000 to 213,000. Meanwhile, the 4-week average of initial claims was down 1,500 at 219,750.
On the continuing claims side, these were down 57,000 to 1.64 million. This is the lowest it’s been since August 1973. Meanwhile, the 4-week average was at about 1.681 million, down 13,000 from the previous week.
Personal Income And Outlays
Personal incomes were up in October, but so insignificantly that it was a rounding error. Disposable personal income was down 0.1% on the month as personal consumption expenditures were up 0.3% or $39.7 billion.
With an inflation increase of 0.2% on the month, real disposable personal income was down 0.3%. Overall inflation is up 1.3% on the year. Excluding food and energy, inflation was up 0.1% on a monthly basis and 1.6% compared to the same time a year ago.
Wage and salary increases were offset by decreases in interest and the income of farmers. Americans were saving 7.8% of their disposable personal income in October. Personal expenses totaling more than $15 trillion in October.
Pending Home Sales Index
The number of existing homes under contract for sale in the near future fell 1.7% in October to an index level of 106.7. However, this number is up 4.4% from the same time a year ago.
In terms of regional data, the Northeast was the only region to see an increase, with the other three reporting declines.
It’s a great day to lock your mortgage rate because Quicken Loans® is doing is Cyber Monday sale. Eligible clients who lock their rate by midnight Pacific time today, December 2 will receive 0.5 mortgage discount points off our current rates.1
Meanwhile, mortgage rates across the industry increased just slightly last week. Let’s take a look.
The average rate on a 30-year-fixed mortgage with 0.5 points paid in fees was up a couple of basis points to 3.68%. This is down from 4.81% a year ago.
Meanwhile, the average rate on a 15-year fixed mortgage with 0.5 points paid was unchanged on the week at 3.15%. This has fallen from 4.25% last year at this time.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage with 0.3 points paid upfront rose four basis points to 3.43%. This is still down from 4.12% last year.
Stocks fell to end November, but they posted their best monthly gain since June. The ups and downs of the trade war with China continue to weigh heavily. One of the theories for the downturn was that traders for taking some profit off the table while gains were high due to continued uncertainty over when a deal might get done, if at all. It’s also the end of the year, so portfolios are being rebalanced at this time.
The Dow Jones Industrial Average was up 0.63% on the week after falling 112.59 points Friday to close at 28,051.41. The S&P 500 was down 12.65 points to 3,140.98, up 0.99% since last week. Finally, the Nasdaq finished at 8,665.47, up 1.71% on the week despite being down 39.7 points on the day.
The Week Ahead
Monday, December 2
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.
Wednesday, December 4
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 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.
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, December 6
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.
Consumer Sentiment (10:00 a.m. ET) – The University of Michigan’s Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending.
There’s not nearly as much coming out this week, but we’ll have it all covered in next week’s Market Update!
If economic data doesn’t get your mind activated on a Monday afternoon, we get it. Don’t worry. There’s plenty of home, money and lifestyle content we still have to share if you subscribe to our email list below. With today being Cyber Monday, it’s important to know whether you’re actually getting a good deal. Check out this article on the best time of year to buy various items. Have a great week!
1Client will receive 0.5 discount points off current pricing. One point is equal to 1% of the loan amount. This offer is available for refinance and purchase loans. This offer is only available to clients who lock their interest rate while completing the application process before 11:59 p.m. PT on December 2, 2019. Offer valid on loan amounts of $100,000 or higher. Offer does not apply to loans submitted to Quicken Loans through a mortgage broker, jumbo loans, portfolio loans, agency plus loans, Charles Schwab loans or team member loans. Offer is non-transferable. This offer cannot be retroactively applied to previously closed loans or loans already in process. Quicken Loans reserves the right to cancel this offer at any time. Acceptance of this offer constitutes acceptance of these terms and conditions, which are subject to change at the sole direction of Quicken Loans. This is not a commitment to lend. Additional restrictions/conditions may apply.
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