March is probably one of my favorite months of the year. Baseball is right around the corner. There’s a basketball tournament everybody seems to go mad for – huge conference tournament game for my alma mater tonight, go Grizzlies – and my birthday is thrown in for good measure.
However, the month of March seemed to get off to a rather inauspicious start and it may have driven the markets just a little mad. Let’s jump in!
New Home Sales
New home sales proved to be a shining beacon last week. Numbers just released for December showed that sales were up 3.7% during the month for a seasonally-adjusted annual rate of 621,000. It’s worth noting that there was some volatility resulting in a net revision of 71,000 less sales when October and November were re-examined. Additionally, sales were down 2.4% from the same time a year ago.
However, the fundamentals for the actual monthly report were very strong. As mentioned previously, sales were up, but so were prices, which rose 5% to a median of $318,600. Again, this is down 7.2% from the same time in 2017, but the way this report has been trending, it’s a win.
Supply was up 3% to 344,000 units. However, homes were selling faster to end the year than they could be replaced as supply relative to sales fell from 6.7 months to 6.6 months.
Regionally, sales were up 1.4% in the West in December. It’s a region that builders have been focused on. Sales in the area are still down 24% annually. Meanwhile, sales were also quite strong in the Northeast and South, which helped make up for a not so great month in the Midwest.
MBA Mortgage Applications
Mortgage applications seem to be a little bit rate sensitive at this point. The average rate on a 30-year fixed conforming mortgage was up two basis points according to the Mortgage Bankers Association.
That said, there were other indicators that it could be a strong spring buying season. The average loan size for purchase applications moved up to a record high, suggesting that current homeowners are looking to upgrade.
Applications were down 2.5% overall last week, with a 3% dip in applications to purchase and a 2% downturn in refinance applications. People looking to refinance now only make up 40% of the mortgage market.
International trade data for December was finally released, and there are those that probably wish it hadn’t been. The trade deficit in the U.S. ballooned by $9.5 billion to $59.8 billion.
Let’s start with exports, which were down 1.9% to come in at $205.1 billion. Food exports fell to $9.6 billion, which are the lowest they’ve been since August 2010. Analysts think it’s likely that China cut back on purchasing U.S. foods as a result of the ongoing tariff tensions. While exports of services were unchanged at $69.5 billion, the goods deficit continues to deepen. Here, the U.S. exported just $12.3 billion with cars, which is the lowest since September 2017 in just one example.
It wasn’t good on the import site either, coming in at a record $12.6 billion. Imports of services were also up 1% to $47.7 billion. Meanwhile, imports of cars were also up to a record high of $32.1 billion.
Initial jobless claims were down 3,000 last week to come in at 223,000. This brought the 4-week average down by the same amount at 226,250.
On the continuing claims side, these were down 50,000 to 1.755 million. However, this was a bit mixed as the 4-week average was up 4,750 to come in at about 1.767 million, which is 15,000 higher than where it was at the end of January.
After being up 311,000 in January, 20,000 additional jobs added for February seems like a dud, but January may have been an extreme case in terms of added jobs and there are some strong numbers under the headline.
Let’s get the bad parts out of the way. There were 25,000 jobs added to private sector payrolls, meaning the government actually cut 5,000 jobs. There were 31,000 jobs cut in construction while retailers slashed 6,000 jobs. One point of strength was the professional and business services sector where 42,000 positions were added.
In better news, some of the lack of job gains may be due to the fact that most people have them. The unemployment rate fell 0.2% to 3.8% while labor force participation stayed steady at 63.2%. While employees worked six less minutes on average than last month at 34.4 hours, they made more money. Wages were up 0.4% on the month and average hourly earnings for the year have risen 3.4%.
While this isn’t the greatest performance, there’s some thought that this report was also heavily impacted by the government shutdown.
Housing starts were up 18.6% in January to a seasonally-adjusted annualized rate of 1.23 million after falling quite a bit in December in a result widely blamed on wildfires in California.
There was a 25% uptick in starts of single-family homes, a metric that’s very closely watched because it represents the majority of residential home buying. However, condo sales were also up 2.4% overall.
Permits were also up 1.4% overall to 1.345 million on a seasonally-adjusted basis. The gain was attributed to strength in the North and Midwest, as permits in the South were down 3.5%, with the West falling a steep 9% on the month.
We’ve been saying it couldn’t last forever, but the trend toward lower mortgage rates broke last week as both stocks and bonds took a bit of a pounding. However, relative to the same time a year ago, fixed rates particularly are still in really good shape. If you’re in the market, it’s a really good time to lock your mortgage rate if you haven’t already.
According to Freddie Mac, the average rate on a 30-year fixed mortgage with 0.5 points paid in fees rose 6 basis points last week to settle at 4.41%. This is still down from 4.46% last year at this time.
Taking a look at shorter terms, the average rate on a 15-year fixed mortgage with 0.4 points also rose 6 basis points to come in at 3.83%, down from 3.94% a year ago.
Finally, the average rate for a 5-year treasury-indexed, hybrid adjustable rate mortgage with 0.3 points rose 3 basis points to 3.87%. This has risen from 3.63% last year.
The stock market wasn’t impressed by weak jobs numbers and posted its fifth consecutive day of losses on Friday. Each index had its worst week of 2019.
The Dow Jones Industrial Average was down 22.99 points Friday to close at 25,450.24. This was down 2.21% on the week. The S&P 500 finished Friday at 2,743.07, falling 2.16% for the week after dropping 5.86 points on the day. Lastly, the Nasdaq was down 2.46% on the week after falling 13.32 points on the day to close at 7,408.14.
The Week Ahead
Monday, March 11
Retail Sales (8:30 a.m. ET) – Retail sales measure total receipts from stores selling merchandise and related services to final consumers. Sales are measured by retail and food service stores. Data is collected from the Monthly Retail Trade Survey conducted by the U.S. Census Bureau.
Tuesday, March 12
Consumer Price Index (CPI) (8:30 a.m. ET) – The consumer price index measures changes based on the price of a fixed basket of goods and services purchased by consumers.
Quicken Loans Home Price Perception Index (HPPI) (10:00 a.m. ET) – Quicken Loans releases data every month comparing what people think their homes are worth to appraisals. Similar opinions of value often make for smoother purchase and refinance transactions.
Quicken Loans Home Value Index (HVI) (10:00 a.m. ET) – Quicken Loans also releases data on home values at both the national and regional levels. Homeowners can gain a perception of whether values are increasing or decreasing and get a better idea of where they stand in terms of equity.
Wednesday, March 13
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.
Durable Goods Orders (8:30 a.m. ET) – These are based on new orders placed with domestic manufacturers for factory goods.
Producer Price Index (PPI) (8:30 a.m. ET) – The Producer Price Index measures the average change over time in prices received by domestic producers for the sale of goods and services.
Thursday, March 14
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.
New Home Sales (10:00 a.m. ET) – This report measures the number of newly constructed homes with a committed sale during the month. This will be the report for January.
Friday, March 15
Industrial Production (9:15 a.m. ET) – The Federal Reserve’s monthly index of industrial production – and the related capacity indexes and capacity utilization rates – covers manufacturing, mining, and electric and gas utilities.
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 are a couple of major reports on inflation next week and we’ll keep an eye on industrial production as well.
An understanding of the movement of the markets and mortgage rates can be important, particularly if you’re in the market. However, it’s not the most scintillating reading. We’ve got plenty more home, money and lifestyle content to pique your interest if you subscribe to the Zing Blog below. This Sunday is St. Patrick’s Day. Check out our own Miranda Crace’s recipe for Guinness chocolate cupcakes. Have a great week!
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