I hope everyone had a good weekend! I mostly read. Speaking of reading, there’s going to be some more economic reports to read about in future weeks as the president and Congress funded the government for three weeks in a deal finalized on Friday.
There wasn’t as much released last week due to the shutdown, but here’s what we do know about the performance of the economy.
Existing Home Sales
It’s cold and lower mortgage rates weren’t enough to heat up the market for existing homes. Sales of existing homes fell 6.4% in December and were ultimately down 10.3% on the year to come in at 4.990 million on a seasonally-adjusted basis. This is the lowest this metric from the National Association of REALTORS® has been in more than three years.
Single-family home sales were down 5.5% to 4.450 million, while sales of the condos fell 12.9% to 540,000. All regions showed declines with the West down 1.9% and the Midwest down an especially steep for 11.2% on the month.
For buyers, less sales don’t necessarily mean increased supply on the market. With sellers not wanting to sell in the dead of winter, the number of homes on the market was down 10.9% to 1.550 million units. At the current sales pace, there were 3.7 months’ worth of supply on the market as opposed to 3.9 months in November.
The sellers who chose to leave their homes up for sale did have to discount their prices as the median price for an existing home was down 1.4% to $253,600. Prices were still up 2.9% on the year.
MBA Mortgage Applications
Purchase applications were down 2% from last week, and applications to refinance fell 5% as overall applications declined 2.7%. To be fair, mortgage activity has surged in recent weeks as interest rates have fallen.
Last week, the average rate on a 30-year fixed conforming mortgage was up just a single basis point to 4.75%. Refinancing activity made up just 44.5% of all applications, as the majority of the market is still interested in purchasing.
FHFA House Price Index
The Federal Housing Finance Agency reported a 0.4% rise in home prices in November. This means that the year-to-year change for this index was a 5.8% increase. This stands in stark contrast to the existing home sales report above, which is somewhat interesting.
The West has been a source of strength, but the Pacific region was down 0.9% in October for a yearly gain of 4.8%. The Mountain region was also down 1.3% for a 7.4% yearly gain.
Other regions picked up the slack. The East South-Central region was up 2.4% and the Mid-Atlantic, which had been a weak region, was up 1.4%, to come in at 4.8%.
Initial jobless claims were down 13,000 to come in at 199,000. This is the first time they’ve been under 200,000 in almost 50 years. The labor force was just half the size it is now at the time. The four-week moving average was down 5,500 to come in at 215,000.
Federal workers’ claims increased by 15,000 to 25,400. For comparison, before they shut down, the number of unemployed federal workers was 1,650. It’s a very good thing for a lot of people that the government will be resuming normal operations.
Meanwhile, continuing claims were down 24,000 to 1.713 million. However, the four-week average was up 1,250 claims to come in at 1.730 million.
Durable Goods Orders
This report wasn’t released on Friday due to the government shutdown. When it does come, we’ll have it covered.
New Home Sales
The report on new home sales comes from the Census Bureau and wasn’t released on time due to the government shutdown. When these numbers do come out, they’ll be covering December.
Fixed-rate mortgages had flat interest rates last week and they’re lower than we’ve seen in some time. It’s a great time to lock your rate. With the government back open for business, the process will be a bit smoother as well.
The average rate on a 30-year fixed mortgage was unchanged at 4.45% with 0.4 points paid in prepaid interest. A year ago, the rate was 4.15%.
The 15-year fixed mortgage was also flat at 3.88% with 0.4 points paid. This is up from 3.62% last year.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) was up three basis points to 3.9% with 0.3 points paid. This is up from 3.52% at this time in 2018.
A deal to temporarily reopen the government helped investors to look past disappointing earnings for Intel. The Dow Jones Industrial Average and the Nasdaq managed to squeak out weekly gains.
The shutdown was a major focus for good reason. According to a report released just this morning by the Congressional Budget Office, the partial government shutdown cost the U.S. economy $11 billion. Although $8 billion is expected to be recouped in a boost to gross domestic product (GDP) the rest of the year, $3 billion of the losses are projected to be permanent in part because the private sector lost the business of furloughed federal workers.
The Dow finished the week up 183.96 points at 24,730.2. This was up 0.12% on the week. Meanwhile, the S&P 500 closed at 2,664.76, down 0.22% on the week, but up 22.43 points on the day. Finally, the Nasdaq was up 0.11% on the week to close at 7,164.86, up 91.4 points on Friday.
The Week Ahead
This has been my personal disclaimer for the last several weeks. These are the reports that are scheduled to come out at this time. Unlike the last few weeks, there may actually be more reports that come out as government agencies work their way through a backlog now that the shutdown is over. We’ll have it all covered for you whatever happens.
Tuesday, January 29
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.
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, January 30
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.
GDP (8:30 a.m. ET) – This release measures the monetary value of all final goods and services produced within the U.S. This report is released on a quarterly basis.
Pending Home Sales Index (10:00 a.m. ET) – The National Association of REALTORS developed the Pending Home Sales Index as a leading indicator of housing activity. Specifically, it’s a leading indicator of existing home sales, not new home sales.
Thursday, January 31
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.
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.
Friday, February 1
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.
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.
All the heavy hitting economic reports come out next week. We’ll have these and anything yet to be announced in next week’s Market Update.
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