Market Update - Quicken Loans Zing Blog

Last week was a big week for economic reports in general. Add to that a Federal Reserve rate decision and it was a big week.

Headline News

Retail Sales: Retail sales were up 0.5% in May, beating expectations. Car and truck sales gave a boost as retail sales taking out automobiles were up 0.4%. There’s also been a reasonable effect of higher gas prices. When cars and gas are removed, sales were up 0.3%. Sales at nonstore retailers were up 1.3% and are up 12.2% on the year. Restaurants were up 0.8% in May as well. On the downside, building materials fell 1.8% as did general merchandise and department store sales.

Quicken Loans Home Price Perception Index (HPPI): Homeowners overvalued their homes by just 1.89% in May compared to 1.95% in April, a slight improvement. Many markets in the West are seeing homeowners still actually undervaluing their homes. Because of this, the Western market is closest to being in equilibrium with a gap of just 1.56%. It’s followed by the South at 1.87% and the Northeast at 2.06%. Homeowners in the Midwest overvalued their homes by 2.12%. Homeowners in Denver most underestimate their home values. Philadelphia is at the opposite end, and Seattle homeowners are closest to agreement with appraisers.

Quicken Loans Home Value Index (HVI): Values rose slightly, up 0.79% in May and 4.36% on the year. The West is up 1.20% for the month and 6.21% for the year. The South follows, up 0.47% in May and 3.83% annually. The Northeast rose 0.69% to 2.03% for 2016. The Midwest pretty much held its ground, up just 0.01%, but rising 3.54% annually.

MBA Mortgage Applications: Despite the average rate on a 30-year fixed mortgage falling four basis points to 3.79%, mortgage applications fell 2.4% last week. Purchase applications were down 5.0% and refinance applications fell 1.0%.

Producer Price Index (PPI): Producer prices were up 0.4% in May, but they’re still down 0.1% on the year. Much of the weakness in this category has had to do with low food and energy prices. This index is up 1.2% on the year when food and energy are taken out. However, rising energy prices contributed to the gains this month with prices only rising 0.3% month-to-month when food and energy are taken out. Trade services also made a significant impact as inflation is down 0.1% from the month when food, energy and trade services are all taken out. However, inflation is up 0.8% on the year in this category.

Industrial Production: Production was down 0.4%, as was manufacturing. Factory capacity utilization fell 0.4% to 74.9%. A big reason for all of these drops is that vehicle production was down 4.2%. Without the drop in vehicle production, production numbers would’ve been up 0.2%. Utilities were also down 1.0%, but, in a bit of a surprise, mining was up 0.2%. This is the first gain since August of last year for the sector. The rest of the news isn’t good. Production of consumer goods, business equipment and construction supplies were all down. There was also a downward revision to the numbers for April.

Consumer Price Index (CPI): Prices across the country were up 0.2% in May. The monthly change is the same when you take out food and energy. Inflation is up 1.0% annually overall and 2.2% when food and energy are taken out. Lower energy prices have contributed to lower overall inflation. Turning to individual industries, housing costs are up 0.3% on the month as is medical care. Notably, energy prices were up 1.2% on a monthly basis that they’re still down 10.1% for the year with gas.

Jobless Claims: Initial claims were up 13,000 this week, but they’re still very low at 277,000. The four-week average is down 250 jobs to 269,250. Continuing claims were up 45,000 to 2.157 million. The four-week average was up 1,000 to come in at 2.150 million.

Housing Market Index: The housing market index was up two points to 60 after four straight months of being unchanged. Future sales expectations had a five point increase to 70. Present sales were up one point to come in at 64. Traffic in new homes is up three points to 47. The West still represents the strongest market for home builders at 70, and the South is at 64. The Midwest is at 56. The Northeast remains a negative market for new homebuilders, coming in at 39.

Housing Starts: Housing starts were down 0.3% in May to a seasonally adjusted annual rate of 1.164 million. However, they’re still up 9.5% for the year. Single-family homes were up 0.3% in the starts category to 764,000. In contrast, multi-family starts were down 1.2%. Permits were up 0.7% to 1.138 million. Permits were down 2.0%, but they’re up 4.8% on the year. Meanwhile, multi-family permits were up 5.9%.

Mortgage News

Mortgage rates continued to fall last week ahead of the big Fed rate decision. The Fed also decided to keep rates where they are for now, so they remain crazy low.

30-year fixed-rate mortgages (FRMs) averaged 3.54% with an average 0.5 point for the week ending June 16, 2016, down from last week when they averaged 3.60%. A year ago at this time, 30-year FRMs averaged 4.00%.

15-year FRMs this week averaged 2.81% with an average 0.5 point, down from last week when it averaged 2.87%. A year ago at this time, 15-year FRMs averaged 3.23%.

5-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) averaged 2.74% this week with an average 0.5 point, down from last week when they averaged 2.82%. A year ago, 5-year ARMs averaged 3.00%.

Stock Market

The market continues to be aflutter over the potential impact of “Brexit”; that’s the slang word analysts are using to talk about the vote on whether Great Britain will leave the European Union. (They’re not very creative with these terms.) Anyway, the referendum is scheduled for this Thursday, so there will be some clarity after that.

The Dow Jones Industrial Average was down 57.94 points Friday to close at 17,675.16. This was a drop of 1.06% on the week. The S&P 500 fell 6.77 points to come in at 2,071.22, a 1.19% week-over-week downturn. The NASDAQ lost 44.58 points Friday, coming in at 4,800.34. It shed 1.92% since last Friday.

The Week Ahead

Wednesday, June 22

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.

FHFA House Price Index (9:00 a.m. ET) – The Federal Housing Finance Agency (FHFA) House Price Index (HPI) covers single-family housing using data provided by Fannie Mae and Freddie Mac. The HPI is derived from transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac.

Existing Home Sales (10:00 a.m. ET) – Existing Home Sales tallies the number of previously constructed homes, condominiums and co-ops in which a sale closed during the month. Existing homes (also known as home resales) account for a larger share of the market than new homes, and indicate housing market trends.

Thursday, June 22

Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals who filed 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.

New Home Sales (10:00 a.m. ET) – New home sales measure the number of newly constructed homes with a committed sale during the month.

Friday, June 23

Durable Goods Orders (8:30 a.m. ET) – Durable goods orders are based on new orders placed with domestic manufacturers for factory hard goods.

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.

Quite a few economic reports are coming out late in the week, but we’ll have it all covered for you right here. If economics and mortgages aren’t your thing, we’ll have plenty of home, money and life content for you to check out by subscribing to the Quicken Loans Zing Blog below.

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