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Market Update - Quicken Loans Zing Blog

One of my teammates here at Quicken Loans, financial blogger extraordinaire Patrick Chism, works remotely most of the time. When he came into the office this morning, he instantly got bombarded with questions. I’m sure he was suddenly feeling very busy. The market last week was kind of the same way. Let’s jump right in.

Headline News

Existing Home Sales: Existing home sales were down 1.8% in June to a seasonally adjusted annualized rate of 5.520 million. They’re still up 0.7% on the year, but this is the lowest annual rise since February. One reason for lower sales might be rising prices, which are up 6.5% from last year at $263,800. Supply was also down 0.5% and is down 7.1% on the year. There are 4.3 months of supply available on the market if sales continue at the current pace.

FHFA House Price Index: Home prices in May were up 0.4% and they’ve risen 6.9% on the year, which is the best it’s been in three and a half years. Despite this strength, there was a 0.2% price drop in the Mountain region and 0.5% higher in the Mid-Atlantic.

S&P Corelogic Case-Shiller HPI: Prices were up only 0.1% on a seasonally adjusted basis in May, according to Case-Shiller’s 20-city index. When the seasonal adjustment was taken out, they were up 0.8%. They’ve risen 5.7% overall on the year. There has been weakness in six of the 20 cities measured and there were large pricing declines in New York, Boston and Chicago.

Consumer Confidence: Consumer confidence for July is up 2.2 points to 121.1. Confidence is up 20 points since the November 2016 election. Only 18% of Americans think jobs are hard to get, which is down from June. More people think jobs are opening up as well. More of the population also sees business conditions as good for both now and the future. More Americans are also planning to buy houses, up 0.7% to 6.7%. Car buying plans are up 0.1% to 12.7%. Inflation expectations are unchanged at 4.6%.

MBA Mortgage Applications: Applications were up 0.4% overall. The main driver of this was a spike in refinance applications, up 3.0%. The average rate on a 30-year fixed conforming mortgage was down five basis points to 4.17%. Purchase applications were down 2.0%

New Home Sales: June sales of new homes were flat on a seasonally adjusted annualized basis at 610,000 in June. The numbers are slightly lower than the first quarter, which is a negative for residential investment in GDP. Sales in the West were up 12.5%, but sales in the South were down 6.1% and that’s the biggest housing region. The Midwest was up and the Northeast was flat. In contrast to existing homes, new home prices were down 4.2% to 310,800, which is down 3.4% compared to last year. That said, there’s been a 9.1% gain in year-over-year sales. There are 5.4 months’ worth of new homes on the market.

Durable Goods Orders: New orders in June are up 6.5% and 16.1% on the year in terms of durable goods. When transportation is taken out, they’re up 0.2% and 6.8% on the year. Core capital goods were down 0.1% and up 5.6% annually. Part of the reason for this imbalance was a 131% increase in civilian aircraft orders. May numbers also dropped 1% in revisions, down to 0.1%.

International Trade in Goods: The goods deficit fell $2.4 billion to $63.9 billion in June. Exports were up 1.4%, including capital goods and vehicle exports. Imports fell 0.4% and there were declines for industrial supplies and consumer goods. Wholesale and retail inventories both rose 0.6%.

Jobless Claims: Initial jobless claims were up 10,000 to 244,000 last week. This matches the four-week moving average of claims, which is flat. On the other hand, continuing claims were down 13,000 to come in at 1.977 million. The four-week average was up 4,750 to 1.959 million.

Gross Domestic Product (GDP): Real GDP was up 2.6% in the initial estimate of the second quarter on a seasonally adjusted annualized basis. Business investment was up 5.2%. Inventories were down, but net exports were up. Inflation is at 1.1% for core categories. Durable goods orders were up 6.3% in the quarter despite weaker vehicle sales. Services spending were up only 1.9%.

Consumer Sentiment: Consumer sentiment was up to 93.4 from 93.1 in the final reading of July. It’s down from June as expectations fell 3.4 points to 80.5. However, the current assessment of the economy is up almost a full point to 113.4. Inflation expectations were at 2.6% over both the next year and the next five years.

Mortgage News

The Federal Reserve had a meeting last week and committee members are worried about low levels of inflation. Mortgage rates dropped, benefitting from the uncertainty. It’s a great time to lock your rate.

First, 30-year fixed-rate mortgages (FRMs) averaged 3.92% with an average 0.5 point for the week ending July 27, 2017, down from last week when they averaged 3.96%. A year ago at this time, 30-year FRMs averaged 3.48%.

In shorter terms, 15-year FRMs this week averaged 3.20% with an average 0.5 point, down from last week when they averaged 3.23%. A year ago at this time, 15-year FRM averaged 2.78%.

Finally, 5-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) averaged 3.18% this week with an average 0.5 point, down from last week when they averaged 3.21%. A year ago at this time, 5-year ARMs averaged 2.78%.

Stock Market

The market wasn’t happy about Amazon’s quarterly profit coming in lower than expected. However, it didn’t keep the Dow Jones industrial average from posting a new record close.

The Dow finished at 21,830.31 Friday, up 33.76 points on the day and 1.16% on the week. The S&P 500 was down 3.32 points on the day to close at 2,472.10. This was down 0.02% on the week. Finally, the Nasdaq finished Friday down 0.20% on the week after falling 7.51 points on the day to finish at 6,374.68.

The Week Ahead

Monday, July 31

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.

Tuesday, August 1

Personal Income and Outlays (8:30 AM 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.

ISM Manufacturing Index (10:00 a.m.) – 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, August 2

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, August 3

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.

Friday, August 4

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 (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.

A few big reports come out next week, including manufacturing and the always important employment report. We’ll have it all to you next week. If economics and mortgages aren’t your thing, we have plenty of home, money and life content to share with you if you subscribe to the Zing Blog below.

We’re glad to have Patrick back in the office this week, but he generally works from home on a professional basis. Here are some great tips for creating your own home office.

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