We had a few interesting pieces of data last week with some housing numbers and GDP coming out at the end of the week. No sense waiting. Let’s get right into it.
New Home Sales: Home sales numbers were mixed last week and new home sales have the better end of the deal. Sales numbers came in at a seasonally adjusted annualized pace of 654,000 in July, well above the consensus estimate of 580,000. This was also up 12.4% for the month. There was a small downward revision in June, which fell 10,000 to 582,000. Part of the surge in sales was a price drop as this fell 5.1% to $294,600. Suddenly, the prices of new homes have fallen 0.5% on the year. Supply in the market is definitely still low, down to 4.3 months from 4.9 months in June. In the South, sales were up 18.1% to 398,000. The Northeast saw sales rise 40.0%, but it’s the smallest region and this translated only to 35,000 sales.
MBA Mortgage Applications: Applications were down 2.1% overall as purchases fell 0.3% last week and refinances were down 3.0%. Rates on 30-year fixed mortgages were up three basis points to average 3.67%.
FHFA House Price Index: Slightly contradicting the data from new home sales, prices were up 0.2% in June, although these increases are a bit soft given the time of year. This is reflected in the year-over-year increase that has fallen from 6.0% to 5.6%. The Mountain region leads the way, up 8.6%, while the Pacific follows at 7.4% on the year. Prices in New England are only at 1.8%, and the Mid-Atlantic is at 3.2% year-over-year.
Existing Home Sales: The strength in new home sales numbers was at least partially offset by weakness in the sales of existing homes, which fell 3.2% to a seasonally adjusted annualized rate of 5.39 million in July. This means sales are down 1.6% for the year. This wasn’t even helped by a discount in prices which fell 1.4% to $244,100. Sales prices are still up 5.3% on the year. Single-family home sales were down a flat 2% to 4.82 million. Meanwhile, condos are down 12.3% on the month to 570,000. The one good thing out of all this is that supply did bump up to 4.7 months from 4.5 months in June.
Durable Goods Orders: New orders are up 4.4% in the durable goods category, which definitely brings us back to some good news. Year after year, they’re still down 3.3%. This did get a boost from the transportation sector, as commercial aircraft were up. Excluding transportation, orders were up 1.5%. This reading is down 0.6% on the year. Core capital goods orders were up 1.6% and down 4.9% on the year. Shipments were up 0.2%. There were downturns to core capital goods shipments. Unfilled orders were down 0.1%. This is actually not a good thing because more unfilled orders means more hiring. Also on the downside, there were downward revisions in core capital goods for both June and May. There was monthly strength in both primary and fabricated metals electrical equipment and military aircraft.
Jobless Claims: Initial claims were down 1,000 to 261,000. The four-week average was down 1,250, coming in at 264,000. Continuing claims also saw a decrease, down 30,000 to 2.145 million. The four-week average is unchanged at 2.155 million.
GDP: GDP was up only 1.1% on a seasonally adjusted annual basis in the latest Q2 estimate. There was a 4.4% growth year-over-year in consumer spending. A decrease in inventories brought GDP down by 1.3%. However, lower inventory could mean increased hiring in the future. Residential investment also fell 7.7% on the year in this estimate, but there were big gains in previous quarters. The recent strength in new home sales could mean more investment in the future. However, nonresidential fixed investment is down 0.9% in the quarter. Prices are up 2.3% on the quarter.
International Trade in Goods: The trade deficit narrowed by $5.2 billion to $59.3 billion. Exports were up 2.4% while imports were down 1.3%. Exports of food and beverages were up 31%. However, there was a big decline in capital goods and a small dip in consumer goods.
Consumer Sentiment: Consumer sentiment was down just 0.6 points to 89.8 in the final reading of August. Expectations came in at 78.7, showing that people are confident in the jobs outlook. However, current conditions in the job market aren’t seen quite as favorably. This portion of the report is down 2.0 points to 107.0. One-year inflation expectations are down 0.2% to 2.5%, while five-year expectations matched it, down 0.1%.
Mortgage rates changed very little last week. Now might be the time to lock in your rate. As of Friday, people with power to move target interest rates started saying some things that could begin to move the market. We’ll get into that more below.
30-year fixed-rate mortgages (FRMs) averaged 3.43% with an average 0.6 point for the week ending Aug. 25, 2016, unchanged from last week. A year ago at this time, 30-year FRMs averaged 3.84%.
15-year FRMs this week averaged 2.74% with an average 0.5 point, unchanged from last week. A year ago at this time, 15-year FRMs averaged 3.06%.
5-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) averaged 2.75% this week with an average 0.4 point, up from last week when they averaged 2.74%. A year ago, 5-year ARMs averaged 2.90%.
All eyes were on Jackson Hole, Wyoming Friday as the Federal Reserve held its annual meeting. Fed Vice Chairman Stanley Fischer said two short-term interest rate hikes were possible for later this year, depending on the state of the economic data. Investors had been waiting to read the tea leaves from these statements all week and the market dropped.
The Dow Jones Industrial Average was down 53.01 points Friday to close at 18,395.40. This was a weekly decrease of 0.85%. Meanwhile, the S&P 500 fell slightly, down 3.43 points to 2,169.04, down 0.68% for the week. The NASDAQ was the only market to see a rise, up 6.71 points to 5,218.92. It still lost 0.37% on the week.
The Week Ahead
Monday, August 29
Personal Income and Outlays (8:30 a.m. ET) – This measures all possible income sources as well as public expenditures.
Tuesday, August 30
S&P Case-Shiller HPI (9:00 a.m. ET) – The S&P Case-Shiller home pricing 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 compiles a survey of consumer attitudes on the economy. The headline Consumer Confidence Index is based on consumer perceptions of current business and employment conditions, as well as their expectations when considering business conditions, employment and income.
Wednesday, August 31
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.
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, September 1
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.
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.
Friday, September 2
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.
It looks like a fairly busy short week of economic news. The good thing is college football is back this weekend and because I will be recovering from eating too many hot wings, Market Update will be appearing on Tuesday next week. Oh yeah, and it’s also Labor Day! Enjoy the long weekend!
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