Things keep getting crazier and crazier leading up to the election, that’s for sure. However, the stock market seems to be settling into a mostly predictable pattern of weekly downturns at this point. There’s always a hope for better, despite the fact that many of the fundamentals are recovering.
This report was aided by analysis from Econoday.1 Let’s see what happened last week!
Existing Home Sales
One of the real bright spots in the economy at this point is housing and there’s no better indicator of this than the huge numbers for existing home sales, which showed a seasonally adjusted annual pace of 6 million sales, up 2.4% on the month and an astonishing 10.5% on the year.
Perhaps the biggest reason for this is that there are people who have spent a lot of time at home this year and have begun to realize the space that they have no longer works for them. Maybe they have too little room or too much house to take care of on a regular basis.
However, price and supply are two factors that can keep these numbers from reaching what would be stratospheric levels. Supply is extremely limited on the single-family side, falling from 3 months to 2.8 months at the current pace of sales. Long-term low mortgage rates mean it’s likely that some sellers want to hold on to the deal they have.
Because supply is so low, prices have only been rising. They were up another 1.7% in August and have risen 11.4% year-to-year.
MBA Mortgage Applications
Mortgage applications were up 6.8% overall from last week. Refinances were up 9%, and these are up 86% from a year ago. Meanwhile, purchase applications were up 13% and are 25% higher than the same time last year. In terms of mix, refinancing made up 62.8% of applications.
The average interest rate on a conforming 30-year fixed mortgage with a 20% down payment and 0.46 points paid was up 3 basis points to 3.1%. Meanwhile, 30-year fixed jumbo loans with a 20% down payment and 0.42 points paid was down 6 basis points to 3.35%.
FHFA House Price Index
House prices were up 1% in the month of July, according to the Federal Housing Finance Agency. When combined with June’s upwardly revised 1% uptick, there have been no bigger gains over any 2-month period in the history of the index.
The report says the strength in the numbers is tied to a lot of the factors we’ve been talking about: low mortgage rates, strengthening demand and less-than-stellar inventory numbers.
Demand has been strongest in the Mountain and East South Central regions, while the West North Central region has been lagging.
Initial claims were up 4,000 last week to 870,000 from revised levels for the week prior. The 4-week moving average of initial claims was down 35,250 to come in at 878,250.
On an unadjusted basis, claims were up 28,527 to 824,542. No 4-week average is kept for the unadjusted data.
On the continuing claims side, these were down 167,000 to come in at 12.58 million. The 4-week average fell 478,000 to roughly 13.041 million. The unemployment rate was down 0.1% to 8.6%.
When taking out the seasonal adjustment, the unemployment rate was down 0.1% to 8.4%. Continuing claims were down 176,510 to settle at about 12.264 million.
New Home Sales
New home sales were up 10.5% in August 2 a seasonally adjusted annual rate of 1.011 million. This is up 41.2% compared to February before the effects of COVID-19 and 43.2% when compared to last August.
There’s certainly some volatility here and the number is likely to drop as we get into the fall and winter months when people don’t typically buy a ton of houses. COVID-19 also could throw off seasonal adjustments because the high levels could be misleading given that some buyers are likely just now closing purchases that were otherwise delayed.
Another interesting note here is that unlike existing home prices, prices for new homes seem to be dropping. The median sales price was down 4.6% on the month to come in at $312,800, which is down 5.7% compared to February and 4.3% from last year.
However, offsetting some of the price weakness were upward revisions in home sales over the last 3 months. There were 125,000 unit sales that were previously uncounted that have now been added. It all points to strength.
Durable Goods Orders
New orders of durable goods were up 0.4% in August and this number held true even when transportation was taken out. On one hand, this is a bit of a weak gain. Expectations had been for a 1.5% increase in overall orders and 1.2% after removing transportation.
Yet that doesn’t tell the whole story. Core capital goods orders – the reading analysts really look at because it takes out military and aircraft spending, which can be volatile – were up 1.8% in August. Core orders are also now 1.9% higher than they were in February. This is a great sign for the recovery.
Breaking this down further, motor vehicle orders were down and so were orders for electrical equipment and fabrications. With very few people traveling, orders of commercial aircraft were down, as they have been in 5 of the last 6 months.
There were fewer unfilled orders, as these were down 0.6%, continuing a trend that has been happening for the last 3 months. Unfortunately, this means factories are keeping up with demand as it is and don’t have as much incentive to hire. The same can be said of backlog orders, while inventories were 0.1% lower.
Overall mortgage rates were up just slightly last week, but they remain below 3% in the Freddie Mac survey. Given that, it remains a great time to purchase or refi and save yourself some money. Feel free to speak with one of our Home Loan Experts about qualifying.
I want to make sure we call out that FHFA’s adverse market refinance fee aimed at mitigating some of the COVID-19 expenses for Fannie Mae and Freddie Mac goes into effect December 1. Because of turn times, lenders will begin pricing this into their rates around the beginning of October, which is right around the corner.
The average rate on a conforming 30-year fixed mortgage with 20% down and 0.8 points paid in fees was 2.9%, up 3 basis points on the week, but down from 3.64% last year.
Looking at a 15-year fixed mortgage with the same down payment and 0.7 points paid, the rate was up 5 basis points at 2.4%. This is down from 3.16% last year at this time.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage with a 20% down payment fell 6 basis points to 2.9% with 0.2 points paid, down from 3.38% last year.
Tech stocks led a move higher on Friday which helped to cut back significantly on losses for the week, although the S&P 500 and Dow Jones Industrial Average both still dropped relative to last Friday’s closing levels.
Traders are still feeling relatively cautious. There are concerns around the pace of economic recovery as well as a lack of movement on fiscal stimulus, with Congress failing to reach a deal.
The Dow was up 358.52 points Friday to finish at 27,173.96, down 1.75% for the week. Meanwhile, the S&P 500 fell 0.63% over the previous 5 days despite being up 51.87 points Friday and closing at 3,298.46. Finally, the Nasdaq closed at 10,913.56 Friday, up 241.3 points and rising 1.11% for the week.
A Note On The Future Of Market Update
This is the last weekly edition of Market Update, at least for now. We’re going to move to a monthly cycle. Most of the reports covered here come out on a monthly cadence anyway, and this will enable us to engage in slightly longer-term analysis of trends.
A monthly release should allow our regular readers to still have an understanding of some of the broader market forces impacting the economy as a whole and get an idea of which way the wind is blowing. It also helps to avoid the tendency to report on things that can be very volatile that aren’t broader indications of anything in particular.
If you’ve made it to the end of this article and realized this isn’t your cup of tea, maybe you’re glad there will be less of it. To each their own. However, we’ve got plenty more home, money and lifestyle content to share with you if you subscribe to our mailing list below.
To that end, here’s an article on the rise of the home office as a feature in real estate listings. Have a great week and we’ll talk to you soon!
1 Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2020 Econoday, Inc. All rights reserved.
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