Market Update

I’m talking to you from a time machine (or maybe prewriting, but the time machine theory is cooler). As you’re reading this, I should be arriving in Indianapolis for vacation right about now. It’s going to be a really good week.

Let’s see if the economic data and market performance from last week could match up to anything near that good.

Headline News

Quicken Loans Home Price Perception Index (HPPI)

Appraisers and homeowners were 0.03% further apart on home values in July with homeowners overvaluing their homes by 0.28%. That said, in nearly 80% of the metro areas measured, appraised values came in higher than homeowner expectations.

In terms of regional comparisons, homeowners in the West inflated their home value by just 0.14%. This was followed by the South and Northeast at 0.3% and 0.33%, respectively. The Midwest is just behind with estimates 0.35% above those of appraisers.

In what I’m pretty sure is a first, there was no difference between appraised values and homeowner estimates in Miami last month. Meanwhile, homeowners in San Jose have the hottest market around, with appraisals coming in 2.91% higher than homeowner estimates. Chicago homeowners are the most out of touch with the actual values, with estimates coming in 1.58% higher than appraisals.

Quicken Loans Home Value Index (HVI)

Appraised home values were down 0.6% in July, but they’ve still gone up 4.86% on the year.

Breaking this down by region, values in the Midwest were down 1.01% on the month but have still gone up 4.04% on the year. In the South, values were up 0.35% and 4.46% annually. Values in the Northeast have risen 0.72% and 2.78% for the year. Finally, the West was up 1.15% in July and 6.68% since July 2017.

MBA Mortgage Applications

Mortgage applications were down 2% overall as purchases were down 3% and the refinance portion of the index remained flat week-to-week.

This happened despite the average rate on a 30-year fixed conforming mortgage dropping three basis points to 4.81%. Purchases continue to account for an increasing percentage of the market for mortgages, making up 62.4% of overall activity.

Retail Sales

Retail sales came in well above expectations, rising 0.5% the month of July. Motor vehicles were up 0.2%. Despite this, when overall auto sales were taken out, sales increased 0.6%. This gain was matched when gas was taken out as well. Finally, increases in a control group of goods and services matched the overall 0.5% uptick.

The news wasn’t all good as there was a downward revision in June from a 0.5% gain to 0.2%.

Digging in deeper, restaurant sales were up 1.3%, which is a good sign for discretionary spending and represents the third straight increase in the category. E-commerce sales are also up 0.8% for a second straight gain. Also increasing were gasoline sales, up 0.8% as a result of higher demand. Apparel sales also rose.

Building materials sales were flat and sales in June for the category were revised lower for only a 0.1% uptick. There was also a 0.5% decrease in furniture sales, which may point to trouble for residential investment.

Industrial Production

Industrial production numbers came in lower than expected, posting only a 0.1% increase in the month of July. However, production numbers for June were sharply higher on the second look, up 1% as opposed to 0.6% in initial estimates. Manufacturing numbers missed expectations, up 0.3% versus a 0.8% analyst estimate.

There was a 0.3% decline in mining, something that has recently become a rarity. Utility production was down 0.5%. That’s always a category that’s cyclical because weather plays a role. However, it’s important to note that both of these categories played an important role in June’s upward revision, as they both came in quite a bit higher for that month.

Vehicle production was up 0.9% in July and business equipment also had a strong month, up 0.8%. On the other hand, high-tech production was only up 0.1% and construction supplies fell by the same amount.

Factory capacity utilization stood at 78.1%, unchanged from last month.

Housing Market Index

Builder confidence in the housing market fell 1 point in August to come in at 67. Although still indicating growth in the market and a strong number, it is still the weakest since September of last year.

Builders are concerned about a lack of affordability, a shortage of skilled labor and available lots and the rising cost of lumber. The last of these is directly tied to an ongoing tariff battle.

Current sales were down one point to 73 and future sales fell by the same amount, coming in at 72. Traffic of prospective buyers in new homes fell two points to come in at 49, meaning for the first time in a while that there were fewer potential buyers coming in than there were in the previous month. A lack of first-time home buyers touring homes is thought to be responsible.

Housing Starts

Despite the above-mentioned decreasing builder confidence, starts were up 0.9% in the month of July to come in at 1.168 million on a seasonally-adjusted annual basis, although the gain was slightly less than expected. June numbers were also revised down to 1.158 million from 1.173 million, so it was a mixed bag. Starts are down 1.4% overall on the year.

The good news is, permits are up 1.5% on the month to 1.311 million on the year. Permits are up 4.2% on the year which includes a 6.4% gain in the single-family category and a 0.2% rise in multi-family permits.

The biggest gains for starts and permits are in the Midwest and South, while the West and Northeast are a bit behind at this point. Finally, completions of homes are down 0.8% on the year at a 1.188 million annualized rate.

Jobless Claims

initial jobless claims were down 2,000 last week to come in at 212,000. The drop wasn’t enough to keep the four-week average from going up 1,000 claims to come in at 215,500.

Continuing claims fell quite a bit, down 39,000 to 1.721 million. This helped pushed the four-week average down 8,000 to come in at 1.739 million for the week.

Consumer Sentiment

Consumer sentiment fell a fairly sharp 2.6 points to come in at 95.3 in the preliminary August reading. This is the lowest reading since last September.

People don’t plan to buy large household durable goods or vehicles, with both at a four-year low. Consumers think that prices are higher than they’ve been at any time in the last 10 years for the durable goods. Vehicle prices are seen as more unfavorable to buyers than at any time since 1984.

Despite the thoughts that prices are high, inflation expectations remain steady. Expectations over the next year are flat at 2.9%, while prices over the next five years are expected to rise by 2.5%, up 0.1% from last month.

Mortgage Rates

Mortgage rates were down slightly across the board last week. Whether you’re looking to buy or refinance, it remains a great time to take advantage of a rate you like and go ahead and lock.

The average rate on a 30-year fixed mortgage with 0.5 points in fees was down six basis points to 4.53% last week. This is up from 3.89% at the same time a year ago.

Looking at shorter terms, the average rate on a 15-year fixed mortgage with 0.5 points fell four basis points to come in at 4.01%. This has risen from 3.16% last year.

Finally, the average rate on a 5-year treasury-indexed adjustable rate mortgage (ARM) with 0.4 points fell three basis points to 3.87%. This is up from 3.16% last year at this time.

Stock Market

The U.S. and China agreed to talk trade in November. This agreement alone was enough to ease investors’ fears over the ongoing trade issues with the country. The stock market saw broad gains.

If you’re in our Fantasy Stock League, odds are you had a good day with the gains on Friday. My portfolio is up 10.4% since I started playing. If the money were real, I wouldn’t get rich overnight, but it’s fun to look at. I can’t win because I work here, but you should definitely get in on the action. It’s free and there are prizes for both the overall winner as well as the investor who does the best in two-month intervals.

The Dow Jones industrial average was up 110.59 points on the day to close at 25,669.32, up 1.41% on the week. Meanwhile, on the S&P 500, stocks finished up 9.44 points on the day to end at 2,850.13, rising 0.59% for the week. Finally, the Nasdaq was down 0.29% on the week despite being up 9.81 points on the day to finish at 7,816.33.

The Week Ahead

Wednesday, August 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.

Existing Home Sales (10:00 a.m. ET) – Existing Home Sales tallies the number of previously constructed homes, condominiums and co-ops that were sold 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, August 23

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.

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.

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

Friday, August 24

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

There’s nothing going on at the beginning of the week, but the backend of the week sees some important housing and industrial data.

Economic data and mortgage rates aren’t exactly thrilling topics to read about. We get it. Fortunately, we have plenty of home, money and lifestyle content to share with you if you subscribe to the Zing Blog below.

If you need more than a mental break at this point, perhaps a change of scenery is in order for the end of the summer. Here are five vacation destinations that won’t break the bank. Enjoy your week!

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