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GDP Strong in 4th Quarter – Market Update - Quicken Loans Zing Blog

Anticipation was high. A show that a lot of people watched for a long time had its series finale last night. I hope fans got the ending they wanted.

While all the talk last night may have been about an iron throne, the main focus of economic analysts last week was on whether the U.S. could iron out a trade deal with China. But before we get into that, let’s go over last week’s data releases.

Headline News

Quicken Loans Home Price Perception Index (HPPI)

Homeowners and appraisers were slightly further apart in terms of their perception of home values in April, with homeowner estimates coming in 0.87% higher than actual appraised values as compared to a difference of 0.78% in March.

Breaking things down by region, Western homeowners are closest to the actual appraisal data, overvaluing their homes by just 0.83%. Homeowners in the Midwest and South overestimated their home value by 0.85 and 0.87%, respectively. Finally, the Northeast trailed a bit with homeowner estimates inflated by 0.94% compared to actual values.

Turning to individual markets, Boston homeowners have a really hot housing market with appraised values checking in 2.08% higher than homeowners estimate. At the other end of the spectrum, homeowners in Cleveland are overvaluing their homes by 1.95%. Homeowners in DC have estimates which are closest to those of appraisers, with home values 0.05% higher than homeowner expectations.

Quicken Loans Home Value Index (HVI)

In the largest monthly increase since January 2015, home values were up 1.95% in April, pushing the annual pace of home value appreciation up to 5.43%.

Home values were up 2.11% in the Midwest, which has seen values rise 5.33% on the year. Values were up 1.74% in the South, and they’ve now risen 5.12% annually. Home values in the West were up 3.87% on the year after rising 1.58% on the month of April. The Northeast posted the smallest monthly uptick, but still saw prices rise 1.16% monthly and 4.81% on an annual basis.

MBA Mortgage Applications

Mortgage applications were down 0.6% overall as both applications to purchase and refinance were down 1% for the week. However, mortgage applications are now up 7% on the year.

The average mortgage rate according to this survey was down one basis point to 4.4% last week.

Retail Sales

Retail sales were down 0.2% in the month of April, unpleasantly missing expectations for a 0.2% gain. There was a 1.1% drop in car sales, which was somewhat expected, but even when these were taken out, sales were only up 0.1% on the year. When taking out automobiles and gas together, retail sales fell 0.2%, matching the headline rate. In a control group of categories that aren’t expected to vary as much on a seasonal basis, sales were flat, missing expectations for a 0.4% uptick.

Gasoline sales were higher, up 1.8% as the price of gas rose in April. However, there was a 1.3% dip in sales at electronics and appliance stores, which is not good news for the consumer electronics sector or if you’re looking at how many people are doing home improvement projects. Furniture sales were flat, which is leading some analysts to have concerns about residential investment, especially when coupled with a 1.9% drop in sales of building materials in April.

In a piece of good news, department store sales were up 0.7%, but general merchandise sales were up just 0.2%. However, there was a 0.2% uptick in restaurant sales after they had risen 5.7% in March. Speaking of March, overall sales numbers for the month were pushed 0.1% higher in revisions to a 1.7% increase.

Industrial Production

It was a bad month for industrial production. Overall production was only expected to be flat, but production fell 0.5% overall and in the key manufacturing category. Factory capacity utilization fell 0.6% to 77.9% in April.

Manufacturing of motor vehicles and their parts were down 2.6% in April and has fallen 4.4% on the year. Meanwhile, business equipment manufacturing was down 2.1% and the production of consumer goods was down 1.2%. Construction supplies were up 0.1%, but analysts would’ve hoped for a bigger rise given that these were down 1.7% in March. In one positive, high-tech production was up 0.6% in April and has risen 3.2% on the year.

Mining volumes were up 1.6%, but overall utility output was down 3.5% and energy volumes are down 4.7% on the year

Housing Market Index

Builder confidence in the housing market increased quite a bit in May, up three points to come in at 66. When it comes to both present sales and the outlook for sales over the next six months, these numbers are very positive at 72. However, there are still fewer buyers coming in to walk through homes as this number is in contraction at 49.

Regionally, the markets in the West and South have builders most excited, but there have been gains in the Northeast and Midwest as well.

Housing Starts

In terms of both starts and permits, builders kept busy in April and exceeded analyst expectations.

Looking at starts, these were up 5.7% to come in at a seasonally-adjusted annualized rate of 1.235 million. Multi-family units were up 4.7% to come in at 381,000 and single-family residences were up 6.2% to 854,000. This is one metric that points to good things for residential investment in second-quarter GDP readings. However, starts are still down 2.5% on the year.

On the permit side, these are up 0.6% to a seasonally-adjusted annualized rate of 1.296 million. However, the gains here are uneven. On the multi-family side, these are up 8.9% to 514,000. However, when it comes to single-family residences, these were down 4.2% at 782,000. Overall permits were down 5% on the year.

Jobless Claims

After a couple of weeks in which it appeared that initial jobless claims might be trending higher, these claims were down 16,000 to come in at 212,000 last week. Meanwhile, the 4-week average, still affected by the previous movements, was up 4,750, settling at 225,000.

On the continuing claims end, these were down 28,000 to come in at 1.66 million. Finally, the 4-week average was up 1,500, finishing at about 1.668 million.

Consumer Sentiment

Consumer sentiment was up by better than five points in preliminary readings for May to come in at 102.4. This is the highest the index has been in 15 years.

Expectations for the future were up 8.6 points to 96 and drove most of the upswing. The current conditions component was up 0.1% to 112.4. The authors of the report do note that the majority of the responses were collected before trade negotiations between the U.S. and China took a step back in the last couple of weeks.

Americans are also starting to show that they expect prices to increase soon. Both the outlook for the next year and over the next five years saw prices up 0.3%, rising to 2.8% and 2.3%, respectively.

Mortgage Rates

Fixed-rate mortgages saw their rates dip again last week. If you’re in the market to purchase or refinance, it’s a good time to consider locking your rate.

The average rate for a 30-year fixed mortgage with 0.5 points paid in fees was down three basis points to 4.07%. This is down from 4.61% at the same time last year.

The average rate for a 15-year fixed mortgage was 3.53% with 0.4 points paid. This is down four basis points on the week and has fallen from 4.08% a year ago.

Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage with 0.4 points paid was up three basis points on the week at 3.66%. This is still down from 3.82% last year.

Stock Market

Trade talks between the U.S. and China didn’t end in a good spot on Friday, and the stock market reacted negatively. Chinese officials have delayed further scheduling of talks as the U.S. has indicated a desire to take a closer look at the nation’s telecom industry.

The Dow Jones Industrial Average finished the week at 25,764, down 98.68 points on the day and 0.69% on the week. Meanwhile, the S&P 500 was down 16.79 points on the day to close at 2,859.53, down 0.76% for the week. Finally, the Nasdaq was down 1.27% on the week after dropping 81.76 points Friday to close at 7,816.29.

The Week Ahead

Tuesday, May 21

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.

Wednesday, May 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.

Thursday, May 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 4-week moving average of new claims smooths out weekly volatility.

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

Friday, May 24

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

There aren’t as many data points on next week, but we do get some important housing data to look at as well as orders of durable goods. It’ll all be covered in next week’s Market Update, which will be out on Tuesday next week. Quicken Loans will be closed on Monday in observance of Memorial Day. We wish to thank our military servicemembers – past and present – for their service to our nation.

We understand that this isn’t the most enthralling read on a Monday afternoon. If you subscribe to the Zing Blog below, we’ve got plenty of other home, money and lifestyle content to share with you. It’s a little cool in the Detroit area this morning, but summer will be here before we know it. Here are tips on getting your patio ready. Have a great week!

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