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  4. Inflation Moves Even Higher as Home Prices Dip – Market Update

If you’re reading this Monday afternoon, this is one last friendly reminder for those of you who haven’t filed your tax return to get on it. Maybe you can even get on the news while you’re lined up at the post office. It’s always funny to me that something as mundane as mailing a tax return is something someone thinks makes good TV.

From an economic perspective, most of the talk last week was focused around Brexit and trade deals, but before we get there, let’s look at some data on home prices and inflation, among other reports.

Headline News

Quicken Loans Home Price Perception Index (HPPI)

There was an increase in discord between homeowners and appraisers in March when actual appraisals came in 0.78% below homeowner estimates as compared to a gap of just 0.5% in February.

Looking at the country’s regional data, homeowners in the Midwest inflated their value estimates by 0.9%. Other regions were pretty close together with homeowners in the Northeast, South and West overvaluing their homes by 0.78%, 0.76% and 0.7%, respectively.

At the metropolitan level, Boston homeowners continue to have the hottest market when comparing their best guesses to actual appraised values. In Boston, values are coming in 2.23% above estimates. Meanwhile, homeowners in the Windy City are on the other side of things, overvaluing properties by 1.94%. Meanwhile, LA homeowners are near the same page, overestimating property values by just 0.03%.

Quicken Loans Home Value Index (HVI)

Home values were down 0.2% in March, but they’re still up 3.37% on the year, meaning there’s an uptick in equity for homeowners even if it’s accruing at a slower rate.

Home values were down 1.45% in the South, but they’ve gone up 2.31% annually. Meanwhile, in the Northeast, values are up 3.65% on the year despite being down 0.19% on the month. Values in the Midwest were up 0.68% in March and 4.11% since the same time in 2018. The largest monthly value increase was seen in the South where home values rose 0.79%, but they’re only up 2.79% on the year.

MBA Mortgage Applications

Applications were down 11% on the refinance side, and this was a major contributor to overall mortgage applications being down 5.6%. The average rate on a 30-year fixed rate is up four basis points to 4.4% last week.

Purchase applications were up 1% on the week and have risen 13% on the year.

Consumer Price Index (CPI)

Inflation on the consumer side was up 0.4% in March and has risen 1.9% on the year. When taking out food and energy and leaving only core categories, prices were only up 0.1% but had risen 2% annually.

The cost of housing and medical care were both up 0.3% on the month and have risen 2.9% and 1.7% annually, respectively. Digging further into the housing numbers, rents were up 0.4% and have gone up 3.7% on the year according to this index. Meanwhile, the equivalent rent that homeowners would pay for a similar space was up 0.3% and 3.3% annually. On the medical care side, physician services were down 0.4%, but hospital services were up 0.3% and have risen 1.8% annually.

Energy prices were up 3.5% on the month, but are still down 0.4% on the year. In particular, gasoline was up 6.5% in March, but it has still fallen 0.6% since 2018. Meanwhile, food prices were up 0.3% and up 2.1% annually.

The price for wireless services was down 0.1% and internet costs were down 1.1%. Meanwhile, the price of new vehicles was up 0.4% while used vehicle prices were down by an equal amount.

Jobless Claims

Initial jobless claims were down 8,000 on the week to come in at 196,000. The 4-week average was down 7,000, coming in at 207,000.

On the continuing claims side, these were down 13,000 to come in at 1.713 million. Meanwhile, the 4-week moving average was down 11,000 to about 1.735 million.

Producer Price Index (PPI)

Prices for producers of goods and services were up 0.6% on the month and have risen 2.2% on the year. When food and energy were taken out, prices were only up 0.3% in March and 2.4% annually. Finally, when trade services were further removed, prices were flat and inflation on the producer’s side has gone up an even 2%.

There was a 16% rise in the cost of gasoline, which helped energy prices go up 5.4%. Meanwhile, higher vegetable prices pushed the cost of food up 0.3%. Meanwhile, trade services and the wholesale and retail sector were up 1.1%, balanced against a 0.8% drop in the cost of transportation services. Meanwhile, prices for services were up 0.3%.

Other highlighted categories included finished goods with a 1.4% rise as a 3.4% uptick in cigarette prices offsets a small decline in the price for computers and vehicles. Meanwhile, finished service prices were up 0.3%.

Consumer Sentiment

Consumer sentiment was down 1.5 points in a preliminary reading for April to come in at 96.9. This is blamed on a three-point dip in expectations to 85.8. This is the lowest reading for this metric since the aftermath of the government shutdown in February.

The effects of the dip in expectations were somewhat mitigated by a 0.9% increase in the assessment of current conditions to 114.2. It marks the best number in this category since December.

Consumers are still expecting inflation to remain low. Over the next year, predictions were down 0.1% to 2.4%, while the longer-term five-year outlook had expectations falling 0.2% to 2.3%.

Mortgage Rates

After weeks of being lower or unchanged, mortgage rates began to rise a bit last week. When compared to the same time a year ago, it’s still a great time to get a home or refinance your current one. Think about locking your rate today.

The average rate for a 30-year-fixed mortgage with 0.5 points in fees rose four basis points last week to 4.12%. Still, a year ago at this time, the rate was 4.42%.

Meanwhile, looking at shorter terms, the average rate for a 15-year fixed mortgage with 0.4 points was also up by four basis points to come in at 3.6%. Last year at this time, the rate was 3.87%.

The rate for a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) was up a sizable 14 basis points to 3.8% with 0.4 points. It’s up from 3.61% last year.

Stock Market

There were some big bank earnings for J.P. Morgan that had investors hopeful about the economy, even as the Brexit deadline has been extended to October 31. The European Union also gave the go-ahead for trade negotiations with the U.S., opening up another battle on the trade front.

The Dow Jones Industrial Average was up 269.25 points to 26,412.3 on Friday, down 0.05% on the week. Meanwhile, the S&P 500 was up 0.11% on the week, closing at 2,907.41, up 19.09 points on the day. Finally, the Nasdaq finished the week at 7,984.16, up 0.57% on the week and 36.8 points on the day.

The Week Ahead

Tuesday, April 16

Industrial Production (9:15 a.m. ET) – The Federal Reserve’s monthly index of industrial production – and the related capacity indexes and capacity utilization rates – covers manufacturing, mining, and electric and gas utilities.

Housing Market Index (10:00 a.m. ET) – The National Association of Home Builders produces a housing market index based on a survey in which respondents from the organization are asked to rate the general economy and housing market conditions. The index is a weighted average of separate diffusion indexes, including present sales of new homes, sales of new homes expected in the next six months and traffic of prospective buyers in new homes.

Wednesday, April 17

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.

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.

Thursday, April 18

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.

Retail Sales (8:30 a.m. ET) – Retail sales measure total receipts from stores selling merchandise and related services to final consumers. Sales are measured by retail and food service stores. Data is collected from the Monthly Retail Trade Survey conducted by the U.S. Census Bureau.

Friday, April 19

Housing Starts (8:30 a.m. ET) – A housing start is registered when the construction of a new residential building begins. The start of construction is defined as the beginning of excavation of the foundation for the building.

We get retail sales and plenty of housing data among other reports next week. It’ll all be covered in Market Update next Monday.

We get that this isn’t always the most interesting reading for your Monday afternoon. Fortunately, we’ve got plenty of other home, money and lifestyle content to share with you if you subscribe to the Zing Blog below. Here in Michigan, it’s been a chilly start to the spring for the most part. If you need a little sunshine in your life, maybe this article on sunrooms will at least have you thinking about warmer weather. Have a great week!

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