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

The big activity in my house last night was the installation of a new 4K smart TV. As I was observing the setup of this thing, it occurred to me technology is just getting more and more complicated. And yet, there was plenty of enthusiasm once we finally got the football turned on.

This trade deal with China is complicated and seems to have more twists and turns than the autobahn, but last week, there was reason for optimism. Before we get there, let’s jump into the headlines.

Headline News

Quicken Loans® Home Price Perception Index (HPPI)

Appraisers and homeowners were closer to each other in terms of what homes were worth in October. The difference between homeowner estimates and appraiser opinions was only 0.45%, compared to 0.49% in October. While homeowners continue to inflate their property value in comparison to actual appraisals, the gap has been getting smaller for 3 consecutive months.

Taking a look at regional data, homeowners in the West overvalued their homes by just 0.39% compared with appraiser opinion. The difference is 0.4% in the Northeast. The South and Midwest brought up the rear, with properties overvalued by 0.47% and 0.52%, respectively.

At the metro level, homeowners and appraisers have been on a consistent track toward harmony. In each of the areas surveyed, the difference between actual appraised value and homeowner opinion was less than 2%. Homeowners in Charlotte, North Carolina, have the most undervalued properties when comparing homeowner estimates to actual values, with appraisals coming in 1.4% higher than expectations. Homeowners in Chicago overvalue their properties by 1.64%, the biggest such inflation. Meanwhile, homeowners in Kansas City, Missouri, are nearly getting their value on the button, with appraisals being 0.01% above estimates.

Quicken Loans Home Value Index (HVI)

Although home values fell 0.04% in October, they’ve risen 7.07% since the same time a year ago. This means that it’s still very much a seller’s market out there for various reasons, including low interest rates and inventory that hasn’t really kept up with demand.

At the regional level, homeowners in the West saw their property values drop by 0.75% in October, but values there have still risen 6.07% year-to-year. Midwestern homeowners saw values drop 0.64%, but they’re still up 5.6% since last October. Values were down 0.16% in the South, but they’ve increased by 3.77% on the year. Finally, in the Northeast values did rise 0.08% in October and they’ve gone up 5.11% since the same time a year ago.

MBA Mortgage Applications

Overall mortgage applications were up 9.6% last week. Purchase applications were up 5% and applications to refinance rose 13%. Purchase applications happen to be up 15% from the same time a year ago.

All of this occurred despite a five-basis point increase in the average rate on a 30-year fixed conventional mortgage, which settled at 4.03%. The rise in purchase applications in particular should mean good things for home sales as we come toward the end of the year.

Consumer Price Index (CPI)

Inflation on the consumer side was up 0.4% in October after being flat in September. The annual rate of inflation is at 1.8% overall, just below the Federal Reserve’s 2% target, but there are signs that energy prices in particular are holding that number down. When food and energy were taken out, inflation was up 0.2% on the month, but 2.3% on the year.

It is worth noting that energy prices were up 2.7%. Food prices were up 0.2%.

In core categories that aren’t as impacted by energy prices, new vehicle prices were flat and up only 0.1% on the year. Prices for airfare were down 0.4% on the month and have gone up 1.5% since last October. Computers and accessory components saw prices fall again, while prices for wireless phone service were flat and have fallen 2.9% on the year.

Prices paid for rent were up 0.1% and 3.7% annually, while housing costs have gone up 3.3% on the year after rising 0.2% in October. Medical costs were up 0.9% on the month and have risen a sizable 5.1% on the year. Health insurance costs specifically are up 20.1% on the year and 2.2% in October. There are signs of upward price pressure in several sectors.

Jobless Claims

Initial jobless claims include a number of state estimates prior to revisions, so it’s hard to take any change too seriously before seeing a trend, but initial jobless claims were up 14,000 last week to 225,000. This pushed the 4-week moving average of initial claims up 1,750 to 215,250. It’ll be something to keep an eye on.

Meanwhile, on the continuing claims end, these were down 10,000 to come in at 1.683 million. The 4-week average of continuing claims was flat at about 1.688 million.

Producer Price Index (PPI)

As with consumer prices, prices on the production side were up 0.4% in October. However, this is a rebound from September, when prices were down 0.3%. Partially for this reason, overall inflation is only up 1.1% on the year. When food and energy were taken out, prices were up 0.3% on the month and 1.6% on the year, down from the previous annual pace of 2% inflation. Finally, when retail and wholesale costs were further removed, inflation was only up 0.1% on the month and 1.5% on the year compared to the previous inflation rate of 1.7%.

Two of the key categories mentioned were prices for the above-mentioned retailers and wholesalers, also known as trade services. These were up 0.8%. This helped cause inflation to rise in an otherwise ho-hum month. Food and energy prices were also up somewhat.

Retail Sales

Retail sales were up 0.3% in October. However, when cars and trucks were taken out, these were up just 0.2% on the month. When removing gas sales, sales were only up 0.1%. However, it’s important to note that when looked at through the lens of a control group less prone to seasonal price fluctuations, sales were up 0.3% in a good sign.

Retail sales at gas stations were up 1.1%, while car sales were up 0.5% in October. Other sales increases included a 0.9% rise in sales for non-store retailers. Nowadays, this category is mostly e-commerce.

However, there was plenty of weakness to know in the report. Furniture stores are discounting prices, and because of this, sales fell 0.9%. Meanwhile, sales of apparel were down 1%. Sales of sporting goods were down 0.8%, while electronics and appliance sales were down 0.4%. Moreover, a sign that Americans may be tightening the pocketbooks is the fact that restaurant sales are down 0.3%.

Industrial Production

The General Motors strike is probably largely responsible for this, but overall industrial production was down 0.8% and October’s manufacturing output fell 0.6%. Still, the headline number is double the expected drop. Capacity utilization in factories was also down 0.8% at 76.7%.

Production of vehicles was down 7.1% to add to a 5.5% dip in September and they fell 1.2% in August. Business equipment production was also down 0.6% in October, for a second straight monthly decline. Declines in business spending really aren’t a good sign for the economy. Consumer goods production was down 0.8%. Construction supplies also fell 0.4%.

Mining production was down 0.7% after a similar drop in September. The sector, which had previously shown very strong annual growth, is only up 2.7% on the year now. However, in comparison, manufacturing output is down 1.5% on the year. Utility output was down 4% for the month. Any way you look at it, this report is a stinker.

Mortgage Rates

After falling quite a bit a couple weeks ago, mortgage rates bounced back up last week, according to Freddie Mac. There’s more optimism for a trade deal with China. When optimism reigns, people tend to put more money into stocks and less into the bonds that back mortgage rates, causing yields to go higher.

The good news is that rates are still relatively low, so it’s a great time to lock your rate, because they bounce around with different market movements, and you can provide yourself some protection.

The average rate on a 30-year fixed mortgage with 0.6 points paid in fees was up six basis points to 3.75%. Meanwhile, since this time last year, the rate is down from 4.94%.

The average rate on a 15-year fixed mortgage was 3.2% with 0.5 points paid, up seven basis points on the week, but down from 4.36% a year ago.

Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage with 0.4 points paid was up five basis points to 3.44%. This has fallen from 4.14% last year.

Stock Market

The Dow Jones Industrial Average crossed 28,000 points for the first time ever Friday. There is growing optimism over a trade deal with China and this time the source of that optimism is the president’s economic advisor Larry Kudlow. We’ll see if phase one of the trade deal happens anytime soon.

The Dow finished Friday at 28,004.89 points, this was up 222.93 points on the day and 1.17% on the week. Meanwhile, the S&P 500 was up 0.89% on the week after finishing Friday at 3,120.46, up 23.83 points on the day. Finally, the Nasdaq was up 61.81 points on the day to close at 8,540.83. The index gained 0.77% for the week.

The Week Ahead

Monday, November 18

Housing Market Index (10:00 a.m. ET) – The National Association of Home Builders (NAHB®) 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 6 months and traffic of prospective buyers in new homes.

Tuesday, November 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.

Wednesday, November 20

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, November 21

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.

Friday, November 22

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.

Consumer Sentiment (10:00 a.m. ET) – The University of Michigan’s Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending.

There’s not as much on next week’s economic calendar, but we do get several pieces of key housing data. We’ll cover all the important data releases in next week’s Market Update!

Economics isn’t the most exciting thing to read about on a Monday afternoon. The good news is that we have plenty of home, money and lifestyle content to share with you if you subscribe to our email list below. Turkey day is approaching, and the holidays will be here before we know it. Here’s an article on getting your dining room furniture ready. Have a great week!

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