Normally, I write this on Monday mornings in preparation for the rest of the week. But by the time you read this, my vacation will be in full swing. Here’s hoping everyone that wants it can get a couple days on the lake. We need a break from 2020.
Let’s take this time to see what happened just before I left. There were some good housing numbers, while we continue to slog along with relatively high unemployment.
As always, this week’s report was prepared with the assistance of Econoday.1 Here comes all the economic news worth talking about.
Housing Market Index
We might be in the middle of an unprecedented situation, but it hasn’t dampened enthusiasm in the housing market based on the sentiments of home builders.
In August, home builder sentiment was 78, which ties a record for this index originally set back in December 1998. Current sales were up 6 points to 84 while sales over the next 6 months were up 3 points to 78.
Meanwhile, perhaps the most telling thing about what’s driving the optimism now is the traffic number. For years, traffic of buyers going through homes had been at fairly low levels, but this has skyrocketed in recent months, up 8 points to 65, which is a record for the component.
What does that traffic number mean? One way to interpret it might be that people have become underwhelmed with their current living situation after spending so much time in their homes this year. It seems there’s a rush on finding new abodes.
Housing Starts And Permits
That builder enthusiasm isn’t just talk. It’s translating into action. The construction of housing was up to 1.496 million starts on a seasonally adjusted annual basis. That’s up 22.6% from the prior month. Of those, 940,000 were single-family starts, which is up 8.2% in July.
On the permit side, these rose 18.8% to 1.495 million. This included a 17% uptick in single-family permits at 983,000. Meanwhile, multifamily permits were up 22.5% to come in a total of 512,000.
Finally, when looking at completions, these were up 3.6% at 1.28 million. The only bad news is that single-family completions were down 1.8% at 909,000 on a seasonally adjusted annualized basis. Supply remains limited.
MBA Mortgage Applications
Mortgage rates picked up a bit last week and this led to a 3.3% decrease in overall applications. The average 30-year fixed mortgage rate rose 7 basis points to 3.13%.
Refinance applications were down 5%. The good news is purchase applications picked up 1% and are up 27% on the year. Housing demand is huge right now.
After a brief dip below the 1 million-mark, initial jobless claims were up again last week at 1.106 million, an increase of 135,000. The 4-week moving average was down 79,000 to 1.176 million.
On the continuing claims side, the unemployment rate was 10.2%, down 0.4% on the week. Claims were down 636,000 to 14.844 million. The 4-week moving average was down 326,750 to about 15.841 million.
Existing Home Sales
Sales of existing homes were up 24.7% on the month and now have fully recovered and even surpassed pre-COVID-19 levels at a seasonally-adjusted annual rate of 5.86 million. Sales are now up 8.7% since last July which would’ve been in the middle of peak home buying season.
Moreover, sellers aren’t discounting to reach these levels either. The average sale price of an existing home was up 3.3% during the month to $304,100. That’s an increase of 8.5% since last July.
Finally, there is a likelihood that prices will remain high because demand is outpacing supply. There are only 3.1 months’ worth of homes on the market at the current sales pace. The 1.5 million units is a 21.1% downtick from this time a year ago.
We keep coming back to this, but there’s a race on for any and all available homes at the moment driven by low rates and dissatisfaction with current living situations partially induced by stay-at-home orders.
Mortgage rates were up slightly last week according to Freddie Mac, but with the rate on a 30-year fixed under 3%, it’s still an incredibly good time to get in if you’re looking to purchase or refinance. To get started, feel free to speak with one of our Home Loan Experts.
The average rate on a 30-year fixed mortgage was 2.99%, up 3 basis points on the week, with 0.8 points paid in fees. This is down from 3.55% a year ago.
Meanwhile, the average rate on a short-term 15-year-old fixed mortgage with 0.7 points paid was up 8 basis points to 2.54%. This is down from 3.03% last year.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage with 0.3 points paid rose a single basis points to 2.91%, down from 3.32% at the same time last year.
The Dow Jones Industrial Average was up almost 200 points to close the week as the S&P 500 ended on another record note. While Apple hit an all-time high again, there were gains outside the tech sector as well with Foot Locker and John Deere up 1.4% and 4.4%, respectively.
Outside earnings, traders were reacting to economic data that was for the most part very positive. Housing is driving some optimism all over the place.
The Dow was flat for the week, up 190.6 points to come in at 27,930.33 Friday. Meanwhile, the S&P 500 was up 11.65 points Friday to finish at 3,397.16, an increase of 0.72% weekly. Finally, the Nasdaq finished at 11,311.8, 46.5 points on the day and 2.65% since last Friday.
The Week Ahead
Tuesday, August 25
FHFA House Price Index (9:00 a.m. ET) – The Federal Housing Finance Agency House Price Index 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.
S&P CoreLogic Case-Shiller HPI (9:00 a.m. ET) – The S&P CoreLogic Case-Shiller home price index tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S.
Consumer Confidence (10:00 a.m. ET) – The Conference Board surveys consumers on their feelings about current and future business and employment conditions as well as their future spending plans.
New Home Sales (10:00 a.m. ET) – This report measures the number of newly constructed homes with a committed sale during the month.
Wednesday, August 26
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.
Durable Goods Orders (8:30 a.m. ET) – These are based on new orders placed with domestic manufacturers for factory goods.
Thursday, August 27
Gross Domestic Product (GDP) (8:30 a.m. ET) – This release measures the monetary value of all final goods and services produced within the U.S. This report is released on a monthly basis with estimates on the growth in the previous quarter.
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.
Pending Home Sales Index (10:00 a.m. ET) – The National Association of REALTORS® developed the Pending Home Sales Index as a leading indicator of housing activity. Specifically, it’s a leading indicator of existing home sales – not new home sales.
Friday, August 28
International Trade in Goods (8:30 a.m. ET) – The Bureau of Economic Analysis has begun breaking out the goods from the remaining international trade numbers to get an idea of import and export estimates for GDP calculations.
Personal Income and Outlays (8:30 a.m. ET) – This is a measurement of how much consumers are taking in as well as their corresponding spending. This also gives insight into how much is being saved.
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 a lot of important economic data out next week including income and spending figures, GDP and new home sales. We’ll have a look at it all in next week’s Market Update!
If this report isn’t your idea of a Monday pick-me-up, that’s understandable. We’ve got plenty more home, money and lifestyle content to share with you if you subscribe below. Looking for a change? Here are 2020’s best places to live. Have a great week!
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