I’m running a little behind today. It’s one of those Mondays. Anyway, I hope everyone had a great weekend!
The stock market as a whole probably feels a little bit behind the eight ball, too. Let’s see what was making headlines last week.
Producer Price Index (PPI)
Producer prices increased only 0.1% in November, but they were above consensus expectations. On the year, price growth for producers slowed to 2.5%. When food and energy were taken out of the equation, prices were up 0.3% and 2.7% annually. Finally, when trade services were further removed, they remained up 0.3% and have risen 2.8% since last year.
Digging deeper into the numbers, food prices were up 1.3% on the month, but were only up 0.4% on the year. Meanwhile, energy prices were down 5%, including a 14% drop in gas prices. Gas prices are now down 1.2% on the year for producers.
Service prices were up 0.3%. Prices were up in the wholesale and retail sectors 2.2% on the year.
Quicken Loans Home Price Perception Index (HPPI)
Homeowners overestimated the value of their homes by 0.36% in November, up slightly from 0.28% in October, but they were still very close to agreement with appraisers. The difference has been less than 0.5% since March.
In the West, homeowners were off in their estimates by just 0.23%. Homeowners in the South inflated property values by 0.33%. Meanwhile, values in the Northeast and Midwest were overestimated by 0.4% and 0.48%, respectively.
Turning to the metropolitan level, Boston is a hot housing market right now. Appraisals came in 2.92% above homeowners’ estimates. Chicago is at the opposite end of the spectrum. Homeowners there overvalued their homes by 2.11%. Meanwhile, homeowners in New York City win the prize for being the closest to appraisals, as they were undervaluing their homes by just 0.1%.
Quicken Loans Home Value Index (HVI)
Home values were up 0.53% in our data and have risen 5.01% annually. This is a slightly slower pace of appreciation, but that may be good for homebuyers.
In terms of the regional data, the biggest monthly gain was posted in the South, where prices were up 0.52% and have gone up 4.7% on the year. The Northeast was up 0.51%, but has a yearly gain of just 3.66%. The West was up 0.42% monthly and 6.16% annually. Finally, the Midwest was up 0.41% in November and 4.53% on the year.
MBA Mortgage Applications
Applications on the whole were up 1.6% on the week. Applications to purchase were up 3%, while refinance application increased 2%.
The average rate on a 30-year fixed mortgage was down 12 basis points to 4.96%, a sizable decrease.
Consumer Price Index (CPI)
Inflation was soft on the producer’s side and downright flat for consumers in November. That said, it’s risen 2.2% on the year. When food and energy were taken out of the equation, they were up 0.2% and the same 2.2% figure on the year.
Energy prices for consumers were down 2.2%, and gas prices fell 4.2%. Apparel prices were down 0.9%, while the cost of transportation dropped 0.8% on the month, and telecommunications costs were down 0.5%.
Offsetting these declines was a 0.3% increase in the cost of housing and a 0.4% uptick in medical care costs.
Initial jobless claims were down 27,000 to 206,000 last week. This brought the four-week average down 3,750 to 224,750. These are once again near historical lows.
Continuing-unemployment claims were up 25,000 to 1.661 million. Meanwhile, the 4-week moving average was down 2,500 to about 1.666 million.
Retail sales were up 0.2% in November, beating expectations for a 0.1% increase. This number was matched when cars were taken out. Lower gas prices have been holding sales totals down, and when gasoline was taken out along with cars, sales were up 0.5%. Finally, sales in a control group, which takes out gas and several other items, were up 0.9%.
First, let’s look at gains outside the control group. Car and truck sales were up 0.2%, but building materials fell 0.3%, and gasoline sales were down 2.3%, given price drops.
The control group goes beyond the necessities of daily living. It’s considered a good indicator of the economy’s health and points to a bigger contribution for GDP. Here, sales for e-commerce retailers are up 2.3% along with a 1.4% uptick at electronics and appliance shops. Other gainers included furniture, which rose 1.2%, and health and personal care stores, up 0.9%.
Industrial production was up 0.6% in November, despite manufacturing levels being flat. Factories were utilizing a bit more space, up to 78.5% in November.
Digging deeper on manufacturing numbers, there was a 1.6% increase in high-tech production and a 0.3% rise in motor vehicle manufacturing. Meanwhile, construction supply manufacturing was down, despite reports of shortages in the sector. Business equipment production was also down, and it had been strong for several months.
Revisions weren’t necessarily good news, either. Manufacturing gains in October were revised down to 0.1% from an initial estimate of 0.3%.
Mortgage rates were down quite a bit across the board last week. If you’re in the market to purchase or refinance, it’s a great time to lock your interest rate.
In general mortgage news, the Department of Veterans Affairs last week announced it would match conventional guidelines for one-unit properties, setting the number at $484,350. Also, the FHA announced its new loan limits. We’ll have more on this in an upcoming post, but for now, the minimum loan limit for FHA mortgages will increase to $314,827; it will be $726,525 in the highest cost areas. These limits are rising in 3,053 counties across the country.
Getting back to rates, the average interest rate for a 30-year fixed conforming mortgage, according to Freddie Mac, was 4.63% with 0.5 points in fees, down 12 basis points on the week. This is still up from 3.93% last year at the same time.
In shorter terms, the average interest rate and a 15-year fixed mortgage was 4.07% with 0.5 points, down from 4.21% the prior week. A year ago, the rate was 3.36%.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable-rate mortgage (ARM) fell three basis points to 4.04% with 0.3 points. This is up from 3.36% last year.
It was a bad day for stocks on Friday, with the Dow Jones Industrial Average down nearly 500 points and having fallen 2.5% on the year. The S&P 500 was even worse, down 2.75% in 2018. The Nasdaq was the only index keeping its head above water, having risen just 0.11%.
The weakness on Friday was blamed on softer-than-expected data out of China and Europe, but this was a continuation of a recent trend. Don’t look at your 401(k) today.
As our Fantasy Stock League winds to a close, if you’re outperforming the market, go ahead and congratulate yourself.
The Dow was down 496.87 points Friday, to close at 24,100.51, down 1.18% on the week. The S&P 500 closed at 2,599.95, down 1.26% on the week and 50.59 points on the day. Finally, the Nasdaq fell 0.84% on the week, to close at 6,910.67, down 159.67 points on the day.
The Week Ahead
Monday, December 17
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 6 months and traffic of prospective buyers in new homes.
Tuesday, December 18
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, December 19
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.
Federal Reserve Rate Decision (2:00 p.m. ET) – The Federal Reserve meets regularly to decide the future of short-term interest rates. Although not directly tied to longer-term rates like those for mortgages, there’s a positive correlation between the direction of these rates and those of mortgages and many other consumer borrowing costs.
Thursday, December 20
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, December 21
Durable Goods Orders (8:30 a.m. ET) – These are based on new orders placed with domestic manufacturers for factory goods.
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 quarterly basis.
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 going on next week, and we’ll have it all covered for you this Christmas Eve while you wait for Saint Nick.
I don’t know about you, but I’m having a hard time thinking about economic data. I wish someone would bring me some figgy pudding. I don’t even know what that tastes like, but if it gets me closer to Christmas vacation, then put it right here. If you’re in the same frame of mind, don’t worry. There’s plenty more home, money and lifestyle content you can find by subscribing to the Zing Blog below that doesn’t involve percentages and numbers. If you’re still doing some last-minute shopping, here’s a gift guide for all the wonderful men in your life. Have a great week!
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