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

This probably isn’t on the radar for many people this week, but Thursday marks the beginning of the most wonderful time of the year – baseball season. Everyone is expecting my Detroit Tigers to have another rebuilding year. Still, maybe it’s the prospect of eventual warm weather or the thought of ballpark hot dogs, but around this time of year, my hope always springs eternal.

The mood for investors was a little more mixed last week. Perhaps they need to see a little green grass themselves? Let’s jump into it.

Headline News

Housing Market Index

Home builder sentiment was unchanged for March at 62. This was a one-point miss from expectations. Unfortunately, buyers aren’t going through homes at the expected pace. This measurement went further into contraction going down four points to 44.

Current sales went up two points to 68, while sales expectations over the next six months were up three points to coming in at 71.

Turning to regional data, the South and West are driving many of the gains, at or near 70. Meanwhile, the Northeast and Midwest are essentially flat at around 50, which indicates neither growth or slowing in builder expectations.

MBA Mortgage Applications

Mortgage rates were at their lowest level since last year according to the survey from the Mortgage Bankers Association. They went down nine basis points from the week prior to come in at 4.55%.

All of this has had a beneficial effect on applications, which were up 1.6% week over week. Purchase applications were up 0.3%, but the big gains were in the refinance category where there was a 4% increase in applications.

Jobless Claims

Initial jobless claims were down by 9,000 last week to come in at 221,000. Meanwhile, the four-week average rose just slightly, up 1,000 to 225,000.

On the continuing claims side, these were down 27,000 to 1.75 million. The four-week average was up only 6,000 to come in at about 1.773 million.

Existing Home Sales

Sales of existing homes were up 11.8% in February to a seasonally adjusted annualized pace of 5.51 million. Despite the rebound, this is still down 1.8% from where they were at this time last year.

Breaking the numbers out further, sales of single-family homes were up 13.3% to 4.94 million. Meanwhile, condo sales were unchanged at 570,000 on an annual basis.

Taking a look at supply, homes coming on the market increased by 2.5% to 1.63 million. However, due to the increased sales pace, the amount of supply on the market effectively decreased to 3.5 months at the current sales rate vs. 3.9 months in January. Meanwhile, the median price for an existing home was up slightly at $249,500 and has risen 3.6% on the year. Analysts say there may be room for this price to come down a bit given that sales are behind last year’s pace.

In regional data, sales in the West were up 16%, but they’re still down 7.9% on the year. It’s worth noting that part of the sales decrease in that region is being blamed on the wildfires that have hit the area. Sales in the South were up 14.9% on the month and the Midwest had a 9.5% gain.

Mortgage Rates

Mortgage rates continue to move in the right direction for consumers last week, but before we get there, let’s take this opportunity to briefly discuss the results of last week’s Federal Open Market Committee meeting and the impact on the mortgage market.

The Federal Reserve chose to leave short-term interest rates unchanged. Although not directly correlated with longer-term rates like mortgages, the two do tend to move together at least directionally. If one goes up or down, the other will likely follow.

Leaving short-term interest rates alone was an expected result of this meeting. What the market was really watching for was forward projections on future interest rate moves. They also got some insight on the balance sheet for the bank.

First, while this could always change on the basis of updated economic data, the Federal Reserve doesn’t plan on increasing interest rates for the remainder of the year. Additionally, they also indicated that it’s nearing time to stop divesting from its portfolio of assets that were picked up in order to try and stimulate the economy after the financial crisis of 2008 hit. The committee plans to continue to reinvest in U.S. treasuries and mortgage bonds beginning in October. While this gets a little complicated, this can all be good for mortgage rates because as more is invested in mortgage-backed securities (MBS), mortgage rates tend to fall because the rate of return doesn’t have to be as high to attract investors. Mortgage rates were very low for the past several years in part because the Fed was a big buyer of mortgage bonds.

For more analysis on this and the reasoning behind the Fed decision, check out our analysis of the Federal Reserve announcement from last week.

No one has a crystal ball to predict the future interest rates, but one thing’s for sure. Mortgage rates are the lowest they’ve been in some time. If you’re in the market, it’s a really good time to lock your rate.

Last week, the rate on a 30-year fixed mortgage according to Freddie Mac averaged 4.28% with 0.4 points paid in fees, down three basis points and falling from 4.45% last year.

In shorter terms, 15-year fixed mortgages averaged 3.71% with 0.4 points, falling five basis points on the week. It’s down from 3.91% a year ago.

Finally, the average rates on a 5-year treasury-indexed adjustable rate mortgage (ARM) was unchanged last week at 3.84%, with 0.3 points. This is up from 3.68% at this time last year.

Stock Market

The stock market didn’t react well to the Federal Reserve’s forecast of economic growth that was lower than previously expected. Combine that with increasing signs of global growth slowdown and it wasn’t a good Friday on Wall Street. The Dow Jones Industrial Average had a huge drop and the S&P 500 saw its worst day since January.

The Dow was down 460.19 points to 25,502.32, falling 1.34% on the week. Meanwhile, the S&P 500 finished Friday at 2,800.71, dropping 54.17 points on day and 0.77% weekly. Finally, the Nasdaq was down 0.6% on the week after falling 196.29 points on the day to close at 7,642.67.

The Week Ahead

Tuesday, March 26

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.

S&P Case-Shiller HPI (9:00 a.m. ET) – The S&P Case-Shiller home price index tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S.

FHFA House Price Index (9:00 a.m. ET) – The Federal Housing Finance Agency (FHFA) House Price Index (HPI) 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.

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.

Wednesday, March 27

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, March 28

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.

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, March 29

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.

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

Plenty of big news coming out next week including a report on the growth of the economy in GDP and international trade as well as lots of home data. We’ll have it all covered in next week’s Market Update!

This isn’t the most interesting Monday afternoon reading, I’m sure. We have plenty of home, money and lifestyle content to share with you, so subscribe to the Zing Blog below. Tax Day is in a few weeks. If you’re still in the process of filing your return, here are some tips on protecting yourself from identity theft. Have a great week!

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