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

Happy Monday! I hope you’re as ready to rock ‘n roll the rest of the week as I am this afternoon. I went to the baseball game Friday night and my team won. Hopefully, it won’t be long before the Old English D is back on top.

The market could really use a win right now. Let’s get into the headlines.

Headline News

MBA Mortgage Applications

After the Federal Reserve cut interest rates last week, the average rate on 30-year fixed conventional mortgages was down seven basis points to 4.01%. This helped trigger a 12% surge in refinances that overcame a 2% drop in the number of purchase applications. Applications were up 5.3% overall.

It’s worth noting that purchase applications were up 7% overall on the year, so lower mortgage rates may be providing some help to the housing sector.

Jobless Claims

Initial jobless claims were down 8,000 last week to come in at 209,000. Meanwhile, the 4-week average was up by 250 claims to come in at 212,250.

On the continuing claims side last week, these were down 15,000 to come in at 1.684 million. Finally, the 4-week average was down 11,000 to settle at 1.687 million. These are very strong labor market numbers.

Producer Price Index (PPI)

Prices for the businesses who produce goods and services were up 0.2% in July and have gone up 1.7% on the year. However, prices actually went down when food and energy were taken out, falling 0.1% and up 2.1% on the year. When trade services are further removed, prices were down 0.1% and up 1.7% on the year.

The price of gasoline and home heating oil forced energy prices 2.3% higher, but they’re still down 4.4% on the year. Meanwhile, food prices are up 2.5% on the year after posting a 0.2% gain in July. Meanwhile, trade services from wholesale and other retailers were up 3.3% on the year after rising 0.2% in July.

On the other hand, personal consumption expenditures on the business side were down 0.1% on the month both when food and energy are excluded as well as when trade services are taken out. These expenditures were only up 0.1% overall. The main reason for the Federal Reserve cutting rates was very slow inflation, and this report seems to bear it out.

Mortgage Rates

Mortgage rates fell significantly in the wake of the Federal Reserve’s decision to lower short-term interest rates last Wednesday. However, there are other factors that may be at play as well.

As we’ve talked about in the past, bad news tends to be good news for the bond market as people look to push their money into safer assets, including mortgage-backed securities, which in turn publishes mortgage rates down. Last week, it was weaker manufacturing headlines and a continuing escalation of trade tensions with China that pushed money into the bond market.

The bottom line right now is that if you’re in the market for a mortgage of any kind, it’s a wonderful time to lock your rate.

The average rate on a 30-year fixed mortgage was down 15 basis points to 3.6% with 0.6 points paid in fees last week. This is down from 4.59% last year.

Looking at shorter terms, the average rate on a 15-year fixed mortgage with 0.5 points paid in fees has fallen a full percentage point from a year ago to 3.05% after falling 15 basis points on the week.

Finally, the average rate on a 5-year treasury-indexed hybrid adjustable rate mortgage (ARM) fell 10 basis points on the week to 3.36% with 0.3 points paid in fees. This is down from 3.9% last year at the same time.

Stock Market

Let’s all just celebrate really low mortgage rates and not look at our 401(k)s for a while. How does that sound? The stock market continues to fall as trade tensions continue to be the thing driving market movement and global economic uncertainty. Analysts say the Trump administration appears to have staked out its position and isn’t showing any signs of movement.

In the latest moves, China stopped buying U.S. crops and devalued their currency, which prompted President Trump to accuse the country of currency manipulation. This doesn’t look like it will end anytime soon, so we’ll have an eye on it.

The Dow Jones Industrial Average was down 0.75% on the week after falling 90.75 points on the day to close at 26,287.44. Meanwhile, the S&P 500 dropped over 20 points to close at 2,918.65. The Nasdaq was down 80.02 points on the day to close at 7,959.14, down 0.56% on the week.

The Week Ahead

Tuesday, August 12

Consumer Price Index (CPI) (8:30 a.m. ET) – The consumer price index measures changes based on the price of a fixed basket of goods and services purchased by consumers.

Quicken Loans Home Price Perception Index (HPPI) (10:00 a.m. ET) – Quicken Loans releases data every month comparing what people think their homes are worth compared to appraisals. Similar opinions of value often make for smoother purchase and refinance transactions.

Quicken Loans Home Value Index (HVI) (10:00 a.m. ET) – Quicken Loans also releases data on home values at both the national and regional levels. Homeowners can gain a perception of whether values are increasing or decreasing and get a better idea of where they stand in terms of equity.

Wednesday, August 13

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, August 14

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.

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 (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.

Friday, August 15

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.

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 was a serious lack of economic data out this week, but everything changes this week as we get busy again. The week starts with some housing data and quickly picks up with retail sales and industrial production numbers coming out. We’ll have it all covered in next week’s Market Update!

If this post hasn’t left you in a chipper mood, not to worry. We’ve got plenty of home, money and lifestyle content to share with you if you subscribe to the Zing Blog below to get our weekly email. We’ve had the pleasure of having Emma Tomsich as our Intern this summer. Emma’s headed back to school, but before class gets back in session, she wants to help you kids do a little organizing of their rooms. Maybe there’s even a place for studying? Is that wishful thinking? Have a great week!

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