It’s been spring for a while according to the calendar, but in Michigan, Mother Nature marches to the beat of her own drummer. This week feels like the first time the warmth is here to stay and all the plants are starting to flower. It even reached the high 80s this weekend.
It’s true that we’ve been through quite the economic winter at this point. While I wouldn’t go so far as to say that spring has sprung – we’ve got a way to go – there are signs that maybe there’s a thaw approaching.
Economic data analysis used in this report was provided by Econoday.1 Let’s go see what happened last week.
Housing Market Index
While it would be hard to call home builders upbeat by any means in May, this index from the National Association of Home Builders did show that the shrinking in the market slowed down in May with sentiment coming in at 37. As a reminder, 50 is an indicator of neutral market feelings. This is up 7 points from April.
Taking a look at individual components, traffic was up 8 points, but it’s still very downbeat at 21. Meanwhile, present sales were up 6 points to come in at a more slowly shrinking 42. Meanwhile, the expectation for sales over the next 6 months was up 10 points to settle at 46.
Housing starts were down a little over 30% in April to settle at a seasonally-adjusted annual rate of 891,000. These levels are the lowest they’ve been in 6 years, but it could be worse given that there were a ton of construction shutdowns related to COVID-19 in states across the country. In some good news, the number of housing starts for March was revised up 60,000 to 1.276 million.
On the permit side, these were down 20.8% to come in at 1.074 million on a seasonally-adjusted basis. Finally, completions were only down 8.1% overall at 1.176 million. Most home purchases are of the single-family variety and these were down only 4.9% at 865,000 after seasonal adjustment.
MBA Mortgage Applications
Mortgage applications were down 2.6% overall. If there was good news here, it’s that the 6% drop in refinance applications was matched by an uptick in purchase applications. Applications on the purchase side are only down 1.5% on the year. That means we’re seeing normal demand ranges for purchase season. That’s really important because it signals economic confidence over the long-term.
The average rate on a 30-year fixed mortgage was down 2 basis points to settle at 3.41% for conventional loans.
Initial jobless claims were down 249,000 last week to a still elevated 2.438 million. Meanwhile, the average of initial claims over the last 4 weeks was down 501,000 to 3.042 million.
On the continuing claims side, these were up 2.525 million last week to settle at 25.073 million. The overall rate for unemployment among those covered by the insurance was up 1.7% to 17.2%. The 4-week average of continuing claims was up 2.314 million to 22.002 million. However, even here there was good news. In the majority of states, continuing claims are going down, which means people are starting to get their jobs back or find new work.
Existing Home Sales
Existing home sales came in at 4.33 million, which was down 17.8% on the month and has fallen 17.2% on the year. However, more than 4 million existing homes projected to be sold by the end of the year still represents significant demand, and the number did manage to slightly beat consensus estimates.
In fact, the average price of an existing home was up 2.2% to a new record at $286,800. The good news for buyers is that because of the drop in sales, there’s more supply on the market at the current sales pace, with supply sitting at 4.1 months in April vs. 3.4 in March. This is the case even with 1.3% of sellers taking their homes off the market amid the COVID-19 situation.
Mortgage rates were down last week. They remain very near record lows. If you’re in the market and can afford to buy or refinance a home right now, it’s a great time. To go over your options and determine whether it makes sense for you, feel free to speak with one of our Home Loan Experts.
The average rate on a 30-year fixed mortgage with 0.7 points paid in fees was down 4 basis points to 3.24% a week ago, down from 4.06% last year at this time.
Meanwhile, with 0.7 points paid in fees, the average rate on a shorter 15-year fixed mortgage was 2.7%, down a couple of basis points for the week and having fallen from 3.51% last year.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage with 0.4 points paid in fees was down a single basis point to 3.17% last week, falling from 3.68% a year ago.
Pretty much everything moving the markets is somehow related to this virus at this point. It was a fairly good week overall. The tone was set Monday, when Moderna said that each of the 45 people who participated in its vaccine trial had developed antibodies against COVID-19. It’s early, and the U.S. wants to test various vaccine candidates on better than 100,000 volunteers, but it’s a start.
The Dow Jones Industrial Average was up 3.18% on the week despite being down 8.96 points Friday to close at 24,465.16. Meanwhile, the S&P 500 was up 6.94 points on the day, closing at 2,955.45, up 3.2% for the week. Finally, the Nasdaq rose 39.71 points Friday to 9,324.59, a weekly uptick of 3.44%.
The Week Ahead
Tuesday, May 26
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, May 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.
Thursday, May 28
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 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, May 29
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.
After this week was mostly about housing from an economic data standpoint, this week we get lots of key numbers on the broader economy. There likely to be highly affected by the ongoing virus situation as these numbers should deal mostly with April, but we’ll see how things play out.
If you’re not into deep dives on mortgage rates and economic data, we get it. We’ve got plenty of home, money and lifestyle content to share with you if you subscribe to our mailing list below. If the warmer weather has you thinking about getting your hands down in the dirt, here are our best tips for planning a spring garden. Have a great week!
1 Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2020 Econoday, Inc. All rights reserved.
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