It was a great weekend! My favorite college football team, the Michigan Wolverines, beat their in-state rivals, the Michigan State Spartans. I only mentioned the win once or twice when we met my sister, a freshman at Michigan State, for lunch on Sunday. Hopefully your team won. Congratulations to those in Boston and LA whose teams will be in the World Series starting Tuesday. Good luck!

The economic data was a little more mixed than my weekend. Let’s see how things shook out.

Headline News

Retail Sales

Retail sales missed expectations by quite a bit in September, gaining only 0.1% vs. analyst expectations for a 0.6% uptick. It could have been worse as automobile sales were up 0.8% on the month. The assumption is the reason for this was the need to replace vehicles damaged in Hurricane Florence. When car and truck sales were taken out, sales were actually down 0.1% monthly.

Gas sales plummeted 1.8% on the month. When these were left out of the metric, retail sales were just flat. One interesting thing this month is that a control group, which takes out categories including cars and trucks, gas, building materials and restaurants, was actually up 0.5% on the month.

Health and personal care store sales were down 0.3% and department stores saw a drop of 0.8%. Meanwhile, non-store retailers had sales rise 1.1% September, matching the gain for furniture stores.

Industrial Production

Industrial production was up 0.3% in the month of September, including a 0.2% rise in manufacturing production, which is up 3.5% on the year. Meanwhile, capacity utilization and factories held steady at 78.1%.

Mining production was up 0.5% in this report and is up 13.4% since last year. Meanwhile, utility production was unchanged, but is up 5.4% annually. Motor vehicle production was up 1.7% in September and 7% since this time a year ago. High-tech production is up 0.6% and a yearly 6.9%.

There was a 0.2% gain in material production, which is up 8% annually. Manufacturing of business equipment was up 0.8% in September for a 3.6% annual gain. The final gainer is consumer goods, up 0.2% to increase 2.5% on the year.

It wasn’t all rosy, as manufacturing of nonindustrial supplies was flat on the month and up 2% on the year. Part of the reasoning for this flat number is a 0.6% drop in the manufacturing of supplies for construction, which has been affected by tariffs. This subcomponent has still seen a 2.4% annual growth rate.

Housing Market Index

Home builder sentiment was up one point in October to come in at 68 overall, the first rise in this number since July.

There was a four-point increase in the traffic of home buyers walking through new homes to come in at 53, the best reading in this area since February. Present sales and sales over the next six months were both up one point, reaching 74 and 75, respectively.

Looking at things regionally, the West is out front with a three-month average score of 74 with the South on its tail at 71. The Midwest and Northeast are just a little bit behind, but still have growing markets. Their three-month average is 57.

MBA Mortgage Applications

Increasing interest rates are no doubt having an effect on overall mortgage applications. The average interest rate on a 30-year fixed conforming mortgage was up five basis points to 5.1%. This is the highest average rates have been since February 2011. The rising rates are continuing to make people less interested in refinancing. Only 38.1% of mortgage applications were for a refinance, down another 0.9% last week.

Purchase applications were down 6% overall on the week, while refinancing applications fell 9%.

Housing Starts

The volume of housing starts slowed in September, down 5.3% to 1.201 million, missing expectations that they would come in at 1.216 million. Completions were down 4.1% to 1.162 million, which was a drop of 4.1% and the lowest number since November 2017.

Hurricane Florence didn’t benefit starts for sure. In the South, starts were down 13.7%, but it should be noted that there was a 14% drop in starts in the Midwest, which wasn’t affected by this weather.

Turning to building permits, these were down 0.6% in September to come in at 1.241 million. This is the weakest seasonally adjusted annualized rate for permits since last November. There was a 7.6% dip in multi-family permits, while permits for single-family homes were up 2.9%. Total permits are down 1.0% on the year with single-family residences only up 2.4% and permits for multi-family dropping 7.8% annually.

Jobless Claims

Initial jobless claims were down 5,000 last week to come in at 210,000. Meanwhile, the four-week average was just slightly higher, up 2,000 and settling at 211,750. While we’ll continue to monitor the effects of Hurricanes Michael and Florence, there appeared to be no impact on claims in the affected states last week.

Continuing claims were down 13,000 last week to 1.64 million. Meanwhile, the four-week average was down 1,250 to 1.653 million. Both are at very low levels not seen in the last 45 years.

Existing Home Sales

Existing home sales for September missed consensus expectations by quite a wide margin, hitting a seasonally adjusted annualized rate of just 5.15 million, while analysts had expected a number of 5.3 million. This was down 3.4% on the month, and they’ve fallen 4.1% on the year.

Turning to regional numbers, sales in the South were down 5.4%, a number which could have been affected by Hurricane Florence. However, sales in the West were nearly as bleak, down 3.6%. Northeastern sales were down 2.9%, while the Midwest held its own, remaining unchanged on the month.

The median sales price of an existing home was down 2.8% to $258,100. Prices are still up 4.2% on the year, but sales have dropped 4.1% annually, so additional cuts may be in order.

There’s still a supply problem and the market’s overall inventory dropped by 1.6% in September to 1.88 million. Despite this, because fewer homes are being sold, supply actually improved relative to sales, coming in at 4.4 months compared to 4.3 months in August.

Mortgage Rates

Mortgage rates were mixed last week, with fixed rates decreasing and rates for adjustable rate mortgages (ARMs) going up. If you’re in the market to purchase or refinance your home, it’s a good time to go ahead and lock your rate.

Mortgage rates were slightly lower to start the week, but they bounced back up after the minutes from the last meeting of the Federal Reserve were released, showing that the Fed governors were comfortable with the current path of increasing short-term interest rates.

As we’ve discussed before, although there’s no direct correlation between short-term rates and longer-term rates for things like mortgages, when one moves up, the other has a tendency to do so, because the increasing cost for lenders is typically passed on to consumers.

The average rate on a 30-year fixed mortgage was down five basis points last week to 4.85% with 0.5 points paid in fees. This is up from 3.88% a year ago.

In shorter terms, the average rate on a 15-year fixed mortgage with 0.4 points fell three basis points to 4.26%. This has increased from 3.19% last year at this time.

Finally, the average rate on a 5-year treasury-indexed, hybrid ARM rose three basis points to 4.1%, rising from 3.17% at this time in 2017.

Stock Market

Stock market shares rebounded a bit last week from the recent downturn they’ve been experiencing, although analysts remain cautious. Procter & Gamble led the way Friday, going up 8.8% for its biggest gain since October 28, 2008. The company had particularly strong earnings reports.

If you had P & G in our Fantasy Stock League, go ahead and give yourself a pat on the back. It’s been a good week. Don’t forget – there are prizes given out for the best performance over a rolling two-month period, as well as the best overall portfolio at the end of the year.

The Dow Jones industrial average was up 64.89 points Friday to finish the week at 25,444.34, a weekly increase of 0.41%. Meanwhile, the S&P 500 finished the week at 2,767.78, down a single point on the day and up 0.02% for the week. Finally, the Nasdaq was down 0.64% on the week as tech stocks continue to be more affected in the current downturn than the wider market. The index was down 36.11 points Friday to close at 7,449.03.

The Week Ahead

Wednesday, October 24

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.

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.

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

Thursday, October 25

Durable Goods Orders (8:30 a.m. ET) – These are based on new orders placed with domestic manufacturers for factory goods.

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.

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 four-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, October 26

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.

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 ton of data hitting in the back half of this week. The most important releases include GDP as a measure of economic growth as well as durable goods orders for a look at the manufacturing sector, but we also get some housing numbers in the form of the pending home sales index for existing homes and new home sales data as well. We’ll have a full recap next Monday.

I’m aware that economic press releases don’t exactly get you fired up and ready to face a new week on a Monday afternoon. Don’t worry! We’ve got plenty of other great home, money and lifestyle content to share with you if you subscribe to the Zing Blog below. Continuing with our spooktacular Halloween theme, turn up the fright with some great fake blood recipes for your costumes and haunted house. Enjoy your week!

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