Market Update

Sometimes you can have the best laid plans in life and then a curveball comes and you just have to go with it. My sister is a big fan of J.D. Martinez, so for her high school graduation gift, I got tickets in right field for when he returned to Detroit with the Boston Red Sox this past weekend.

By the time they got to the sixth place on the batting order of the visiting lineup, it became clear he wasn’t playing after running into the wall when catching a ball the night before. At least the Tigers won, scoring five runs and shutting out Boston.

In terms of economic data last week, it was a similarly mixed bag. A couple of reports came in with really strong numbers, with others leaving a little something to be desired. Let’s get into it.

Headline News

Retail Sales

Retail sales were up 0.5% on the month of June, matching analyst expectations. When cars were taken out, the 0.4% increase in sales results are in line with expected numbers. Sales and consumer cars and trucks were up 0.9% on the month.

Gas prices were up 1% for the month and when these were taken out along with cars, sales were only up 0.3%.

In other key categories, restaurant spending was up 1.5% in June. Combined with a May gain of 2.6%, this points to people having more disposable income. Non-store retailers saw sales increase 1.3%, a good sign for e-commerce. Meanwhile, sales of building materials and furniture are up 0.8% and 0.6%, respectively. This is a good sign for investment in residential homes. Finally, health and personal care spending was up 2.2%.

Industrial Production

Industrial production was up 0.6% in the month of June, meeting expectations and rebounding quite strongly after being down 0.1% last month due in large part to a fire at a major Michigan auto parts supplier. Motor vehicle production was up 7.8% last month after falling 8.6% in May. The high-tech sector was also up 1.4%.

In the closely watched manufacturing sector, output was up 0.8% month after falling 0.7% in May. Mining production was up 1.2%, which made up for a 1.2% dip in utility production blamed on June’s nice weather.

More space was put to use in factories last month, with this metric up 0.3% to 78.0%.

Housing Market Index

This metric of home builder sentiment was unchanged from last month, remaining strong at a level of 68. It has remained flat despite strong home sales, which have also led to increasing housing starts and permits in recent months. Construction costs have been high, which has been a negative for builders.

Current sales numbers are very strong at an index level of 74. One negative is the fact future sales expectations in the next six months were down two points to come in at 73. Traffic of prospective buyers is still growing, albeit slower than the other areas, coming in at 52.

Looking briefly at regional data, the West is out front in terms of builder sentiment, coming in at 75, with the South following at 70. The Midwest is next at 65, with the Northeast playing catch-up at 57.

MBA Mortgage Applications

Mortgage applications were down 2.5% overall last week as the average rate on a 30-year fixed mortgage was up one basis point to 4.77%. Purchases make up 63.5% of the overall mortgage market right now.

Purchase applications were down 5% while applications to refinance rose 2% for the week.

Housing Starts

In a report that won’t make those in the market to purchase a home happy, housing starts fell 12.3% to a seasonally-adjusted annualized rate of 1.173 million in June. Single-family starts were down 9.1% to 858,000 annually. Meanwhile, multi-family starts fell 19.8% to come in at 315,000. The Midwest showed the most visible weakness, but there were declines in all regions.

Permits were down 2.2% to come in at 1.273 million on an annualized basis after seasonal adjustment. Single-family permits were up 0.8% to come in at 850,000. Unfortunately, multi-family permits were down 7.6% to come in at 423,000. Meanwhile, completions for the month were flat.

Jobless Claims

Initial jobless claims fell 8,000 to come in at 207,000 last week. This meant the four-week average was down 2,750, settling at 220,500.

Meanwhile, on the continuing claims side, these were up 8,000, rising to 1.751 million. The four-week moving average of continuing claims stood at about 1.736 million, up 6,000 from the previous week.

Mortgage Rates

Mortgage rates didn’t move much last week, but when they did, it was mostly in the right direction. If you’re in the market for a mortgage, you can’t go wrong locking your rate at this point. It’s hard to guess which way the market is going to go from day to day, so if you see a rate you like, take advantage.

The average rate on a 30-year fixed mortgage was 4.52% with 0.4 points in fees last week, down one basis point from the week prior. At this time a year ago, the rate was 3.96%.

Looking at shorter-term rates, the average for a 15-year fixed mortgage with 0.4 points was 4.00%, falling two basis points from last week. This is up from 3.23% last year.

Finally, the average rate on a 5-year treasury-indexed hybrid adjustable rate mortgage (ARM) was 3.87%, with 0.3 points, rising a single basis point from the previous week. Last year at the same time, the average rate was 3.21%.

Stock Market

Microsoft and Honeywell both reported better-than-expected earnings Friday which helped counter investors’ concerns that the trade war with China is ramping up.

If you had Microsoft or Honeywell in our Fantasy Stock League, your portfolio probably got a little boost to end the week – it’s not too late to join the contest! There are prizes given for the best portfolio at two-month intervals and a grand prize awarded to the best portfolio at the end of the year. You should get in on the action!

The Dow Jones Industrial Average finished the day down 6.38 points to close at 25,058.12. Despite this, it was up 0.15% for the week. The S&P 500 closed at 2,801.83 points, down 2.66 points for the day, but up 0.02% for the week. Finally, the Nasdaq was down 0.07% for the week after falling 5.10 points on Friday to close at 7,820.20.

The Week Ahead

Monday, July 23

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.

Tuesday, July 24

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.

Wednesday, July 25

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.

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

Thursday, July 26

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.

Friday, July 27

Gross Domestic Product (GDP) (8:30 a.m. ET) – This 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 are quite a few big economic reports next week. In terms of things important to the mortgage market, we get price data as well as new and existing home sales. GDP is always an important measure of overall economic activity and growth. We’ll have it all covered in next week’s Market Update.

If talk of economic activity in mortgage rates makes you want to go back to sleep, I can certainly understand the impulse. Fortunately, we’ve got plenty of home, money and lifestyle content we would love to share with you if you subscribe to the Zing Blog below.

If that stuff doesn’t wake you up, perhaps you could be sleeping better. Here’s what you need to know if you’re looking to buy a mattress online. Have a great week!

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