My team won, and I just splurged on concert tickets to go see three bands of my youth. It’s been a good Monday so far!
In what seems to be increasingly rare, the markets and economic data all had their own good news to share last week. Let’s jump right in!
Quicken Loans Home Price Perception Index (HPPI)
Homeowners overestimated the value of their homes by 0.64% in August. The gap between homeowner estimates and actual appraised values was just 0.01% higher than where it stood in July.
Taking a look at the data on a regional level, homeowners in the Midwest thought their homes were worth 0.59% more than appraised values. This difference was 0.6% in the West. The Northeast and South were at 0.66% and 0.67%, respectively.
In major metropolitan markets, the majority of appraised values are still coming in higher than homeowners expect. Boston has a hot market with values coming in 2.05% higher than what homeowners expect. Meanwhile, Chicago is in the opposite position with homeowners continuing to think their homes are worth 1.77% more than they are. Kansas City, Missouri, and Sacramento, California, had the markets closest to balance in August with values coming in 0.08% above homeowner expectations.
Quicken Loans Home Value Index (HVI)
Home values were up 4.64% year-to-year after having risen 0.95% in August.
Regionally, things were a bit uneven. Values were down 0.36% in the Northeast, but they’ve gone up 4.32% on the year. In the Midwest, home values were up 0.07% in August and are now up 5.44% year-over-year. In the West, values increased by 0.35% for August while they’re up 1.93% since August of last year. Finally, values were up 1.09% in the South, making for a sizable increase, which is now up 4.03% on the year.
MBA Mortgage Applications
Overall mortgage applications were up 2% last week compared to the week prior. Applications for purchase and refinance were up 4% and 5%, respectively.
This is no doubt helped by the fact that the average rate on a 30-year fixed conventional mortgage was down five basis points to 3.82%. However, it’s worth noting that it’s not just refinance applications that are driving things due to low rates. Purchase applications are up 9% on the year, which is a good sign for a housing market that has struggled lately to find consistent footing.
Producer Price Index (PPI)
Prices at the production level were up an as expected 0.1% in August. On the year, these were up 1.8%. It’s worth noting that food and energy prices have been holding things down, and this month was no different, with prices up 0.3% on the month and 2.3% on the year when these were excluded. Indeed, food prices were down 0.6%, with the price of vegetables and grains falling quite a bit. Energy prices were down 2.5% after gas prices were down 6.6% for the month. We’ll get into it later, but that may be changing soon.
Of the headline numbers, the final key report was that trade services, which measure retail and wholesale, were up 0.2%. When these costs were removed along with food and energy, inflation was up 0.4% and 1.9% on the year. There was a 4.2% dip in machinery prices at the wholesale level, while there was a 16.8% uptick in the cost for fuel and lubricants in retail.
Overall service prices were up 0.3% as the price of getting a room overnight was up 6.4%. It’s conference season, after all. Goods prices did go down 0.5%.
Consumer Price Index (CPI)
On the consumer side, prices were up 0.1% in August, as expected. Inflation on the year is only up 1.7%, but that’s because food and energy have been holding it back. When these were taken out, inflation was up a higher than expected 0.3% for the month and 2.4% on the year.
At the consumer level, energy prices were down 1.9% in August, while food prices were flat.
In terms of core costs after food and energy were taken out, housing and medical services make up the majority of the index. While housing was only up 0.1%, the cost of medical services was up 0.7%. On the housing side, both rent and the amount owners would have to pay if they wanted to rent a similar space were up 0.2% on the month. Offsetting this was the fact that the price of lodging was down 2.1%, which is the direct opposite of what we saw in the producer index.
Hospital service pricing was up 1.4%, while medical commodity costs were also higher. This offset the fact that physician services were flat. On an annual basis, the cost of housing is up 2.8% in this index while medical care is up 3.5%.
The cost of recreation was also up 0.5%. Finally, the cost of household furniture, airfare and used vehicles started to push upward.
Initial jobless claims were down 15,000 last week to come in at 204,000. Meanwhile, the 4-week average was down 4,250 at 212,500.
On the continuing claims side, these were down 4,000 to come in at 1.670 million. Finally, the 4-week average of continuing claims was down 14,500 to come in at just over 1.680 million.
Retail sales were up 0.4% in August, well above the consensus for a 0.2% increase. Car sales were up 1.8% on the month and have gone up 6.8% on the year. This was the major source of strength, as sales were flat when cars were taken out of the equation. Gas prices were down quite a bit, and when both auto and gas were taken out of the equation, sales were up 0.1% on the month. However, a control group that explains all these voluntary categories and focuses only on things that aren’t as seasonally affected was up 0.3% for the month of August.
Sales at nonstore retailers were up 1.6% as more people move toward e-commerce. General sales were down 0.3% in something that may point toward further problems at department stores. Building materials were up 1.4%. Rounding out the up-and-down motif, food service sales were down 1.2%.
Consumer sentiment was up 2.2 points in a preliminary reading for September to start the month at 92. Although consumers are still concerned about the ongoing effects of the trade war between the U.S. and China, there was a 1.6-point uptick in the current conditions component to 106.9. Expectations for the future were up 2.5 points to come in at 82.4.
Inflation expectations over the next year are up 0.1% to 2.8%. Meanwhile, the outlook for the next 5 years was down 0.3% to 2.6%.
Mortgage rates went up quite a bit last week. This was mostly due to the fact that there was increased optimism over a trade deal with China as the countries agreed to talk again. As of this morning, rates were pushing a bit lower. We’ll discuss why when we get to the stock market.
The key thing to know for now is that rates remain in a really good spot, whether you’re looking to purchase or refi. It’s a good time to lock your rate and avoid this type of market volatility altogether.
The average rate on a 30-year fixed mortgage was up seven basis points last week to 3.56% with 0.5 points paid in fees. However, this is down from 4.6% a year ago.
In shorter terms, the average rate on a 15-year fixed mortgage was up nine basis points to 3.09% with 0.5 points. This is still down from 4.06% last year.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) went up six basis points to 3.36% with 0.3 points. On the year, this is down from 3.93%.
The stock market had a good week last week. There was trade optimism abounding. It’s worth noting that this morning, the Dow Jones Industrial Average was down 150 points. GM workers called for a strike against the automaker, but perhaps more than that, there are tensions with oil as Saudi Arabian oil fields were attacked.
Turning back to last week for the moment, the Dow finished Friday up 1.58% on the week, closing at 27,219.52, up 37.07 points on the day. Meanwhile, the S&P 500 finished the week at 3,007.39, down 2.18 points on the day, but up 0.96% for the week. Finally, the Nasdaq closed Friday down 17.75 points to 8,176.71, but it was up 0.91% over the previous 5-day period.
The Week Ahead
Tuesday, September 17
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.
Wednesday, September 18
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.
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.
Thursday, September 19
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.
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.
We get lots of housing data and a key report on industrial production, which will give us a look at manufacturing next week. All of that is coming in next Monday’s Market Update!
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