I hope everyone had a great week! Baseball finally settled on an agreement to start the season, so it’s incredibly exciting for me. I also had a couple of days off last week, so I’m ready to go this afternoon!
Unfortunately, some of the data still shows that the overall economy might be less peppy than I am, dealing with the fallout from COVID-19.
As usual, and analysis for this report was provided by Econoday.1 Let’s get to it!
Existing Home Sales
Existing home sales were down 9.7% in the month of May and have fallen 26.6% on the year to come in at a seasonally adjusted annual rate of 3.91 million. This comes after sales fell 17.8% in April.
Low mortgage rates and supply that’s still pretty low at 4.8 months as compared to 4 months relative to the pace of sales in April have caused home prices to stay relatively high. The median price for an existing home is $284,600, which is only down 0.7% from last month and still up 2.3% on the year. Overall inventory was up 6.2% to 1.55 million, so maybe the situation will improve if the virus is held at bay and real estate can get somewhat back to normal.
Still, it’s less than encouraging to see major decreases in sales across all four regions of the country. We’ll be keeping an eye on things.
New Home Sales
Meanwhile, builders benefited from a major increase in sales in May. The headline number came in at a seasonally adjusted annual rate of 676,000, up 16.6% on the month. Even more encouragingly, this rate is up 12.7% from where it was in May of last year before anyone was thinking about the economic consequences of the situation we find ourselves in.
It wasn’t all rosy. April numbers were revised downward by 43,000 to 580,000. This means that instead of a small gain compared to March, sales were actually down 5.2%.
After steadily falling the last couple of months, prices were up 4.69% for new homes in May, coming in at a median of $317,900. Still, it’s worth noting that this may be related to their being less supply on market is this fell by 325,000 units to 318,000. The effects of COVID-19 have slowed construction considerably. Supply relative to the current sales rate is at 5.6 months compared to 6.7 months in April.
MBA Mortgage Applications
For the first time in 9 weeks, mortgage applications fell last week, down 8.7% overall. There was a 12% drop in refinance applications. Meanwhile, despite purchase applications being down 3% compared to last week, purchase applications are still up 18% compared to last year at the same time.
When looking at rates, these remained unchanged last week as the average rate on a 30-year conventional mortgage in this survey was at a record low of 3.3%.
FHFA House Price Index
Overall house prices were up 0.2% in the month of April according to FHFA. The year-on-year appreciation rate did slow at bit, going from 5.9 to 5.5%. It’s been noted that the Mountain and Pacific regions which usually show strong growth, were flat for the month.
It’ll be interesting to see if prices start to rise as states reopen, pending the movement of the virus.
Durable Goods Orders
Durable goods orders were up 15.8% is there were big gains in terms of both vehicle orders and aircraft. When these were taken out, orders were only up 4%. Finally, core capital goods were up 2.3% on the month. The core number deals with the removal of defense goods and aircraft being removed.
Orders are still down 13.6% on the year. However, total shipments were up 4.4% on the month, while being down 11.3% on the year. Meanwhile, unfilled orders have fallen 4.1% on the year, despite being 0.1% higher in May. Inventories are up 2.7% on the year after going up your 0.1% for the month.
Gross Domestic Product (GDP)
In terms of economic growth, data showed the economy shrank 5% in the final reading of the first quarter. Given the shutdown that took hold in the majority of the country to one extent or another, there will also be economic shrinkage shown in the second quarter, meaning we are likely officially in a recession, but the good news is that as things start to reopen, there should be a bounce back relatively quickly. What remains to be seen is how long it will take the economy to return to the levels we saw before the virus hit.
In the final reading, consumer spending was down 6.8% and inflation was up 1.4% in this reading. Business investment was down 1.3%. Government spending was up and residential investment rose 18.2%, so it wasn’t all negative. Exports weren’t good here, and that’ll be something to keep an eye on in the second quarter because the world economy has been shut down by this to a certain extent. No one has escaped it.
International Trade In Goods
Speaking of exports, these were down 5.8% in May while imports were down 1.2%. The combination caused the trade deficit to go up by $3.6 billion to $74.3 billion on the goods side.
Agricultural products were down 3.3%, while industrial supplies fell 11.8%. Cars and trucks saw volume decrease 11.1%. Finally, capital goods saw volume decreased 2.5%.
On the imports side, oil prices were up 4.7%, which caused an increase in industrial supply imports. However, in other areas things were weak. Vehicle imports were down 32.8% in May after falling 52.2% in April. On the capital goods said, these were down 1.9% for May after imports fell 10.7% in the category in April.
Initial jobless claims last week were 1.48 million, down 60,000 from the week before. Meanwhile, the 4-week average of initial claims was down 160,750 to about 1.621 million.
On the continuing claims side, these were down 767,000 at 19.522 million. The overall unemployment rate was down to 13.4%, a decrease of 0.5% from the week prior. The 4-week moving average of continuing claims was down 329,750 to about 20.421 million.
Both of these numbers are still very elevated from where they would normally be.
Personal Income And Outlays
Personal incomes fell 4.2% in May. However, this beat expectations for a 6.4% decrease. Part of the reason for the increase of 10.8% in April was the fact that incomes were inflated by government assistance in the form of stimulus checks.
In good news, consumer spending was up 8.2% while prices were up 0.1% in May both overall and in core categories. Overall prices are up 0.5% on the year and 1% in core categories.
There was more spending for recreational goods, vehicles and healthcare, which grabbed some of the activity on the spending side.
Consumer sentiment was down 0.8 points in the final reading of June to come in at 78.1. Despite this, people are still feeling pretty confident with sentiment up 6.7 points compared to May. The gains are also pretty evenly distributed between current conditions and future expectations.
Meanwhile, anticipation for inflation showed that this was down 0.2% over the next year to 3% and down by the same amount for the 5-year outlook at 2.5%.
According to Freddie Mac, mortgage rates stayed relatively flat last week. If you’re in the market for a mortgage, it’s hard to imagine rates getting much lower than this. If you’re ready, feel free to talk to one of our Home Loan Experts.
The average rate on a 30-year fixed mortgage with 0.8 points paid in fees was 3.13%, unchanged from last week. Last year at this time, the rate was 3.73%.
Meanwhile, looking at shorter terms, the average rate on a 15-year fixed mortgage was up a single basis point to 2.59% with 0.8 points paid. This has fallen from 3.16% a year ago.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage was also down one basis point to 3.08% with 0.5 points paid. At the same time a year ago, the rate was 3.39%.
Things have started to reopen a bit, but no one’s out of the woods yet. In fact, spikes in cases of COVID-19 caused a large drop in the stock market to end the week. There is concern that the recovery may not be as quick as some would have hoped given the movement of the virus.
The Dow Jones Industrial Average was down 730.05 points on the day to close at 25,015.55. This was a fall of 3.31% for the week. Meanwhile, the S&P 500 finished at 3,009.05, falling 2.86% on the week and 74.71 points on the day. Finally, the Nasdaq was down 259.78 points and 1.9% for the week after finishing at 9,757.22.
The Week Ahead
Monday, June 29
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.
Tuesday, June 30
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.
Wednesday, July 1
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.
ISM Manufacturing Index (10:00 a.m. ET) – This index measures the general direction of manufacturing within the U.S. The qualitative survey of purchasing managers looks at production, new orders, order backlogs, inventories and supplier deliveries, among other factors.
Thursday, July 2
Employment Situation (8:30 a.m. ET) – The employment situation report measures unemployment in the labor force as well as the sentiments of workers about the job market.
International Trade (8:30 a.m. ET) – International trade is composed of merchandise (tangible goods) and services. It’s available by export, import and trade balance for six principal end-use commodity categories and for more than 100 principal Standard International Trade Classification system commodity groupings.
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.
Friday, July 3
Quicken Loans®, along with banks and the stock market, will be closed Friday in observance of Independence Day. Happy Fourth!
A bunch of stuff is coming out this week in advance of the holiday Friday. We’ll have it all covered in next week’s Market Update!
We get it if this isn’t necessarily your cup of tea on a Monday. We’ve got plenty of home, money and lifestyle content to share with you if you subscribe to our mailing list below. As you get ready to do some celebrating, here’s a post on some good barbecue for your cookouts. Stay safe and socially distant!
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