With the close of the year, it’s worth taking a moment to pause and reflect. As a major fan of Detroit sports, I like to see my teams do well, and for the most part, that didn’t happen in 2019. On the other hand, everyone around me mostly has their health and is doing well. Here’s hoping for more prosperity in 2020.
From an economic standpoint, 2019 has been a pretty good year. There were definite rocky portions, and the tariff situation in China is still an ongoing concern, but it’s on a path to cleaning itself up. Unemployment is extremely low, and the stock market is at all-time highs. There’s even some growing optimism for a more orderly Brexit. While it’s impossible to predict the future, from an economic perspective, we’re headed into the new decade on a high.
But enough looking back. Let’s get into what’s happening in the here and now.
Durable Goods Orders
New orders of durable goods came in at $242.6 billion in November, down 2% on the month. This means new orders of durable goods have been down 2 of the last 3 months. October, which saw a 0.2% increase in the latest revision, is the exception. Taking out transportation orders, new durable goods orders were nearly unchanged. Finally, new orders were up 0.8% when further excluding those from military defense.
Transportation equipment is a good place to start our analysis of new orders because it’s the main reason for the losses on the month. Overall transportation orders were down 5.9% on the month. Orders of motor vehicles and associated parts were up 1.9% on the month, but the real culprit for the down numbers was a 72.7% decrease in new orders of military aircraft. Aircraft orders in general are prone to intense fluctuations.
Capital goods orders were down 7.8% on the month and machinery was also down 1.6%. Manufacturing was down 3.2% while primary and fabricated manuals were down 0.3% and up 0.4%, respectively.
It’s the holiday season and that meant an increase in some consumer categories. There were 2% more orders of electrical equipment and appliances. There was a 2.9% increase in orders of communications equipment and an 8.9% uptick in new orders of computers and related accessories.
In terms of filling existing orders, these were up 0.1% at 251,595 for the month of November.
New Home Sales
New home sales were up 1.3% in the month of November to come in at a seasonally-adjusted annual rate of 719,000. In terms of supply on the market, that was unchanged from October at 323,000.
The most homes were sold in the South, where 400,000 homes were sold. This was followed by the West at 216,000. The Midwest lagged the leaders, with 71,000 sales. The Northeast still represented the smallest housing region by quite a margin, with only 32,000 sales.
Relative to sales, supply on the market was down to 5.4 months as compared to 5.5 months in October. The median sales price of a new home was $330,800, which is up about 4.4% from October.
MBA Mortgage Applications
Overall mortgage applications were down 5.3% last week. When taking out seasonal adjustment, applications were down 6%. Refinance applications fell 5% on the week, although they were 128% higher than that and same time a year ago. Purchase applications were down 7%. Although less sensitive to rate fluctuations than refinance applications, these are still up 5% compared to the same time last December.
According to the Mortgage Bankers Association, the average interest rate for a conforming 30-year fixed mortgage with 0.33 points paid in fees and a 20% down payment was up a single basis point to 3.99%. Refinances made up 62.2% of total applications last week.
Initial jobless claims were 222,000 last week, down 13,000 from the week prior. Meanwhile, the 4-week moving average of initial claims was up 2,250 to settle at 228,000.
On the continuing claims side of the ledger, these were down 6,000 to come in at 1.719 million. However, as with initial claims, there was an increase in the 4-week average. This was up 19,250 to come in at roughly 1.704 million.
Mortgage rates were relatively unchanged last week, and they remain markedly lower compared to the same time in 2018. If you’re in the market to buy or refinance a home, rates look really good right now.
The average rate on a 30-year fixed mortgage with 0.7 points paid in fees was up a single basis point in the week to 3.74%. This has fallen from 4.55% at the same time a year ago.
Looking at shorter terms, the average rate on a 15-year fixed mortgage with 0.7 points paid was unchanged at 3.19%, down from 4.01% a year ago.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) was up eight basis points on the week to settle at 3.45% with 0.3 points paid. This is down from 4% last year.
A flurry of optimism pervaded to end last week. New records were notched on both the Dow Jones Industrial Average and S&P 500. One of the better performing stocks was Amazon, which reported a record-breaking holiday shopping season.
The Dow finished the week at 28,645.26, up 23.87 points on the day and 0.67% for the week. Meanwhile, the S&P 500 was up 0.58% on the week after rising 0.11 points Friday to close at 3,240.02. Finally, the Nasdaq was down 15.77 points on the day, but still managed to hold on to the 9,000 mark, finishing up 0.91% on the week.
The Week Ahead
Monday, December 30
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.
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, December 31
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.
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, January 1
Quicken Loans®is closed along with banks and the stock market. Happy New Year!
Thursday, January 2
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
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, January 3
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.
The biggest report out this week is probably manufacturing. We’ll have it all for you in next week’s Market Update!
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