Normally, I would talk about something exciting that was happening in the world last week or this past weekend to lead into this, but I feel like we’re all in the same spot, not doing much. That said, this weekend I learned that, continuing a pattern that’s been true since age 8, I still stink at a certain real estate property trading game. On the other hand, I was in my element during a game based around various brands and their ads. I think that means I spend a lot of time watching TV.
Not much new is happening in terms of economic news, either. Rather, a lot of stuff is happening, but the data points are being largely ignored because it’s still all about the trajectory of COVID-19 for the markets. Nevertheless, let’s get into it.
The economic data referenced in the following reports was compiled with the assistance of summaries from Econoday.1
MBA Mortgage Applications
Applications for new mortgages were up 7% overall led by a 10% increase in applications to refinance. Consumers were ready to act as the average rate on a conforming 30-year fixed mortgage fell 4 basis points to 3.45%.
The downside here is that purchase applications were down another 2% on the week and have fallen 35% since this time a year ago. The stay-at-home orders covering the vast majority of the country mean that people aren’t in as big a hurry to get a jump on the spring home buying season right now.
Retail sales were down 8.7% overall in the month of March, which was lower than the consensus estimate for the drop. Yet, there was a little bit of good news here. We’ll touch on that below.
Vehicle sales were down 25.6%, which makes some sense because no one is going anywhere. When this was removed from the numbers, sales were only down 4.5%. Even when people do need to go out a little bit, they aren’t using very much gas. Gasoline sales were down 17.2% and when these losses were removed from the data along with the vehicle sales numbers, sales were only down 3.1%.
It was expected, but another area that took a big hit was restaurant sales, down 25.6% on the month. Also seeing double-digit decreases were electronics and appliances, sporting goods and miscellaneous stores. Clothing stores in particular were down 50.5% in terms of sales.
I did say that there was some good news in this report. A control group consisting of components that aren’t as seasonally up and down and more based on consumer staples was actually up 1.9% on the month. Among those areas that saw a rise were grocery stores, which had sales spikes of 25.6% as consumers built out their reserves in the home because they aren’t eating out. Sales in health and personal care stores were up 4.3%. Sales in general merchandise stores were up 6.4%, even as they overcame a 19.7% drop in department stores sales.
Meanwhile, I’ve heard anecdotes from several people that they’re turning to online shopping as a form of retail therapy. There would seem to be evidence of that in the data, where sales of non-store retailers were up 3.1%. Finally, sales of building materials were up 1.3% in March, possibly because people are taking this time to catch up on that never-ending list of home projects.
Like many of these March monthly reports, it’ll be interesting to see what happens in April because things were pretty normal until the middle of the month.
Industrial production dropped 5.4% in March, with manufacturing down 6.3%. Capacity utilization in the factories was down 4.3% to 72.7% overall.
Consumer goods production was down 5.9% including cars and trucks being down 27.2%. Business equipment production saw an 8.6% decrease, including a 22.8% decrease in transit equipment while production of construction supplies was down 5.8% production of durable goods decreased 9.1% in March, while non-durable goods were down 3.2%.
Housing Market Index
Homebuilders were suffering from more than a little pessimism about the outlook for the housing market in April. The overall index was down 42 points to 30, indicating the depth of the contraction in the overall market. For context as to how deep this is, even in these conditions, analysts were only expecting a 12-point downturn. In the Northeast, there was only an overall score of 19.
Statewide lockdowns in many areas definitely impacted traffic of people going through homes. This component fell 43 points to just 13. Meanwhile, current sales were down 43 points and future sales fell 39 points to both settle at 36.
This doesn’t point to good things for the future of housing starts to begin the second quarter. That could have a broader impact on the overall economy because residential construction is a big part of the residential investment numbers for gross domestic product.
Housing starts were down 28.6% to a seasonally adjusted annual rate of 1.216 million in March as the early effects of COVID-19 started to put a damper on construction activity. This missed the consensus estimate for 1.35 million starts. February was also revised down from 1.599 million starts to 1.564 million.
On the permit side, these fell to a seasonally adjusted annual rate of 1.353 million, though not hit as hard as starts. Permits were only down 7.3% as they aren’t dependent on having construction crews available to actually start the job. Finally, completion of construction on homes was down 6.5% at 1.227 million on a seasonally adjusted basis.
Initial jobless claims were down by 1.37 million last week to a still very high 5.245 million. The 4-week moving average of continuing claims was up about 1.241 million to settle at roughly 5.509 million.
The continuing claims side continues to be an issue and will be until business can return to some level of normalcy. Last week, continuing claims were up 4.53 million to settle at 11.976 million. This is the highest number since the beginning of this measurement. The 4-week average of continuing claims was about 6.066 million, up about 2.569 million on the week.
Mortgage rates were fairly stagnant last week, but they’re still sit near all-time lows. With virtual tours and modified appraisal practices, it’s still possible to buy a home if now is the right time for you. With rates where they are right now, it’s also not a bad idea to look at refinancing. Of course, every situation is different, and we strongly encourage you to consult with our Home Loan Experts.
The average interest rate on a 30-year fixed mortgage was down 2 basis points in this survey to 3.31% with 0.7 points paid. This is down from 4.17% a year ago.
Meanwhile, the average rate on a 15-year fixed mortgage with 0.7 points paid was up 3 basis points to come in at 2.8%, still down from 3.62% last year.
Finally, the average interest rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage was 3.34% with 0.3 points paid, having fallen 6 basis points last week and dropping from 3.78% in mid-April of last year.
The stock market was up quite a bit Friday. If you had stock in Gilead Sciences, you may have felt it was a particularly good day. The optimism in the markets had a lot to do with the company reporting that a drug used to treat COVID-19 had some effectiveness in treating the virus in trials.
The Dow Jones Industrial Average was up 704.81 points Friday to close at 24,242.49, up 2.21% on the week. Meanwhile, the S&P 500 finished at 2,874.56, up 75.01 points on the day and 3.04% on the week. Finally, the Nasdaq was up 6.09% for the week after rising 117.78 points Friday to close at 8,650.14.
The Week Ahead
Tuesday, April 21
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.
Wednesday, April 22
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 House Price Index 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.
Thursday, April 23
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.
New Home Sales (10:00 a.m. ET) – This report measures the number of newly constructed homes with a committed sale during the month.
Friday, April 24
Durable Goods Orders (8:30 a.m. ET) – These are based on new orders placed with domestic manufacturers for factory goods.
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 lots of housing data and some durable goods information as well as another peek into the mind of the consumer next week. We’ll have it all covered for you in Market Update.
This all has a tendency to seem a little dry and unimportant at the moment. If you feel that way, we get it. Not to worry. We have plenty of home, money and lifestyle content to share with you if you subscribe to our email list below. We’re all spending a lot more time in our houses right now and learning which spaces work and don’t work for each of us. If you think your kitchen could use some sprucing up, here’s a guide to remodeling. Have a great week and stay healthy!
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