I hope everyone had a great Father’s Day! If everyone is well rested, we should jump right into the market data. There was a lot going on last week, including some and inflation data and industrial production numbers. Add a Federal Reserve rate decision to all that, and it was a busy week.
Producer Price Index (PPI): Producer prices were flat in May. However, much of the weakness was in food and energy. Food was down 0.2% and energy prices fell 3.0%. When these categories are taken out, prices are up 0.3% and 2.1% for the year. Service prices were up 0.3% and trade services were up 1.1%. When trade services were further excluded, prices fell 0.1% and are up only 2.1% on the year. Overall, inflation is at 2.4% annual growth.
Quicken Loans Home Price Perception Index (HPPI): The gap between homeowners and appraisers on home value opinions got a little wider in May, increasing by 0.03% as appraisals came in 1.93% below homeowner estimates. Homeowners overestimated value by 1.63% in the West. This was followed by 1.90 and 1.97% in the South and Midwest, respectively. Northeastern homeowners were off in their estimates by 2.12%. At the metropolitan level, homeowners in Philadelphia are still overestimating property value by 3.32%. Denver homeowners have the most undervalued homes, as appraisals have come in 2.58% higher than homeowner estimates. Residents in Kansas City, Missouri were closest, overestimating value by just 0.12%.
Quicken Loans Home Value Index: Home values rose 0.63% nationally and are up 4.92% on the year. Values fell 1.63% in May in the Northeast. They’ve risen just 1.15% annually. Other regions were up, with values rising 0.51% in the South to 5.07% annually. Prices in the Midwest were up 1.00% to 5.11% on the year. The West was the big winner, up 1.51% in May and 6.85% on the year.
MBA Mortgage Applications: Mortgage applications were up 2.8% last week. Purchase applications were down 3.0%, but refinance applications were up 9.0%, possibly due to anticipation of the Fed raising short-term interest rates. The average rate on a 30-year fixed conforming mortgage fell one basis point to 4.13%.
Consumer Price Index (CPI): Prices for consumers fell 0.1% in May to come in at 1.9% annually. Much of the weakness is in food and energy. When these categories are taken out, prices rose 0.1%. Prices are only up 1.7% on the year with food and energy were removed. Housing was up just 0.2% and the cost of medical care was unchanged as were the education and communication categories. Energy prices were down 2.7% with a 6.4% drop in the price of gasoline. Transportation prices were also down 1.4%. Finally, apparel prices dropped 0.8%.
Retail Sales: The bad news just kept rolling on Wednesday as retail sales came in down 0.3%. It was down the same amount when cars were taken out. Gas prices didn’t help, as the metric came in flat when gas and cars were taken out of the equation. Gas prices were down 2.4% by this metric in May. Restaurant sales were down 0.1% in there was a 1% drop in department stores sales. Finally, electronics and appliance sales were down 2.8%.
Jobless Claims: Initial claims fell by 8,000 jobs to come in at 237,000. The four-week average was up by just 1,000 claims to 243,000. Continuing claims rose by 6,000 to come in at 1.935 million. The four-week moving average of continuing claims rose by 9,000 to 1.927 million.
Industrial Production: Production numbers for unfortunately flat in May. Manufacturing actually fell 0.4%. Factory capacity utilization dropped 0.1% to 76.6%. Vehicle production was down 2.0% as consumers are not consistently buying cars. Business equipment production was also down 0.7%. High-tech goods production was unchanged. In one positive, mining and utilities were up 1.6% and 0.4%, respectively.
Housing Market Index: Builder sentiment has fallen slightly in June, down two points to come in at 67. That said expectations for future sales are strong at 76 and current sales are also quite strong at 73. However, the weakness is in a lack of traffic from first-time home buyers. That number is once again in contraction at 49. Regional data from the West, Midwest and South all shows overall scores near 70. The Northeast is still well behind, in contraction at 46.
Housing Starts: Housing starts were expected to bounce back in May, but they actually fell 5.5% to come in at a seasonally adjusted annualized rate of 1.092 million. Single-family starts fell 3.9% to 794,000 and multifamily starts were down 9.7% to 298,000. Permits weren’t any better, down 4.9% to 1.168 million. On the single-family side, permits were down 1.9% to 779,000. Multifamily permits fell 9.7% to 298,000. Adding to the ugly was the fact that April numbers were revised down.
Consumer Sentiment: Consumer sentiment fell 2.6 points to 94.5 in initial June readings. Expectations readings were down three points to 84.7 due to less confidence in jobs. The current conditions component also fell 2.1 points to 109.6, meaning consumers may be looking to spend less money in June. There were declines in confidence among both Democrats and Republicans. The one-year inflation outlook is flat at 2.6%, matching the five-year outlook, which is up 0.2%.
Mortgage rates were slightly higher ahead of the Federal Reserve’s decision to raise short-term interest rates by a quarter-point last week. That being said, rates are still really low and it’s a great time to lock your rate.
This week, 30-year fixed-rate mortgages (FRMs) averaged 3.91% with an average 0.5 point for the week ending June 15, 2017, up from last week when they averaged 3.89%. A year ago at this time, 30-year FRMs averaged 3.54%.
In shorter terms, 15-year FRMs this week averaged 3.18% with an average 0.5 point, up from last week when they averaged 3.16%. A year ago at this time, 15-year FRMs averaged 2.81%.
Finally, 5-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) averaged 3.15% this week with an average 0.5 point, up from last week when they averaged 3.11%. A year ago at this time, 5-year ARMs averaged 2.74%.
The big news in the market Friday was that Amazon bought the grocery chain Whole Foods for $42 per share. The Dow Jones Industrial Average also closed at a new record high.
The Dow Jones was up 24.38 points to 21,384.28 points. This was a gain of 0.53% for the week. The S&P 500 was up 0.06% for the week after being up 0.69 points Friday to close at 2,433.15. The NASDAQ closed at 6,151.76, down 13.74 points for the day. It fell 0.90% for the week.
The Week Ahead
Wednesday, June 28
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.
Existing Home Sales (10:00 a.m. ET) – Existing Home Sales tallies the number of previously constructed homes, condominiums and co-ops in which a sale closed 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.
Thursday, June 29
Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to report 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.
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.
Friday, June 30
New Home Sales (10:00 a.m. ET) – This measures the number of newly constructed homes with a committed sale during the month.
Next week is a little calmer in terms of the data that comes out. Let’s also hope there are better results. If market data doesn’t push you through a drowsy Monday afternoon, we’ve got plenty of home, money and lifestyle content to share with you if you subscribe to the Zing Blog below. In the world of internet holidays, it’s Martini Day. We thought we would celebrate by showing you how to construct the perfect at-home bar. Have a good week!
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