Happy Tuesday! If you had a three-day weekend, I hope you were able to make the most of that extra day. I think I’ve been spoiled by all the Mondays off recently. I had a hard time forcing myself out of bed this morning.
The stock market had no such problems last week, again jumping to record highs. But before we get there, let’s take a look at some housing, inflation and retail data.
Quicken Loans Home Price Perception Index (HPPI)
The gap between homeowner estimates of home value and actual appraised value came in lower in December than they’ve been at any time since March 2015, with homeowners overvaluing properties by just 0.50%. This is down from 0.67% in November. It’s the seventh straight month the gap has narrowed.
In terms of regional data, homeowners in the West were closest, overestimating by an average of 0.24%. The South followed, on the high side by just 0.53%. The Northeast and Midwest trailed, with high estimates of 0.68% and 0.71%, respectively.
At the metro level, Dallas is showing itself to be a really hot market. Appraisals are coming in 3.17% higher than homeowner estimates. On the other side of the spectrum sits Cleveland, where homeowners are higher by a margin of 2.09% in their estimates. Homeowners in the Big Apple are closest to par, with estimates just 0.15% on the high end.
Quicken Loans Home Value Index (HVI)
Based on appraisals, home values were up 0.65% in December and have risen 6.17% since the same time last year.
The gains weren’t unanimous, with values in the Northeast falling 0.21%. The West was up 0.55% and the South was right behind, up 0.39%. The Midwest saw only a modest value increase of 0.03%.
MBA Mortgage Applications
Mortgage applications were up to begin 2018, rising 8.3% overall last week. Refinance activity was up 11.0% despite the average rate on a 30-year-fixed conforming mortgage being up one basis point to 4.23%. Purchase applications were up 5.0% on the week.
Initial jobless claims rose a steep 11,000 last week. This is something to keep an eye on. Contrary to recent trends, this high number of unemployment claims can’t be blamed on Puerto Rico, which saw its claims average reach pre-hurricane levels last week. Claims in Maine were estimated, possibly due to the bomb cyclone snowstorm.
The four-week average of initial claims was up 9,000 to 250,750.
In good news, continuing claims fell 35,000 to 1.867 million. This is the lowest level since December 29, 1973. The four-week average fell 5,500 to roughly 1.913 million.
Producer Price Index (PPI)
In a sign that’s not good for overall inflation numbers, producer prices fell 0.1% in December, up 2.6% on the year. The same monthly dip was seen when food and energy were taken out. Prices on this metric are up 2.3% annually. There was a little life when trade services were removed, with inflation up 0.1% and 2.3% year to year.
Trade services fell 0.6% in December. It’s the second consecutive decline and the third in a four-month period. Goods prices were unchanged, but the price of finished goods was down 0.3%. There was no change in energy prices. Food prices were down 0.7%, as were computer prices.
Car prices were up 0.2% in a rare bright spot in this report with light trucks unchanged.
Consumer Price Index (CPI)
Inflation in the consumer sector met expectations last month, up 0.1% and 2.1% overall in December. When taking out food and energy, prices were up 0.3% on the month and 1.8% since the same time last year.
Increased housing costs kicked in, with a 0.3% gain, along with an identical gain in the amount homeowners would pay if they were renting. Prescription drug costs were up 1.0%, aiding a 0.3% rise in medical costs.
Food prices saw only minimal gains, up just 0.1% in December, while energy prices fell 1.2% as the price of gasoline dropped 2.7%. Apparel prices were down 0.5%, and wireless prices remained flat.
Retail sales were up 0.4% in December, just off of estimates for a 0.5% uptick. Overall sales in November were revised upward 0.1% to a 0.9% gain. This 0.4% rise even held when cars and then cars and gas were removed.
Sales by non-store retailers, mostly made up of the big online shopping sites, were up 1.2% on the month after rising 4.2% in December. General merchandise sales were up only 0.3% on the month. Department stores sales were down 1.1%. Clothing sales were also down 0.3%, as retailers were likely discounting apparel.
Furniture stores saw a 0.5% sales increase in December following a 0.6% rise in November. Building materials sales were up 1.2% on the month. Restaurant sales were up 0.7% and vehicle sales finished up 0.2%. Gasoline sales were flat.
Mortgage rates were up a bit last week. The stock market continues to be very strong, and when that happens, traders tend to sell in the bond market and pour their money into equities. However, it should be noted that rates are still averaging under 4%. If you’re in the market, it remains a great time to buy or refinance.
First, the average rate on a 30-year-fixed mortgage with 0.5 points in fees was 3.99% last week, up four basis points. At this time last year, the average 30-year fixed rate was 4.12%.
Looking at shorter terms, the average rate on a 15-year fixed mortgage was 3.44% with 0.5 points. This is up six basis points on the week. At the same time last year, the average 15-year fixed rate was 3.37%.
Finally, the average rate on a 5-year treasury-indexed hybrid adjustable rate mortgage with 0.4 points was 3.46%, up one basis point on the week and rising from 3.23% a year ago.
The stock market is off to its best start to the year since 2003. The Dow Jones industrial average and S&P 500 both hit record highs to close the week, helped by stronger-than-expected quarterly results for several companies in the financial sector.
The Dow was up 2.06% on the week, finishing Friday at 25,803.19. This was a gain of 228.46 points on the day. Meanwhile, the S&P 500 ended up 18.68 points Friday, closing at 2,786.24. This was up 1.40% on the week. Finally, the Nasdaq closed at 7,261.00, up 1.45% on the week and rising 49.22 points on the day.
The Week Ahead
Wednesday, January 17
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.
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 produces a housing market index based on a survey where 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 six months and traffic of prospective buyers in new homes.
Thursday, January 18
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.
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 four-week moving average of new claims smooths out weekly volatility.
Friday, January 19
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.
This short week is a bit lighter on economic data, but we do get some data on housing construction and industrial production. We’ll have it all covered next Monday in Market Update.
I know it’s cold in much of the country, and you may need a little extra jolt this afternoon to keep you from going home and crawling back under the covers. We’ve got plenty of home, money and lifestyle content to share with you if you subscribe to the Zing Blog below.
It might help the general malaise if you could dig out and actually see your driveway. Check out some snow removal hacks. Have a great week!
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