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GDP Strong in 4th Quarter – Market Update - Quicken Loans Zing Blog

I’m writing this just a bit in advance because opening day for baseball in Detroit is today and I have the day off. It does feel good to have some normal back. Who are you rooting for?

One thing that we’re all rooting for is some positive news on the economic front. Jobless claims are no doubt a cause for concern and the stock market dropped, despite other underlying data having positives in spades.

Headline News

Some of the reporting used in this analysis comes courtesy of Econoday.1 Let’s see what happened last week.

MBA Mortgage Applications

Mortgage applications were up 4.1% in total last week, including a 2% increase in purchase applications, and now up 19% on the year. Meanwhile, applications to refinance increased 5% for the week, and these have gone up 122% compared to the same time a year ago.

Mortgage rates remain incredibly low. In this survey, they were up just a single basis point at 3.2% for a 30-year fixed conforming mortgage.

FHFA House Price Index

Home prices were down 0.3% in May, but they’ve still gone up 4.9% compared to the same time a year ago. The FHFA and S&P indexes run about 2 months behind the dates they cover, so this is still showing COVID-19 effects as states that reopened really started to do so in June.

One thing that was evident is that some sellers took their properties off the market or slow played sales processes given stay-at-home orders. This shows up in the fact that overall transactions were down by about a third.

Existing Home Sales

Existing home sales had a major rebound in June as both buyers and sellers are making up for lost time. There may not be a traditional home buying season in 2020, but sales were up 20.7% and have now only fallen 11.3% on the year after coming in at a seasonally adjusted annual rate of 4.72 million.

Sales of condos and co-ops were up 29.4% to 440,000 on an annual basis, but sales in the single-family home market were also up 19.9% to 4.28 million. In even better news for sellers, the median sales price was up 3.8% on the month at $295,300, up 3.5% on the year. They aren’t having to discount to sell.

Supply on the market was up 1.3% in June to 1.57 million units, but this is down 18.2% from a year ago. Moreover, relative to sales, there are exactly 4 months’ worth of supply on the market compared to 4.8 months in May.

Jobless Claims

In a potentially ominous sign, jobless claims went up 109,000 last week to settle at 1.416 million. It’s the end of 4 months of consecutive declines in the rate of claims for unemployment insurance and points to the economic recovery happening in fits and starts.

Digging just a bit deeper, initial claims are highest in states that are experiencing a resurgence of viral cases related to reopening. Florida, Georgia and California have 119,305 claims between them. However, it’s noted in the report that Texas, which has been hit just as hard, saw claims fall 11,583. The 4-week average of initial claims was down 17,000 at 1.36 million.

On the continuing claims side, these were down 1.107 million to 16.197 million last week as the unemployment rate was down 0.7% to 11.1%. The 4-week average of continuing claims was down 758,500, settling at about 17.505 million.

When looking at continuing claims, it’s important to note that these cover a timeframe from 2 weeks ago as opposed to the initial claims, which are week to week, so there’s going to be a slight lag in any potential trends. Next week’s continuing claims may shed further light on where we are in terms of an economic recovery.

New Home Sales

Sales of new homes were up 13.8% in June to come in at 776,000 on a seasonally adjusted annual basis. This beat consensus estimates for a 700,000-housing unit level. This is right back where sales were prior to COVID-19 kicking in and the best reading since the subprime housing crash in 2008.

Builders aren’t having to lower prices to get to these levels, either. The median price of a new home was up $19,000 to $329,200. This is supported by the fact that supply relative to sales is down to 4.7 months compared to 5.5 months in May.

Finally, the gains were about equal across the country, showing that the virus is having little effect on demand. It’ll be interesting to see July, but builders couldn’t ask for a better June.

Mortgage Rates

Mortgage rates were up for the first time in quite a while last week, according to Freddie Mac. With that said, they’re still right around record lows.

If you’re in the market to buy a home or refinance, the interest rate environment remains incredibly favorable. If you’re in a position to make your move, it’s a good time to do so. To get started, 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 3.01%, up a few basis points on the week, but down from 3.75% last year.

Moving to shorter terms, the rate on a 15-year fixed mortgage was up 6 basis points to 2.54% with 0.7 points paid. Last year at this time, the rate was 3.18%.

Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) was up 3 basis points to 3.09% with 0.3 points paid. It’s worth noting that the average teaser rate for this option is higher than the rate on a 30-year fixed. Not only does this never happen, but it underscores the fact that ARMs aren’t a good option for pretty much anyone at this point. A year ago, the rate was 3.47%.

Stock Market

Stocks struggled Friday with tech stocks falling and continued uncertainty with China roiling the markets. On the tech front, Intel posted disappointing earnings and there are concerns that there is another technology bubble burst on the horizon.

Meanwhile, China ordered the closure of a U.S. consulate in Chengdu in retaliation for the U.S. forcing the closure of a Chinese consulate in Houston. The administration is concerned that the Houston consulate in particular was involved in stealing trade secrets and passing information along to Chinese intelligence officials.

The Dow Jones Industrial Average was down 182.44 points Friday to close at 26,469.89, which represented a fall of 0.76% for the week. The S&P 500 finished the week down 0.28% after falling 20.03 points to 3,215.63. Finally, the Nasdaq finished the week at 10,363.18, down 98.24 points Friday and 1.33% over the last week.

The Week Ahead

Monday, July 27

Durable Goods Orders (8:30 a.m. ET) – These are based on new orders placed with domestic manufacturers for factory goods.

Tuesday, July 28

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 29

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.

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.

Federal Reserve Meeting Announcement (2:00 p.m. ET) – The Federal Reserve will make an announcement regarding short-term interest rates this coming Wednesday. Although rates aren’t expected to move, market participants will be looking for any indication on the Board’s read on the economy.

Thursday, July 30

Gross Domestic Product (GDP) (8:30 a.m. ET) – This release measures the monetary value of all final goods and services produced within the U.S. This report is released on a monthly basis with estimates on the growth in the previous quarter.

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 31

Personal Income and Outlays (8:30 a.m. ET) – This is a measurement of how much consumers are taking in as well as their corresponding spending. This also gives insight into how much is being saved.

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 a boatload of important data out next week including two measures of consumer confidence, a look at consumer spending and income levels and our first look at second-quarter GDP. The latter is expected to be down, but we’ll see just how much. Add that to a Federal Reserve meeting and it’s going to be a busy week.

It’s certainly understandable if economics and mortgage rates aren’t what excites you every day. We’ve got plenty of home, money and lifestyle content to share if you subscribe to our mailing list below.

Check out some ways you can reduce waste in your home! Have an enjoyable and productive workweek, and go Tigers!

1 Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2020 Econoday, Inc. All rights reserved.

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