New Home Sales: New home sales came in 67,000 below expectations in September, at a seasonally adjusted annual rate of 468,000. August was also revised down, losing 33,000 sales from the numbers in the process. These decreases made market supply surge up to 5.8 months from 4.9 months in August. One possible factor that’s keeping sales low is the fact that prices are rising, up 2.7% in September to $296,900, 13.5% higher than the same time a year ago. Turning to the regional data, sales were down 62% in the Northeast, but that alone doesn’t explain what’s going on in this report because the market for new homes in the Northeast is extremely small. Of more concern is the fact that sales are down in the 8.7% and 6.7% in the South and West, respectively.
Durable Goods Orders: New orders for durable goods were down 1.2% in September, and the report doesn’t get much better from there. If you take out transportation, orders were down just 0.4%. Core capital goods were off 0.3%. Overall, new orders are down 3.0% on the year. Unfilled orders are also down 0.6%, which means factories won’t be hiring to cut down the backlog. Motor vehicles were a positive as orders were up 1.6% and shipments gained 1.8%.
S&P Case-Shiller HPI: Home prices were up 0.1% from month to month in August. This is up 0.4% on a non-seasonally adjusted basis and 5.1% for the year. Better news is that fewer cities were showing declines in home prices. The best markets for sellers right now are San Francisco, with a 10.8% increase from last year, and Denver, at 10.7%. Meanwhile, New York, Chicago and Washington, DC are the stragglers, gaining only 1.9% for the year.
Consumer Confidence: A downturn in the outlook for the job market pushed consumer confidence numbers down 5.0 points to 97.6 in October. Consumers think there are fewer jobs available, and 25.8% say jobs are hard to get. This helped bring the present situation component down 8.2 points to 112.1. The good news is expectations over the next six months are still high. The component comes in at 88.0, down just 2.8 points. While fewer people expect to buy cars, more people expect to buy houses and appliances. Inflation expectations are at 5.1%.
MBA Mortgage Applications: Mortgage applications were down 3.5% overall, with purchases falling 3.0% and refinances down 4.0%. The average rate on a 30-year fixed-rate mortgage was up three basis points to 3.98%.
GDP: GDP was up 1.5% for the third quarter. While net exports and inventories brought things down, final sales were up 3.0% and residential and nonresidential fixed investment rose. Prices came in slightly lower than expected, up just 1.2% over the quarter. Personal consumption expenditures were up 3.2%. Spending on services contributed to this, but durables had the big gains, including vehicles. Government purchases also contributed positively.
Jobless Claims: New jobless claims were up 1,000 to 260,000. Meanwhile, recent reports of low claims are dragging down the four-week average, which again fell 4,000 to 259,250. Continuing claims were down 37,000 to 2.14 million. The four-week average of continuing claims was down 12,750, coming in at 2.17 million.
Pending Home Sales Index: Pending home sales fell 2.3% to 106.8 in September. This is blamed on a lack of affordable housing in the market. Pending home sales are up only 3.0% on the year at this point.
Personal Income and Outlays: Personal incomes were up a modest 0.1% in September with spending up 0.1% to match. Prices in core categories were up 0.1%, while they fell 0.1% overall, likely pushed lower by fuel. Wages and salaries remained flat.
Consumer Sentiment: Sentiment fell 2.1 points to come in at 90.0 in the final reading of October. Current conditions and expectations are at 102.3 and 82.1. These are gains from September, but down from the mid-month reading. Inflation expectations are at 2.7% over the next year, down one tenth from September. Five-year expectations are down two tenths at 2.5%.
Freddie Mac reported rates were either down or unchanged last week.
30-year fixed-rate mortgages (FRMs) averaged 3.76% with an average 0.6 of a point for the week ending October 29, 2015, down from last week when they averaged 3.79%. A year ago at this time, 30-year FRMs averaged 3.98%.
15-year FRMs this week averaged 2.98% with an average 0.6 of a point, unchanged from last week. A year ago at this time, 15-year FRMs averaged 3.13%.
5-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) averaged 2.89% this week with an average 0.4 of a point, unchanged from last week. A year ago, 5-year ARMs averaged 2.94%.
1-year Treasury-indexed ARMs averaged 2.54% this week with an average 0.2 of a point, down from 2.62% last week. At this time last year, the 1-year ARMs averaged 2.43%.
U.S. stocks were down on Friday, but they had their best month in the last four years. Each index was up between 8% and 9% in October. This is in part based on a recovery in oil prices and investor hopes that rates will stay low.
No one knows what the Fed will do, though. If I saw a rate I liked on any kind of loan, I would lock it in before they meet again in December.
Now that we’ve gotten the only economic decision anyone seems to want to talk about out of the way, let’s get back to stocks.
The Dow Jones Industrial Average was down 92.26 points Friday, to close at 17,663.54. Still, it managed to hold its own, up 0.10% for the week. The S&P 500 was up 0.20% on the week despite losing 10.05 points Friday, to close at 2,079.36. Finally, the NASDAQ was down 20.53 points, finishing the week at 5,053.75, up 0.43% from last week.
The Week Ahead
Monday, November 2
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.
Wednesday, November 4
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 (8:30 a.m. ET) – International trade is composed of merchandise (tangible goods) and services. It’s available by export, import and trade balance for six principal end-use commodity categories and for more than 100 principal Standard International Trade Classification system commodity groupings.
Thursday, November 5
Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals who filed 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, November 6
Employment Situation (8:30 a.m. ET) – The employment situation report measures unemployment in the labor force as well as the sentiments of workers about the job market.
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