Update: As of this morning, the government shutdown is over. All operations including those affecting mortgages will return to normal. Huzzah!
It was a crazy weekend. We know who’s in the Super Bowl, and the government shut down. It’s Monday, so I’m going to ease you in and stick to the lighter side for the moment, so congratulations to the New England Patriots and Philadelphia Eagles. We’ll have a little more on the government shutdown below.
In terms of economic news, there was lots of important housing data last week, so let’s jump right in.
MBA Mortgage Applications
Mortgage applications were up 4.1% last week, with refinancing applications up 4.0% and purchase applications rising 3.0%. The average rate on a 30-year fixed conforming mortgage was up 10 basis points to 4.33%.
Industrial production was up 0.9% in December, coming in well above estimates. Much of this was due to increases in both utility production, up 5.6%, and mining production, up 1.6%.
Manufacturing gains were modest, up 0.1% on the month and 2.4% annually. Vehicle production was up 2.0% and high-tech production was up 0.4%. Production of nondurable goods went down 0.1% and construction supply production was unchanged.
Factories are utilizing more of their available capacity in these December numbers. This metric jumped 0.7% to 77.9%.
Housing Market Index
Home builders have lost confidence in the housing market this month, as January’s numbers are down two points at 72, which is still strong. It’s also worth noting that last month’s numbers were the highest of any since the recession.
The traffic component came in at 54, which is very high, but four points below last month’s 13-year high. which was very Current sales came in at 79 and sales over the next six months were at 78.
In terms of regional data, the West led the way at 83. The South was at 72 and the Midwest came in at 69. The Northeast is still lagging behind the others, but it’s up 12 points since November to come in at 62.
Housing starts were down 8.2% to a seasonally-adjusted annualized rate of 1.192 million in December. There’s some thought among analysts that this might simply be a return to normal after hurricane rebuilding really boosted the number of starts in the last several months.
On the single-family home side, starts were down 11.8% to 836,000. There was a 1.4% uptick in multifamily starts to 356,000.
Permits were up just a little bit, coming in at 1.302 million. Single-family permits were up 1.8% to 881,000.
Initial claims were down 41,000 to the lowest level in 45 years last week. However, part of this might be based on the fact that six states had to estimate claims. One of them was California, which was potentially affected by the mudslides. This report may have also been affected by the Martin Luther King Jr. federal holiday. The four-week average was down 6,250, coming in at 244,500.
Continuing claims were up 76,000 to 1.952 million. The four-week average was a little less volatile, up just 4,000 to 1.921 million.
Consumer sentiment fell 1.5 points in initial January readings to 94.4. This is the weakest the reading has been in six months.
The current conditions part of the reading was down more than 4.5 points at 109.2. This is a 15-month low and indicates potential weakness in consumer spending as well as the labor market.
Expectations did come in at a positive 84.4. Inflation expectations over the next year were up 0.1% to 2.8%. There was a matching gain for five-year expectations, which were up to 2.5%.
There’s not usually much mortgage news outside of rates on a weekly basis, but with the government shutdown, there are a couple of things to be aware of. For all loans, we won’t be able to get tax transcripts from the IRS until the end of the shutdown. We’ll have to get proof from you that you filed your taxes.
The FHA and VA have automated systems for loan approval, but USDA loans with conditional approval may see their closings delayed. Hopefully this doesn’t last too long, but we’ll provide updates on anything you need to know. For more on the broader impact of a government shutdown, ABC News has a nice breakdown.
Turning to actual rates, fixed rates were up last week in Freddie Mac data, although not as much as reported in the MBA numbers. It remains a great time to lock your interest rate, as they are still very low.
The average rate on a 30-year-fixed mortgage was up five basis points to 4.04% with 0.6 points in fees. Last year, the average rate was 4.09%.
Looking at shorter terms, the average 15-year fixed rate was up five basis points to 3.49% with 0.5 points in fees. At the same time a year ago, the rate was 3.34%.
Finally, the average 5-year treasury-index hybrid adjustable rate mortgage (ARM) rate was 3.46% with 0.3 points. This was flat for the week. At the same time last year, the average rate was 3.21%
The looming government shutdown didn’t affect stocks Friday, as the S&P 500 and Nasdaq hit record highs again.
The Dow Jones industrial average was up 1.04% on the week after rising 53.91 points on the day to close at 26,071.72. Meanwhile, the S&P 500 finished at 2,810.30, up 12.27 points on the day and 0.86% on the week. The Nasdaq finished Friday up 40.33 points to 7,336.38. It was up 1.04% on the week.
The Week Ahead
Wednesday, January 24
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 (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.
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, January 25
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.
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.
New Home Sales (10:00 a.m. ET) – This measures the number of newly constructed homes with a committed sale during the month.
Friday, January 26
Durable Goods Orders (8:30 a.m. ET) – These are based on new orders placed with domestic manufacturers for factory hard goods.
Gross Domestic Product (GDP) (8:30 a.m. ET) – This measures the monetary value of all final goods and services produced within the U.S. This report is released on a quarterly basis.
It’s quite a packed week of economic reports. We’ll have this and any important government shutdown developments ready for you in Market Update next week.
It might be the weather, but I’m having a really hard time making my brain work this morning. If you find yourself in a similar situation, maybe these brain training activities will help. January is also national brainteaser month. If you like that, we’ve got plenty more home, money and lifestyle content where that came from if you subscribe to the Zing Blog below.
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