I came down with some kind of bug over the weekend. While I’m working from home and pushing through, I feel a bit ill, much like stock traders might be when looking at last week’s performance.
The weekend wasn’t all bad though as both my favorite football teams won. It was a similar situation for the economy. Despite stock market performance, there were other indicators of good things happening. Let’s get into it.
Quicken Loans Home Price Perception Index (HPPI)
In October, homeowners overvalued their homes by just 0.28%, an improvement from September’s 0.29% difference of opinion with appraisers.
Regionally, the West was closest to actual appraised value, estimating on the high side by just 0.13%. In the South and Northeast, the gaps were 0.26% and 0.36%, respectively. The Midwest wasn’t far behind, off by 0.39%.
At the major metropolitan level, Boston’s market for residential housing is hottest right now with appraisals coming in 2.93% higher than homeowner estimates. The Windy City is on the opposite side of the ledger with homeowner’s overestimating value by 2.12%. In Miami, appraisers and homeowners are experiencing a rare instance of complete harmonious agreement as they both valued homes at a median of exactly $355,000 in October.
Quicken Loans Home Value Index (HVI)
Home values were down 0.55% in October, according to appraisal data obtained by Quicken Loans. However, the rate of home value growth still significantly outperforms inflation. Values are up 4.49% annually.
Regional data points were a mixed bag. The West really dragged things down for the month of October as values fell 1.28%. However, the West has been the hottest housing region for quite some time and is up 6.04% on the year. Northeastern home values were down 0.48% on the month and have only gone up 2.59% on the year. Meanwhile, the Midwest was up 0.06% on the month and has seen values increase 4.32% since last year. Finally, the South had the biggest monthly gains of any housing region for the month, up 0.32% in October and 3.97% annually.
MBA Mortgage Applications
Mortgage applications were down 3.2% overall last week as applications to purchase fell 2.3% and refinance applications were down 4.3%
The average rate on a conforming 30-year fixed mortgage was up two basis points to 5.17% in this survey. Despite this, the percentage of people looking to refinance increased in comparison to the overall market, rising 0.3% for the week. Still, refinance applications only account for 39.4% of overall market activity.
Consumer Price Index (CPI)
Prices for consumers were up 0.3% in the month of October for a 2.5% annual increase. When food and energy were taken out, the monthly and yearly increases were 0.2% and 2.1% in core categories.
Energy prices were up 2.4% in October. Analysts expect a lower number in November because gasoline prices have recently gone down. Meanwhile, food prices were down 0.1%.
Housing costs are increasing on a very moderate basis according to this report. Rent went up 0.2% for the month and owners’ equivalent rent, a measure of how much a homeowner thinks they could get if they were renting out their home, was up 0.3%.
The cost of medical care only increased 0.2% as both the cost of doctor and hospital services remained flat in October. Other categories of interest include apparel, which was up 0.1%. Prices of used vehicles were up 2.6% after having fallen 3% in September. However, the cost of new vehicles fell 0.2%.
Initial jobless claims were up 2,000 to 216,000 last week. The four-week average of initial claims was up 1,500 at 215,250.
Unfortunately, continuing claims increased by 46,000 last week to come in at 1.676 million, pulling the four-week average it up 9,000 to 1.644 million.
Retail sales were up 0.8% in October, exceeding all expectations. However, a control group which excludes a few items for which sales are more volatile was only up 0.3% on the month.
Looking at a few other top-line categories, cars had a strong month, up 1.1%. Even when these were excluded, retail sales were still up 0.7% for the month. Meanwhile, gasoline sales were up 3.5%. This last number is expected to drop somewhat in October due to recent decreases in the price of barrels of oil. When gas is further taken out, the monthly inflation gain is 0.3%.
Restaurant sales were down 0.2% and furniture sales fell 0.3%. This would point to decreasing consumer optimism, but there were also some key categories that saw gains.
Sales of general merchandise were up 0.5%. Included in that was a 0.5% gain for department store sales. Meanwhile, non-store retailers – made up mostly of e-commerce sites – saw their sales rise 0.4% in October.
Production saw only paltry gains in October, rising 0.1% versus expectations for a 0.2% increase.
The impact of Hurricane Michael meant that there was a 0.5% decrease in utility production because of power outages affecting customers in parts of six states. Mining production, which has been a consistent gainer, was also down 0.3%, for its second straight month of declines. Year-on-year growth in this sector is still at 13.1%, however.
The good news is that manufacturing was up 0.3% despite factory capacity utilization falling 0.1% to 78.4% in October. Manufacturing is up 2.7% for the year. Business equipment production was up 0.8% and construction supplies were up 0.6%.
In less pleasing news, high-tech production was flat and motor vehicle production fell 2.8%.
Freddie Mac reported that lower oil prices and flow wage growth are helping to ease inflationary pressures which meant that mortgage rates didn’t rise much if at all last week.
Take advantage of this lull in the market to lock your rate now before they start to rise again.
The average rate on a 30-year fixed mortgage with 0.5 points paid in interest was 4.94%, flat for the week. This is up from 3.95% a year ago.
Looking at shorter terms, the rate on the average 15-year fixed mortgage was up three basis points to 4.36% with 0.4 points. Last year at the same time, the rate was 3.31%.
Finally, the average rate for a 5-year treasury-indexed hybrid adjustable-rate mortgage (ARM) with 0.3 points was unchanged on the week, coming in at 4.14%. A year ago, the rate was 3.21%.
Tech stocks took a special pounding Friday. There wasn’t any one culprit. Facebook’s handling of Russian election interference was under renewed scrutiny. Meanwhile, analysts are worried that iPhone sales might slow down for Apple. Finally, computer chip maker Nvidia reported losses that sent waves through the entire sector.
Losses last week weren’t limited to the tech sector though. In general, today might not be the best day to look at your 401(k). I was doing fairly well in our Fantasy Stock League, but my portfolio was tech heavy, so I hesitate to look. I can’t win of course, but it’s been fun to check out how I would do. It’s not too late to get in and compete for prizes. The contest runs through the end of the year.
The Dow Jones Industrial Average was actually up 123.95 points Friday to close at 25,413.22. This wasn’t enough to prevent weekly losses of 2.22%. The S&P 500 closed at 2,736.27. This was up 6.07 points on the day, but down 1.61% for the week. Finally, on the Nasdaq, which is predominantly tech stocks, there were weekly losses of 2.15% after the index fell 11.16 points on the day to finish at 7,247.87.
The Week Ahead
Monday, November 19
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.
Tuesday, November 20
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.
Wednesday, November 21
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.
Durable Goods Orders (8:30 a.m. ET) – These are based on new orders placed with domestic manufacturers for factory goods.
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.
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.
Existing Home Sales (10:00 a.m. ET) – Existing Home Sales tallies the number of previously constructed homes, condominiums and co-ops that were sold 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, November 22
It’s Thanksgiving in the U.S. Enjoy your family and the food coma!
Every year, it seems like there are a bunch of reports released in the week before the Thanksgiving holiday so no one has to think in the week after the feast. We’ll have it all covered for you in next Monday’s Market Update!
If this article has put you in a doze before the big meal, I completely understand. We have plenty of home, money and lifestyle content to share with you if you subscribe to the Zing Blog below. This week, let’s take a look at some of our top tips to host Friendsgiving gatherings. Have a great week!
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