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

Up and down. That’s the way I felt watching my teams this weekend. I’m hoping my preferred college football team got a wake-up call or it’s going to be a long year. On the other hand, I’m feeling a bit better about my pro team – although Kansas City will be a tough test next week.

The market and economic headlines were up and down last week. There were a few events that were worth cheering. Others may have solicited a cringe. Let’s jump in.

Headline News

Industrial Production

It was a good month for manufacturing as production in this area was up 0.5% in August. Overall industrial production was up 0.6% overall. What’s more, factories utilized more of their available space because they were keeping busy. This metric was up 0.4% to 77.9%. This is the strongest industrial production report of the year.

Business equipment production was up 1% which is a good sign in terms of business investment that had been stagnating a bit. Business supplies were also up along with construction supplies. There were gains for aerospace equipment as well as three areas that are key capital goods: primary metals, fabrications and machinery.

Utility production was also up 0.6%, while mining was up 1.4% in August. This is an uptick as mining production has been flat on the year overall.

One thing to note is that the production of motor vehicles did fall. It’ll be interesting to track this category into September. The United Auto Workers continued their strike against General Motors, which is now in its second week.

Housing Market Index

Builders are feeling more confident about the housing market as the calendar turns to Fall. Sentiment was up two points in September to come in at 68.

The current sales metric was up two points to come in at 75. This is considered good news for upcoming reports on sales of new homes to be reported by the U.S. government. Meanwhile, expectations for sales 6 months from now did go down one point to come in at 70 which is still fairly high. The amount of foot traffic going through new homes isn’t getting higher, but it’s not lower either. It’s holding at a breakeven level of 50.

Breaking this down on a regional level, the West is out in front at 75, followed by the South at 70. The Northeast and Midwest trail, but are holding in at 59 and 57, respectively.

MBA Mortgage Applications

Mortgage rates have been jumping around a little bit given the current trade situation with China and up-and-down economic data. There’s no more prime example than the fact that mortgage rates, according to the Mortgage Bankers Association, were up 19 basis points on the week, although they were admittedly still very low at 4.01% for a 30-year fixed conventional mortgage.

However, increasing rates may have had something to do with the fact that applications fell 0.1% overall on the week. Purchase applications were up 6%, but higher mortgage rates meant that not as many people are looking to refinance. These applications were down 4% on the week.

Housing Starts

Housing starts and permits both blew expectations out of the water. Housing starts increased just under 12.3% in August to come in at a seasonally-adjusted annualized rate of 1.364 million. On the single-family side there were 919,000 starts, while there were 445,000 multifamily starts. It’s worth noting that both starts and permits tend to be volatile readings, so 3-month averages are something analysts pay close attention to with this report. There were 888,000 single-family starts and also a jump in multifamily starts for a 4.1% uptick overall, which may show that there is some sustainability to these levels.

On the permit side, these were up 7.7% to come in at 1.419 million on a seasonally-adjusted annual basis. On a 3-month basis, permits are up 2.2%. For August, single-family permits were at 839,000, and 553,000 on the multifamily side.

Jobless Claims

Initial jobless claims were up just slightly to come in at 208,000, an increase of 2,000 on the week. The 4-week average of initial claims was down 750 to come in at 212,250.

Meanwhile, on the continuing claims end, claims were down 13,000 to 1.661 million. Finally, the 4-week average was down 3752 just under 1.678 million.

Existing Home Sales

Existing home sales were up 1.3% on the month to come in at 5.49 million on a seasonally-adjusted basis. This is up 2.6% on the year.

The median price of an existing home was $278,200, down slightly on the month but up 4.7% on the year. Supply did go down a little bit, however. It’s now at 4.1 months based on the current sales pace. There are 1.86 million units on the market.

There was a decline in sales in the West, but this is offset by gains in the Northeast, South and Midwest.

Mortgage Rates

Mortgage rates were up quite a bit last week on the back of strong economic data and trade negotiations that were going well – at least until the end of the week – with the Chinese.

It is worth noting that the Federal Reserve lowered short-term interest rates by 0.25% last week. Although not directly correlated with longer-term rates for things like mortgages, these rates tend to move in the same general direction. For more on last week’s announcement, check out the analysis of Quicken Loans® President and Chief Operating Officer Bob Walters.

Mortgage rates for fixed mortgages have still fallen nearly a full point in comparison to where they were at this time last year. Whether you’re in the market to buy or refinance, it’s a good time to consider locking your rate.

The average rate on a 30-year fixed mortgage rose 17 basis points last week to 3.73% with 0.5 points paid in fees. This is down from 4.65% last year.

Looking at shorter terms, the average rate on a 15-year fixed mortgage was up 12 basis points to 3.21% with 0.5 points. This is fallen from 4.11% a year ago.

Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) was up 13 basis points to come in at 3.49% with 0.4 points paid. This is down from 3.92% at this time last year.

Stock Market

The stock market didn’t react well Friday after Chinese officials cut their trip to the U.S. short. On top of this, President Donald Trump said he doesn’t need a trade deal with China before the 2020 election. I’m not an expert in international diplomacy, but I’m guessing that means the two sides aren’t close to a resolution.

The Dow Jones Industrial Average was down 159.72 points Friday to close at 26,935.07, down 1.05% on the week. Meanwhile, the S&P 500 fell 0.51% on the week after closing at 2,992.07, down 14.72 points on the day. Finally, the Nasdaq closed at 8,117.67, falling 65.2 points on the day and 0.72% for the week.

The Week Ahead

Tuesday, September 24

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.

S&P Case-Shiller HPI (9:00 a.m. ET) – The S&P 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, September 25

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.

New Home Sales (10:00 a.m. ET) – This report measures the number of newly constructed homes with a committed sale during the month. This will be the report for January.

Thursday, September 26

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.

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 4-week moving average of new claims smooths out weekly volatility.

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.

Friday, September 27

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

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 ton coming out next week including the always vital GDP number as a measure of economic growth. We’ll have it all covered in next week’s Market Update!

While the information in this post is important, it’s not always very engaging. I do my best, but it’s economics. If this isn’t keeping your attention right now, I recommend checking out some of the other home, money and lifestyle articles you can see by subscribing to the Zing Blog below. Before you know it, the holidays will be upon us. If you’re thinking about your holiday budget now, we have a look at layaway programs that you might be interested in. Have a great week!

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