Great Week for Housing Starts – Market Update

The Detroit Tigers traded my sister’s favorite player, right fielder J.D. Martinez, last Tuesday. Despite the discord this is causing in my house, the logical part of my brain says this is the right move. The team hasn’t had a great year so far. Yet, the Tigers find a way to keep pulling you back in, going 6-4 in their last 10 and just five games back in a division where no one is yet to pull away.

It very much reminds me of where the economy has been lately. We’re doing OK, but there are just enough contradictory signs that observers aren’t quite sure where to go next.

Headline News

Housing Market Index: Home builders have been less confident in July than they have been in recent months, with the index coming in at 64. This is down from 66 in June and the lowest level since November. Part of this may have to do with higher lumber costs for home builders. However, with the exception of this week’s housing starts data that we’ll get into below, this joins a group of housing reports that’s been a little weaker recently. Future sales are still strong at 73 and present sales are holding at 70. However, traffic came in at 48. The second sub-50 rating in as many months means there are fewer prospective buyers walking through new homes. That’ll be something to keep an eye on. In terms of regional strength, the West, Midwest and South are looking good, while the Northeast trails a bit.

MBA Mortgage Applications: Overall applications were up by 6.3% last week, helped by a 13.0% jump in refinance applications. Applications to purchase were up 1.0% as the average rate on a 30-year fixed conforming mortgage remained at 4.22%.

Housing Starts: Housing starts were up 8.3% to 1.215 million in June. This is good news for a metric that has been down recently. Builders may be starting to cut into that inventory shortage. Single-family starts were up 6.3% last month to 849,000. On the multifamily side, they were up 13.3% at 366,000. Starts are rising fastest in the Northeast in contrast to the housing market index data. The West and Midwest also show rises, with the only decline in the South. When it comes to permits, the single-family category was up 4.1% to 811,000 and multifamily permits were up 13.9% to 443,000. Unlike the starts data, permits are the weakest in the South. In terms of permits, the Midwest is strongest followed by the West and South. Completions are up 5.2% to 1.203 million on the strength of multifamily units. Homes under construction are flat at 1.070 million.

Jobless Claims: Initial jobless claims were down 15,000 last week to 233,000. This brought the four-week moving average of initial jobless claims down 2,250 at 243,750. On the continuing claims side, they were up 28,000 to 1.977 million. This pushed the four-week average up 8,750 to come in at 1.959 million.

Mortgage News

Continuing on our theme of uncertainty, Federal Reserve Chairwoman Janet Yellen and Mario Draghi, her counterpart at the European Central Bank, have real concerns that inflation may not be picking up quite as fast as they think it should to sustain economic growth at the pace they’d like to see. Yellen said in recent testimony before Congress that if inflation remained below 2% annually, the Fed might be forced to rethink its plans for future increases in short-term interest rates.

The effect of the comments from these powerful folks in finance was finally fully felt last week. Some of the money that has been flooding into the stock market found its way back into the relative safety of mortgage bonds, pushing rates down. If you’re in the market for mortgage, it’s a great time to lock your rate.

Leading the way, 30-year fixed-rate mortgages (FRMs) averaged 3.96% with an average 0.6 point for the week ending July 20, 2017, down from last week when they averaged 4.03%. A year ago at this time, 30-year FRMs averaged 3.45%.

On the shorter-term side, 15-year FRMs this week averaged 3.23% with an average 0.5 point, down from last week when they averaged 3.29%. A year ago at this time, 15-year FRMs averaged 2.75%.

Finally, 5-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) averaged 3.21% this week with an average 0.5 point, down from last week when they averaged 3.28%. A year ago at this time, 5-year ARMs averaged 2.78%.

Stock Market

The stock indexes all fell varying degrees to end the week. General Electric was down 2.9% and this took other industrial and energy companies along with it as investors looked for indications of trends. Sales at the electronics and industrial giant fell 12% year-over-year, according to the company’s quarterly results.

The Dow Jones industrial average was down 31.71 points on the day and 0.27% for the week, closing at 21,580.07. The S&P 500 closed up 0.54% for the week after falling just 0.91 points Friday to finish at 2,472.54. Finally, the Nasdaq finished the week at 6,387.75. This is up 1.19% on the week and down just 2.25 points on the day.

The Week Ahead

Monday, July 24

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.

Tuesday, July 25

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 Pricing 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 compiles a survey of consumer attitudes on the economy. The Consumer Confidence Index is based on consumer perceptions of current business and employment conditions, as well as their expectations when considering business conditions, employment and income.

Wednesday, July 26

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 measures the number of newly constructed homes with a committed sale during the month.

Thursday, July 27

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

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 report 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.

Friday, July 28

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.

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.

In addition to these, there’s also a Federal Reserve meeting next week. No rate changes are expected, but people will be paying close attention to the statement to try to read the tea leaves.

This mortgage and economic news isn’t for everyone, I know. This may be especially true for a Monday. The good news is if you subscribe to the Zing Blog below, we’ve got plenty of home, money and lifestyle content to share with you. I’ve got Tiger tickets tonight, so I’ve got baseball on the brain. Believe it or not, there are some lessons from baseball that can be applied to mortgages.

When it comes to the economy as well as my baseball team, I’m an optimist. Housing starts are good and Justin Verlander is pitching tonight. It’s going to be good. Go Tigers! Have a great week!

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