Mortgage Rates Fall – Market Update

I’m feeling very thankful this morning! As I’m sure many of you did, I took some extra time around Thanksgiving last week to spend with friends and family and just generally recharge the batteries. However, when I checked my email, I realized my teammates were right there to pick me up. We’ve got something a little special for you all today, and many of us played a part in getting it ready. There’s more on that later, or you can skip ahead to the mortgage rates, but for now, I’m feeling especially grateful to my team for all the help they give me throughout the year.

One thing about taking time off is that you don’t necessarily stay plugged in to what’s going on, especially in the financial markets. With that, let’s get caught up together on what happened before the big meal.

Headline News

Housing Market Index

Home builders seem to be having a hard time finding something to be thankful for all of a sudden. We know this because the Housing Market Index put out by the National Association of Home Builders was down a sizable eight points to 60 this month. While that still indicates growth in the market, it’s a dramatic slowing.

Sales expected in the next six months saw a sizable downturn to come in at 65, the lowest this has been since May 2016. Meanwhile, current sales were down seven points to settle at 67, which is also the lowest reading in more than two years. Finally, traffic of prospective buyers is now in outright contraction, down eight points to 45. This represents the lowest reading in this category since August 2016.

Regionally, the slowdown in the market seems to be fairly broad-based. The South and West turned quite a bit lower at 65 while the Midwest and Northeast were at 54 and 52, respectively. These latter readings portray markets that are barely growing.

Housing Starts

While home builders might not be feeling confident at the moment, housing starts for October haven’t dampened. Although the growth is only slight, after the recent run of bad news from this report, growth of 1.5% to 1.228 million starts annually doesn’t look too bad.

The key catalyst for the growth was a 10.3% uptick in multi-family starts. The seasonally adjusted annualized rate for these was 363,000. This offset a downturn of 1.8% on the single-family side to 165,000 units. The good news is that starts were strong in the South, up 4.7% despite the recent hurricane activity. There were also gains in the Midwest, while the West and Northeast dropped back a bit.

On the permits side, the picture was slightly less optimistic. Single-family permits were down 0.6%, while multi-family unit permits were down 0.5%. Unfortunately, there’s heavy weakness in the West, where many builders have focused energies. It’s down 7.9% on the month and 17.2% on the year. Overall, starts across the nation are down 2.9% annually with permits falling 6%. Completions were down 3.3% on the month and have fallen 6.5% in 2018.

MBA Mortgage Applications

Mortgage applications were down 0.1% on the week as reported by the Mortgage Bankers Association. Purchase applications were up 3% and refinance applications fell 5% on the week.

The average rate on a 30-year conforming mortgage was down a single base point to 5.16%. Meanwhile, the percentage of people looking to refinance continues to fall, representing just 38.5% of applications last week after falling 0.9%.

Durable Goods Orders

New orders for durable goods were down 4.4% in October. The good news is the slide looks like it can be blamed on a bad performance in one sector. When transportation was taken out, orders are actually up 0.1%. Still, core capital goods orders were just flat on the month.

Orders for defense aircraft were down 59%, while civilian aircraft orders were down 19%. These orders in particular are extremely volatile and can really swing transportation numbers in one way or the other.

Also down last month were primary metal orders, which fell 1.2% after being down 2.3% in September. Analysts think these are the effects of tariffs taking their toll. Meanwhile, machinery orders were down 0.5% after being marginally up in September and August.

Revisions weren’t necessarily good either, with orders for core capital goods falling back further in September upon a second look. There was some good news in that shipments were up in revisions.

Jobless Claims

Initial jobless claims increased by 3,000 last week to come in at 224,000 after the prior week’s revisions. Meanwhile, the four-week average was up 2,000 to come in at 218,500.

Continuing claims were down 2,000 to come in at 1.668 million. However, the four-week average was up 16,000.

Consumer Sentiment

Consumer sentiment fell slightly in the final reading of November, dropping back 0.8 points to 97.5. Comparing this to the final reading of October, consumer attitudes have dropped a little more than a point in a month.

Expectations for the future were down 1.2 points to come at 88.1, while current conditions fell 0.8 points at 112.3. The prevailing feeling is that things could have been worse given the downturn in the stock market. We’ll have a little more on that later.

On the inflation side, consumers expect prices to rise 0.2% over the next five years, but expect prices to stay steady in the short term. Inflation expectations over the next year are down 0.1% to 2.8%.

Existing Home Sales

In a reversal of recent fortunes, it was a pretty good month for existing home sales in October. Sales were up 1.4% on a seasonally adjusted basis for the month coming to rest at 5.220 million. However, that wasn’t enough to keep sales from shrinking further on a yearly basis as annual sales are now 5.1% behind where they were last year at the same time.

Single-family homes rose 0.9%, while condo sales were up 5.3%. However, single-family sales are still down 5.3% on the year while condo sales are down 3.2% annually.

Regionally, sales in the West were up 2.8%, while the South and Northeast were up 1.9% and 1.5%, respectively. Only the Midwest saw a sales decrease of 0.8%.

The median price fell 0.6% to $255,400 for an existing home. However, this is still up 2.8% yearly. Supply was down 1.6% in October with 1.85 million existing homes on the market. Supply relative to sales fell to 4.3 months from 4.4 months in September.

Mortgage Rates

Mortgage rates fell last week, which alone would make it a great day to lock your rate if you were in the market to purchase or refinance given upward trends recently.

However, just for you on this Cyber Monday, we’ve got a special deal. If you lock before midnight tonight (November 26), you’ll receive special discounted pricing.¹ Check out this post for more info on our biggest deal of the year and other special offers!

The average rate on a 30-year fixed mortgage with 0.4 points in fees was down 13 basis points to 4.81% last week, according to Freddie Mac. This is up from 3.92% a year ago.

Looking at shorter terms, for a 15-year fixed-rate loan, the average was 4.24% with 0.5 points paid. This has fallen 12 basis points on the week but is up from 3.32% last year.

Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) was down five basis points to 4.09% with 0.3 points. At this time last year, the rate was 3.22%.

Stock Market

The fall of tech stocks continues to affect the stock market adversely. Falling oil prices didn’t help, either. There can be no doubting the deep declines in the past several weeks.

At least if you’re in our Fantasy Stock League, you can feel good about the fact that that’s play money. If you managed to outperform everyone else, there’s still a chance for a prize.

The Dow Jones Industrial Average was down 4.44% on the week to close at 24,285.95 after falling 178.74 points Friday. Meanwhile, the S&P 500 fell 17.37 points to close at 2,632.56, down 3.94% on the week. Finally, the Nasdaq closed at 6,938.98, down 4.45% on the week and down 33.27 points on the day

The Week Ahead

Tuesday, November 27

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, November 28

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.

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 quarterly basis.

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.

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

Thursday, November 29

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.

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.

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.

There doesn’t seem to be as much data on the calendar this week as there was last week, but what’s there are the heavy hitters including GDP as an indicator of economic growth and a look at personal incomes in the U.S.

Let’s be honest: This post does nothing to help you come out of your food coma. There’s probably more than a few of us that have our eye on some Cyber Monday deals as you read this. With that in mind, let’s at least be savvy and not fall for any retailer tricks today. You can find more content like this by subscribing to the Zing Blog below. Have a great week!

¹Client will receive between 0.5 discount points and 2.625 discount points off current pricing. This offer is only available to clients who lock their interest rate while completing the application process before 11:59 p.m. ET on November 26, 2018. Offer valid on loan amounts of $100,000 or higher. Offer is available on 30-year and 15-year products only. Offer does not apply to loans submitted to Quicken Loans through a mortgage broker, loans originated through the Relocation channel, Non-agency jumbo loans or portfolio loans. This offer cannot be retroactively applied to previously closed loans or loans already in process. Quicken Loans reserves the right to cancel this offer at any time. Acceptance of this offer constitutes acceptance of these terms and conditions, which are subject to change at the sole discretion of Quicken Loans. This is not a commitment to lend. Additional restrictions/conditions may apply. Not valid with any other discount or promotion.

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