There’s no doubt that the event we’re in the middle of is unprecedented in our lifetimes and maybe in American history. What’s more, the experts are warning that it’s going to get worse before it gets better, so I thought we would start with something a little bit different today.
The Quicken Loans® marketing team is doing a virtual spirit week, and today is Motivation Monday. But why limit it to the marketing team? We could all use something a little bit uplifting right now.
To borrow from Chumbawamba, we got knocked down, but we’ll get up again. This virus or any other challenge we confront won’t keep us down forever. The economic data is bad right now and there are people who aren’t working, but we will be back.
Headline News
Econoday provided summaries that were used in this report.1 Let’s jump into it.
Pending Home Sales Index
In February, homes under contract for sale were up 2.4%. Ordinarily, this would mean good things for future sales of existing homes, but it’ll be interesting to see what happens with the effects of the coronavirus as we start working at March data.
S&P CoreLogic Case-Shiller HPI
It’s worth noting that when it comes to these home price indexes, the data are a couple months behind the actual release dates, so although this report came out on the last day of March, it covers January.
With that said, prices across the 20-city index were up 0.3% on a seasonally adjusted basis despite being flat overall. This is up 3.1% since last January, which is a slight acceleration in year-over-year appreciation from December.
It’s going to be interesting to see how this shakes out in existing home sales for March. The logistics of buying a home right now along with the economic situation mean this may not be as reliable an indicator of existing home sales.
Consumer Confidence
Consumer confidence was down 12.6 points to exactly 120 for March. They note here that layoffs related to the virus were already in effect at the time of the cutoff date, so that probably has a lot to do with this.
Still, only 13.9% of people felt a job was hard to get and that was flat from February. There are still 44.9% of people who see jobs as plentiful, which is only down 1.6% from the last reading. However, less people see more jobs opening up in the next 6 months, down 1.1% to 15.5%. Those who see less jobs opening up in the future saw their numbers increased 5.1% in March.
Less people anticipate buying homes, cars and appliances in the near future, although the numbers didn’t actually change very much. Start market sentiment did take a beating in March.
MBA Mortgage Applications
Mortgage applications were up 15.3% on the week. Purchase applications were down 11% and are now down 24% from this time a year ago. That’s understandable, as not many people are out looking at houses at the moment.
Refinance applications are driving the increase, up 26% after rates fell to 3.47% on a 30-year fixed mortgage, down 35 basis points from the prior week. The bond buying moves of the Federal Reserve are starting to have an effect.
ISM Manufacturing Index
The manufacturing sector officially started shrinking for the first time in a while in March, although only slightly at 49.1. The bad news is that much of the positivity that does exist in this report actually comes from longer delivery times, which in this report usually correlate with higher demand, but this time around it’s actually not good because the reason for the increased delivery times has to do with the major logistical reshuffling and supply shortfalls caused by COVID-19.
The number of new orders shrank substantially, down 7.6 points to 42.2. Meanwhile, the number of orders on backlog was down 4.4 points to 45.9. Inventory shrink is now a thing in full force as suppliers are having to go into their existing inventory without being able to replenish it necessarily either because of supply problems or the fact that people aren’t working. On that note, employment in the sector started contracting at a faster rate, down 6 points to 43.8. Finally, production was down 3.6 points to 47.7.
International Trade
The U.S. trade deficit shrank by $5.4 billion in February 2 $39.9 billion. However, it was a result of a decrease in imports rather than any increase in exports.
Our exports were down $800 million to $207.5 billion. Food exports were down $10.9 billion, while capital goods were up slightly to a total of $44.6 billion. However, there weren’t gains elsewhere.
On the import side of the ledger, these were down $8.3 billion to $247.5 billion. Capital goods imports fell $3.7 million to $51.7 billion. Meanwhile, consumer goods imports were down $1.2 billion to $51.3 billion. Finally, petroleum imports fell $200 million to settle at $15.4 billion. With the price of oil declining precipitously in the face of oversupply and no one going anywhere, this is likely to show an even bigger effect in March.
Jobless Claims
This is expected given the state of shelter-in-place or stay-at-home orders impacting the majority of the population right now, but there are a lot of people who aren’t working. Last week there were 6.648 million new claims for unemployment insurance. This is just over 3 million more than the week prior. The 4-week average now stands at 2.612 million.
On the continuing claims side, these were up 1.245 million to 3.029 million last week. The 4-week moving average of continuing claims was up 327,250 to almost 2.054 million.
Employment Situation
Many layoffs have taken place since the employment numbers for this report were finalized the week of March 14. As it was, 701,000 jobs were cut from nonfarm payrolls and the unemployment rate was up almost a full percentage point to 4.4%.
There were declines in leisure and hospitality sectors of 459,000 jobs, many of them coming from restaurants and bars. But there were also big declines across healthcare and social programs, professional and business services, retail and construction.
There were 18,000 jobs lost in manufacturing. One of the only industries seeing major gains was the federal government, which is ramping up workers for the census.
The labor force also shrank quite a bit, down 0.7% to 62.7%. The workweek was also 12 minutes shorter on average at 34 hours, 12 minutes. One of the only bright spots was the average hourly earnings increased 0.4% to 3.1%. It is worth noting that employment in sectors like information, wholesale trade, warehousing and transportation, information and finance were pretty flat.
This report isn’t good and with guidelines to try to stay home as much as possible extending at least through the end of the month to combat the spread, April isn’t looking good.
Mortgage Rates
Fixed mortgage rates have fallen again. If you’re moving forward when looking to refinance or buy at this point, interest rates have certainly moved heavily in your favor. Obviously, there are other factors at play right now, so feel free to rely on the advice of a Home Loan Expert.
The average rate on a 30-year fixed mortgage right now is down 17 basis points to 3.33% with 0.7 points paid in fees, according to Freddie Mac. This has fallen from 4.08% a year ago.
Looking at shorter terms, 15-year fixed mortgages are averaging 2.82% with 0.6 points paid, down 10 basis points from the week prior. This has declined from 3.56% last year.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage was 3.4% with 0.3 points paid, up 6 basis points on the week but down from 3.66% at the same time last year.
Stock Market
The stock market is just looking at COVID-19 at this point. Until the situation improves, it’s likely to be about wild swings.
The Dow Jones Industrial Average was down 2.7% on the week after falling 360.91 points Friday to close at 21,052.53. On the S&P 500, the drop was 38.25 points for the day to finish at 2,488.65, a decline of 2.08% on the week. Finally, the Nasdaq finished the week at 7,373.08, down 114.23 points on the day and falling 1.72% on the week.
The Week Ahead
Wednesday, April 8
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.
Thursday, April 9
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.
Producer Price Index (PPI) (8:30 a.m. ET) – The Producer Price Index measures the average change over time in prices received by domestic producers for the sale of goods and services.
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.
Consumer Price Index (CPI) (8:30 a.m. ET) – The consumer price index measures changes based on the price of a fixed basket of goods and services purchased by consumers.
We get inflation data next week, but probably the biggest market mover will continue to be the weekly jobless claims number for now as well as what’s happening with COVID-19.
Friday is Good Friday, so the stock market and many banks will be closed. Quicken Loans will remain open. Happy holidays to those who celebrate at this time of year!
It’s not fun out there right now, but we’re here to help and give you tips on getting through this. Here’s a post on how to handle retirement savings and investments during this situation. Stay safe and healthy!
1 Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2020 Econoday, Inc. All rights reserved.
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