The Housing Market Gives a Winning Performance – Market Update


I usually watch awards shows only for the monologue. However, last night’s Oscars ceremony delivered more than its fair share of drama. And while there wasn’t nearly as much drama on the economic front in the last week, the housing market had a week that was truly award-worthy.
Headline News
MBA Mortgage Applications: Purchase applications were down 3.0%, and refinance applications were down 1.0% last week. They were down 2.0% overall. The average rate on a 30-year fixed mortgage was up four basis points to 4.36%.
Existing Home Sales: Existing home sales were up 3.3% in the month of January to 5.690 million on a seasonally adjusted annual basis. They’re up 3.8% since the same time last year. January’s growth rate is the best since February 2007. Single-family homes saw a 2.6% increase in sales, while condos were up 8.3%. This put them on pace for an annual sales rate of 5.040 million and 650,000, respectively. Supply in the market is still at 3.6 months, unchanged from December. The median price of an existing home was down 1.9% to $228,900. However, this represents a 7.1% gain since last January.

Jobless Claims: Initial claims were up slightly last week, rising 6,000 to 244,000. Despite this, the four-week average was down 4,000 to come in at 241,000. This is the lowest level for the four-week average since July 1973. Continuing claims were down 17,000 to 2.060 million. Meanwhile, the four-week average was down 9,000 to 2.070 million.
FHFA House Price Index: Home prices rose 0.4% in December, in line with consensus expectations. This puts them up 6.2% year-over-year. Home prices in Oregon are up 11.0%, and prices in Colorado and Florida top the 10% mark for the quarter. The hottest home market surveyed was St. Petersburg-Clearwater, Florida, where prices were up 13.2% in the fourth quarter of 2016. Wilmington, Delaware, saw its prices decline 1.8%.
New Home Sales: The seasonally adjusted annualized rate for new home sales was up 19,000 in January. That being said, it managed to miss expectations a bit. Supply in the market did tick up a bit at 5.7 months. There was a 3.5% jump in the number of new homes on the market which came in at 265,000. Building permits are also higher. Due to increased supply, the price of the average new home fell 1.0% to $312,900. However, that’s up 7.5% on the year.
Consumer Sentiment: Consumer sentiment rose 0.6 points to 96.3 in the final reading for February. Expectations fell to 86.5 in February, compared to 90.3 in January. The jobs outlook is down a bit in terms of future expectations. However, the current conditions component is holding on strong at 111.5. Consumers expect inflation to rise 2.7% in the next year and 2.5% over the next five years.
Mortgage News
Fixed rates were up slightly last week, while adjustable rates fell. Mortgage rates overall are in kind of a holding pattern right at the moment. It remains a great time to lock your rate if you’re in the market.
This week, 30-year fixed-rate mortgages (FRMs) averaged 4.16% with an average 0.5 point for the week ending February 23, 2017, up from last week when they averaged 4.15%. A year ago at this time, 30-year FRMs averaged 3.62%.
Looking at shorter terms, 15-year FRMs this week averaged 3.37% with an average 0.5 point, up from last week, when they averaged 3.35%. A year ago at this time, 15-year FRMs averaged 2.93%.
Finally, 5-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) averaged 3.16% this week with an average 0.4 point, down from last week when they averaged 3.18%. A year ago, 5-year ARMs averaged 2.79%.
Stock Market
The markets are really waiting for more clarity around President Donald Trump’s plans for the tax code, health care and business deregulation. Some of that detail is expected to come Tuesday when he addresses a joint session of Congress for the first time. In the meantime, the market just keeps setting more records.
The Dow Jones Industrial Average was up 11.44 points Friday, closing at 20,821.76. This was a 0.96% increase on the week. The S&P 500 managed to end the shortened week in positive territory, closing at 2,367.34, up 3.53 points on the day and 0.69% on the week. The NASDAQ was up 0.12% Friday to Friday after finishing the day at 5,845.31, up 9.80 points.
The Week Ahead
Monday, February 27
Durable Goods Orders (8:30 a.m. ET) – These are based on new orders placed with domestic manufacturers for factory hard goods.
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.
Tuesday, February 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.
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.
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, March 1
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.
Personal Income and Outlays (8:30 a.m. ET) – This measures all possible income sources as well as public expenditures.
ISM Manufacturing Index (10:00 a.m.) – This index measures the general direction of manufacturing within the U.S. The qualitative survey of purchasing managers looks at production, new orders, order backlogs, inventories and supplier deliveries, among other factors.
Thursday, March 2
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.
There’s lots on the calendar this week that could cause the market to bounce in one direction or another. President Trump’s address could throw a wrench in as well. It should be enough to keep us all on our toes.
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