Stock Market Continues Making Up Lost Ground – Market Update

The gold medal for the U.S. men’s curling team was somewhat unexpected, but in life as in the markets, you really never know what’s in store.

Last week there wasn’t much in terms of actual economic data on the calendar, but the Federal Reserve had its meeting minutes released and the market reacted swiftly. Let’s jump right in.

Headline News

MBA Mortgage Applications

The average rate on a 30-year-fixed conforming mortgage was up seven basis points to 4.64%, the highest it’s been in this report since January 2014.

Perhaps predictably, mortgage applications fell 6.6% last week with the increase in rates. Purchase applications fell 6.0% and refinance applications were down 7.0%.

Existing Home Sales

Existing home sales unexpectedly fell 3.2% in January to a seasonally adjusted annualized rate of 5.380 million. This is down 4.8% from the same time a year ago. The consensus estimates for this month had been for a slight increase in home sales to 5.650 million.

Supply in the market was up 4.1% from the 19-year low seen in December, coming in at 1.520 million existing homes on the market and bringing supply relative to current sales up from 3.2 months to 3.4 months. Sale prices were down 2.4% in January to $240,500, but it’s still up 5.8% on the year.

Sales were down in all four regions of the country last month, including in the Midwest, where sales fell 6.0%, and the West, with sales down 5.0%.

Jobless Claims

Initial jobless claims fell 7,000 last week to 222,000. The four-week average of initial claims fell 2,250 to 226,000 last week. Both numbers are near historical lows. The four-week average has fallen roughly 13,500 from this time a month ago.

If possible, continuing claims look even better. Continuing claims were down 73,000 to 1.875 million. This pushed the four-week average down 16,250 to 1.927 million claims.

It’s also worth noting that unemployment reporting in the areas affected by the hurricanes, particularly Puerto Rico, appears to be back to normal.

Mortgage News

Mortgage rates continue to rise. This most recent Freddie Mac survey was completed before the Federal Reserve released the minutes of its Federal Open Market Committee meeting last week. In short, the Fed’s optimism about the economy led analysts to believe further increases in short-term interest rates were coming and the 10-year U.S. Treasury bond climbed above 2.9%. While this isn’t a guarantee, mortgage rates typically sit somewhere around 2% higher than the treasury rate.

Whether you’re in the market to buy a home or take equity out of your existing one, if you see a rate you like, don’t hesitate to lock that rate. While we don’t know where rates will go from one day to the next, the current trend doesn’t favor waiting around.

A 30-year-fixed rate mortgage averaged 4.40% with 0.5 points in fees last week, up two basis points from the week prior. At this time a year ago, the rate was 4.16%.

When looking at shorter terms, the rate on a 15-year fixed mortgage with 0.5 points was up one basis point to 3.85%. Last year, the rate was 3.37%.

Finally, the average rate on a 5-year treasury-indexed hybrid adjustable rate mortgage (ARM) rose two basis points to 3.65%. At the same time last year, the average rate was 3.16%.

Stock Market

After looking like they were headed for a down week, stocks made gains as interest rates came back down from a four-year high by Friday. There were gains across the board on the week.

The Dow Jones industrial average was up 347.51 points Friday to close at 25,309.99, up 0.36% on the week. The gains were led by Intel, which seems to be bouncing back following recent issues with processor design flaws. Meanwhile, the S&P 500 saw gains of 43.34 points on the day and 0.55% on the week, closing at 2,747.30. Finally, on the back of strong performances by Netflix, Alphabet (parent company of Google) and Amazon, the Nasdaq was up 1.35% on the day, after rising 127.30 points to close at 7,337.39.

The Week Ahead

Monday, February 26

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

Tuesday, February 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.

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, February 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 measures the monetary value of all final goods and services produced within the U.S. This report is released on a quarterly basis.

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.

Thursday, March 1

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 AM 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.

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.

Friday, March 2

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 of economic data hitting this week and we’ll have it all covered for you in Market Update. Data like durable goods orders and GDP are key economic indicators and can have an impact on mortgage rates.

While knowing where the economy is going is important in making home finance decisions, we’re not all data all the time. If you would prefer some lighter fare to get your week off to the right start, we’ve got plenty of home, money and lifestyle content to share with you if you subscribe to the Zing Blog below.

The internet has a holiday for everything, and today is Pistachio Day. This makes my mouth water thinking of my grandma’s pistachio whip, but if you’re looking for a snack without the calories, you might want to just include pistachios in this heart-healthy mixed nut snack. Have a great week!

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