I want to start this by saying that if you were affected by Hurricane Michael, our thoughts are with you. If you’re a Quicken loans client, we’re here to help. Here’s what you need to know.
Home prices were up. As we’ll see, the stock market wasn’t nearly that fortunate, but we’ll get there. First, let’s go over the economic data for the week.
Headline News
Quicken Loans Home Price Perception Index (HPPI)
Homeowner estimates came in 0.29% higher than the actual appraised values in September. This was a slight increase from the 0.28% gap seen in August, but still a huge improvement from a year ago when the difference was 1.14%, with homeowner estimates on the high side.
Homeowners in the West overestimated home value by just 0.12%. The South followed with a 0.31% difference with the Midwest close behind with a 0.35% overestimation. Northeastern homeowners were the caboose to this train, overestimating value by 0.38%.
In terms of individual markets, Boston has the hottest market if you compare appraisal values to homeowner estimates. The homeowners’ best guess is 2.95% below actual appraised values right now. Meanwhile, homeowners in the Windy City overvalue their properties by 1.95% on the flip side of the coin. Detroit Rock City was closest to appraised values, with their estimates coming in just 0.16% above appraised value.
Quicken Loans Home Value Index (HVI)
Home values increased by 0.35% in September and have gone up 5.69% on the year. The pace of appreciation has moderated slightly from 5.79% in August.
Regionally, the only area to see a decrease was the West, which was down 0.56%, but has still risen 6.36% on the year. Meanwhile, the South was up 0.03% in September and 7.06% annually. This was followed by the Midwest, up 0.65% and 3.97% on the year. Values in the Northeast shot up 1.33% and have gone up 4.22% on an annual basis.
MBA Mortgage Applications
Mortgage applications were down 1.7% on the week as applications to purchase fell 1% and refinancing applications were down 3%.
A big reason for this decrease may be that the average rate on a 30-year fixed conforming mortgage was up nine basis points to 5.05% in this week’s reporting. This is the highest level seen since February 2011. Purchase applications make up 61% of overall mortgage activity.
Producer Price Index (PPI)
Prices for America’s producers were up 0.2% in September and 2.6% on the year. This same rate of increase held when food and energy were taken out of the equation and the annual pace of appreciation in this area is 2.5%. Finally, when trade services are further removed, inflation is up 0.4% for the month and 2.9% on the year.
Prices for transport were up 1.8% and have risen 5.9% yearly. This rapid rate of increase is blamed on shipping constraints. Goods prices were down 0.1% in September and energy prices have fallen 0.8% on the month. Food prices also dropped 0.6% and there was a 1.8% dip in food related exports. Construction costs were up 0.1% and 3.4% annually in an area where capacity has been an issue.
Service prices were up 0.3% and have gone up 2.4% on the year. Trade service prices have been held down recently and were up only 0.1% in September and 0.9% on the year.
Steel and aluminum prices are being closely watched due to tariffs. Steel prices were unchanged last month and down 0.3% for aluminum shapes. Still, aluminum prices have gone up 10.7% annually and steel a whopping 18.1%.
Consumer Price Index (CPI)
Prices were up 0.1% on the month and 2.3% overall for consumers in September. It was the same monthly change when food and energy were taken out and prices have risen 2.2% in this core category on the year.
There was a 0.5% drop in the price of energy as the price of both gasoline and electricity fell in September. Food prices were up only 0.1% and were unchanged if you don’t include beverages. Energy prices have seen the highest yearly increase, up 4.8%, but food prices are only up 1.4%. Transportation prices also fell 0.3% with the price of used vehicles down 3% and new vehicles down 0.1%.
Housing prices make up the largest portion of the index and these only increased 0.1% on the month. Apparel prices had the biggest gains, up 0.9%. However, this is after three months of dips in the sector. Prices are down 0.6% for apparel on an annual basis.
Jobless Claims
Initial jobless claims were up 7,000 last week to come in at 214,000. The four-week average is up 2,500 to come in at 209,500.
Elevated initial claims are being blamed on Hurricane Florence. North Carolina was up 4,000 to 9,500. A partial offset to this is the fact that claims in South Carolina were down 2,000 to a little over 3,000. We’ll be tracking Hurricane Michael, whose effects will show up in this week’s jobless claims report, released Thursday.
In terms of continuing claims, these were up 4,000 to 1.660 million. The four-week average fell 10,000 to 1.656 million. This is the lowest level of continuing claims since 1973.
Consumer Sentiment
Consumer sentiment fell a little over a point in the preliminary reading for October, coming in at an even 99.
The public seems to have high confidence in government policies. There’s strong confidence among Republicans, but this level of confidence is even going higher among Democrats. Inflation expectations are up 0.1% over the next year to 2.8%, but there was a 0.2% decline in five-year inflation expectations, coming in at 2.3%.
Americans soured slightly on current conditions, down 0.8 points to 114.4. Meanwhile, expectations for the future were down 1.4 points to 89.1.
Mortgage Rates
The stock market didn’t have a great week last week, and usually that means people put their money in the bond market which benefits the demand for mortgage-backed securities (MBS), which has the effect of pushing mortgage rates down. However, there appeared to be no safe haven last week as rates continued to rise.
As mentioned earlier, the average mortgage rate in the MBA data hasn’t been seen since 2011. In this data reported by Freddie Mac, 30-year mortgage rates haven’t been this high since April 14, 2011.
If you’re in the market for a new home or thinking of taking cash out of your current one, it’s a good idea to lock your rate because they’re definitely on an upward trend at this point.
If you’re looking to purchase, our RateShield™ Approval will let you secure your rate for up to 90 days while you shop for a new home.1 Once we have your purchase agreement back, we’ll compare your locked rate with current mortgage interest rates. If rates are higher, you keep your rate. If they’re lower, we’ll relock you at the lower rate while you complete the process.
The average rate on a 30-year fixed mortgage with 0.5 points paid in fees was up 19 basis points this week to 4.9%. Taking a look at the same time a year ago, this is up from 3.91%.
In shorter terms, the average rate on a 15-year fixed mortgage with 0.5 points was up 14 basis points to come in at 4.29%. This is up from 3.21% a year ago.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) with 0.3 points paid rose six basis points to 4.07%. This is up from 3.16% last year.
Stock Market
What goes up must come down, and the stock market has really been feeling the effects of a downward trend in the last few weeks. Stocks were higher on Friday, but there have still been broad-based losses affecting all sectors. Even President Trump is talking about the fact that this might be an overdue correction.
If you’re in our Fantasy Stock League and your portfolio was down for the week, I’m sure that was the case for just about everybody, so write it off. If you happened to outperform the market, you should feel pretty good about that. It’s not too late to get in and compete for prizes.
The Dow Jones Industrial Average was down 4.19% on the week to closing 25,339.99 points despite being up 287.16 points on the day. The S&P 500 was up 38.76 points Friday to close at 2,767.13, falling 4.1% on the week. Finally, the Nasdaq closed at 7,496.89, down 3.74% on the week but up 167.83 points on the day.
The Week Ahead
Monday, October 15
Retail Sales (8:30 a.m. ET) – Retail sales measure total receipts from stores selling merchandise and related services to final consumers. Sales are measured by retail and food service stores. Data is collected from the Monthly Retail Trade Survey conducted by the U.S. Census Bureau.
Tuesday, October 16
Industrial Production (9:15 a.m. ET) – The Federal Reserve’s monthly index of industrial production – and the related capacity indexes and capacity utilization rates – covers manufacturing, mining, and electric and gas utilities.
Housing Market Index (10:00 a.m. ET) – The National Association of Home Builders produces a housing market index based on a survey where respondents from the organization are asked to rate the general economy and housing market conditions. The index is a weighted average of separate diffusion indexes, including present sales of new homes, sales of new homes expected in the next six months and traffic of prospective buyers in new homes.
Wednesday, October 17
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.
Housing Starts (8:30 a.m. ET) – A housing start is registered when the construction of a new residential building begins. The start of construction is defined as the beginning of excavation of the foundation for the building.
Thursday, October 18
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.
Friday, October 19
Existing Home Sales (10:00 a.m. ET) – Existing Home Sales tallies the number of previously constructed homes, condominiums and co-ops that were sold 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.
We get lots of housing data as well as some production and retail sales numbers. We’ll have it all covered for next week’s Market Update.
If this post isn’t your idea of a Monday afternoon pick up, we understand completely. If you subscribe to the Zing Blog below, we’ve got plenty of other home, money and lifestyle content we would love to share with you. Continuing on our Halloween theme, here are some great DIY costumes. Have a great week!
1 RateShield Approval locks your initial interest rate for up to 90 days on 30-year conventional, FHA and VA fixed-rate purchase loan products. Your exact interest rate will depend on the date you lock your rate. Once you submit your signed purchase agreement, we’ll compare your rate to our published rates for that date and re-lock your interest rate at the lower of the two rates for an additional 40 to 60 days. Quicken Loans reserves the right to cancel this offer at any time. Acceptance of this offer constitutes the 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 conditions or exclusions may apply.
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