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Mortgage Rates Push Up – Market Update

Kevin Graham9 minute-read
March 02, 2021

It’s been a bit of a crazy month as mortgage rates continue to push up on optimism about the economy. Speaking of optimism, the Johnson & Johnson vaccine was just approved for emergency use authorization by the Food and Drug Administration (FDA). With three COVID-19 vaccines soon to be in the market, there’s hope that the economy will pick up steam.

Headline News

We’ll have more on crazy market swings later on. For now, let’s get to some data underlying those movements. As always, this portion of the report was put together with assistance from our friends at Econoday.1

ISM Manufacturing Index

Manufacturing has continued to be strong, as January came in at 58.7, down from 60.5 in the prior month, which indicates that growth in the sector expanded at a slightly slower pace to begin the year. Still, it continues a recent trend toward higher numbers.

New orders are strong and 61.1. Meanwhile, orders in the backlog are at 59.7. That second number is particularly pretty high and can point to increased employment growth to keep up with backlogged orders.

Speaking of employment, it’s at 52.6. While still on the slower growth side, it’s at least trending in the right direction and it’s up almost a point from December. Delivery delays are at 82.1, which is extremely high to go along with input cost. This could mean that you’ll be paying more and waiting longer for your orders in some cases.

Employment Situation

The monthly jobs report for January was a real mixed bag. First, the good. There were 49,000 jobs added to nonfarm payrolls and the unemployment rate fell 0.4% to 6.3%. Average hourly earnings were up 0.2% to have risen 5.4% since last January. The length of the average workweek also increased 18 minutes to 35 hours.

Now for the bad, beginning with December revisions, which showed the number of jobs on nonfarm payrolls was actually down 227,000 in December, from a previous estimated fall of 140,000. Moreover, at least some of the drop in the unemployment rate has to do with people leaving the labor force as participation was down 0.1% to 61.4%.

Continuing with underwhelming news, in contrast to the ISM index, this report showed that manufacturing payrolls went down 10,000 jobs in January. Meanwhile, the bulk of new jobs came from the government payrolls, which were up 43,000, with only 6,000 total jobs added in the private sector.

There were 61,000 jobs lost in leisure and hospitality to go along with a 37,800-job decrease in the retail trade sector. These industries have been particularly hard hit by measures to contain the spread of COVID-19. However, health care employment was also down 40,800 and there was a 27,800-job drop in transportation and warehousing.

There was a 97,000 payroll increase for professional and business services. On the downside, 81,000 of those jobs were for temporary help. Education also added 49,000 jobs.

International Trade In Goods And Services

The overall U.S. trade deficit dropped $400 million in December to $68.6 billion. On the export side, these were up 3.4%, while imports of goods and services were up 1.5%.

Capital goods exports were up $1.1 billion as there was some strength shown in manufacturing. Soybean exports were up $1 billion to $4.2 billion on increased exports to China. Despite this, the deficit with China is still $310.8 billion for the full year 2020.

Consumer Price Index (CPI)

Overall inflation was up 0.3% in January and has risen 1.4% for the year as of January. Meanwhile, when food and energy were taken out, prices were flat for the month and had risen by the same amount since last January.

It’s worth noting that there was a 7.4% rise in gas prices to go along with a 3.5% overall increase in energy prices. Since last February, prices are still down 3.6% in this area. Meanwhile, food prices were up just 0.1% last month and have gone up 3.8% since last January.

Shelter prices were up 0.1% with rent and the cost to rent an equivalent space for homeowners up just 0.1%. Recreation prices were down 0.6%, showing that the virus still continues to heavily affect this industry.

Producer Price Index (PPI)

On the production side, prices were up 1.3% in January. Prices have gone up 1.7% overall since last January. Both beat expectations by quite a bit. When food and energy were taken out, prices are up 1.2% for the month and 2% on the year. These numbers were matched when further excluding trade services.

Digging deeper into individual categories, food prices were up 0.2% for the month and have gone up 1.4% since January 2021. Energy prices were up 5.1% in January, but they are still down 3% on the year.

There was a 1.3% increase in the price of finished goods and a 1.4% uptick in service prices. Meanwhile, there was a 9.4% rise in portfolio management that helped the increase in service prices.

Retail Sales

Retail sales were up 5.3% in January after dropping 1% in December. When vehicles were taken out of the equation, this was up 5.9% for the living gas, sales were up 6.1%, matching a control group less prone to seasonal fluctuations. Many Americans received a $600 stimulus check in January, and that helped push things up.

Electronic and appliance stores saw sales rise 14.7%, while furniture retailers were up 12% and nonstore retailers were up 11%. Encouragingly, there was a 6.9% sales lift at restaurants, a sector that’s been one of the most affected by the virus-related restrictions.

There’s no doubt that retail has been hit hard and February isn’t the biggest shopping month, but compared to February of last year, sales are up 7.8%. It will be interesting to see if the sector can continue the momentum heading into February.

Industrial Production

Industrial production was up 0.9% overall including a 1% increase in manufacturing output. Space used on the factory floor was up 0.7% to 75.6%.

Meanwhile, there was a 0.5% uptick in machinery output, as well as a 2.9% increase in aircraft production. That category has been strongly negative for a while starting with the Boeing issues and continuing with the dramatic slowdown in travel caused by COVID-19. Overall manufacturing is still down 0.8% compared to February of last year.

Mining output was up 2.3%, but it still down 10.1% from a year ago.

Housing Market Index

Homebuilders are supremely confident in the housing market right now. This was up 1 point to 84 in February. Traffic of buyers going through homes was up 4 points at 72. Current sales numbers were flat at 90. The one blemish in the report was that sales over the next 6 months were down 3 points to a still incredibly high level at 80.

New Residential Construction

Building permits were up 10.4% to come in at a seasonally adjusted annual rate of 1.881 million. This is 22.5% above the same time a year ago. It includes a 3.8% uptick in single-family permits to 1.269 million. Multifamily permits were up 557,000.

Meanwhile, housing starts were down 6% at 1.58 million. Single-family starts fell 12.2% to 1.162 million. On the multifamily side, starts were at 402,000.

Finally, completions for a housing construction were down 2.3% to 1.368 million, but 2.4% above the same time a year ago. Single-family starts were up 10% to come in at 1.036 million. On the multifamily side, these were 296,000.

Existing Home Sales

Existing home sales were up 0.6% to 6.69 million. This was up 23.4% since last January. Prices were down 1.7% in January to $303,900, but this is still up 14.2% on the year. Meanwhile, inventory is holding at only 1.9 months given the current pace of sales. It’s a very tight market out there right now.

Case-Shiller House Price Index

According to the Case-Shiller index, home prices were up 1.3% on a seasonally adjusted basis to end the year across the 20 cities in this survey. Prices rose 0.8% overall and 10.1% compared to last December. The pace of annual appreciation is the highest it’s been in more than 6.5 years.

FHFA House Price Index

Somewhat in line with the Case-Shiller index, which is a 3-month average of all homes sold, the FHFA index based on home sales backed by conventional loans showed that home prices were up 1.1% in December. They’ve risen 11.4% for the year. That pace of appreciation is a new record for the index which goes back 30 years.

Consumer Confidence

Consumer confidence was up 2.4 points overall to 91.3. It is worth noting that the cut off for surveys for this report was February 11, which predates the storms in Texas.

Fewer people were saying jobs were hard to get. This indicator was down 1.3% while the number of people saying jobs were plentiful was up 1.9%. On the downside, only 15.2% of those surveyed see themselves earning more in the next 6 months.

Plans to buy homes, vehicles and appliances were also down. A steeper drop in home buying plans may mean that people are starting to feel the pressure of upward prices. Meanwhile, those who see the stock market up in the future and those who see it going down are about evenly divided.

MBA Mortgage Applications

Mortgage rates have been starting to move a little bit higher, but refinance applications are still 50% higher than they were a year ago. Meanwhile, the purchase applications were up 8% compared to February of last year.

The average rate for a conforming loan with a 20% down payment and 0.46 points paid was up 10 basis points to 3.08% last week. Meanwhile, jumbo balances with the same down payment and 0.43 points paid was up 12 basis points to 3.23%.

New Home Sales

New home sales were up 4.3% to a seasonally adjusted annual rate of 923,000. Meanwhile, the December numbers were also revised up quite a bit, showing this is a good report.

The numbers may have been helped by the fact that sales prices were down 1.9% to $346,400. Median price growth also lags behind the existing home sales gains as these are up 5.3% on an annual basis. Supply is only at 4.4 months, which is a downward trend. Although not quite as crazy as the existing side, supply is limited.

Durable Goods Orders

Durable goods orders were up 3.4% in January. Even when transportation was removed, they were up 1.4%. The one downside was that core capital goods orders only grew by 0.5%. There were also major upward revisions of about 1% across the board in these numbers for December.

Commercial aircraft orders had a relatively strong month and that drove a lot of the gain, powering a 7.8% uptick in transportation equipment. Meanwhile, shipments of durable goods recorded 2% growth in January. Unfilled orders were up 0.1% and inventories increased 0.3%.

Gross Domestic Product (GDP)

U.S. GDP was a mixed bag in the second revision of the fourth quarter. On one hand, overall GDP was up 0.1% to 4.1%. On the other, consumer spending was down 0.1% to 2.4%.

On a good note, both business investment and residential construction were revised higher, accounting for 75% of GDP growth in the quarter.

Pending Home Sales Index

Pending home sales were down 2.8% in the month of January to come in at an index level of 122.8. This isn’t a good sign for next month’s existing home sales because homes under contract are a leading indicator for that metric.

Personal Income And Outlays

Personal incomes were up 10% in January, helped by a fresh round of $600 stimulus checks given to Americans with qualifying incomes. Consumers were spending that money as well, with personal expenditures up 2.4%. Prices were up 0.3% overall in January with prices rising 1.5% since last year. This was matched in core categories.

Mortgage Rates

Mortgage rates are really starting to pick up as expectations of stimulus and an improving economy looking forward to a full vaccine rollout spark inflation concerns. If you’re looking to buy or refinance a home, rates are still great, but it’s about time to jump on things at the moment.

The average rate on a 30-year fixed mortgage with 20% down and 0.6 points paid in fees was up 16 basis points this week to 2.97%. This is down from 3.45% a year ago.

Meanwhile, the average rate on a 15-year fixed mortgage with 0.6 points paid and the same down payment was up 13 basis points to 2.34%. This has fallen from 3.95% last year.

Finally, the average rate on a 5-year, treasury-indexed hybrid adjustable-rate mortgage was up 22 basis points to 2.99% with 0.1 points paid. This is still down from 3.2% last year.

Stock Market

With the exception of the Nasdaq, which saw a rebound in big tech, the stock market was down Friday. Investors fear rapid inflation. As you’ll note from the market data just shared previously, we haven’t really reached that point yet. However, business is concerned that stimulus plans going through Congress have the ability to create those conditions.

The Dow Jones Industrial Average finished the day down 469.64 points to 30,932.37. Despite this, the index was up 3.17% on the month. Meanwhile, the S&P was up 2.61% for the month despite being down 18.19 points Friday to close at 3,811.15. Finally, the Nasdaq was up 72.96 points on the day and 0.93% for the month to finish at 13,192.35

If this isn’t your thing, we’ve got plenty of home and lifestyle tips to share with you. Here are seven easy ways to save water and money around the house. Have a great month!

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 2021 Econoday, Inc. All rights reserved.

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    Kevin Graham

    Kevin Graham is a Senior Blog Writer for Quicken Loans. He specializes in economics, mortgage qualification and personal finance topics. As someone with cerebral palsy spastic quadriplegia that requires the use of a wheelchair, he also takes on articles around modifying your home for physical challenges and smart home tech. Kevin has a BA in Journalism from Oakland University. Prior to joining Quicken Loans, he freelanced for various newspapers in the Metro Detroit area.