Market Update for the Week of May 7, 2018

Info That Hits Us Where We Live

Heading north for the second month in a row, Pending Home Sales posted a 0.4% gain in March. Tight inventories in many markets kept this measure of contracts signed on existing homes down from a year ago.

Are homes really less affordable? The latest First American Real House Price Index pegs real home prices 33.7% below their 2006 pre-recession peak. The index factors in the rising incomes and still low interest rates that boost consumer house-buying power. 

Freddie Mac’s chief economist observed: “First-time buyers appear to be having more success… despite higher borrowing costs and home prices…. First timers represent 46% of purchase loans, up from 43%…a year ago.”

Business Tip of the Week

Business is a contact sport. The most successful people in any profession are the ones who continually get face-to-face with prospects and potential referral sources.

Review of Last Week

ALL’S WELL THAT ENDS WELL… Another week of volatile daily moves in the stock market all ended well, the Dow and the S&P 500 only modestly to the downside, the Nasdaq with a 1.3% gain. The Fed didn’t hike rates (no surprise), but there were concerns.

Core PCE Prices, the Fed’s favorite inflation measure, was up 0.2% in March and up 1.9% the last year. This is close enough to their 2% inflation target that some worried we may see more aggressive rate hikes.

A less-than-expected 164,000 Nonfarm Payrolls were added in April. But the trend in job growth remains strong, with the three-month average above 200,000, and unemployment now at 3.9%, an 18-year low, while wages rise at a healthy pace.

The week ended with the Dow down 0.2%, to 24263; the S&P also down 0.2%, at 2663; but the Nasdaq UP 1.3%, to 7210.

April’s nonfarm payrolls miss sent some traders scurrying to bonds. The 30YR FNMA 4.0% bond ended UP .03, at $101.84. After edging up most of April, the national average 30-year fixed mortgage rate dipped in Freddie Mac’s latest Primary Mortgage Market Survey. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

Did You Know?

Analyzing home sales from 2011 to 2017, Attom Data Solutions found that May is the best month to sell, with homeowners realizing the biggest premiums above estimated market value, averaging almost 6%.

This Week’s Forecast

PUTTING THE MICROSCOPE ON INFLATION… Inflation has remained south of the Fed’s 2% target. However, this week’s Core CPI inflation read is forecast to hit a monthly rate that, if maintained for the next 12 months, would exceed that annual target.

The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of May 7 – May 11

Date Time (ET) Release For Consensus Prior Impact
May 09
08:30 Producer Price Index (PPI) Apr 0.2% 0.3% Moderate
May 09
08:30 Core PPI Apr 0.2% 0.3% Moderate
May 09
10:30 Crude Inventories 05/05 NA +6.2M Moderate
May 10
08:30 Initial Unemployment Claims 05/05 220K 211K Moderate
May 10
08:30 Continuing Unemployment Claims 04/28 NA 1.756M Moderate
May 10
08:30 Consumer Price Index (CPI) Apr 0.3% -0.1% HIGH
May 10
08:30 Core CPI Apr 0.2% 0.2% HIGH
May 10
14:00 Treasury Budget Apr NA $182.4B Moderate
May 11
10:00 U. of Michigan Consumer Sentiment – Preliminary May 98.0 98.8 Moderate

Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… We got through last week with no rate hike, but the futures market is certain we’ll get one in June. Then all stays calm until September  Note: In the lower chart, a 100% probability of change is a 0% certainty the rate will stay the same.

Current Fed Funds Rate: 1.50%-1.75%

After FOMC meeting on: Consensus
Jun 13 1.75%-2.00%
Aug   1 1.75%-2.00%
Sep 26 2.00%-2.25%


Probability of change from current policy:

After FOMC meeting on: Consensus
Jun 13        100%
Aug   1            6%
Sep 26          74%

Statistics source:

Material in this article from: Inside Lending Market Snapshot

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Jim Passi
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1284 West Northwest Hwy.
Palatine, IL 60067
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