Market Update for the Week of June 25, 2018

INFO THAT HITS US WHERE WE LIVE

Home builder activity took off in May: Housing Starts spiked 5.0%, to a 1.350 million unit annual rate, the highest in more than a decade. Building Permits dipped, but are 8.0% ahead of a year ago.

Builders are finishing units at the fastest pace since the recession, freeing them to start new construction. Rising lumber costs lowered the National Association of Home Builders sentiment index, but it’s still a very high 68.

Existing Home Sales slipped 0.4% in May, to 5.43 million units annually. But First American’s model estimates the potential for existing home sales is currently at a seasonally adjusted 6.11 million annual rate.

BUSINESS TIP OF THE WEEK

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Review of Last Week

TENSE OVER TRADE… Trade tensions kept buyers on the sidelines, so the three major stock indexes went south for the week. The concern is that a possible trade war could spike inflation and slow global economic growth.

But the first $50 billion in tariffs on Chinese imports have yet to go into effect, the additional $200 billion announced will go through a review process too, and analysts doubt the U.S. will enact all proposed tariffs.

Plus, economic fundamentals are strong. Low unemployment and high consumer confidence push household spending, which is more than two-thirds of our economy, while tax cuts, government spending and business investment provide support against trade challenges.

The week ended with the Dow down 2.0%, to 24581; the S&P 500 down 0.9%, to 2755; and the Nasdaq down 0.7%, to 7693.

It was a quiet week in bonds, Treasuries modestly lower, other bonds modestly up. The 30YR FNMA 4.0% bond ended UP .09, to $101.73. The national average 30-year fixed mortgage rate fell in Freddie Mac’s latest Primary Mortgage Market Survey, dropping now three of the last four weeks. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?

Realtor.com’s chief economist reports, “in spite of ongoing record-low inventories in the housing market, we know that 557,000 new listings hit the market in May, the highest number since summer 2015.”

This Week’s Forecast

NEW AND PENDING HOME SALES GROW, ALONG WITH EVERYTHING ELSE… May New Home Sales should be up, like the Pending Home Sales index of contracts signed on existing homes. Other key parts of the economy predicted to rise include Q1 GDP, May Personal Spending and June Chicago PMI, measuring Midwest factory activity. Core PCE Prices are also forecast up, but gains in Personal Income should cover that.

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 Jun 25 – Jun 29

Date Time (ET) Release For Consensus Prior Impact M Jun 25 10:00 New Home Sales May 666K 662K Moderate Tu Jun 26 10:00 Consumer Confidence Jun 127.1 128.0 Moderate W Jun 27 08:30 Durable Goods Orders May -1.0%% -1.7% Moderate W Jun 27 08:30 Durable Goods Orders – ex transportation May 0,4% 0.9% Moderate W Jun 27 10:00 Pending Home Sales May 0.8% -1.3% Moderate W Jun 27 10:30 Crude Inventories 06/23 NA -5.9M Moderate Th Jun 28 08:30 Initial Unemployment Claims 06/23 220K 218K Moderate Th Jun 28 08:30 Continuing Unemployment Claims 06/16 NA 1.723M Moderate Th Jun 28 08:30 GDP – 3rd Estimate Q1 2.2% 2.2% HIGH F Jun 29 08:30 Personal Income May 0.4% 0.3% Moderate F Jun 29 08:30 Personal Spending May 0.4% 0.6% HIGH F Jun 29 08:30 Core PCE Prices May 0.2% 0.2% HIGH F Jun 29 09:45 Chicago PMI Jun 61.0 62.7 HIGH F Jun 29 10:00 U. of Michigan Consumer Sentiment – Final Jun 99.0 99.3 Moderate

Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… The Fed Funds futures market sees no rate hike in August, then one in September but none in November. Note: In the lower chart, a 0% probability of change is a 100% certainty the rate will stay the same.

Current Fed Funds Rate: 1.75%-2.00%

After FOMC meeting on:	Consensus
Aug   1	1.75%-2.00%
Sep 26	2.00%-2.25%
Nov   8	2.00%-2.25%

Probability of change from current policy:

After FOMC meeting on:	Consensus
Aug   1	0%
Sep 26	71%
Nov   8	32%

Statistics source: www.markettrends.com

Material in this article from: Inside Lending Market Snapshot

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