MARKET UPDATE
New Home Sales slid 1.7% in July to a 627,000 yearly rate, off for the second straight month. But the housing recovery holds: sales for the first seven months of 2018 are up a healthy 7% over 2017.
Existing Home Sales slipped 0.7% in July to 5.34 million units annually, off now four straight months. But the decline in inventories reversed, coming in unchanged versus a year ago for the first time in 37 months!
Buyers may also be encouraged by the fact that although home prices rose in Q2, they did so at the slowest pace in four years for purchases financed with conventional (FHFA) mortgages.
REVIEW OF LAST WEEK
NEW HEIGHTS… The Dow gained a decent 0.5%, while the S&P 500 and the Nasdaq hit new highs, as trade and politics took a back seat to Fed Chairman Powell’s comments, economic data and strong corporate earnings.
At the Fed’s symposium in Jackson Hole, Wyoming, Powell said “the current path of gradually raising interest rates” would keep the economy growing without overheating and prevent inflation from overshooting its target range.
One more measure of the strengthening economy is Durable Goods Orders, up 9.2% overall from a year ago. Gains were widespread, though the volatile transportation sector pulled down July’s overall read.
The week ended with the Dow UP 0.5%, to 25790; the S&P 500 UP 0.9%, to 2875, and the Nasdaq UP 1.7%, to 7946.
Bonds fell as investors flocked to stocks, but the Fed chair’s speech brought prices back up on Friday. The 30YR FNMA 4.0% bond ended up .15, to $101.98. In Freddie Mac’s latest Primary Mortgage Market Survey, the national average 30-year fixed mortgage rate fell for the third week in a row. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW?
Millennials account for one in three home purchases, and 89% of new home shoppers use a mobile search engine throughout the buying process.
THIS WEEK’S FORECAST
ALL GOOD: PENDING HOME SALES, GDP, MANUFACTURING, INFLATION… July Pending Home Sales are forecast up, same as June. The GDP-Second Estimate for Q2 should show strong 4% economic growth. Midwest factory activity is predicted up according to the closely-watched Chicago PMI, while the Fed’s favorite inflation read, PCE Prices, should stay in the central bank’s target range.
NOTE: 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.
FEDERAL RESERVE WATCH
Forecasting Federal Reserve policy changes in coming months…Wall Street still sees two small rate hikes before the end of the year, one at the end of September, the second in December. Note: In the lower chart, a 96% probability of change is only a 4% probability the rate will stay the same.
Current Fed Funds Rate: 1.75%-2.00%
| AFTER FOMC MEETING ON: | CONSENSUS |
| Sep 26 | 2.00%-2.25% |
| Nov 8 | 2.00%-2.25% |
| Dec 19 | 2.25%-2.50% |
Probability of change from current policy:
| AFTER FOMC MEETING ON: | CONSENSUS |
| Sep 26 | 96% |
| Nov 8 | 4% |
| Dec 19 | 67% |
BUSINESS TIP OF THE WEEK
On cold calls, be positive and confident. Lead with how you can help prospects, acknowledge any objections, nail down what they want to accomplish, then say how you’ll help them achieve it.
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