MARKET UPDATE
Hurricane Florence blew September Housing Starts down 13.7% in the South, though they were up 3.8% in the rest of the country. So, starts overall slipped 5.3%, to a 1.201 million annual rate.
The National Association of Home Builders chairman noted their confidence index rose on “solid housing demand fueled by a growing economy.” In addition, “lumber prices have declined for three straight months.”
September Existing Home Sales were down 3.4%, with Florence contributing to a 5.4% dip in the South. Lack of supply is the prob, but inventories are improving, now up two months in a row after 18 months flat or down.
REVIEW OF LAST WEEK
MIXED… The Dow was up, the S&P 500 flat and the Nasdaq down, but this was better than the three prior weeks of declines. As corporate earnings season starts, investors are skittish over interest rates and some of the economic data.
Rate worries were somewhat allayed when FOMC Minutes confirmed the Fed’s penchant for gradual hikes, though the hurricane-battered housing data looked bad, same as the lower-than-expected September Retail Sales read.
But manufacturing stays strong, in Philadelphia Fed, Empire State and Industrial Production data. And initial jobless claims fell (210,000) while continuing claims sank (1.64 million), indicating good job strength for the housing market.
The week ended with the Dow UP 0.4%, to 25444; the S&P 500 virtually flat, at 2768; and the Nasdaq down 0.6%, to 7449.
Bonds headed south, led by Treasuries, which finished the week lower. The 30YR FNMA 4.0% bond ended down .24, to $99.89. The national average 30-year fixed mortgage rate dropped back 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?
Attom Data Solutions reports homes remain more affordable than at the height of the housing boom in 2006, when buying a home required 52% of average wages, versus 37% today.
THIS WEEK’S FORECAST
HOME SALES SLIP, GDP GROWS… September numbers for both New Home Sales and Pending Home Sales are forecast a tad down, thanks again to Hurricane Florence. Yet the GDP-Advanced read for Q3 should show economic growth still north of 3%, good for jobs, wages and real estate.
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 higher loan rates.
FEDERAL RESERVE WATCH
Forecasting Federal Reserve policy changes in coming months… The Fed futures market is still betting on no rate hike next month, then a quarter percent uptick in December, but no move in January. Note: In the lower chart, a 6% probability of change is a 94% probability the rate will stay the same.
Current Fed Funds Rate: 2.00%-2.25%
| AFTER FOMC MEETING ON: | CONSENSUS |
| Nov 8 | 2.00%-2.25% |
| Dec 19 | 2.25%-2.50% |
| Jan 30 | 2.25%-2.50% |
Probability of change from current policy:
| AFTER FOMC MEETING ON: | CONSENSUS |
| Nov 8 | 6% |
| Dec 19 | 85% |
| Jan 30 | 22% |
