Market Update for the Week of November 5, 2018


Freddie Mac’s chief economist notes: “Despite higher mortgage rates, the monthly mortgage payment remains affordable. For many buyers, the chronic lack of entry-level supply is a larger hurdle.” reports that hurdle has now been cleared. After declining monthly four years in a row, October listings were up 2% versus a year ago, ending the longest housing inventory slump in history.

Demand is there. The Census Bureau put the homeownership rate up to 64.4% in Q3, driven by millennial first-time buyers. For those under 35, homeownership is up a whopping 1.2% over Q3 a year ago.


ALL ABOUT WORK… Stocks worked up solid weekly gains, thanks to more people working. Worries over tariffs, which haven’t yet had much economic effect, were abated by surprisingly strong employment data.

A quarter of a million new jobs were added in October, way more than expected. The Job Creators Network reports over 4.3 million more people are now working than in January 2017.

Wages are 3.1% up from a year ago, the biggest gain since 2009. The National Retail Federation says consumers have 4.1% more to spend this holiday season than last–over $1,000 on average, a new high.

The week ended with the Dow UP 2.4%, to 25271; the S&P 500 also UP 2.4%, to 2723; and the Nasdaq UP 2.6%, to 7357.

Bond prices sank on the big October jobs report. The 30YR FNMA 4.0% bond ended down .81, to $99.55. The national average 30-year fixed mortgage rate receded after last week’s tiny rise 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.


Rents just hit an all-time high. The Census Bureau reports that in Q3 the nationwide median asking rent topped $1,000 for the first time ever.


SERVICES SECTOR GROWS, BUT NOT INTEREST RATES… The ISM Services index should show strong growth well above 50 for October, though a tick down from its ultra-high September read. Interest rates, however, are not expected to grow with Wednesday’s Fed Rate Decision.

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.


Forecasting Federal Reserve policy changes in coming months… There is overwhelming feeling on Wall Street the Fed won’t touch rates this week. But a quarter percent blip is seen in December, then zilch again in January. Note: In the lower chart, a 7% probability of change is a 93% probability the rate will stay the same.

Current Fed Funds Rate: 2.00%-2.25%

Nov   8 2.00%-2.25%
Dec 19 2.25%-2.50%
Jan  30 2.25%-2.50%


Probability of change from current policy:

Nov   8    7%
Dec 19   81%
Jan 30   29%
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