MARKET UPDATE
Housing Starts were up 1.5% in October, to a 1.228 million annual rate. For the first ten months of this year, starts are up 5.0% for single families and up 5.4% overall versus the first ten months of 2017.
After six months of declines, Existing Home Sales rose in October–up 1.4%, to a 5.22 million annual rate. Supply is the prob, so it’s also good to see inventories up year-over-year, three months in a row.
Advice from Freddie Mac‘s chief economist: “Mortgage rates are the lowest since early October, and the dip offers a window of opportunity for would be buyers that have been on the fence waiting for a drop in mortgage rates.”
REVIEW OF LAST WEEK
BLACK FRIDAY BARGAINS… At the end of the short trading week, many stock prices looked like Black Friday doorbusters. Investors worried falling oil prices signaled slower global growth, while financial media focused on doom and gloom.
But there’s a disconnect between all this and economic reality. Data shows rising wages, low unemployment, tax stimulus dollars still flowing into paychecks and the economy heading for its fastest growth rate in more than a decade.
Consumers are feeling pretty good. Thanksgiving online shopping shot up 28% over last year and Black Friday sales should hit a record $23 billion overall, up 9% from last year’s strong showing.
The week ended with the Dow down 4.4%, to 24286; the S&P 500 down 3.8%, to 2633; and the Nasdaq down 4.3%, to 6939.
The bond market saw both modest gains and modest dips. The 30YR FNMA 4.0% bond went down .08, to $100.23. In Freddie Mac’s Primary Mortgage Market Survey, the national average 30-year fixed mortgage rate dropped. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW?
A study revealed 31.3% of listings in October had a price drop of at least 1%, an eight-year high. With sellers coming closer to buyers, the market could start moving more quickly.
THIS WEEK’S FORECAST
NEW AND PENDING HOME SALES, GDP GAIN, INFLATION DOESN’T… The forecasts call for increases in both New Home Sales and the Pending Home Sales index of contracts signed on existing homes. Analysts predict the GDP – Second Estimate will push economic growth up to 3.6%, and Core PCE Prices will show inflation remains tame.
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… Wall Streeters are certain we’ll get another hike from the Fed next month, then none in January, but they only see a 50-50 chance of another bump in March. Note: In the lower chart, a 74% probability of change is a 26% probability the rate will stay the same.
Current Fed Funds Rate: 2.00%-2.25%
| AFTER FOMC MEETING ON: | CONSENSUS |
| Dec 19 | 2.25%-2.50% |
| Jan 30 | 2.25%-2.50% |
| Mar 20 | 2.25%-2.50% |
Probability of change from current policy:
| AFTER FOMC MEETING ON: | CONSENSUS |
| Dec 19 | 74% |
| Jan 30 | 28% |
| Mar 20 | 50% |
