Market Update for the Week of February 18, 2019


The National Association of Realtors chief economist reports, “with inventory steadily increasing, home prices are, on average, rising at a slower and healthier pace.”

Freddie Mac‘s chief economist adds: “While housing activity has clearly softened… lower mortgage rates and a strong job market should rekindle demand for the spring homebuying season.”

Make no mistake, real estate remains healthy. Black Knight’s PR director confirms, “home values are still up year over year in every state and 99 of the 100 largest U.S. markets.”


GOOD NEWS RULES… Stocks shot up on China-U.S. trade talk progress, the avoidance of another government shutdown, and reassurance from a Fed member that with rate hikes, the Fed is keeping its finger on the pause button.

All that good news prevailed over December slumps in Retail Sales and Industrial Production, especially once traders noted that other reports indicated strong holiday sales and continued manufacturing growth.

Plus, January had more job openings than unemployed workers (now 10 months in a row), inflation stayed under the Fed’s 2% target, consumer confidence rose, and corporate earnings hit double digit growth for the fifth straight quarter.

The week ended with the Dow UP 3.1%, to 25883; the S&P 500 UP 2.5%, at 2776; and the Nasdaq UP 2.4%, to 7472.

Surging stocks hurt bond prices, but negative data cut losses. The 30YR FNMA 4.0% bond ended down .28, at $102.02. Freddie Mac’s Primary Mortgage Market Survey reported the national average 30-year fixed mortgage rate fell to its lowest level in a year. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.


Attom Data Solutions reports that in Q4 2018 more than 14.5 million American properties were equity-rich–having secured loans that are 50% or less of the estimated market value.


EXISTING HOME SALES REBOUND, MANUFACTURING EXPANDS, WHAT THE FED SAID… Key reports include an expected January turnaround in Existing Home Sales, continued but slower manufacturing growth by the Philadelphia Fed Index, and a deeper look into the Fed’s last meet, with the release of the FOMC Minutes.

U.S. stock and bond markets were closed yesterday, February 18, in observance of Presidents Day.

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… Wall Street clearly feels the Fed will sit on its hands and not touch rates for the first half of the year.  Note: In the lower chart, a 0% probability of change is a 100% certainty the rate will stay the same.

Current Fed Funds Rate: 2.25%-2.50%

Mar  20 2.25%-2.50%
May   1 2.25%-2.50%
Jun  19 2.25%-2.50%


Probability of change from current policy:

Mar  20     0%
May   1     0%
Jun  19     0%
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