Market Update for the Week of June 17, 2019

MARKET UPDATE

In the Fed’s Q1 Flow of Funds report, the value of all U.S. owner-occupied homes rose to a record $26.1 trillion, 15% above the 2006 peak. And homeowner equity is up to 60.4%, its highest level since 2002.

CoreLogic’s CEO explains, “the country continues to experience record economic expansion,” while Freddie Mac‘s May forecast adds, “existing home sales have benefited from low mortgage rates and a healthy job market.”

2017’s Tax Cut and Jobs Act also helped. John Burns Real Estate Consulting found last year, renters on average paid $2,716 less in taxes, homeowners $1,508 less, those disposable income spikes helping boost home ownership.

REVIEW OF LAST WEEK

STOCKS UP TWO WEEKS STRAIGHT… Investors worried about weakness in our interdependent global economy, but optimism around trade wars and rate cuts, plus solid economic data, sent stocks north again.

Mexico tightened its borders to avoid tariffs, and the G-20 summit later this month could mean progress on a deal with China. Investors also expect this week’s Fed meeting will hint strongly at a rate cut come July.

Retail Sales rose nicely in May, while prior months were revised higher, showing strong consumer buying power. Industrial Production gained, but CPI inflation moderated, which could delay Fed rate cuts.

The week ended with the Dow UP 0.4%, to 26090 the S&P 500 UP 0.5%, to 2887; and the Nasdaq UP 0.7%, to 7797.

Rising stocks and positive data pushed bond prices lower. The 30YR FNMA 4.0% bond ended down .20, to $103.14. In Freddie Mac’s Primary Mortgage Market Survey, the national average 30-year fixed mortgage rate stayed near its two-year low. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?

A new study reveals people are happiest with their lives when their debt is in the form of mortgages. In other words, mortgages are the most satisfying form of debt.

THIS WEEK’S FORECAST

HOME BUILDING, EXISTING SALES GAIN, THE FED HOLDS… Home builders should show more activity in May’s Housing Starts and Building Permits reports. But no action is expected with the Fed’s FOMC Rate Decision on Wednesday, though we’ll all look for indications of a rate cut in July.

NOTE: Weaker 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 should leave rates unchanged this week, but the Fed Funds Futures market sees a quarter percent rate cut in July, followed by another one in September. Note: In the lower chart, a 19% probability of change is an 81% probability the rate will stay the same.

Current Fed Funds Rate: 2.25%-2.50%

AFTER FOMC MEETING ON: CONSENSUS
Jun 19 2.25%-2.50%
Jul 31 2.00%-2.25%
Sep 18 1.75%-2.00%

 

Probability of change from current policy:

AFTER FOMC MEETING ON: CONSENSUS
Jun 19    19%
Jul 31    84%
Sep 18    95%
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Jim Passi
Regional Manager
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1300 East Woodfield Road, Suite 302
Schaumburg, IL 60173
Mobile: 847-899-1813
Office: 847-273-3265

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