Market Update for the Week of July 1, 2019


The Pending Home Sales index of contracts signed on existing homes rose 1.1% in May. This suggests closed Existing Home Sales, which rebounded nicely in May, should continue their upward move in June.

But New Home Sales took a 7.8% dip in May, to a 626,000 annual rate, 3.7% down from a year ago. However, total new home sales from January to May this year are UP 3.7% over the same period in 2018.

Last week, the President signed a bill lifting the cap on no-down-payment VA loans for service members and veterans, and created a White House Council charged with “eliminating regulatory barriers to affordable housing.”


SO-SO WEEK, SUPER SIX MONTHS… Stocks dipped a tick for the week, but the S&P 500 posted its best first half in 22 years, up 17% since January. Investor enthusiasm cooled ahead of President Trump and President Xi’s G-20 meet.

Other downers included May’s New Home Sales and a drop in Durable Goods Orders, although all this made investors more certain about a July rate cut from the Fed, especially when Core PCE inflation also fell.

Yet the economy rolls on, with personal incomes and consumer spending up in May, and the University of  Michigan consumer sentiment index just south of 100. Plus, final Q1 GDP confirmed the economy grew a strong 3.1%.

The week ended with the Dow down 0.4%, to 26600; the S&P 500 down 0.3%, to 2942; and the Nasdaq also down 0.3%, to 8006.

Safe haven investing drove up bond prices.The 30YR FNMA 4.0% bond ended UP .09, to $103.31. Freddie Mac’s Primary Mortgage Market Survey saw the national average 30-year fixed mortgage fall to its lowest level in two and a half years. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.


Harvard’s Housing Studies Center says “regulatory constraints on development” are one of “the most significant factors” hurting affordable housing. And after a 12-year decline, homeownership rose in 2017 and 2018 to 64.4%, mostly among millennials.


MANUFACTURING, SERVICES SECTORS, JOBS ALL GROW… You have to wonder what data those recessionistas are reading. ISM Manufacturing and ISM Services are expected to remain in growth territory, above 50, for June. And the forecast is for 160,000 new Nonfarm Payrolls in June, a 3.6% Unemployment Rate, and another nice climb for Average Hourly Earnings.

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.


Forecasting Federal Reserve policy changes in coming months… Wall Street still feels it’s a sure thing we’ll get a rate cut in July, followed by another in September. There’s a 33% chance of an October rate cut, but that’s balanced by a 17% possibility of a hike, so the rate probably won’t change. Note: In the lower chart, a 100% probability of change is a 0% probability the rate will stay the same.

Current Fed Funds Rate: 2.25%-2.50%

Jul 31 2.00%-2.25%
Sep 18 1.75%-2.00%
Oct 30 1.75%-2.00%


Probability of change from current policy:

Jul 31   100%
Sep 18    75%
Oct 30    50%
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