MARKET UPDATE
Existing Home Sales shot up 11.8% in February, heading back over 5 million, all the way to a 5.510 million annual rate. This gain wipes out nearly a year’s worth of declines.
Also, the rate of growth for median home prices slowed to a mild 3.6% increase for the month. So wages are now growing almost as fast as prices, which, combined with lower mortgage rates, boosts affordability.
That might be why the National Association of Realtors HOME survey reports more folks say now is a good time to buy–37%, up from 34% in Q4 2018. Purchase mortgage applications, in fact, were up for the week and versus a year ago.
REVIEW OF LAST WEEK
DOVISH FED, BUT STOCKS DIVE… The Fed left rates alone AND strongly hinted there could be no more hikes this year, a very dovish stance. Stocks headed up Thursday, but tanked Friday, finishing the week down.
Traders fretted over economic growth after weak eurozone manufacturing reports and a yield curve inversion, where the rate of the 10-year Treasury dipped below the rate of the three-month note, a recession indicator for some.
But that inversion corrected itself, plus traders saw continued U.S. manufacturing expansion, super low Unemployment Claims and the super high Existing Home Sales covered above. Go figure.
The week ended with the Dow down 1.3%, to 25502; the S&P 500 down 0.8%, to 2801; and the Nasdaq down 0.6%, to 7643.
Bonds gained on the flight to safety. The 30YR FNMA 4.0% bond ended UP .45, to $102.81. Kicking off the spring homebuying season, the national average 30-year fixed mortgage rate dropped in Freddie Mac’s Primary Mortgage Market Survey. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW?
Black Knight reports 3.27 million homeowners could now reduce their mortgage rate 0.75% by refinancing, up 16% from a year ago, and the largest number since January 2018.
THIS WEEK’S FORECAST
HOME BUILDING SLIPS, NEW AND PENDING HOME SALES GAIN, GDP GROWS… February’s Housing Starts and Building Permits should be off just a tick, but New Home Sales and Pending Home Sales are expected up. The GDP-Third Estimate is forecast to show decent economic growth in Q4.
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… Last week, the central bankers heavily hinted they won’t hike rates this year. The only probable change is for rates to move down. Note: In the lower chart, a 4% probability of change is a 96% probability the rate will stay the same.
Current Fed Funds Rate: 2.25%-2.50%
| AFTER FOMC MEETING ON: | CONSENSUS |
| May 1 | 2.25%-2.50% |
| Jun 19 | 2.25%-2.50% |
| Jul 31 | 2.25%-2.50% |
Probability of change from current policy:
| AFTER FOMC MEETING ON: | CONSENSUS |
| May 1 | 4% |
| Jun 19 | 17% |
| Jul 31 | 26% |
