People continue to buy homes and prices keep moving ahead. The Case-Shiller Home Price Index was up 0.1% in March, and is up 5.2% in the last year - a bigger annual gain than the 4.3% logged for the year ending March 2015.
The index has been driven by some hot metros (Denver, Portland, Seattle), but also by the tight supply in markets across the country. The Case-Shiller Index Committee's managing director said, "The low inventory means that would-be sellers seeking to trade up are having a hard time finding a new, larger home."
But he added, "This may be starting to change: starts of single family homes in February were the highest since November 2007. The single-family home share of total housing starts was...approaching the 75%-80% range seen before the housing crisis." The chief economist at an online real estate site observed, "Despite facing some broader economic headwinds, market demand remains healthy." This enthusiasm in many regions may entice more owners to bring their homes onto the market. One source of comprehensive housing data reported Q1 saw the highest rate of home flips in two years and the biggest profits since the end of 2005. There are values out there.
Review of Last Week
Just when people seemed to be getting used to this stubbornly slow economic recovery with its monthly parade of economic reports which are neither terrific nor terrible, out come the May jobs numbers on Friday and, wow, are they terrible. A mere 38,000 new Nonfarm Payrolls were added last month, the weakest level of hiring in more than five years. Including downward revisions of 59,000 jobs to the March and April reports, the U.S. saw a net loss of 21,000 jobs in May. Investors took solace in the fact this would delay a Fed rate hike, but sent stocks south, worrying about a slowdown in the pace of job creation.
The Unemployment Rate dropped to 4.7%, but this was because almost half a million people stopped looking for work, sending the labor force participation rate back down to 62.6%. Those seeking a silver lining in the jobs report found it in the continued increase in hourly earnings, up 0.2% for the month, and 2.5% ahead of a year ago. Those with jobs are putting that extra money back into the economy, with Personal Spending up a hot 1.0% in April. Too bad Friday's very bad jobs report was followed by ISM Services falling to a two-year low, although it remains above 50, showing that this vital sector of our economy is still showing growth.
The week ended with the Dow down 0.4%, to 17807; the S&P 500 flat, at 2099; and the Nasdaq UP 0.2%, to 4943.
Friday's horrible jobs numbers sent investors scurrying to the safe haven of bonds, boosting prices. The 30YR FNMA 4.0% bond we watch finished the week UP .31, at $106.98. National average 30-year fixed mortgage rates edged up for the third week in a row in Freddie Mac's Primary Mortgage Market Survey for the week ending June 2. But their chief economist noted that rates are still near three-year lows. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
This Week’s Forecast
Productivity down, labor costs up, consumers tread water. Analysts expect another weird week of data. The Q1 Productivity revised number is forecast to stay negative, while Unit Labor Costs - Revised keep growing. Small wonder the University of Michigan Consumer Sentiment - Preliminary reading is predicted to stay pretty much where it's been. Will it surprise anyone that the May Federal Deficit should reveal that the government spent more money than it took in?
The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Jun 6 – Jun 10
Jun 7 08:30 Productivity - Rev.u
Jun 7 08:30 Unit Labor Costs - Rev. Q1
Jun 8 10:30 Crude Inventories
Jun 9 08:30 Initial Unemployment Claims
Jun 9 08:30 Continuing Unemployment Claims
Jun 10 10:00 U. of Michigan Consumer Sentiment - Prelim.
Jun 10 14:00 Federal Deficit May NA -$84.1B Moderate
Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months...
After the May jobs report, the majority of economists now think the Fed will leave rates alone clear through September. Note: In the lower chart, a 4% probability of change is a 96% certainty the rate will stay the same.
Current Fed Funds Rate: 0.25%-0.5%
After FOMC meeting on:
Jun 15 0.25%-0.50%
Jul 27 0.25%-0.50%
Sep 21 0.25%-0.50%
Probability of change from current policy:
After FOMC meeting on:
Jun 15 4%
Jul 27 31%
Sep 21 44%
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