New data from realtor.com says that following a summer housing market that saw both high demand and rising home prices, we could experience the hottest fall sales in a decade. Their chief economist said "house hunters who were shut out this summer because of fierce competition could fare better this fall, with more opportunities." He adds, "pent-up demand remains as buyers seek to get a home under contract while rates remain so low."
A research firm projects the third quarter will be the best for mortgage lending since Q4 of 2007. Going forward, a blog by the National Association of Realtors (NAR) notes that sales should heat up even more next year, reaching 6 million units, up from their latest forecast of 5.8 million units for 2016. This post reported that the Mortgage Bankers Association, Fannie Mae and Freddie Mac all had similar predictions. Here's the NAR's explanation: "A huge wave of Generation Y-ers [aka Millennials], who have delayed home buying, are emerging into their key buying years. They are predicted to keep home and condo sales strong well into 2020, according to economists."
Review of Last Week
The stock market went up and down but never broke out of a narrow trading range, which led one observer to conclude investors seem to be finding it hard to know what to think. In the end, the three major indexes all finished a smidge down, their first fall after three weekly gains. Wall Street worried that the European Central Bank would cut back on the assets it's buying to shore up their economies. We heard rate hike talk from Fed officials and watched the British pound swoon. Then came Friday's jobs report: an unimpressive 156,000 new Nonfarm Payrolls were added in September, a net gain of 149,000, deducting downward revisions to prior months.
This was technically no job growth at all according to economists who say we need 150,000 new payrolls a month just to keep up with the population. However, average hourly earnings were up 2.6% annually, near a seven year high. But, hey, if less than 3% is nearly our best annual raise in seven years, we're not doing very well, are we? At least a rate hike before December seems off the table. For good stuff, the ISM Index saw manufacturing expand again and ISM Services shot up to the year's highest read for the sector that supports the most jobs. Plus the four-week moving average of weekly initial jobless claims was the lowest in more than 40 years.
The week ended with the Dow down 0.4%, to 18240; the S&P 500 down 0.7%, to 2154; and the Nasdaq down 0.4%, to 5292.
Treasuries traded higher after the jobs report missed expectations, but the data wasn't bad enough to rule out a December Fed hike, so other bonds fell. The 30YR FNMA 4.0% bond we watch finished the week down .26, at $107.16. Freddie Mac's Primary Mortgage Market Survey for the week ending October 6 showed national average 30-year fixed mortgage rates unchanged, holding at a 10-week low. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
This Week’s Forecast
This Wednesday's release of the FOMC Minutes from the Fed's last meeting may give some indications of when the next rate hike will come. Or this detailed look at what was said at the Fed may just keep everyone guessing. (Bet on the latter.) We ought to finally have some good news on Retail Sales, September's number expected to show reasonable growth.
The bond market is closed today for Columbus Day, but the stock market is open.
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 Oct 10 – Oct 14
Oct 12 10:30 Crude Inventories
Oct 12 14:00 FOMC Minutes
Oct 13 08:30 Initial Unemployment Claims
Oct 13 08:30 Continuing Unemployment Claims
Oct 13 14:00 Federal Budget
Oct 14 08:30 Producer Price Index (PPI)F
Oct 14 08:30 Core PPI
Oct 14 08:30 Retail Sales
Oct 14 10:00 Business Inventories
Oct 14 10:00 U. of Michigan Consumer Sentiment
Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months... Nothing much has changed among Fed watchers, meaning they're betting on no rate hike in November, then a small boost in December, which the Fed will likely leave there for a while. Note: In the lower chart, an 8% probability of change is a 92% certainty the rate will stay the same.
Current Fed Funds Rate: 0.25%-0.5%
After FOMC meeting on:
Nov 2 0.25%-0.5%
Dec 14 0.5%-0.75%
Feb 1 0.5%-0.75%
Probability of change from current policy:
After FOMC meeting on:
Nov 2 8%
Dec 14 65%
Feb 1 68%
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