One could call today both a good day and a bad day for housing data since we have to report Housing Starts down and Existing Home Sales up in September.
A look beyond the headline numbers paints a better picture. Yes, Housing Starts dropped 9.0% last month, to a 1.047 million annual rate. But, the drop came from a 38% dive in those volatile multifamily starts, their biggest dip in seven years.
Single family starts came in up 8.1% for the month and up 5.4% versus a year ago. Building Permits were up 6.3% in September, with both single-family and multifamily gains, so all should be well going forward.
Our 'good day' headline reads, 'Existing Home Sales Rose 3.2% in September, to a 5.47 Million Annual Rate.' Good to see them nudging up to 5.5 million units. Even better, the increase was driven by a big boost in first-time home buyers. They accounted for 34% of the market, up from 31% in August and 29% a year ago, reaching their highest share since July 2012. The National Association of Realtors chief economist feels, "there is hope the leap in sales to first time buyers can stick through the rest of the year and into next spring." He believes "the market fundamentals are there for the steady rise in first timers needed to finally reverse the decline in the home ownership rate."
Review of Last Week
After two weekly declines in a row, all three stock indexes scored weekly gains, though the blue chip Dow ended up by a mere seven points, less than a tenth of a percent. There were continued concerns about the Fed boosting rates, spurred when FOMC Vice Chair William Dudley said that a rate hike before the end of 2016 makes sense to him. San Francisco Fed President John Williams chimed in that he wanted to see the Fed raise rates "preferably sooner rather than later." Yet corporate earnings reports started coming in, and despite a few good ones, some analysts are predicting the sixth straight quarter of declining earnings among S&P 500 companies.
This sign of a weak if not yet sputtering economy might give the Fed pause about throwing higher borrowing costs into the mix. The last thing they want to do if they raise rates is to have to take them back down. The week's economic reports delivered the usual mixed bag of data. Industrial Production was up just 0.1% in September after an August setback, and it's down 1% from a year ago. The Philadelphia Fed Index showed factory sentiment down in that region but still indicating growth. The Consumer Price Index (CPI) pegged inflation up 1.5% from a year ago, getting closer to the Fed's 2% target. But real average hourly earnings are up just 1.0% the past year.
The week ended with the Dow UP just 7+ points, to 18145; the S&P 500 UP 0.4%, to 2141; and the Nasdaq UP 0.8%, to 5257.
Bond trading ended the week quietly, with a slight uptick in Treasuries, as well as other issues. The 30YR FNMA 4.0% bond we watch finished the week UP .14, at $107.16. In Freddie Mac's Primary Mortgage Market Survey for the week ending October 20, national average 30-year fixed mortgage rates edged higher for the second week in a row. They're at their highest level in four months, but still near record lows. Remember, mortgage rates can be extremely volatile so call me any time to discuss the market.
This Week’s Forecast
Analysts are not forecasting much of a gain for New Home Sales in September, but at least they aren't sliding backwards. The Pending Home Sales index of contracts signed on existing homes should tick up into growth territory, expected to be up 0.6%, a 3% jump from its August contraction. The Employment Cost Index, is predicted to be up again. This is a key inflation indicator, since when employment costs (wages and benefits) go up, prices may soon follow.
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 24 – Oct 28
Oct 25 10:00 Consumer Confidence
Oct 26 10:00 New Home Sales
Oct 26 10:30 Crude Inventories
Oct 27 08:30 Initial Unemployment Claims
Oct 27 08:30 Continuing Unemployment Claims
Oct 27 08:30 Durable Goods Orders
Oct 27 10:00 Pending Home Sales
Oct 28 08:30 GDP - Advanced
Oct 28 08:30 Employment Cost Index
Oct 28 10:00 U. of Michigan Consumer Sentiment
Federal Reserve Watch
A December rate hike forecast is now being repeated so often, it will be a shock if we don't get it. But almost no one expects one in November.
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 70%
Feb 1 71%
Have a great week!
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