The U.S. Home Flipping Report from ATTOM Data Solutions saw home flipping reach its highest level since 2010. They define a flip as a property sold in an arms length sale for the second time in a 12-month period. The 51,434 homes and condos flipped in Q2 were 14% more than in Q1, putting the annual gain up 3% over last year. The firm's senior vp pointed out that "an increasing number of flippers are financing their purchases," so a "favorable lending environment" has fueled the "frenzy we've seen over the past five quarters."
The report also said flippers are realizing a much bigger gross ROI this year, averaging 49% so far, versus just 27% back in 2006. A strong majority of home owners and renters also feel now is a good time to buy, according to the National Association of Realtors latest HOME (Housing Opportunities and Market Experience) Survey. However, the NAR's chief economist found that young adults can be hesitant because they don't realize there are mortgage options "that do not require a 20% down payment." In fact, NAR data reveals that over the last 35 years, "the average median down payment has been 5% for first-time buyers." Gotta get the word out.
Review of Last Week
It was a volatile week on Wall Street, as investors were kept on edge prognosticating over this week's Fed meeting. In addition to wondering if our central bank was going to increase interest rates come Wednesday, traders were also stressed about the Bank of Japan's policy meeting the same day. (It's a global economy!) As the week wore on, stocks recovered, fears of a September rate hike evaporating after the report that Retail Sales dropped -0.3% in August when they should have been boosted by back-to-school spending. Versus a year ago, Retail Sales are up 1.9%, pretty much matching the tepid growth of the overall economy.
Friday we saw the Consumer Price Index (CPI) go up 0.2% in August. You might think this higher than expected inflation reading would have rekindled fears of a Fed rate hike, but the CPI is up only 1.1% from a year ago, far from the Fed's 2% target. The Producer Price Index (PPI) reported non-existent inflation for wholesale prices. Other reads on the economy were mixed. Factory capacity and output remain down nationally, with both Capacity Utilization and Industrial Production slipping in August. But the Philly Fed index vaulted to +12.8, showing manufacturing expansion at least in that region. Finally, University of Michigan Consumer Sentiment did not improve in September. Surprised?
The week ended with the Dow UP 0.2%, to 18123; the S&P 500 UP 0.5%, to 2139; and the Nasdaq UP 2.3%, to 5245.
Bonds hate inflation, so Friday's hot CPI number sent Treasuries and other bonds mostly lower. The 30YR FNMA 4.0% bond we watch finished the week down .02, at $107.25. Freddie Mac's Primary Mortgage Market Survey for the week ending September 15 reported the national average 30-year fixed mortgage rate up a tad to pre-Brexit levels, but still well below where it was a year ago. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
This Week’s Forecast
This week's key data goes up, down and nowhere at all. Analysts predict Housing Starts will dip in August and Building Permits will go up. August Existing Home Sales are also forecast up, to a 5.5 million annual rate. But the Fed isn't expected to go anywhere with their FOMC Rate Decision. Nonetheless, every word in the policy statement and Chair Janet Yellen's presser will be heavily scrutinized.
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 Sep 19 – Sep 23
Sep 20 08:30 Housing Starts
Sep 20 08:30 Building Permits
Sep 21 10:30 Crude Inventories
Sep 21 14:00 FOMC Rate Decision
Sep 22 08:30 Initial Unemployment Claims
Sep 22 08:30 Continuing Unemployment Claims
Sep 22 10:00 Existing Home Sales
Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months... In spite of last week's weak economic reports, a slight majority of economists still feel there will be a rate hike after the election. Note: In the lower chart, a 12% probability of change is an 88% certainty the rate will stay the same.
Current Fed Funds Rate: 0.25%-0.5%
After FOMC meeting on:
Sep 21 0.25%-0.5%
Nov 2 0.25%-0.5%
Dec 14 0.5%-0.75%
Probability of change from current policy:
After FOMC meeting on:
Sep 21 12%
Nov 2 21%
Dec 14 55%
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