It's a little early for New Year's celebrations but we can still existing home sales. Celebrate as the November report had Existing Home Sales handily beat expectations, up 0.7% for the month to a 5.61 million unit annual rate. This is the third month in a row existing home sales have gained and they are now at their fastest pace since 2007. Sales are up 15.4% over a year ago and even though inventories are low, prices are edging up and demand remains strong. In November 42% of the properties sold in less that one month.
Another thing to celebrate are New Home Sales, up 5.2% for November, to a 592,000 unit annual rate, 16.5% ahead of a year ago. Inventories went up too, but supply dropped to 5.1 months with the faster sales rate. The median new home price is down 3.7% from a year ago, a sign that builders are seeking a larger market. Overall prices are up 6.2% annually by October's FHFA index of homes financed by conforming mortgages, just 0.2% higher than the year before. Some analysts worry about rising mortgage rates, but others point out that rates remain historically low, and are being offset by growing incomes and expectations of a faster growing economy.
Review of Last Week
The week before the Christmas holiday, Wall Streeters seemed in a daze. Stocks traded in a narrow range absent the volatility we've seen for much of the year and the week ended on very light volume. Friday, more investors were off buying presents instead of equities. Nonetheless, since the election, the S&P 500 is now up more than 5% and the Dow more than 8%, so observers felt that taking it easy for a week to digest those moves was healthy. In any case, no one's foot was completely off the gas. All three major stock indexes ended the week up, the blue chip Dow matching its longest weekly winning streak in more than two years.
Economic data continued with up and down readings. The ups included the housing reports covered above. But Durable Goods Orders dropped 4.6% in November, while Initial and Continuing Unemployment Claims both increased. A good up read was the final Q3 GDP number, which pegged the economy growing at a 3.5% annual rate, the fastest in two years. Personal Income was up 3.5% the past year, Personal Spending up 4.2% and Core PCE Prices up only 1.6%, still short of the Fed's 2% inflation goal. Yet Michigan Consumer Sentiment hit its highest level since January 2004, reflecting a post-election boost in consumer confidence.
The week ended with the Dow UP 0.5%, to 19934; the S&P 500 UP 0.3%, to 2264; and the Nasdaq UP 0.5%, to 5463.
The bond market also saw a quiet Friday heading into the holiday, but the investor money in play brought the 10-year Treasury its first weekly gain in seven weeks. The 30YR FNMA 4.0% bond we watch finished the week UP .36, to $104.31. Freddie Mac's Primary Mortgage Market Survey for the week ending December 22 showed national average 30-year fixed mortgage rates moving higher again. This only takes them to the level they were in April 2014. Remember, mortgage rates can be extremely volatile, so contact me direct at 303.668.3350 with any questions you might have.
This Week’s Forecast
We close out the year with the Pending Home Sales gauge of contracts signed on existing homes. This indicates actual existing home sales a few months out and no dramatic moves are expected. The only other thing to watch is the Chicago PMI measure of factory activity in the Midwest. This should still show growth, though at a slightly slower pace. Stock and bond markets were closed yesterday for Christmas. The bond market closes 2 p.m. Friday and stock and bond markets are closed Monday for New Year's Day.
Wishing you a happy, healthy and prosperous New Year!
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 Dec 26 – Dec 30
Dec 27 10:00 Consumer Confidence
Dec 28 10:00 Pending Home Sales
Dec 28 10:30 Crude Inventories
Dec 29 08:30 Initial Unemployment Claims
Dec 29 08:30 Continuing Unemployment Claims
Dec 30 09:45 Chicago PMI
Federal Reserve Watch
Speculative Forecasting Federal Reserve policy changes in coming months:
The overwhelming majority of economists see the Fed leaving rates alone come February but sentiment is mounting for another hike as we move into Spring.
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:
Feb 1 0.5%-0.75%
Mar 15 0.5%-0.75%
May 3 0.5%-0.75%
Probability of change from current policy:
After FOMC meeting on:
Feb 1 4%
Mar 15 25%
May 3 36%
Where are interest rates headed?
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Scott Synovic is a top performing mortgage loan originator providing superior levels of service and satisfaction to clients and business partners in Colorado - www.scottsynovic.com NMLS #253799 Fairway Independent Mortgage Corporation #2289