Market Update

 

 

>> Market Update

QUOTE OF THE WEEK… “Things are not always as they seem; the first appearance deceives many.” –Phaedrus, Roman poet and fabulist INFO THAT HITS US WHERE WE LIVE… The ancient Roman writer of fables certainly hit the nail on the head with regard to last week’s housing reports. Housing Starts dipped 14.4% in August to a 956,000 annual rate, while Building Permits dropped 5.6% to a 998,000 annual rate. With both numbers coming in under a million units a year, pundits were quick to declare that the home building recovery is over. But they were truly deceived. Even with the August decline, starts are up 8.0% over a year ago. The multi-family sector is a bit stronger, but single-family starts are still up 4.2% in the past year. Starts are volatile from month to month, so to see the trend, we need to look at the 12-month moving average, now at its highest level since October 2008. Equally encouraging, the number of homes under construction but not finished was up 0.6% in August and up 21.6% from a year ago. The pundits also overlooked two more facts. 1) Residential construction jobs are up 123,000 in the last year, which wouldn’t make sense if the recovery were going in the other direction. 2) The National Association of Home builders said that builder confidence in the market for new single-family homes rose in September for the fourth month in a row, to a nine-year high!>> Review of Last Week

THE FED FIDDLES, STOCKS SPIKE… Wednesday’s Fed meeting was basically a non-event, as Chair Janet Yellen continued to fiddle around about how soon they’ll start raising interest rates. The Fed didn’t change its Policy Statement language that it will be a “considerable period” before rate hikes begin. This was a relief to investors who promptly pushed the Dow to another record close for the week. Adding to the positive vibe was Scotland’s vote to remain in the U.K., as well as Chinese e-commerce giant Alibaba’s ginormous initial public offering. It was a big upper for Wall Street to have a company with a dominant presence in China list its shares in the U.S.  Investors needed all this good news to offset the mostly disappointing economic data. In the manufacturing sector, Industrial Production, Capacity Utilization, and the Philadelphia Fed Index all missed estimates, although the New York Empire Manufacturing Index beat expectations. Housing Starts and Building Permits came in way below forecasts, but builder confidence was higher. Best of all, last week’s Initial Unemployment Claims fell by 36,000 to 280,000, its lowest reading in two months and the second lowest level since 2000. Furthermore, Continuing Claims dropped another 63,000 to 2.43 million. The week ended with the Dow up 1.7%, to 17280; the S&P 500 up 1.3%, to 2010; and the Nasdaq up 0.3%, to 4580.As stocks went up, bonds ended mixed, in choppy trading that reacted to both the good news and the disappointing data. The 30YR FNMA 4.0% bond we watch finished the week up 0.75, to $105.02. Freddie Mac’s Primary Mortgage Market Survey had national average mortgage rates up for the week ending September 18. It was the biggest one-week gain of the year, yet rates are still well down from where they were a year ago. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.  DID YOU KNOW?… This week’s GDP Deflator is the measure of economic growth that accounts for inflation. It factors in the change in prices of goods produced within the quarter being reported, letting us compare GDP readings in constant dollars.

>> This Week’s Forecast

HOME SALES ADVANCE, AND SO DOES GDP… Housing market news remains in the spotlight. August Existing Home Sales should continue to come in over the 5 million unit annual rate. New Home Sales are also forecast up for the month, solidly into 400,000 per year territory. The end of the week sees the GDP-3rd Estimate, predicted to show economic growth edging ahead in Q2 after its dismal contraction in Q1. But economists expect the GDP Deflator, which accounts for inflation, to languish around an anemic 2% growth rate. August Durable Goods Orders should do a big dip, but if you take out volatile transportation orders, they’re forecast to be up a tick.

>> 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 22 – Sep 26

 Date

Time (ET)

Release

For

Consensus

Prior

Impact

M Sep 22

10:00

Existing Home Sales

Aug

5.20M

5.15M

Moderate

W Sep 24

10:00

New Home Sales

Aug

435K

412K

Moderate

W Sep 24

10:30

Crude Inventories

9/20

NA

+3.67M

Moderate

Th Sep 25

08:30

Initial Unemployment Claims

9/20

300K

280K

Moderate

Th Sep 25

08:30

Continuing Unemployment Claims

9/13

2.470M

2.429M

Moderate

Th Sep 25

08:30

Durable Goods Orders

Aug

-16.3%%

22.6%

Moderate

F Sep 26

08:30

GDP-3rd Estimate

Q2

4.6%

4.2%

Moderate

F Sep 26

08:30

GDP Deflator-3rd Estimate

Q2

2.1%

2.1%

Moderate

F Sep 26

09:55

U. of Michigan Consumer Sentiment

Sep

85.0 

84.6

Moderate

 

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months… The Fed’s statements last week have most economists expecting the central bank to keep the Funds Rate where it is well into 2015. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%-0.25%

After FOMC meeting on:

Consensus

Oct 29

0%-0.25%

Dec 17

0%-0.25%

Jan 28

0%-0.25%

Probability of change from current policy:

After FOMC meeting on:

Consensus

Oct 29

     <1%

Dec 17

     <1%

Jan 28

     <1%

 This information is provided by Laurie A Moore of Wallick & Volk Mortgage Corp. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice, or a commitment to lend. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material does not represent the opinion of Wallick & Volk Mortgage. Wallick and Volk Mortgage Corp. NMLS #2973. BK 0018295 AZ MLO #0912625

 Laurie Moore

Sr. Mortgage Consultant

Certified Reverse Mortgage Specialist

2086 Willow Creek Road

Prescott, AZ 86301

Office: 928-778-7167

Mobile: 928-308-1723

Fax: 928-445-5308

laurie.moore@wvmb.com

 

 

 

 


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