Weekly Market Update
INFO THAT HITS US WHERE WE LIVE… The daily efforts of housing market professionals achieved some impressive successes in May. Existing Home Sales were up 4.9% for the month, to a 4.89 million annual rate. Sales are still down a tick versus last year, but they’re getting closer to a healthy 5 million unit yearly pace. It was especially good to see that inventories continued to grow in May and are now up 6% compared to a year ago. The months’ supply dipped to 5.6 months thanks to the faster selling pace. The median price for existing homes is up 5.1% over a year ago, which is no doubt bringing more sellers into the market.
We saw even more impressive success on Tuesday with New Home Sales up 18.6% in May to a solid 504,000 unit annual rate, their highest pace in six years. Sales were up in all major areas of the country and the median price is up 6.9% from a year ago. The FHFA price index for homes financed with conforming mortgages was flat in April, yet up 5.9% versus a year ago.The S&P/Case-Shiller 20-city home price index was just 0.2% higher in April over March. But prices were up 10.8% year-over-year, slightly less than March’s 12.3% reading. Many experts feel that slowing home price gains indicate a return to a more stable market.
BUSINESS TIP OF THE WEEK… Prioritize your goals by which are the most urgent, or the easiest to achieve, or the most important for long-term growth. Then write down the steps you’ll take each month or each quarter to achieve them.
>> Review of Last Week
HEADING SOUTH… Winter is usually the season to head south, but Wall Street marches to its own drum. So the first week of summer saw enough stock prices drop to send both the Dow and the S&P 500 south for the week. Technology stocks still looked good to investors and the Nasdaq ended ahead for the second week in a row. The big downer was the GDP-3rd Estimate. It reported that the economy contracted in Q1 by -2.9%, its lowest reading since Q2 2009. Many ignored this ugly number, blaming it on the terrible winter. But there were other causes for investor concern.
Worrisome news from Iraq was joined by a trio of disappointing economic reports. Durable Goods Orders, Personal Spending, and the S&P/Case-Shiller 20- city home price index all missed expectations. On the other hand, weekly initial jobless claims continued on their steady trend downward, falling 2,000 after the prior week’s drop of 6,000. The 4-week average also posted its 18th straight decline! Plus, Existing Home Sales, New Home Sales, Consumer Confidence, and Michigan Consumer Sentiment all beat estimates. Let’s hope consumers start spending to match their upbeat feelings.
The week ended with the Dow down 0.6%, to 16852; the S&P 500 down 0.1%, to 1961; and the Nasdaq up 0.7%, to 4398.
The bad news GDP reading was good news for bonds, as investors looking for less risk nudged prices up. The 30YR FNMA 4.0% bond we watch finished the week up .09, at $105.32.For the week ending June 26, Freddie Mac’s Primary Mortgage Market Survey showed national average fixed mortgage rates down once again. They’re now lower than they were at this time 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?… Freddie Mac reported that more than one in five borrowers who took out conventional mortgages this year made a down payment of 10% or less of the purchase price.
>> This Week’s Forecast
MIXED SIGNALS FROM MANUFACTURING, PENDING HOME SALES AND JOBS… The economic data in this holiday shortened week is expected to go in both directions. Sound familiar? The ISM Index of manufacturing is forecast up, but the Chicago PMI gauge of Midwest manufacturing should slip. Happily, both are still indicating growth in the factory sector. Pending Home Sales are predicted up in May, good news for Existing Home Sales when these contracts close a few months out. Economists think we’ll see more than 200,000 new Nonfarm Payrolls in June, OK if not great, but the Unemployment Rate should stay at 6.3%.
The stock market closes early Thursday July 3 and all financial markets are closed Friday July 4 in observance of Independence Day.
>> 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 Jun 30 – Jul 4
Date Time (ET) Release For Consensus Prior Impact
Jun 30 09:45 Chicago PMI Jun 61.0 65.5 HIGH
Jun 30 10:00 Pending Home Sales May 1.5% 0.4% Moderate
Jul 1 10:00 ISM Index Jun 55.8 55.4 HIGH
Jul 2 10:30 Crude Inventories 6/28 NA 1.742M Moderate
Jul 3 08:30 Average Workweek Jun 34.5 34.5 HIGH
Jul 3 08:30 Hourly Earnings Jun 0.2% 0.2% HIGH
Jul 3 08:30 Nonfarm Payrolls Jun 210K 217K HIGH
Jul 3 08:30 Unemployment Rate Jun 6.3% 6.3% HIGH
Jul 3 08:30 Initial Unemployment Claims 6/28 315K 312K Moderate
Jul 3 08:30 Continuing Unemployment Claims 6/21 2.580M 2.571M Moderate
Jul 3 08:30 Trade Balance May -$45.2B -$47.2B Moderate
Jul 3 10:00 ISM Services Jun 56.5 56.3 Moderate
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months… Last week, St. Louis Fed President James Bullard said he expects the central bank to raise interest rates “at the end of the first quarter of next year.” This is sooner than analysts and other Fed members predict. 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
Jul 30 0%-0.25%
Sep 17 0%-0.25%
Oct 29 0%-0.25%
Probability of change from current policy:
After FOMC meeting on: Consensus
Jul 30 <1% Sep 17 <1% Oct 29 <1%