QUOTE OF THE WEEK… “I have enough money to last me the rest of my life unless I buy something.” –Jackie Mason, American comedian
INFO THAT HITS US WHERE WE LIVE … Money was a big topic last week, as the Fed meeting dialed up discussions about the cost of money–in other words, interest rates. As far as mortgage rates are concerned, Freddie Mac’s chief economist had this to offer: “Wednesday’s Fed decision to once again stand pat on rates, as well as growing anticipation of the U.K.’s upcoming European Union referendum will make it difficult for…mortgage rates to substantially rise in the upcoming weeks.” It seems the window of opportunity to take advantage of today’s low mortgage rates should stay open a little bit longer this selling season. Good deal!
Friday gave us some good reads on home builders. Following April’s big gain, Housing Starts in May were pretty much flat, off just 0.3%. The 1.164 million unit annual rate beat expectations and put starts 9.5% ahead of a year ago. Looking at the trend, the 12-month moving average is at its highest level since 2008. And the mix is improving. Single-family starts were actually up 0.3% in May and are climbing more quickly than multifamily starts. New Building Permits were up 0.7% in May, with the single-family share up 4.8% from a year ago. Small wonder the NAHB home builders confidence index hit 60 in June, its highest read since January.
BUSINESS TIP OF THE WEEK… Be ready for success. That big opportunity to succeed can come along any time. Make sure you’re prepared to grab it, by working hard every day, with a positive mindset.
>> Review of Last Week
BANKS, BREXIT STYMIE STOCKS… Investors spent a good part of their time last week listening to central banks. Four of the biggies, including our Federal Reserve, Bank of Japan, Bank of England and Swiss National Bank, all had meetings and all left their key interest rates unchanged. Normally stocks surge when rates are kept low, but this time all four banks voiced growth concerns in their policy statements. This Thursday’s “Brexit” vote to decide whether Great Britain will leave the European Union also kept Wall Street nervous. Nervousness makes traders sell, so the S&P 500 and the Nasdaq chalked up their largest weekly drops since late April.
While our Fed expressed uncertainty about U.S. economic growth, last week’s data broadcast the same mixed messages we’ve heard forever in this painfully slow recovery. Retail Sales were up a strong and way better than expected 0.5% in May, and Consumer Price Index (CPI) inflation came in lower than forecast. Initial Unemployment Claims stayed below 300,000 and Continuing Claims dropped into 2.1 million territory. Yes, manufacturing still suffers, with output (Industrial Production) and factory usage (Capacity Utilization) both falling in May. But then there were the aforementioned housing reports pointing to continued growth in home building.
The week ended with the Dow down 1.1%, to 17675; the S&P 500 down 1.2%, to 2071; and the Nasdaq down 1.9%, to 4800.
The decent housing reports on Friday cooled things off in the bond market. Treasuries ended lower, but the 30YR FNMA 4.0% bond we watch finished the week UP .01, at $107.03. Freddie Mac’s Primary Mortgage Market Survey for the week ending June 16 saw national average 30-year fixed mortgage rates drop once again. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW?… New home facts: in 1973, 49% had no air conditioning vs. 7% in 2015; in 1973, 40% had 1.5 bathrooms or fewer vs. 4% in 2015; in 1973, median size was 1525 sq.ft. vs. 2467 sq.ft. in 2015. >>This Week’s Forecast
SALES UP FOR EXISTING HOMES, DOWN FOR NEW, DURABLE GOODS FADE… Economists anticipate mixed housing reports this week. They see Existing Home Sales springing up to a 5.50 million unit annual rate, but forecast a drop in New Home Sales, which could make home builders cautious. A cautious outlook may also be prevalent among manufacturers, as May Durable Goods Orders for the items they produce are expected to fade from the nice rise they enjoyed the month before.
>> 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 20 – Jun 24
Date
Time (ET)
Release
For
Consensus
Prior
Impact
W
Jun 22
10:00
Existing Home Sales
May
5.50M
5.45M
Moderate
W
Jun 22
10:30
Crude Inventories
6/18
NA
-0.933M
Moderate
Th
Jun 23
08:30
Initial Unemployment Claims
6/18
273K
277K
Moderate
Th
Jun 23
08:30
Continuing Unemployment Claims
6/11
NA
2.157M
Moderate
Th
Jun 23
10:00
New Home Sales
May
560K
619K
Moderate
F
Jun 24
08:30
Durable Goods Orders
May
-0.6%
3.4%
Moderate
F
Jun 24
10:00
U. of Michigan Consumer Sentiment – Final
Jun
94.0
94.3
Moderate
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months… Fed Chair Janet Yellen’s dovish comments following last week’s meeting have most economists thinking there won’t be a rate hike until the very last meeting in December–maybe. Note: In the lower chart, a 7% probability of change is a 93% certainty the rate will stay the same.
Current Fed Funds Rate: 0.25%-0.5%
After FOMC meeting on:
Consensus
Jul 27
0.25%-0.50%
Sep 21
0.25%-0.50%
Nov 2
0.25%-0.50%
Probability of change from current policy:
After FOMC meeting on:
Consensus
Jul 27
7%
Sep 21
24%
Nov 2
24%