INFO THAT HITS US WHERE WE LIVE… Well, some interesting economic studies have appeared revealing that this year could well be a great time to buy a home. In Fannie Mae’s June 2015 National Housing Survey, 59% of respondents expect rents to increase in the next year, a survey high. At the same time, 52% think now is a good time to sell a home, a survey high that went over 50% for the first time in its history. Fannie Mae’s chief economist concluded, “these results point to a healthier home purchase market, with more renters likely to find owning to be more cost-effective than renting and more sellers likely to put their homes on the market.”
Another study by a real estate data firm reported home prices gained in May for the 39th month in a row. Year-over-year, prices were up 6.3%, and are forecast to be up another 5.1% by May 2016. The firm’s CEO feels these gains have spurred new home construction, and “as rising values build equity for homeowners, we expect to see more existing homes offered for sale in the coming year.” Buyers of course are encouraged by bigger supply. Another data firm reports that principal and interest payment on a median-priced home is now just 21% of median gross monthly income nationally. That ratio had been 25%-26% historically and up to 33% at the height of the market in 2006.
BUSINESS TIP OF THE WEEK… Psychologists have found optimism is key to success. Stay positive with a gratitude list. Each day, note five things you’re grateful for–your health, a new lead, that great latte–things you could easily take for granted.
>> Review of Last Week
LOTS OF SURPRISES… Investors don’t much like surprises, just look at what they do to the stocks of companies whose profits miss estimates. Last week’s surprises started with the Greek vote to turn down the deal offered by creditors. As that country’s banks ran out of cash, Wednesday saw a half-day trading halt on the New York Stock Exchange, thanks to an unexplained computer crash. In China, stocks continued to tank. But our stocks ended the volatile week OK, as NYSE servers came back up, the Shanghai Composite recovered once their government threw 1.8 trillion Yuan at the problem, and Greek officials came back to the bargaining table with a creditor-friendly proposal.
Once you got away from the volatility on Wall Street, things didn’t look too bad for the rest of the country. The ISM Services index climbed up to 56.0 in June, continuing to show expansion in this part of the economy that supplies well over 80% of our jobs. In 2015, the service sector racked up the fastest growth starting a year since 2005, and has now seen expansion for 65 months in a row. The trade deficit, at $41.9 billion, came in smaller than expected, registering more normal levels for the last two months. This report also showed the U.S. headed toward energy independence, as petroleum imports were only 1.6 times exports in May vs. 11 times exports in 2005.
The week ended with the Dow UP 0.2%, to 17760; the S&P 500 flat, at 2077; and the Nasdaq down 0.2%, to 4998.
On Friday, investors calmed down about Greece, and Chair Janet Yellen said the Fed will likely raise rates this year, so bond prices dropped. The 30YR FNMA 4.0% bond we watch finished the week down .03, at $105.21. But for the week ended July 9, national average fixed mortgage rates reversed course and dipped down in Freddie Mac’s Primary Mortgage Market Survey. Their chief economist put this to “investor concerns about events in Greece and China” earlier in the week. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.
DID YOU KNOW?… Using current interest rates on existing 30-year mortgages and broad-based underwriting criteria, a leading data firm found that more than 6 million borrowers could benefit from traditional refinancing, saving about $1.5 billion every month.
>>This Week’s Forecast
HOME BUILDING UP AND DOWN, RETAIL AND INFLATION OK… Lots of data to chew on this week. Highlights include a look at June home building, where Housing Starts are forecast up, but Building Permits, measuring builder optimism going forward, are expected down just a bit. Retail Sales are predicted up for June, though not by as much as in May. Inflation measures should be OK: both the Consumer Price Index (CPI) and the wholesale arena’s Producer Price Index (PPI).
>> 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.
Info provided by Troy lepisto of First Mortgage Company. Phone 505-670-6399