INFO THAT HITS US WHERE WE LIVE…Home builders are building plenty of doors, sending single family construction spending up 2.1% in July over June, and up 15.8% over a year ago. In fact, single family spending was the leading driver of total private residential construction spending in July. Single family starts rose 12.9% to a 782,000 annual rate, an 8-year high and the National Association of Home Builders (NAHB) is forecasting single family spending will accelerate through the rest of this year. The NAHB’s chairman noted, “Our builders are reporting more confidence in the market and are stepping up production of single family homes as a result.”
The Fed’s latest Beige Book on economic conditions told us home sales and home prices headed up in all 12 Federal Reserve Districts. But construction activity was mixed and inventories continue to decline or stay flat. However, the overall residential outlook was positive, with the majority of Districts expecting the increased residential activity to continue. Freddie Mac’s August Insight & Outlook report says that 2015 should be the best year yet, as their annual home sales projection soared to 5.73 units. The Mortgage Bankers Association’s Weekly Applications Survey pegged their Purchase Index at its highest level since July, and 25% higher than a year ago.
BUSINESS TIP OF THE WEEK… At the end of each day, ask yourself, “Did I do the best that I can for my clients?” No matter what the answer, take today’s level of effort and dial it up a notch tomorrow.
>> Review of Last Week
SUMMER’S OVER… No one comes to Wall Street for fun in the sun, but everyone has a good time watching their investments go up. Traders enjoyed that sort of entertainment for most of the warm season, but the week before Labor Day the summer fun ended. The five-day roller coaster ride ended with the three major stock indexes posting their second largest weekly losses of the year. China’s economic slowdown didn’t help, but Friday’s jobs report sent stocks down with a thud. The 173,000 new Nonfarm Payrolls for August was on the low side, but good Hourly Earnings growth and a 5.1% Unemployment Rate may encourage the Fed to raise rates later this month.
However, those central bankers may want to take a closer look at this economic recovery. The ISM manufacturing index slipped to 51.1 in August, still signaling expansion above 50, but just barely. The ISM services index was way higher, at 59.0, though that too had slipped for the month. But let’s get positive. Productivity increased at a 3.3% annual rate in the second quarter, a nice upward revision from the prior 1.3% estimate. Initial Unemployment Claims have now come in under 300,000 for 31 weeks in a row, while Continuing Unemployment Claims dropped to 2.27 million. But the July Trade Deficit was $41.9 billion, $7.9 billion bigger than a year ago. Ugh.
The week ended with the Dow down 3.2%, to 16102; the S&P 500 down 3.4%, to 1921; and the Nasdaq down 3.0%, to 4684.
Stocks may have tanked, but bonds only had an OK week, thanks to investor concerns over a Fed rate hike in September. The 30YR FNMA 4.0% bond we watch finished the week up .04, at $106.15. Freddie Mac’s Primary Mortgage Market Survey for the week ending September 3 showed national average fixed mortgage rates up a tick. This was put to “another week with lots of volatility on essentially no new information.” Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.
DID YOU KNOW?… In theirAugust Insight & Outlook report,Freddie Mac increased their mortgage originations estimate for2015 to $1.45 trillion.
>> This Week’s Forecast
JOBLESS CLAIMS UNDER CONTROL, JUST LIKE WHOLESALE PRICES… Not much to look after during our first week back from the summer. The four days will have us checking if Initial Unemployment Claims remain under the 300,000 threshold. Analysts predict they will. The Producer Price Index (PPI) is forecast to show wholesale price inflation is also under control, contracting in August. If this keeps consumer prices down, the Fed may delay hiking rates, as they first want to see inflation up around 2%.
All financial markets were closed Monday September 7 for the Labor Day holiday.
>> 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.
Troy Lepisto 505-670-6399
Senior Loan Officer
1048 Paseo De Peralta
Santa Fe, NM 87501
Direct: (505) 670-6399