Market Update Santa Fe Las Campanas for the Week of Oct 10, 2016

For the week of October 10, 2016 – Vol. 14, Issue 41

QUOTE OF THE WEEK… “The future ain’t what it used to be.” –Lawrence Peter “Yogi” Berra, American professional baseball player, manager and coach

INFO THAT HITS US WHERE WE LIVE … The future certainly isn’t as upbeat as it once was, but at least housing-wise, it seems to be moving in the right direction. New data from says that following a summer housing market that saw both high demand and rising home prices, we could experience the hottest fall sales in a decade. Their chief economist explained: “House hunters who were shut out this summer because of fierce competition could fare better this fall, with more opportunities to buy.” He adds, “pent-up demand remains substantial as buyers seek to get a home under contract while rates remain so low.”

A research firm projects the third quarter will be the best for mortgage lending since Q4 of 2007. Going forward, a blog by the National Association of Realtors (NAR) notes that sales should heat up even more next year, reaching 6 million units, up from their latest forecast of 5.8 million units for 2016. This post reported that the Mortgage Bankers Association, Fannie Mae and Freddie Mac all had similar predictions. Here’s the NAR’s explanation: “A huge wave of Generation Y-ers [aka Millennials], who have delayed home buying, are emerging into their key buying years. They are predicted to keep home and condo sales strong well into 2020, according to economists.”

>> Review of Last Week
WHAT SHOULD WE DO?… The stock market went up and down but never broke out of a narrow trading range, which led one observer to conclude investors seem to be finding it hard to know what to think. In the end, the three major indexes all finished a smidge down, their first fall after three weekly gains. Wall Street worried that the European Central Bank would cut back on the assets it’s buying to shore up their economies. We heard rate hike talk from Fed officials and watched the British pound swoon. Then came Friday’s jobs report: an unimpressive 156,000 new Nonfarm Payrolls were added in September, a net gain of 149,000, deducting downward revisions to prior months.

This was technically no job growth at all according to economists who say we need 150,000 new payrolls a month just to keep up with the population. However, average hourly earnings were up 2.6% annually, near a seven year high. But, hey, if less than 3% is nearly our best annual raise in seven years, we’re not doing very well, are we? At least a rate hike before December seems off the table. For good stuff, the ISM Index saw manufacturing expand again and ISM Services shot up to the year’s highest read for the sector that supports the most jobs. Plus the four-week moving average of weekly initial jobless claims was the lowest in more than 40 years.

The week ended with the Dow down 0.4%, to 18240; the S&P 500 down 0.7%, to 2154; and the Nasdaq down 0.4%, to 5292.

Treasuries traded higher after the jobs report missed expectations, but the data wasn’t bad enough to rule out a December Fed hike, so other bonds fell. The 30YR FNMA 4.0% bond we watch finished the week down .26, at $107.16. Freddie Mac’s Primary Mortgage Market Survey for the week ending October 6 showed national average 30-year fixed mortgage rates unchanged, holding at a 10-week low. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… Nearly 40,000 investors flipped homes in Q2, a nine-year high, and 32% were financed, the highest level in eight years.
>> This Week’s Forecast
FED MEETING REVELATIONS AND RISING RETAIL SALES… This Wednesday’s release of the FOMC Minutes from the Fed’s last meeting may give some indications of when the next rate hike will come. Or this detailed look at what was said at the Fed may just keep everyone guessing. (Bet on the latter.) We ought to finally have some good news on Retail Sales, September’s number expected to show reasonable growth.

The bond market is closed today for Columbus Day, but the stock market is open.
>> 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.