Market Update Santa Fe Las Campanas

There isn’t too much to annoy us in the latest prognostications about what the housing market’s performance might be in the year just entered. The National Association of Realtors (NAR) housing and economic forecast predicts the housing market might see 1 to 3% growth in overall sales in 2016. The NAR estimates that existing home sales for 2015 will come in 6.5% ahead of 2014 and then hit 5.3 to 5.4 million units this year. They forecast housing starts at 1.25 to 1.35 million units for 2016, as home building continues to strengthen. Price gains are expected to moderate, with median home prices up 4.0 to 5.0%.

For 2016, Fannie Mae’s Economic & Strategic Research Group sees increased household income and job security helping the housing market, while increased consumer spending spurs economic growth. Their January Housing Forecast for the year projects single-family housing starts up 16.9% and single-family home sales up 11.9%. Existing Home Sales should increase by 2.9%, resulting in total home sales coming in 3.7% ahead for 2016. The median home price of all homes purchased with conforming mortgages is forecast to go up 5.2% this year. Mortgage applications started 2016 impressively, up 21.3% for the week, to their second highest level in five years.

BUSINESS TIP OF THE WEEK… Satisfied former clients are great sources of new business. Even if they don’t need your services again, they can refer you to new prospects, starting you off with a great introduction.

>> Review of Last Week

BAD BUT BETTER… It was another bad week on Wall Street for stocks, though the price drop was better–a bit less than the week before. However, those two weeks wound up as the worst 10-day start to a calendar year in stock market history. Even though prices were volatile the first four days, the S&P 500 was still flat for the week at Thursday’s market close. Sparking the volatility were the same concerns as the prior week: China and falling oil prices. The Shanghai Composite stock market index ended down 9% for the week and 18% for the month. Meanwhile, the price of oil got hammered to its lowest level in over 12 years. West Texas crude closed the week at $29.45 a barrel.

What sent stocks southward on Friday were a handful of less than stellar U.S. economic reports. Retail Sales dropped 0.1% in December, reflecting a cooler holiday shopping season. Taking out volatile auto sales, retail was still down by 0.1%. The Producer Price Index (PPI) showed wholesale prices sliding in December, although Core PPI, excluding food and energy prices, went up a tic. On the manufacturing front, Empire Manufacturing reported contraction in the New York region; Industrial Production slid 0.4%; and factory Capacity Utilization dropped to 76.5%. Yet Michigan Consumer Sentiment rose again for the month and Initial Unemployment Claims stayed under 300,000 for another week.

The week ended with the Dow down 2.2%, to 15988; the S&P 500 down 2.2%, to 1880; and the Nasdaq down 3.3%, to 4488.

Friday’s U.S. economic data sent even more investor money to the safe haven of bonds. The 30YR FNMA 4.0% bond we watch finished the week down just .06, at $106.30. National average 30-year fixed mortgage rates dropped for the second straight week in Freddie Mac’s Primary Mortgage Market Survey for the week ending January 14. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.

DID YOU KNOW?… An analytics firm estimates about 5.2 million qualified borrowers could now benefit from refinancing–but a 0.5% rise in interest rates would eliminate 2.1 million and a 1% rise would eliminate 3.1 million of these potential candidates.

>>This Week’s Forecast

HOME BUILDING HOLDS, EXISTING HOME SALES GAIN, INFLATION TAME… For December, home builders are expected to stay in a holding pattern, with Housing Starts a shade up but Building Permits a shade down. Existing Home Sales are forecast nicely ahead for the month, back over the 5 million unit annual rate. The Consumer Price Index measure of inflation should be flat overall, with the Core CPI up just a touch. This is good news for keeping the Fed in check, as the central bankers say they want to see stronger inflation before they raise rates any more.

U.S. stock and bond markets are closed Monday in observance of Martin Luther King, Jr. 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.