QUOTE OF THE WEEK… “A day without laughter is a day wasted.” –Charlie Chaplin, English comic actor, filmmaker and composer
INFO THAT HITS US WHERE WE LIVE … Whether or not there was any laughter at the Fed, last Wednesday looked like a day wasted there, as they had their meeting, didn’t touch rates and didn’t have Chair Janet Yellen hold a presser to elaborate on anything. This left the pundits speculating over a Fed policy statement that said to expect rates to remain historically low “for some time.” Still, most economists think a December rate hike is a certainty. However, the Fed’s latest statement did downgrade its view of household spending from “growing strongly” to “rising modestly.” And one member who voted for a rate hike in September now voted against it.
Of course, the Fed Funds Rate isn’t a mortgage rate, although a hike from the Fed can eventually affect mortgages. Nonetheless, the chief economist at a major aggregator of real estate data commented, “I think we’ll see rates rise from dirt cheap to a very low level as we move into next year.” At least younger buyers are finally showing up in the housing market. The National Association of Realtors (NAR) chief economist said that in the past year, “those under age 35 made up 61% of first-time buyer transactions.” He added that their increased presence “greatly depends on supply improvements…and if wages can finally awaken from their sluggish pace of growth.
>> Review of Last Week
ELECTION DEFLECTION… Stocks ended the week before the election with all three indexes decidedly down, the S&P 500 and the Nasdaq posting losses for the second week in a row. This is normal stock market reaction to a close Presidential race and this year’s has recently tightened. Do understand this has nothing to do with any political leanings on Wall Street. Investors simply hate uncertainty, and more observers are now saying the White House prize is up for grabs. Economic data remains uncertain too, with the ISM Index of manufacturing activity up a bit, but ISM Services down for that part of the economy supplying more than 80% of U.S. jobs.
Speaking of jobs, Friday’s employment report got the usual mixed reviews. October saw 161,000 new nonfarm payrolls, and there were upward revisions to prior months, yet these numbers barely cover population growth. The household survey, which includes small businesses (the big engine for new jobs), showed a reduction of 43,000 for the month. And the unemployment rate dipped to 4.9%, but that was with 195,000 leaving the labor force. The report’s brightest spot was the 0.4% rise in average hourly earnings, and many feel the Fed will take that as a sign they can raise rates next month in spite of an economy that grew at just a 1.4% annual rate in Q2.
The week ended with the Dow down 1.5%, to 17888; the S&P 500 down 1.9%, to 2085; and the Nasdaq down 2.8%, to 5046.
Bond traders focused on the negative rather than the positive in Friday’s jobs report, sending Treasuries and other issues higher. The 30YR FNMA 4.0% bond we watch finished the week UP .08, at $107.14. National average 30-year fixed mortgage rates went up in Freddie Mac’s Primary Mortgage Market Survey for the week ending November 3, but remain below where they were a year ago. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW?… The National Association of Realtors reports nearly 88% of recent homebuyers purchased through an agent, just 1% below the record high set in 2011 and 2012. And FSBO and discount broker sales are at a record lows.
>> This Week’s Forecast
SURPRISE! THE FEDERAL GOVERNMENT IS RUNNING A DEFICIT… Forgive the sad joke, but the October Federal Deficit is one of this week’s few economic reports, and no one expects to hear that Washington is suddenly operating in the black. Tuesday is Election Day and the markets will no doubt react to the results, especially given the paucity of economic data.
Friday, November 11, the stock market is open, but the bond market is closed in observance of Veterans 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.