|For the week of March 7, 2016 – Vol. 14, Issue 10|
>> Market Update
QUOTE OF THE WEEK… “The rule is, jam tomorrow and jam yesterday–but never jam today.” –Lewis Carroll, English writer and mathematician
INFO THAT HITS US WHERE WE LIVE … What the White Queen offered Alice seems similar to what the media often gives us in their coverage of the housing market. The headlines blared that Pending Home Sales dropped 2.5% in January. This index of contracts signed on existing homes is a forward-looking indicator of those sales, so the media typically reported that rising prices and low inventories continue to impede housing growth. As usual, a deeper look into the facts shows otherwise. First, the decline was made larger because December’s number was revised upward. A good thing. Also ignored was the fact Pending Home sales are UP 1.4% from a year ago. Oh.
The National Association of Realtors chief economist felt, “some buyers could be waiting for a hike in listings come springtime.” That very well may happen as rising home prices entice more homeowners to sell. Then let’s look at how existing home sales began this year, considerably higher than their start in 2015, even with 8.2% annual price gains. Also, home prices aren’t too high and inventories aren’t too low for the flippers. A major real estate information company reported the number of homes flipped in 2015 was the highest in almost ten years, with the market share of flips scoring its first annual increase in four years. They define a flip as a home that’s bought and sold again within 12 months.
BUSINESS TIP OF THE WEEK… A key to business success is simply being a good listener. The better you listen to your customers, the more you can do for them. The more you do for them, the more they’ll do for you.
>> Review of Last Week
CAN’T BEAR IT… For most of this year on Wall Street, the bears have been in charge. The December Fed rate hike, along with some disappointing economic data at the end of last year and the start of this one, got some economists forecasting another recession. Falling oil prices and slowdowns in the global economy didn’t help, so stocks tanked. But before anyone could pronounce it a bear market, stocks came back, scoring weekly gains, and last Friday the Dow and S&P 500 wound up hitting two-month highs. Throw in the tech-y Nasdaq, and the three major indexes finished ahead for the third week in a row. A big boost came from the better-than-expected February jobs report.
The week ended with the Dow UP 2.2%, to 17007; the S&P 500 UP 2.7%, to 2000; and the Nasdaq UP 2.8%, to 4717.
The better than anticipated February jobs growth swung investor money out of bonds and back into riskier equities. Treasuries got torched, but the 30YR FNMA 4.0% bond we watch finished the week UP .02, at $106.66. National average 30-year fixed mortgage rates finally stopped dropping, edging up slightly in Freddie Mac’s Primary Mortgage Market Survey for the week ending March 3. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.
DID YOU KNOW?… The latest survey from a real estate database said one in four homebuyers in February purchased because their rent was too high, up from one in five in November and one in eight in August. The only reason more frequently cited was a major life event, such as the birth of a child or marriage.
>> This Week’s Forecast
NOTHING MUCH TO TELL… Economic data nerds will be disappointed this week, not in the data, but in the almost total lack of it. Yes, we get reads on Crude Inventories and Initial and Continuing Unemployment Claims, but we see those every week. With the oil supply glut, you can count on plenty of barrels in inventory. And the Initial Claims number hasn’t drifted above 300,000 for almost a year, while Continuing Claims remain just above two million. The Federal Budget is expected to show a deficit, and you don’t have to be an economic data nerd to predict that.
>> 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.
Economic Calendar for the Week of Mar 7 – Mar 11
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months… We’re back to a smaller number of economists who think the Fed will vote for a second rate hike any time in the first half of this year. Note: In the lower chart, a 2% probability of change is a 98% certainty the rate will stay the same.
Current Fed Funds Rate: 0.25%-0.5%
Probability of change from current policy: