Market Update February 9th

Market Update February 9th

For the week of February 9, 2015 – Vol. 13, Issue 6>> Market UpdateQUOTE OF THE WEEK... "The people who get on in this world are the people who get up and look for the circumstances they want, and, if they can't find them, make them." --George Bernard Shaw, Irish playwright and criticINFO THAT HITS US WHERE WE LIVE... Circumstances in the housing market continue to improve. A National Association of Home Builders (NAHB) report says the U.S. is running at 90% of normal economic and housing activity, based on current employment, home price, and building permit data. The NAHB Chairman feels, "A growing economy and rising consumer confidence should help drive the release of pent-up demand in 2015." Their Chief Economist likes the employment picture, "where the number of metros that reached or surpassed their norms rose by 23." But builders are still behind the curve, as "single-family permits are only at 44% of normal activity."But mortgage applications are continuing in the right direction: up for the fourth week, according to the Mortgage Bankers Association (MBA) survey for the week ending January 30. A reduction in annual mortgage insurance premiums for FHA loans took effect January 26. In response, FHA purchase loan applications were up 12.4% over the week before, while FHA refinance applications shot up 76.5%. The MBA also saw its Mortgage Credit Availability Index increase in January. A major economic research consultancy reports their "survey evidence shows consumers are increasingly confident that this is a good time to make a home purchase."BUSINESS TIP OF THE WEEK... In business, big opportunities can come along unexpectedly. But to get the most out of them, you must be prepared. So prepare for the unexpected, every day. >> Review of Last WeekBACK TO WORK... Friday's jobs report showed an unexpectedly large number of Americans went back to work in January. The stock market got back to work too, booking solid weekly gains. But equities were down a bit Friday, thanks to worries over (let's not act surprised) Greece. The latest setup for a Greek tragedy came from Standard & Poor's downgrade of the country's sovereign debt (B-minus on the report card). This was followed by a eurozone official pointing out that Greece faces a February 16 deadline to apply for a bailout extension. These developments caught traders off-guard, stifling their celebration of the great U.S. jobs data.Great data it was. Nonfarm payrolls grew by 257,000 in January, with December revised higher to 329,000, and November to 423,000. Best of all, average hourly earnings went up 0.5% for the month and are up 2.2% from a year ago. The unemployment rate rose to 5.7%, but that was because more than a million people optimistically re-entered the labor force. The rest of the economic data was mixed. The ISM manufacturing index dipped in January, while ISM Services went up. Q4 Productivity slid at a 1.8% annual rate and the trade deficit hit $46.6 billion. Yet Core PCE prices went down in December and show inflation up just 0.7% versus a year ago.The week ended with the Dow UP 3.8%, to 17824; the S&P 500 UP 3.0%, to 2055; and the Nasdaq UP 2.4%, to 4744.The stronger than forecast January jobs report clobbered bonds, as investors priced in the possibility of an earlier than expected rate hike by the Fed. The 30YR FNMA 4.0% bond we watch finished the week down .79, to $106.26. National average fixed mortgage rates ticked lower in Freddie Mac's Primary Mortgage Market Survey for the week ending February 5. This put them back near their May 2013 lows. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information. DID YOU KNOW?... Consumers are growing more confident about the overall economy. The Conference Board's most recent Consumer Confidence index zoomed to 102.9, way past the expected 95.5 reading. >> This Week’s Forecast RETAIL SLOWS FOR ANOTHER MONTH... After going in the wrong direction in December, Retail Sales are expected to contract again in January. When you take out auto sales, retail shrinks even more. Some of this is from lower gasoline prices, but the hope was that consumers would spend those savings on other things. Hasn't happened yet. At least fewer people are being laid off, as weekly Initial Unemployment Claims are expected to remain under the 300,000 threshold. The University of Michigan Consumer Sentiment index is forecast to keep going up, so that should bode well for more consumer spending in the near future. >> The Week’s Economic Indicator CalendarWeaker 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 Feb 9 – Feb 13 DateTime (ET)ReleaseForConsensusPriorImpactWFeb 1110:30Crude Inventories2/7NA6.333MModerateWFeb 1114:00Federal BudgetJanNA–$10.3BModerateThFeb 1208:30Initial Unemployment Claims2/7285K278KModerateThFeb 1208:30Continuing Unemployment Claims1/312.405M2.400MModerateThFeb 1208:30Retail SalesJan–0.5%–0.9%HIGHThFeb 1208:30Retail Sales ex-autoJan–0.5%–1.0%HIGHThFeb 1210:00Business Inventories Dec0.2%0.2%ModerateFFeb 1310:00Univ. of Michigan Consumer SentimentFeb98.598.1Moderate >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months... With last week's surprisingly positive January jobs report, more economists are saying a rate hike is possible in June, likely by September. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.Current Fed Funds Rate: 0%–0.25%After FOMC meeting on:Consensus Mar 180%–0.25%Apr 290%–0.25%Jun 170%–0.25%Probability of change from current policy:After FOMC meeting on:Consensus Mar 18 0%Apr 29 5%Jun 17 23%


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