Market Update January 26

Market Update January 26

>> Market UpdateQUOTE OF THE WEEK... "Enthusiasm is the greatest asset in the world. It beats money and power and influence."--Henry Chester, Australian public servantINFO THAT HITS US WHERE WE LIVE... Home builders showed plenty of enthusiasm in December, sending Housing Starts up 4.4%, to a way-better-than expected 1.089 million annual rate. Overall starts are up 5.3% compared to a year ago, with annualized growth of more than one million units for the fourth month in a row. In fact, more homes were started last year than any year since 2007. Single-family starts shot up 7.2% for the month and are up 18.4% over the last two years. Building Permits did drop 1.9% overall, but the falloff was all due to multi-family units, which are volatile month to month, while single-family permits reached their highest level since 2008.All this activity added 132,100 new residential construction jobs in the past year. No wonder the National Association of Home Builders confidence index stays well over 50, meaning the majority of respondents feel conditions are good. Existing Home Sales were also up in December, although the 2.4% gain was less than expected. Nonetheless, versus a year ago, sales are up 3.5%, the median price is up 6.0%, and the months' supply is down to 4.4 months. Low inventories are a problem, but experts say higher prices will bring in more sellers. November's FHFA index of prices for homes financed with conforming mortgages saw its largest rise in 18 months.BUSINESS TIP OF THE WEEK... Don't get lost in the noise on the Internet. Just remember to keep your brand genuine: true to who you are and what you value. That's the best way to stand out. >> Review of Last WeekSUPER MARIO TO THE RESCUE... European Central Bank (ECB) President Mario Draghi played Super Mario last Thursday, attempting to rescue Princess Toadstool in the form of the European economy from the Bowser known as deflation. His rescue effort was a long-anticipated Quantitative Easing (QE) bond buying program. What was not anticipated was the scale of the effort: a commitment to buy 60 billion euros worth of bonds per month until September 2016, spending a total of 1.1 trillion euros, or about 1.3 trillion dollars. Stock markets all over the world went nuts, and even though U.S. equities dipped on Friday, the three big indexes ended up for the week. While what's good for the European economy is good for ours in this interconnected world, the U.S. could see some challenges. Draghi's program de-values the euro and boosts the dollar, which is good for their exports and bad for ours. But some analysts also think this program makes it harder for the Fed to hike rates. Meanwhile, we saw December Housing Starts surprise to the upside, though Existing Home Sales and Building Permits missed estimates. Leading Economic Indicators met expectations. Initial Unemployment Claims dropped by 10,000 to 307,000, though Continuing Claims were up 19,000 to 2.443 million.The week ended with the Dow UP 0.9%, to 17673; the S&P 500 UP 1.6%, to 2052; and the Nasdaq UP 2.7%, to 4758.Bonds lost while stocks soared through Thursday, but the ECB's QE program helped push bond prices back up. The 30YR FNMA 4.0% bond we watch finished the week UP .04, at $106.28. In Freddie Mac's Primary Mortgage Market Survey for the week ended January 22, national average mortgage rates dropped again. As bond yields and oil prices fell, national average fixed mortgage rates hit their lowest levels since May 2013. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information. DID YOU KNOW?... Non-cash sales of existing homes, where the buyer uses a mortgage, have steadily risen and accounted for 74% of total sales in December. Although credit has been relatively tight, this is evidence of a thaw. >> This Week’s Forecast HOME SALES GAIN, EMPLOYMENT COSTS MODERATE, THE FED MEETS... We're back to a full week of economic reports. Both New Homes Sales and Pending Home Sales (contracts signed on existing homes) are expected up in December. The Employment Cost Index should show slower growth in Q4, good news for keeping inflation under control. The Fed meets on Wednesday and no one expects any FOMC Rate Decision changes, but the policy statement will be interesting, following this week's blockbuster news from the ECB. Consumers also look more hopeful, as both Consumer Confidence and Michigan Consumer Sentiment are predicted to post healthy numbers.>> 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 Jan 26 – Jan 30 DateTime (ET)ReleaseForConsensusPriorImpactTuJan 2708:30Durable Goods OrdersDec0.5%–0.9%ModerateTuJan 2710:00Consumer ConfidenceJan95.592.6ModerateTuJan 2710:00New Home SalesDec450K438KModerateWJan 2810:30Crude Inventories1/24NA10.071MModerateWJan 2814:00FOMC Rate DecisionJan0%–0.25%0%–0.25%HIGHThJan 2908:30Initial Unemployment Claims1/24301K307KModerateThJan 2908:30Continuing Unemployment Claims1/172.430M2.443MModerateThJan 2910:00Pending Home SalesDec0.6%0.8%ModerateFJan 3008:30GDP–AdvancedQ43.2%5.0%ModerateFJan 3008:30GDP Chain Deflator–Advanced Q41.0%1.4%ModerateFJan 3008:30Employment Cost IndexQ40.5%0.7%HIGHFJan 3009:45Chicago PMIJan58.058.3HIGHFJan 3009:55U. of Michigan Consumer Sentiment–FinalJan98.298.2Moderate >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months... There's lots of talk about the Fed raising the Funds Rate this year, but last week's moves by the ECB may delay any rate hike for awhile. Note: In the lower chart, the probability of change is rated "Low" if few economists think the rate will rise, "Moderate" or "High" if more think it will go up.Current Fed Funds Rate: 0%–0.25%After FOMC meeting on:Consensus Jan 280%–0.25%Mar 180%–0.25%Apr 290%–0.25%Probability of change from current policy:After FOMC meeting on:Consensus Jan 28 LowMar 18 LowApr 29 Low

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Dated: January 26th 2015
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About Ralph and Karen: THE CHIODO TEAM - Ralph Chiodo Broker / Owner 610-792-4800 x 111 K...

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