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Market Update August 10
>> Market Update QUOTE OF THE WEEK... "If you could kick the person in the pants responsible for most of your trouble, you wouldn't sit for a month." --Theodore Roosevelt, 26th President of the United StatesINFO THAT HITS US WHERE WE LIVE... Many homeowners are missing out on the opportunities in today's housing market but, as TR noted, it's actually their own fault. Fannie Mae's National Housing Survey (NHS) found that as many as 15 million homeowners underestimate the equity they have in their homes, so they're reluctant to consider buying another one. Such borrowers underestimate how large a down payment their home equity could provide, their chances of qualifying for a mortgage, and therefore their opportunities to sell their current property and buy a different one. These perceptions are especially surprising since home values have risen about 20% from 2011 to 2014! Further evidence of that price appreciation came with the latest home price index from a major real estate tech and data firm. They reported that home prices across the country in June were up 1.7% for the month, and up 6.5% annually, which made 40 straight months of yearly gains. Price gains are moderating, as these data mavens are forecasting a 0.5% price increase from June to July and a 4.2% annual hop from June 2015 to June 2016. The "Advance Read of July Trends" from realtor.com reports the median list price is up 7% year-over-year, but days on the market increased to 69. Their chief economist said this "suggests the market is finding more of a balance, but demand is still strong."BUSINESS TIP OF THE WEEK... If you want to be innovative, stop doing things the way everyone has always done them. Take all you know and turn it upside down. Approach a challenge with no constraints.>> Review of Last WeekJOBS GOOD, STOCKS NOT SO GOOD... Stocks closed down for the week, chalking up a seven day losing streak, with Friday's drop the result of another good if not great jobs report. Investors felt the 215,000 jobs added in July dialed up the possibility the Fed would begin raising interest rates in September, especially with unemployment holding at 5.3%. The Fed's action would be good in the sense that it shows the economy is finally vital enough to withstand higher rates, but bad if you don't really believe that--plus everyone loves rock-bottom rates. But the most anyone is predicting is a 0.25% increase and the Fed has also strongly hinted it wouldn't hike the rate two meetings in a row.So how good are things economic? We got our usual mixed bag of data. The ISM Manufacturing index dropped in July but stayed above 50, signaling expansion. Personal Income and Personal Spending were up in June, good stuff. Core PCE Prices, the Fed's favorite inflation measure, was up only a tick in June and is up just 1.3% the last year. That's well below the Fed's 2% inflation target, so they may indeed wait a few months more before raising rates. Then we got a blowout ISM Services report for July, showing strength in the sector that produces over 80% of our jobs. But that's just one month of data, and it was preceded by the sobering news the Trade Deficit ballooned to $43.8 billion in June.The week ended with the Dow down 1.8%, to 17373; the S&P 500 down 1.2%, to 2078; and the Nasdaq down 1.7%, to 5044.Investors are see-sawing between fear of an imminent Fed rate hike and fear of risk in betting on this economic recovery. The 30YR FNMA 4.0% bond we watch finished the week down just .03, to $106.10. Freddie Mac's Primary Mortgage Market Survey for the week ending August 6 showed national average fixed mortgage rates moving down for the third week in a row. This was put to economic uncertainty that pushed bond yields and interest rates lower. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information. DID YOU KNOW?... The Mortgage Bankers Association reports: "While affordability is a concern, in many places house prices have not yet recovered to their 2007 levels, while wages and salaries are now 16% higher according to the Employment Cost Index." >> This Week’s Forecast RETAIL REBOUNDS, BUDGET BLOOMS, CONSUMERS FEEL BETTER... There's a little something for everyone this week, but most importantly, Retail Sales are forecast to come back from their June dip to positive growth in July. Meanwhile, the Federal Budget blossoms to a predicted $149 billion deficit, no surprise there. Still, University of Michigan Consumer Sentiment should continue to ascend, as positive attitudes prevail, we're grateful to report.>> 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 Aug 10 – Aug 14 DateTime (ET)ReleaseForConsensusPriorImpactTuAug 1108:30Productivity-Prel.Q21.4%-3.1%ModerateTuAug 1108:30Unit Labor Costs-Prel.Q2-0.1%6.7%ModerateWAug 1210:30Crude Inventories8/8NANAModerateWAug 1214:00Federal BudgetJul-$149.0B-$94.6BModerateThAug 1308:30Initial Unemployment Claims8/8273K270KModerateThAug 13 08:30Continuing Unemployment Claims8/12.247M2.261MModerateThAug 1308:30Retail SalesJul0.5%-0.3%HIGHThAug 1310:00Business InventoriesJun0.3%0.3%ModerateFAug 1408:30Producer Price Index (PPI)Jul0.1%0.4%ModerateFAug 1408:30Core PPIJul0.1%0.3%ModerateFAug 1409:15Industrial ProductionJul0.3%0.2%ModerateFAug 1409:15Capacity UtilizationJul78.0%77.8%ModerateFAug 1410:00Univ. of Michigan Consumer SentimentAug93.993.1Moderate >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months... Sentiment among economists is increasing that the Fed will start raising rates in September. It's probable that a small upward move will occur by October and even more likely we'll see it by December. Note: In the lower chart, a 38% probability of change is an 62% certainty the rate will stay the same.Current Fed Funds Rate: 0%–0.25%After FOMC meeting on:Consensus Sep 170.00%-0.25%Oct 280.25%-0.50%Dec 160.25%-0.50%Probability of change from current policy:After FOMC meeting on:Consensus Sep 17 NAOct 28 38%Dec 16 60%
THE CHIODO TEAM - Ralph Chiodo Broker / Owner 610-579-9514 Karen Chiodo Realtor / Owner 610-579-9514 Together Ralph and Karen (and their dedicated Team) have success....