Market Update: Existing Home Sales Up; Housing Starts Slipped by Ron Schulz

>> Market Update

QUOTATION OF THE WEEK… “Inspiration exists, but it has to find us working.” –Pablo Picasso, Spanish artist

INFO THAT HITS US WHERE WE LIVE … Home builders appear to be working hard and the results are indeed inspiring. The Mortgage Bankers Association (MBA) reports purchase applications for new homes surged to a record high in March. Their Builder Application Survey pegged those purchase applications UP 23% over February and 6.7% ahead of March a year ago. The MBA tabbed new home sales in March at a seasonally adjusted 670,000 unit annual rate. Their vp of research and economics commented, “developers are finding ways to bring new product on line to help supplement otherwise low inventories of existing homes for sale.”

She also noted, “In contrast to the increasing average loan size trend in our Weekly Survey, which reports applications for both new and existing homes, the average loan size for new homes… was unchanged from a year ago.” In spite of that larger loan size, the survey for the week ending April 7 reported purchase applications UP 3% overall. Though last year showed the strongest home sales pace in a decade, the National Association of Realtors reported a drop in vacation home buying. But they note investment sales “reached their highest level since 2012 as investors…recognized the sizable demand for renting.”

BUSINESS TIP OF THE WEEK… Some business gurus claim the customer will give you all the advice you need to be a success. You certainly can learn a lot by asking those you’ve pitched, why they did–or didn’t–hire you.

>> Review of Last Week

GEOPOLITICAL GYRATIONS… It was a holiday shortened week and the four days of trading were continually disturbed by an equal number of geopolitical concerns. Syria, North Korea, Russia and the bombing of ISIS tunnels in Afghanistan caused enough investor gyrations to keep stock prices in check. The result? The three major market indexes ended down for the second week in a row. And this was in spite of the fact that the Q1 corporate earnings season got started with better than expected numbers from three large U.S. banks. Plus, we received some pretty good if not yet spectacular economic data.

Kicking off with the good data, overall Retail Sales fell a tick in March, but the drop was largely due to dips in gasoline prices and auto and truck sales. Vehicle sales are very volatile month-to-month and lower gas prices leave consumers with more to spend on other goods and services to boost the economy. Taking out auto and gas numbers, retail sales actually rose 0.1% in March. Inflation came in super tame, both with the Producer Price Index of wholesale prices and the Consumer Price Index. Best of all, University of Michigan Consumer Sentiment showed consumers are more optimistic about their present situation than at any point since 2000.

The week ended with the Dow down 1.0%, to 20453; the S&P 500 down 1.1%, to 2329; and the Nasdaq down 1.2%, to 5805.

The geared-up geopolitics and innocuous inflation sent money into bonds, advancing prices nicely. The 30YR FNMA 4.0% bond we watch finished the week UP .33, at $105.39. For the week ending April 13, Freddie Mac’s Primary Mortgage Market Survey showed national average 30-year fixed mortgage rates falling for the fourth week in a row, landing at a new low for the year. Note that this follows the Fed’s latest rate hike. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… More than 13 million Americans work from home at least one day a week, the majority of them tech-happy Millennials. They want a home office space where they can engage with their technology, but it doesn’t have to take up a whole room.

>> This Week’s Forecast

EXISTING HOME SALES UP, STARTS DOWN, MANUFACTURING MIXED… We get some great reads on the March housing market. According to the forecasts, Existing Home Sales went up while Housing Starts slipped. But home builders remain optimistic, as Building Permits are expected up. We also get mixed reads on the factory front. The Philadelphia Fed Index of manufacturing activity in that key region should be down, while the national Industrial Production and Capacity Utilization measures are predicted up.

>> 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 Apr 17 – Apr 21

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… Economists expect no rate hike at the Fed’s next meeting and now a smaller majority sees an increase in June. Note: In the lower chart, a 5% probability of change is a 95% certainty the rate will stay the same.

Current Fed Funds Rate: 0.75%-1.0%

Probability of change from current policy: