For the week of August 21, 2017 – Vol. 15, Issue 33

>> Market Update 

QUOTATION OF THE WEEK... "If you look at what you have in life, you'll always have more. If you look at what you don't have in life, you'll never have enough." --Oprah Winfrey, American media proprietor, talk show host, actress, producer and philanthropist

INFO THAT HITS US WHERE WE LIVE... The housing market pundits who love looking at what we don't have had a field day with last week's data. What we didn't have was growth in starts and permits in July. Housing Starts dipped 4.8% last month, to a 1.155 million annual rate, while Building Permits slipped 4.1%, to a 1.223 million yearly rate. Before we get caught up in talk about the end of the housing recovery, let's note that most all the drop was in multi-unit starts, which, because of the size of those projects, are very volatile, month to month. Single-family starts were off just 0.5% in July but their trend continues to rise, up 10.9% in the past year.

Yes, multi-family starts are off 33.7% from a year ago, but that just reflects a shift in the mix. In 2015, 35.7% of starts were multi-family. Last month, multi-family made up just 25.9% of all starts. This is good for the economy, since each single-family home contributes about twice what a multi-family unit does to GDP. Finally, the EVP of an online real estate company explained why today's home prices aren't near bubble-era: "while prices nominally have surpassed the 2006 peak, we're not talking about 2006 dollars. We've had 9 years of inflation... home price  today have basically recovered to about where they were in 2004." How about that.

BUSINESS TIP OF THE WEEK... Prioritize your to-do list. Understand the difference between what's important and what's urgent. Establish a rating system, then rank order what you need to do, from urgent, to important, to everything else.

>> Review of Last Week

THE SOUND AND THE FURY... The news was dominated by the sound of political controversy in the U.S. and the fury of yet another instance of Islamic State terrorism, this time in Spain. Those things left investors a bit jittery, which, along with low summertime trading volumes, set the stock market up for a selloff. The Dow, the S&P 500 and the Nasdaq all slipped for the week. We monitor market performance because investor sentiment is a pretty good leading indicator for the economy. Some analysts feel last week showed that Wall Streeters are becoming impatient waiting for major elements of the President's pro-growth agenda.

But
some pro-growth measures are happening, and although the promised tax cuts aren't here yet, the economy is obviously improving. Retail Sales kicked up 0.6% in July and are up 4.2% compared to a year ago. The NY Empire Manufacturing Index shot up from 9.2 in July to 25.2 in August, its highest read in almost three years. Consumer discretionary spending is up solidly in areas from amusement parks and campgrounds to motorcycles and boats. Corporate earnings in Q2 are up 10.2%, year over year, hitting double-digit growth for the second quarter in a row--plus, revenues are up 5.1%, their strongest performance in 11 quarters!

The week ended with the Dow down 0.8%, to 21675; the S&P 500 down 0.6%, to 2426; and the Nasdaq down 0.6%, to 6217.

It was an up and down week for bonds, with prices finally settling little changed from the Friday before. The 30YR FNMA 4.0% bond we watch finished the week down .06, to $105.41. In Freddie Mac's Primary Mortgage Market Survey for the week ending August 17, national average 30-year fixed mortgage rates edged lower again. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?... A recent study found FSBOs sold on average for 5.5% less than comparable properties sold with an agent, netting sellers about the same proceeds, but without benefitting from an agent's ability to reduce work, risk and time on the market.

>> This Week’s Forecast

NEW AND EXISTING HOME SALES HEADING UP... The big news for us will be the home sales reports for July. Wednesday, New Home Sales are expected to come in up for the month. Thursday, Existing Home Sales are forecast to be up nicely as well. Durable Goods Orders are predicted down from the prior month's gain, but when you exclude the volatile transportation segment, they're growing.

>> 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 Aug 21 – Aug 25

 Date Time (ET) Release For Consensus Prior Impact
W
Aug 23
10:00 New Home Sales Jul 615K
610K Moderate
W
Aug 23
10:30 Crude Inventories 0819 NA -8.9M Moderate
Th
Aug 24
08:30 Initial Unemployment Claims 0819 237K 232K Moderate
Th
Aug 24
08:30 Continuing Unemployment Claims 08/12 NA 1.953M Moderate
Th
Aug 24
10:00 Existing Home Sales Jul 5.56M 5.52M Moderate
F
Aug 25
08:30 Durable Goods Orders Jul -6.0% 6.5% Moderate
F
Aug 25
08:30 Durable Goods Orders - ex transportation Jul 0.5% 0.2% Moderate
                                                                                                          

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... We have a very slight probability the Fed will cut rates at one of the next few meetings. The probability of a December hike is now off the table, with the March meeting being the earliest we could see higher rates. Note: In the lower chart, a 4% probability of change is a 96% certainty the rate will stay the same.

Current Fed Funds Rate: 1.0%-1.25%

After FOMC meeting on: Consensus
Sep 20 1.0%-1.25%
Nov 1 1.0%-1.25%
Dec 13 1.0%-1.25% 

Probability of change from current policy:

After FOMC meeting on: Consensus
Sep 20         4%
Nov 1         6%
Dec 13       41%