Thoughts to Ponder and The Market Update Oct. 21

 

Thoughts to Ponder . . .

• Never test how deep the water is with both feet.
• The most important four words for a successful marriage: ‘I’ll do the dishes.’
• How many roads must a man walk down before he admits he’s lost?
• Never ask a starfish for directions.
• That moment when you spell a word so wrong, even auto-correct is like “I’ve got nothing man.”

 

And now onto The Market Update . . .

The next 10 days will be telling about what is happening in the real estate market.

• With three major housing reports due out next week, FHFA House Price Index, Case-Shiller House Price Index, and Pending Home Sales, without question there will be plenty of data for the Fed to digest in regard to the status of the housing market.
• This week also provided some insight to what is happening in housing with the Housing Starts report and the Housing Market Index.

 

Thus far the two mentioned reports are mostly positive.

• The new home sector seems to be growing and is expected to finish off the second quarter in positive territory.
• The index only declined 2 points for October down to 63, which is still considered quite positive.
• Home builders seem to be expressing significant optimism about future sales.
• Current sales are down slightly but they continue to remain very strong at a reading of 68.
• Traffic coming to visit new home sites is down slightly as well however, it does not seem to be putting a damper on overall sales or the optimism of builders.

 

In the second building related report for the week, Housing Starts, this data seems to reinforce that the area of new construction is strong in the residential sector.

• This is the area that investors and the Fed care about most.
• Starts for residential properties jumped 8.1 percent.
• Permits for single-family residences rose 0.4 percent.

 

Some positive movement in purchase activity and mortgage financing occurred for the week of October 14^th.

• The Mortgage Bankers Association of America reported that purchase applications increased 3.0 percent, which reverses last week’s decline of the same amount.
• As expected with mortgage rates inching slightly higher, refinance applications continue to slow with last week being no exception with a miniscule drop of 1.0 percent.
• Overall applications for purchases remain 13.0 percent higher than the same time last year.

 

Inflation, which plays a major role in the Fed’s decision on whether or not to raise rates, continues to remain below Fed goals.

• Consumer prices rose a strong 0.3 percent for the month of September.
• The challenge is that the core inflation rate remains virtually flat as the jump in prices was related to energy prices.
• The Fed does not put as much weight on energy prices as they do other consumer goods because of the price volatility that exists with energy.

 

After a long run of unemployment claims below 250K, claims climbed up to 260K for the week ending October 15^th.

• There are no special factors that seem to relate to the increase.
• It is only one report and the level of claims remains at a very healthy level so investors did not pay any mind to the report.

 

This week’s potential market moving reports are:

• Tuesday October 25^th – FHFA HPI, S&P Case-Shiller HPI, Consumer Confidence
• Wednesday October 26^th – MBA Mortgage Applications
• Thursday October 27^th – First Time Jobless Claims, Pending Home Sales
• Friday October 28^th – GDP, Consumer Sentiment