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Market Update August 24th

Market Update August 24th
August 24, 2015 wpengine

The Fed is going to raise rates in September…No they are not…Yes they are…
If you ever wondered if we live in a global economy, Thursday was all the proof you could ever need.

  • The Dow plummeted 358 points and it had very little to do with anything in the U.S., today, Friday 419 points
  • For many months there has been talk about the Fed raising rates in September.
  • Then comes along China and other countries with their economic woes and now nobody knows what the Fed will do.

The Fed is being seen as the world’s bank and monetary policy decision maker.

  • It is abundantly clear that whatever the Fed decides about rates will likely impact economies worldwide, not just here at home.

Because of China’s change in economic policy related to their currency:

  • Major companies from the United States and Europe will likely suffer significant losses in profit.
  • It is estimated that companies listed on the U.S. S&P 500 generate about 44 percent of their revenue from outside the country.
  • Devaluation of currency in any market they operate in can have a devastating impact on their profit margins.

Additional downward pressure on the stock market is coming from the fact that there is an oversupply of oil in the world.

  • Part of the reason for the excess oil is on account of China’s lower than expected consumption.
  • Add on top of that the increase in energy efficiency and the overall less need for oil worldwide, this is impacting major energy company’s ability to earn profits.

For many years after the great recession it was said that housing needs to recover in order for the economy to improve.

  • The existing homes sales report released this week shows that housing continues to improve.

Existing home sales jumped 2.0 percent for the month of July and they are 10.3 percent higher than the same time last year.

  • Demand continues to remain very strong with the desire for housing much higher than the available inventory.
  • Supply of homes fell from 5.1 months down to 4.8 months.
  • This is sharply lower than July 2014’s supply of 5.6 months.
  • Median home prices are up also by 5.6 percent.

The upward pressure on housing is a strong sign for the real estate market. It is important to realize that in order for the market to truly recover inventory needs to increase so there is more balance between supply and demand.
There are a number of major housing reports due out next week:

  • Tuesday August 25th – FHFA House Price, S&P Case-Shiller HPI & New Homes Sales
  • Wednesday August 26th – MBA Applications & Durable Goods Orders
  • Thursday August 27th – First Time Jobless Claims & GDP
  • Friday August 28th – Consumer Sentiment