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Market Update February 8th

Market Update February 8th
February 8, 2016 devsite

Coming out of the recession, everyone was told that real estate would need to lead the way.

  • The reality was that the labor market took us out and real estate lagged behind.
  • Today it may be that real estate is the only thing that may keep the economy from returning to a recession.

With global markets in turmoil relating to the economic slowdown in China, as well as the world’s oversupply of oil, there appears to be more and more uncertainty happening.

  • Real estate appears to be the only real bright spot in the economy as of late.
  • However, even the real estate market may be starting to show signs of slowing, but it is still too early to tell.

The labor market seems to be weakening somewhat with more people making claims for unemployment benefits.

  • Recent weeks have been showing an upward trend in first time jobless claims and the pattern seems to be growing.
  • On top of this was Wednesday’s ADP Employment Report which showed less strength in hiring for the month of January.
  • ADP reported new hires of 205,000 which is down 62,000 from Decembers employment rally.
  • Friday morning at 8:30AM the Labor Department will release their employment data.
  • Analysts are expecting a decline in this number as well from last month’s 292,000 jump down to 188,000.

Mortgage rates have returned to 9 month lows and are likely to be a catalyst for more homebuyers to enter the market.

  • Higher demand may also be just what home sellers need to see in order to move them to finally get off the fence and start selling.
  • There continues to be a significant disparity between the demand for homes versus what is available.
  • Inventory in most of the country continues to remain tight.

The bright spot in housing came from the construction spending report for December.

  • Although the overall numbers were not worthy of a celebration, the good news is that the residential component was strong.
  • Construction spending in this sector reported a very strong 0.9 percent growth.
  • The year-on-year growth rate is up 8.1 percent which is partially due to the abnormally mild winter.

Those of you that read my newsletter on a regular basis, know that I always try to be positive.

  • It is just a little challenging this week on account of so many reports showing weakness in the economy.
  • We know this is only one week, but it still raises concerns.
  • We will have to wait for the middle of February before we start receiving significant housing data to determine which direction the market is heading in this sector.
  • I continue to remain positive on housing and believe that it may very well slow somewhat, but by no means push us into a recession.

The major potential market moving reports are:

  • Wednesday February 10th – MBA Applications & 10 Year Note Auction
  • Thursday February 11th – First Time Jobless Claims
  • Friday February 12th – Retail Sales and Consumer Sentiment