NATIONAL MARKET UPDATE
October Residential Construction was just a smidge below September’s read, at a seasonally adjusted annual rate of $887.2 billion . This is still 8.6% ahead of a year ago, with growth focused on the multifamily sector.
The Pending Home Sales index of signed contracts on existing homes slipped in October. But the NAR sees “a return of buyers, as mortgage rates appear to have already peaked and have been coming down since mid-November.”
Homebuyers on the sidelines should note those lower rates, along with the growing active inventory (49% above a year ago) that’s giving them more choices. Plus, Case-Shiller home price gains have now decreased six months in a row.
REVIEW OF LAST WEEK
UP DOWN UP… After rallying midweek on the Fed’s dovish rate hike comments and improved inflation data, then tanking on Friday’s better-than-forecast November jobs report, stocks still finished ahead for the second week in a row.
Investors loved hearing Fed Chair Powell say rate hikes could moderate “as soon as December.” This was followed by PCE Price inflation dropping from September’s 6.2% annual rate to 6.0% in October.
But Friday’s November jobs data–higher-than-expected 263,000 new Nonfarm Payrolls and 5.1% annual wage growth–showed the Fed still has a ways to go before its rate hikes cool the labor market and inflation along with it.
The week ended with the Dow UP 0.2%, to 34,430; the S&P 500 UP 1.1%, to 4,072; and the Nasdaq UP 2.1%, to 11,461. Bonds had another strong week overall, the UMBS 5.5% UP 0.95, to $101.22. With bond prices up, rates go down, and the national average 30-year fixed mortgage rate fell again in Freddie Mac’s Primary Mortgage Market Survey. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW… The conforming loan limit–the maximum mortgage amount Fannie Mae or Freddie Mac will guarantee–goes up in 2023 to $726,200 in most counties and to $1,089,300 in designated high-cost areas, as well as in Alaska, Hawaii, Guam, and the U.S. Virgin Islands.
THIS WEEK’S FORECAST
DATA ON THE SERVICES SECTOR, WHOLESALE PRICES, THE CONSUMER… Expect November’s ISM Non-Manufacturing Index to recede but remain above 50, in growth territory. Unfortunately, November wholesale price inflation is also forecast to grow, according to the Producer Price Index (PPI). Analysts predict the preliminary December read on University of Michigan Consumer Sentiment will remain at historically low levels.
FEDERAL RESERVE WATCH
Forecasting Federal Reserve policy changes in coming months. The futures market expects the Fed to hike the rate by a half percent in December and February, then hold at that level in March. Note: In the lower chart a 100.0% probability of change is a 100.0% probability the rate will rise. Current rate is 3.75%-4.00%.
AFTER FOMC MEETING ON: CONSENSUS
Dec 14 4.25%-4.50%
Feb 1 4.75%-5.00%
Mar 22 4.75%-5.00%
Probability of change from current policy:
AFTER FOMC MEETING ON: CONSENSUS
Dec 14 100.0%
Feb 1 53.8%
Mar 22 83.8%
BUSINESS TIP OF THE WEEK
Expressing gratitude can do more than make you feel good. When you’re grateful for someone’s work, give them a positive online review. When they thank you, you might bring up your business and ask if they know anyone who could use your help.