Information provided by Toby Gilchrist, Mann Mortgage, LLC
NMLS: 487285
I regularly work with Toby Gilchrist and his team at Mann Mortgage, to secure financing for my buyers. This team is sharp, and can work around some tricky lending issues that other lenders can’t such as short job time and self-employed clients. Toby recently sent this great break down of the current financial markets, including real estate. It’s rolling into listing and selling season, and I thought you all might like a brief overview of what things are doing in the current market.
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Economic Calendar - for the Week of March 11, 2019
Economic reports having the greatest potential impact on the financial markets are highlighted in bold.
Weekly Review
The major stock market indexes moved lower during each treading day of the week with the Nasdaq Composite Index conspicuously recording its first weekly drop since late December. As a result, bond yields fell with the 10-year Treasury yield touching its lowest point since January 4th on Friday morning. Investor sentiment was negatively impacted by signs of slowing global growth and little progress on a trade deal between the U.S. and China.
Supporting the view of slowing global growth was a statement from The Organization for Economic Cooperation and Development (OECD) cutting its forecast for 2019 global economic growth to 3.3% from its November forecast of 3.5%. The OECD stated "Economic prospects are now weaker in nearly all G20 countries than previously anticipated. Vulnerabilities stemming from China and the weakening European economy, combined with a slowdown in trade and global manufacturing, high policy uncertainty and risks in financial markets, could undermine strong and sustainable medium-term growth worldwide.”
Furthermore, the European Central Bank (ECB) also cut its forecast for eurozone growth in 2019 to 1.1% from 1.7% as the U.S. - China trade dispute impacts economies across Europe. ECB President Mario Draghi stated “the economic outlook for the next 22 months has deteriorated after a series of shocks to the global economy, including a cut in China’s growth forecast and Brexit that are likely to persist throughout 2019.” In an effort to stimulate the slowing eurozone economy, the ECB launched a program called the Targeted Longer-Term Refinancing Operation (TLTRO III) consisting of two-year loans to help avoid a squeeze on credit that would lower economic growth.
U.S. - China trade deal surfaced when U.S. Ambassador to China, Terry Branstad, told The Wall Street Journal “a date has not been set for a summit because neither side feels an agreement is imminent.” Independently, President Trump said if a China trade deal is “not a great deal,” he will not make one, and “the U.S. will do well with or without a China trade deal.”
U.S. economic news during the week was mixed. Non- manufacturing activity (Services) in February exceeded consensus forecasts as did New Home Sales for December while the February Employment Situation Report at first glance was very disappointing.
The monthly payrolls report from the Department of Labor showed employers added only 20,000 jobs in February, well below expectations of 173,000 and the smallest number since September 2017. As bad as this number was, it may have been weather related and may be revised higher in coming months.
Average hourly earnings increased 0.4% with year-over-year average hourly earnings up 3.4%. This is great news as rising hourly earnings forms the basis for increased consumer spending.
The February unemployment rate was 3.8%. Persons unemployed for 27 weeks or more accounted for 20.4% of the unemployed versus 19.3% in January. The U6 unemployment rate, which accounts for unemployed and underemployed workers, was 7.3% versus 8.1% in January. The labor force participation rate held steady at 63.2% in February. There are a number of economists expecting payrolls will continue to grow by roughly 160,000 jobs per month, bringing the unemployment rate as low as 3.5% by the end of the year.
In housing news, the Commerce Department reported New Home Sales increased 3.7% month-over-month in December to a seasonally adjusted annual rate of 621,000, their highest pace in seven months. This was above the consensus forecast of 572,000. November's sales were revised down to 599,000 from an annual rate of 657,000.
The median sales price fell 7.2% year-over-year to $318,600 while the average sales price dropped 6.4% to $377,000. Regionally, New Home Sales were 44.8% higher in the Northeast; fell 15.3% in the Midwest; were 5.0% higher in the South; and were 1.4% higher in the West.
Homes priced at $399,999 and less accounted for 67% of total homes sold in December versus 72% in November.
The inventory of new homes for sale dropped slightly to a 6.6-month's supply at the December sales rate from 6.7 months in November.
The improvement in New Home Sales corresponded to a drop in both median and average selling prices.
The New Home Sales gains point to a potentially stronger 2019. The purchase of new homes not yet under construction surged 22.4% in December from the prior month. Average 30-year mortgage rates at 4.35%, down from nearly 5% in early November, have also eased some affordability pressures.
The Commerce Department also reported Housing Starts increased more than expected in January as construction of single-family housing rebounded after four straight monthly declines.
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