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Sep 21 2015 9890 1
>> Market UpdateQUOTE OF THE WEEK... "Drawing on my fine command of the English language, I said nothing." --Robert Benchley, American humorist, newspaper columnist, and film actor
INFO THAT HITS US WHERE WE LIVE... Some people felt there was really nothing to say after Housing Starts dropped 3.0% in August, to a 1.126 million annual rate. But, as usual, a deeper dive into the data gives us plenty to talk about. While it's obvious that home building took a summer break in August, it's been pretty active the last 12 months, with starts in that period up 14.9% for single-family units and up 16.6% overall. Some see that trend continuing at least through the end of 2016. They say that with population growth and tear downs, housing starts need to get to about 1.5 million units annually, so there's lots of recovery still to come.
We could get there sooner than some think, since new building permits went up 3.5% in August, climbing to a 1.170 million yearly rate. In fact, single-family permits are now at their highest level since January 2008. No wonder the National Association of Home Builders confidence index reached its best reading since October 2005. Before the Fed left rates unchanged on Thursday, Freddie Mac's chief economist said, "Even if the Fed decides to raise short-term interest rates, we don't expect a significant impact on the housing market." A good thought to remember whenever the Fed finally hikes rates. He added: "We're still on track for the best year of home sales since 2007."
BUSINESS TIP OF THE WEEK... The way to get new business with the least investment of time and money is to solicit past and present clients. You know how to reach them, they know your value and may have additional needs you can meet.
>> Review of Last WeekTHE FED HOLDS, STOCKS FOLD... Regular Inside Lending readers weren't surprised by the Fed's decision last week to hold rates down. Our prior edition pegged the probability of a rate hike at just 23%. The mass media felt otherwise, hinting rates would likely go up at Thursday's meeting. This was strange, as the probabilities we report come from public sources respected by many economists. After the Fed's rate hold, stocks folded, as the Dow fell 290 points Friday, leaving it and the S&P 500 down for the week and the Nasdaq barely ahead. This was blamed on the Fed's doubts about U.S. and global economic strength, but Friday was also a volatile quarterly "quadruple witching" day.
Some analysts see the current stock downturn as purely a technical correction, driven by investors taking profits after a long bull market run. These folks point out that although the economy is far from booming, it is making progress, if ever so slowly. One aspect of that progress was the 0.2% gain for Retail Sales in August. Unfortunately, the manufacturing sector didn't fare as well, with Industrial Production, Capacity Utilization, the New York Empire and Philadelphia Fed Indexes all posting declines. On the other hand, Initial Unemployment Claims dipped to their lowest level in two months, while Continuing Unemployment Claims fell to 2.237 million.
The week ended with the Dow down 0.3%, to 16385; the S&P 500 down 0.2%, to 1958; and the Nasdaq UP 0.1%, to 4827.
Bonds did well, strongly rallying as global stock markets and oil prices suffered steep declines. The 30YR FNMA 4.0% bond we watch finished the week UP .12, to $106.20. Freddie Mac's Primary Mortgage Market Survey for the week ending September 17 showed national average fixed mortgage rates largely unchanged. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.
DID YOU KNOW?..."Quadruple witching" day is when stock index futures, stock index options, stock options, and single stock futures all expire. Since investors must close out of their positions, there's usually high volatility and trading volumes. It's the third Friday of the last month of each quarter.
>> This Week’s ForecastHOME SALES UP AND DOWN, BUSINESS INVESTMENT OFF, ECONOMY GROWS... The typically mixed bag of economic data includes August Existing Home Sales, forecast a bit down, and New Home Sales, a bit up. Durable Goods Orders should show business investment slightly on the wane, yet theGDP - 3rd Estimate is expected to report economic growth holding at 3.7%.>> The Week’s Economic Indicator CalendarWeaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Sep 21 – Sep 25
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months...The Fed's move last week to leave the Funds Rate unchanged has led most economists to think we won't see a hike now til next year. Note: In the lower chart, an 11% probability of change is an 89% certainty the rate will stay the same.
Current Fed Funds Rate: 0%–0.25%
Probability of change from current policy: