FOR THE WEEK OF JUNE 26, 2023

“Money won’t buy happiness, but it will pay the salaries of a large research staff to study the problem.”—Bill Vaughan, American columnist and author 

Housing Starts shot up almost 22% in May, the biggest monthly gain since 2016 and 5.7% ahead of a year ago. Builders have lots of projects in the pipeline, so building permits rose a less dramatic 5.2% for the month.

The NAHB builder sentiment index hit 55 in June, signaling most builders see conditions as good. Small wonder. The NAR reports “newly constructed homes are selling at a pace reminiscent of pre-pandemic times.”

Even Existing Home Sales gained in May, up 0.2%, and, good news for buyers, the median price was down 3.1%. But prices shouldn’t crater, as there’s only 3 months of inventory, versus 5 months in a normal market.

PROFIT TAKING, PLUS… The three major stock indexes ended the holiday-shortened week down, as traders took profits following the market’s recent run-up, while fearing more rate hikes might induce a recession.

Those fears came after Chair Powell told Congress the Fed wasn’t through raising rates to fight inflation. In addition, the Leading Economic Index fell for the 14th straight month, and the June manufacturing PMI showed contraction.

Yet, as reported above, Housing Starts came in really strong, purchase mortgage applications lifted 2% for the week, initial jobless claims were unchanged, and continuing claims fell by 13,000.

The week ended with the Dow down 1.7%, to 33,727; the S&P 500 down 1.4%, to 4,348; and the Nasdaq also down 1.4%, to 13,493.

Bond prices barely moved up overall, while the 30-Year UMBS 5.5% slipped 0.12, to $99.91.The national average 30-year fixed mortgage rate dipped 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… Freddie Mac’s Chief Economist noted, “a recent rebound in single-family housing starts is an encouraging development that will hopefully extend through the summer.” 

NEW AND PENDING HOME SALES, HOME PRICES, INFLATION… Both New Home Sales and the Pending Home Sales index of signed contracts on existing homes are expected to slip a tad for May. Same goes for the April S&P CoreLogic Case-Shiller Home Price Index. Happily, PCE Prices, the Fed’s favorite inflation measure, is also forecast to continue down.

U.S. financial markets will close early next Monday, July 3, and will be closed Tuesday, July 4, in observance of Independence Day.

Forecasting Federal Reserve policy changes in coming months. Wall Street continues to expect the Fed to hike a quarter percent in July, then hold there for the next two meets. Note: In the lower chart, a 71.9% probability of change is a 71.9% probability the rate will rise. Current rate is 5.00%-5.25%.

Probability of change from current policy:

Of course, your first commitment is to provide exceptional service to current clients. But right behind that should be the commitment to continually prospect. Don’t think of this as an occasional task. Treat prospecting like it’s your second-highest priority.