Market News Update - Investors Cheer at Weak GDP

It is simply amazing that there used to be a time that the stock market would tank at any economic report that was negative and indicated a less than strong economy.  However, this week the exact opposite happened.  The markets rallied on Wednesday when the GDP report came in worse than expected.

You may be reading this and thinking that investor behavior just doesn’t make any sense.  The reality is that investors cheered the weak GDP report because they want to believe that the poor report is enough to get the Fed to delay their reduction in their bond buying program and stimulus withdrawal.  The question that remains is how investors can draw this conclusion on a single economic report, plus the fact that the Fed did not give a definitive time table for the tapering of the program?

Housing just keeps rocking.  Mortgage rates have receded off of their large increases over the last couple of weeks giving mortgage lenders a breather from the panic that has set in for most of them.  Reality has finally sunk in that the refinance boom is over.  The good news is that the increase in rates has sparked fence sitting buyers to take action on purchases.  Application for purchase loans increased 2.0% while refinances declined by 5%.

Home prices showed positive increases in four major housing reports released on Tuesday.  The Federal Housing Finance Agency reported that home prices rose .7% for the month of April on single family homes that were purchased with a Fannie Mae or Freddie Mac loan.

The S&P Case-Shiller Home Value Index showed that because of a shortage of housing inventory along with a sense of panic about rising rates, home prices are rising rapidly.  The Case-Shiller 20 city index rose 1.7% for the month of April which follows March’s increase of 1.9%.  Additionally home prices are up 12% from the same time last year.  Home price gains are occurring in every part of the country in all major cities.  The West is the strongest growth area with monthly gains averaging 3% and the annual increase is currently at 20%

The third report for the week related to housing is new home sales.  The expected annual pace for new construction was 460,000 units per year.  The report shows that the pace of construction and sales is on target for 476,000 which is over 3% higher than anticipated.  Additionally, builders are increasing the pace of construction in an attempt to keep up with rising demand.

The final housing report for the week was pending homes sales.  This index rose a whopping 6.7% with the largest increase in activity occurring in the west and Midwest.

Market moving reports for next week are:

• Monday July 1^st – ISM Manufacturing Index and Construction Spending
• Tuesday July 2^nd – Factory Orders
• Wednesday July 3^rd - MBA Applications and ADP Employment Report
• Thursday July 4^th – Independence Day Holiday – Markets Closed
• Friday July 5^th – National Unemployment and First Time Jobless Claims

I appreciate your business and look forward to talking to you soon! Have a great day!!!
 
Sincerely,

Cindy Tomlinson
Loan Officer

USLending Company

DRE Lic # 01520422
NMLS # 214851   

 

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