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Week In Review – October 20, 2017

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Week In Review
UFSC Week In Review

Volume 23, Number 38 by

Reginald J. Smith, Community Development Manager – Bank of Kansas City

Economic Highlights for the Week

Ending October 20, 2017

 

MONDAY, October 16th

The Dow continued its record run today, gaining 0.4 percent to 22,956.  There was also movement in bonds as the 2-year Treasury rose 3 basis points to 1.54% and the benchmark 10-year note was up 2 basis points to 2.30%, together flattening the yield curve further in line with building expectations for a Federal Reserve rate hike.  Oil edged higher near $52 and gold dipped just below $1,300.

 

TUESDAY, October 17th

The NAHB housing market index jumped to 68 in October from a score of 64 in September.  This suggests that the housing market is already starting to rebound from the hurricanes.  All three subcomponents of the index posted higher scores led by future sales up, 5 points to a strong 78 and present sales also up 5 points to 75 while foot traffic through model homes gained a point to 49.  Homebuilders are optimistic and with the index resting in the upper 60s, the U.S. housing market is well positioned for growth in the coming months.

 

WEDNESDAY, October 18th

Housing starts plunged 4.7% in September to an annual rate of 1.127 million following an annual rate of 1.183 million in August.  The decline was unexpected however, housing starts remain 6.1% above their September 2016 pace.  Single-family housing starts fell 4.6% last month to an annual rate of 829k while multifamily starts (5 or more units) dropped 6.2% to an annual rate of 286k.  Single-family starts are up 5.9% and multifamily starts are up 7.9% from September 2016.  Total permit issuance fell 4.5% last month to 1.215 million.  Permits for single-family homes rose 2.4 percent to an 819,000 rate and a year-on-year gain of 9.3%. Single-family homes are the backbone of the housing sector and strength here not only points to greater supply in the new home sales market but also to gains ahead for residential investment in the GDP report.

The Federal Reserve’s Beige Book, covering economic activity in September through early October, suggests that economic activity expanded moderately in all 12 districts during the period.  Manufacturing activity and nonfinancial services improved moderately in most districts.

Retail spending increased slightly, as vehicle sales and tourism expanded in most districts.  Residential construction improved on balance, while commercial construction was up on net.  On the downside, Hurricanes Harvey and Irma caused disruptions in transportation, energy and agriculture sectors in some districts.  Odds of a Fed rate hike by the end of the year, likely at the December meeting remain firmly in place.

 

THURSDAY, October 19th

Initial claims for unemployment insurance benefits continue to decline following sharp increases caused by recent hurricanes. Jobless claims fell 22k to 222k for the week ending October 14.  This was the sample week for the October employment report and a comparison with the sample week in September shows improvement suggesting another strong gain in payrolls this month.

 

FRIDAY, October 20th

Existing home sales rose modestly last month, gaining 0.7% to an annualized pace of 5.39 million.  The gain follows three straight monthly declines. Existing home sales are trending modestly lower, down 1.5% over the last year.  Regionally, sales were mixed with a decline in the South, gains in the Midwest and West while sales were unchanged in the Northeast.  The inventory of homes available for sale rose 1.6% on the month to 1.900 million which represents a 4.2-month supply at the current sales pace.  Inventories are down a steep 6.4% from September of last year.  Clearly, such low supply on the market is constraining sales.  Properties typically stayed on the market for 34 days in September, up from 30 days in August but down from 39 days a year ago.  House prices continued to move higher over the past year as the median price for an existing home gained 4.2% to $245,100 in September from September 2016.  NAR chief economist, Lawrence Yun noted, Sales activity likely would have been somewhat stronger if not for the fact that parts of Texas and South Florida hit by Hurricanes Harvey and Irma saw temporary, but notable declines.

Stock Market Close for the Week


Index

Latest

A Week Ago

Change



DJIA
23,328.63
22,871.72
+456.91 or +2.00%


NASDAQ
6,629.05
6,605.80
+23.25 or +0.35%


WEEK IN ADVANCE

After a week of mostly housing market related data, reports in the coming week wrap up the sector for the month. Watch for new home sales and pending home sales, both on next week’s calendar.


Key Interest Rates

Latest

6 Mos Ago

1 Yr Ago



Prime Rate
4.25%
4.00%
3.50%


Fed Discount
1.75%
1.50%
1.00%


Fed Funds
1.17%
0.91%
0.41%


11th District COF
0.732%
0.591%
0.703%


10-Year Note
2.38%
2.23%
1.76%


30-Year Treasury Bond
2.90%
2.88%
2.50%


30 -Yr Fixed (FHLMC)
3.88%
3.97%
3.352%


15 -Yr Fixed (FHLMC)
3.19%
3.23%
2.79%


6-Mo Libor (FNMA)
1.50600%
1.42322%
1.23972%

Sources: IBC’ s Money Fund Report; Bank Rate Monitor; Federal Home, Loan Bank of San Francisco

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