Thoughts to Ponder and the Market Update August 29th

Thoughts to Ponder . . .

• A lie gets halfway around the world before the truth has a chance to get its pants on.
• The difference between stupidity and genius is that genius has its limits.
• My wife told me the other day that I don’t take her to expensive places any more, so I took her to the gas station.
• Any man who can drive safely while kissing a pretty girl is simply not giving the kiss the attention it deserves.
• Love your enemies. It makes them so damned mad.

 And now on to the Market Update . . .

New Home Sales: Trying to chart the trajectory of new home sales can prove challenging. For the month of July, sales rocketed up 12.4 percent to 654,000 annualized rate. This however follows June’s modest report that was revised downward by 10,000 to 572,000 annually. Up or down, we just don’t seem to see a clear path as to which direction the market is going.

It appears that the jump in sales is being driven by builders offering pricing discounts as the median price fell by 5.1 percent. What appears odd in the report is that prices have declined despite the fact that inventory has declined as well. It would be expected that with inventories dropping to 4.3 months from 4.9 months, this would create upward movement in pricing versus the opposite which is being seen.

FHFA House Price Index: The FHFA HPI appears to reinforce the data from the new home sales report that home sales are moving higher with increasing seller incentives and discounts. For the second straight month the index is up, although a meager 0.2 percent. Currently prices are 5.6 percent higher than the same time last year. In March and April, the difference between this year and prior year prices were 6.3 percent and 6.0 percent. It is clear that price momentum is slowing.

Mortgage Rates and Applications: The data from the Mortgage Bankers Association of America continues to point to slowing activity for home purchases. For the week ending 8/19, the data shows a slight decline in purchase applications of 0.3 percent. This follows the prior report of a 4.0 percent drop. Refinances have also been slowing for the second consecutive week by 3.0 percent. This follows the previous week decline of 4.0 percent. Applications compared to the same time last year remain higher by 8.0 percent.

First Time Jobless Claims: It is getting to the point that writing about first time jobless claims is like a broken record. Once again the claims remain at a very healthy rate of 261,000. This is a slight drop from the prior week’s 265,000 and remain well below the artificial threshold of 300K.

The Fed and Interest Rates: Traders appear to be thinking that the odds of the Fed raising interest rates in September are rising. The latest surveys show that about 1/3 of investors believe that a September rate hike will occur. Although this is all speculation, many investors will be focused on Fed Chair Janet Yellen’s comments in her speech at the monetary policy symposium in Jackson Hole, Wyoming to try and get a better gauge of the Fed mindset for their next meeting.  

This week’s potential market moving reports are:

• Monday August 29^th – Personal Income and Outlays
• Tuesday August 30^th – S&P Case-Shiller HPI & Consumer Confidence
• Wednesday August 31^st – MBA Mortgage Applications, ADP Employment Report, Pending Home Sales, and EIA Petroleum Status Report
• Thursday September 1^st – First Time Jobless Claims, ISM Mfg Index & Construction Spending
• Friday September 2^nd – National Employment & Factory Orders