For the week of january 27, 2020

"Strive for progress, not perfection."--Anonymous

After slumping in November, Existing Home Sales rebounded in December, up 3.6% for the month, jumping safely over the 5.5 million unit annual rate threshold, 10.8% higher than a year ago. 

Putting the brakes on sales are low inventories in many areas. But builders are responding, with units under construction rising to post-recession highs. As folks go for the new builds, more existing homes become available.

Plus, price growth keeps slowing. The FHFA index of prices for homes bought with conforming mortgages rose just 0.2% in November. Prices are now up 4.9% the past year, versus a 6.0% gain the year before.

BULLS TAKE A BREATHER... Stocks have put on a strong performance since the start of the year, but the bulls rested during the holiday shortened week, as investors took profits, nudging all three major indexes down. 

Fears roiled around the coronavirus outbreak in China, which could also infect travel and trade, trimming global economic growth. As a result, oil prices saw their worst drop in a year, anticipating lower fuel demand. 

The coronavirus story still develops, but past viral outbreaks in the world haven't significantly hurt economies or markets. Positive investor sentiment emerged as two thirds of corporate earnings reports so far have beaten estimates.

The week ended with the Dow down 1.2%, to 28,990; the S&P 500 down 1.0%, to 3,295; and the Nasdaq down 0.8%, to 9,315.

Viral outbreak concerns made the bond market healthy. The 30YR FNMA 4.0% bond ended UP .08, to $104.33. In Freddie Mac's Primary Mortgage Market Survey, the national average 30-year fixed mortgage hit its lowest level in three months. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?... For 2019, 5.341 million existing homes were sold, precisely matching 2018. But sales are nearly fully recovered from their 2018 dip, and analysts expect them to hit new post-recession highs heading into 2020.

HOME SALES UP, CONSUMERS HEALTHY, GDP MODERATE, RATES HOLD... This week's slew of economic data should report New and Pending Home Sales on the rise, and Personal Income and Spending showing consumers in good shape. Economists forecast Q4 GDP at just under 2% and inflation in check, making the FOMC Rate Decision a non-event at the Fed.

NOTE: Weaker economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and higher loan rates.

Forecasting Federal Reserve policy changes in coming months... The Fed meets this week, but the Fed Funds Futures market is betting nothing will change with rates. Note: In the lower chart, a 13% probability of change is an 87% probability the rate will stay the same.

Current Fed Funds Rate: 1.50%-1.75%

Probability of change from current policy:

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