Much of the economic activity for the month of October can be summarized in one word…”Uptrend”. The United States stock market reached new highs during the month based primarily on companies’ earnings reports. Edward Jones Investing reported the following information, “U.S. large-cap stocks edged higher, reaching record levels for the seventh week in a row. These gains came in what was the busiest week for earnings in the quarter. Several large-cap technology stocks reported solid earnings, pushing the NASDAQ up 2.2%.” These markets have been in an uptrend throughout 2017.
According to ADP National Employment, job growth was higher than expected with the US private sector adding 235,000 jobs in October versus the 200,000 anticipated wage inflation remained somewhat stagnate.
Consumer optimism continued to increase in October. The Conference Board by Nielsen presented the following statement after their most recent Consumer Confidence Survey®. “Consumer confidence increased to its highest level in almost 17 years (Dec. 2000) in October after remaining relatively flat in September,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions improved, boosted by the job market which had not received such favorable ratings since the summer of 2001.
Consumers were also considerably more upbeat about the short-term outlook, the prospect of improving business conditions as the primary driver. Confidence remains high among consumers, and their expectations suggest the economy will continue expanding at a solid pace for the remainder of the year.” It is also important to note that Jeff Cox with CNBC reported the following, “Americans are saving at the slowest pace in nearly 10 years, a sign of growing confidence as money pours into risk. The savings rate in September fell to 3.1 percent, according to Commerce Department data. That’s the weakest level since December 2007, just as the U.S. economy was entering the worst of the financial crisis amid the Great Recession.”
The bond market witnessed increased activity as well, the U.S. Ten Year Treasury Rate increased to 2.46 percent to end the month at 2.37 percent. This uptrend in the bond market was further solidified with a statement from Mathew Graham, Chief Operating Officer of Mortgage News Daily proclaiming in an article from October 26, 2017, that Thomson Reuters MBS indicated bond yield activity with the headline, “It’s an Uptrend!” These upward moving trend lines have been present within the bond market since the summer and some are calling it the most important economic story being reported.
On Bloomberg Markets, “DoubleLine Capital LP’s Jeffrey Gundlach called it “the moment of truth” for the bond market’s three-decade bull run after yields broke through 2.4 percent. Bill Gross at Janus Henderson Group said this month that a sustained move through that level would signal the end of the 30-year rally”. It must be stated that the Ten Year Treasury yield has a direct impact on mortgage rates and can impact home prices and values. The impact is greater as housing affordability continues to be a concern for most housing experts. Many economists speculate that the U.S. Federal Reserve with stay on track for a December 2017 rate hike as well.
Buyer demand also remained strong within most markets according to the National Association of Realtors; however, supply problems continue to be a concern. The Pending Home Sales Index, a forward-looking indicator based on contract signings, was at 106.0 in September (unchanged from a downwardly revised August figure). The index is now at its lowest reading since January 2015.
“Demand exceeds supply in most markets, which is keeping price growth high and essentially eliminating any savings buyers would realize from the decline in mortgage rates from earlier this year,” said Lawrence Yun, NAR chief economist, “While most of the country, except for the South, did see minor gains in contract signings last month, activity is falling further behind last year’s pace because new listings aren’t keeping up with what’s being sold.” He continued, “Buyers looking for a little relief from the stiff competition from over the summer may, unfortunately, be out of luck in the coming months,” said Yun. “Inventory starts to decline heading into the winter, and many would-be buyers from earlier in the year are still on the hunt to find a home.”
Overall, the month of October 2017 marked an uptrend in consumer confidence, employment, bond yields, the U.S. stock markets, and continued housing demand.
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