Market Update as of April 19, 2019

Steady Interest Rates
Over the past two weeks, the yield on the 10yr treasury note rose nearly 20bps or .20%, though interest rates remained unchanged over the weekend. But throughout this past two-week period, Chinese data has been a major factor for interest rates, with the recent upturn in manufacturing data indicating the Chinese economy may avoid the hard landing many market participants expected. In 2018, growth in the world’s second-largest economy slowed to its worst pace in 28 years, causing equities to tank and influencing the Fed’s view on interest rate policy. The escalation in the trade war between the US and China also hurt investments in riskier assets, such as stocks.

Builders See Limited Relief
The nation’s homebuilders are pleased with the strong demand they’re seeing this spring, but they continue to see buyers being held back by today’s high home prices. Builder confidence rose 1 point to 63 in April in the monthly National Association of Home Builders/Wells Fargo Housing Market Index. It was at 68 last April, and then hit a 2018 high of 70 in May. Sentiment has remained in the low 60s for the past three months. Anything above 50 is considered positive. “Builders report solid demand for new single-family homes, but they are also grappling with affordability concerns stemming from a chronic shortage of construction workers and buildable lots,” said NAHB Chairman Greg Ugalde, a homebuilder and developer from Torrington, Connecticut. Of the index’s three components, current sales conditions increased 1 point to 69. Buyer traffic rose 3 points to 47 but is still in negative territory. Sales expectations over the next six months fell 1 point to 71. Builders are trying to cater to strong demand at the entry level of the market, but only a few of the large production companies, like D.R. Horton, were really focused there during the housing recovery. More, like Pulte’s Centex brand, are now turning in that direction, but the bulk of new production is still in the move-up market.

Stability
It may not feel like it after living through the Great Recession but the U.S. economy has become far more stable over time. Just look at the inflation rate over the past 100 plus years. And the contraction in GDP in each of the past 15 recessions. he Great Recession was an epic financial crisis but in terms of an economic slowdown, it doesn’t even come close to matching the pre-WWII era. Plus there’s the fact that the time in between recessions has extended. From 1926-1980, the U.S. experienced a recession every 5 years or so. Since 1980, the average length between recessions is almost 8 years. If the current expansion continues through July, it will be the longest in U.S. history.

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Courtesy of Sotheby's International Realty's in-house Lender Simon Atik, 310.880.8414, Simon.Atik@grarate.com, Vice President of Mortgage Lending, Guaranteed Rate Affinity.

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