Market Matters – October 26, 2019 Edition

With global trade and Brexit headlines pausing this week, the market had a chance to shift focus back on some economic data such as Durable Goods and Home Sales data before looking ahead to the Fed meeting next week.
Existing Home Sales
Existing Home Sales for September posted the first decline in three consecutive months, down -2.2% to a 5.38mln unit selling rate. Single-family home sales dropped by -2.6% to 4.78mln, while multi-family sales rose by +1.7% to 600k. All four regions saw a decline in sales, led by the Midwest -3.1%, Northeast -2.8%, the South -2.1%, and the West -.9%. The median price for all existing sales last month was $272,100, which is still up 5.9% from a year ago. Inventory fell -2.7% annually to 1.83mln units, now a fourth straight decline, and equates to a 4.1 month selling pace to clear all supply. The National Association of Realtors says that land and labor shortages are contributing to shortfall and lack of inventory “is preventing home sales growth potential.”
Durable Goods Orders
The FHFA Home Price Index was up by +.2% in August vs. expectations of a +.4% increase. Looking YoY now, prices are up +4.6% in August vs. +5.0% in July. For the nine census divisions, seasonally adjusted monthly price changes from July 2019 to August 2019 ranged from -.8% in the East South Central division to +.9% in the New England division. Looking at the 12-month changes, we see all positives in the report, ranging from +3.9% in the Middle Atlantic and Pacific divisions, to +6.5% in the Mountain division.
New Home Sales
New Homes Sales for September fell by -.7% to a 701k unit selling rate. We also see a downward revision to the originally posted 713k rate for August, now at 706k. Although we see some lower numbers, sales have exceeded the 700k mark in the last three out of four months. Looking YoY, September sales are up +15.5%, while total sales for the year are up +6.9%. The inventory of new homes for sale dropped to 321k units from a prior 323k units in August, which represents about a 5.5-month supply. Finally, the median sales price is
down -8.8% from a year ago and now at its lowest level since back in February 2017, at $299k.

As global headlines have subsided momentarily, the markets continue to focus on the data and Q3 earnings releases to see how much effect the U.S./China trade wars have had on the economy. As those earnings reports start to fade, investors will then look ahead to next week’s FOMC two-day Meeting, which begins on Tuesday. Chances are still well in nose-bleed territory that the Committee will plan to implement another 25bps cut, but there are growing fears that it will be a “hawkish” cut at that. It’s believed that after this third “insurance cut,” the Fed will pause for a decent amount of time and change language in the Statement to reflect that sentiment.


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