The Week in Review: January 21, 2020

Falling Mortgage Rates Boost Housing  

Mortgage rates have a big influence on housing. Last year, the 30-year fixed mortgage rate peaked in November, averaging 4.87%. Rising rates throughout much of 2018 slowed housing activity as we can see in the graphic below.

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Thirteen months later, the 30-year rate averaged 3.72%, and we’ve seen a significant uptick in housing.

December’s 11.2% jump in single-family housing starts is a 12-year high. The big increase was likely influenced by mild weather in parts of the country; therefore, we could see a pullback in January. While it can be volatile on a monthly basis, the overall trend is favorable.

Though more stable, single-family building permits have also been on the upswing and have risen in seven of the last eight months.

In a press release last week, the National Association of Home Builders credits attractive mortgage rates, a healthy labor market, and a shortage of homes in parts of the nation for the upturn in building.

It noted that confidence among home builders remains at a high level, which is encouraging as we enter 2020.

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It’s not that all the data have been flashing green. While job growth has been solid, job openings tumbled in November (U.S. BLS), which might be a signal the economy will remain on a modest growth track over the near term.

Yet, let’s not discount the renewed strength in housing, which is considered a leading economic indicator. It’s an encouraging sign as the new year begins.

Two for the Road

  1. The stock market’s performance in the first five days of a given year can sometimes predict the market’s direction for the rest of the year. Going back to 1950, when stocks finish that period higher, as it did in 2020, the S&P 500 has been positive 82% of the time at year-end with an average gain of 13.6%. - CNBC, January 7, 2020

  2. In emerging markets, roughly 5 people enter the middle class every second. - Axios, October 13, 2018

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