January 2020 Market Updates
Despite stock markets finishing near all-time highs at the end of 2019, the beginning of the new year is already presenting new challenges for investors. While the housing industry remains optimistic, manufacturing continues to suffer. Several political issues will continue to affect the markets as we begin the new year.
Year-End Review of Housing Data
Trading at the end of 2019 brought the stock market to record highs. Mortgage rates finished the year slightly higher as well, though housing sector reports released at the end of the year were mixed. A decrease in inventory held back home sales across the United States, but overall numbers for the year were positive. Compared to the end of 2018, the total inventory of homes for sale was 6% lower.
However, the national median price for existing homes was up 6% from the previous year. And, despite falling at the end of this year, sales of existing homes still finished 3% higher than last year as well. New housing starts increased at the end of the year, and a total increase of 14% was seen throughout the year. Building permits are a significant indicator of future construction and have been finished at the highest level since 2007. According to the NAHB housing index, home builder confidence was at 76, 16 points higher than a year ago and the highest in over 20 years.
Inflation rates remained relatively low towards the end of the year. In November, the Core PCE index, which does not include the volatile food and energy components, was only 1.6% higher than a year ago. This mark was well below the stated goal of a 2.0% increase for 2019.
Manufacturing Industry Continues to Suffer
Despite dropping more than an entire point from October 2018 to October 2019, mortgage rates saw little change during the final two months of 2019. Major factors affecting the mortgage rates have included changing Fed policy, economic data, and continuing trade negotiations with China. Economic data indicates that growth will continue to be moderate through 2020. This comes despite a weakening manufacturing sector.
According to Federal Officials, the Fed policy will likely remain unchanged, barring a significant economic shift that might require adjusting the federal funds rate. Concerning trade, the United States and China have agreed to a limited “phase one” plan paving the way for more thorough negotiations.
The manufacturing sector continues to suffer due to the fallout from the United States-China trade dispute. As a matter of fact, December was the fifth month in a row to see the ISM national manufacturing index below 50. Readings below 50 indicate a contraction of the sector as a whole.
This comes after the index unexpectedly fell to 47.2 to kick off 2019. However, most investors do not see its weakness as representative of the US economy at large.
Trade negotiations with China and the impeachment inquiry are likely to remain a focus for investors. But, the biggest news for investors during the beginning of 2020 will be the increased tensions between the United States and Iran after a recent U.S. drone strike killed a top Iranian commander and leader of their Quds force. The early response has been a shift to safer assets such as bonds as investors await further developments.
For further information on the loan and real estate market, get in touch with one of the specialists at Plymouth Title Guaranty Corporation.
Information accredited to MBSQuoteline.
