DOW 20,000, yes it finally happened! After weeks of drifting all around it, the Dow closed above 20K and has remained there ever since. Although we cannot say it is firmly seated at this new level, the index has managed to hold on to the majority of the gains this week.
One thing that appears to be taking shape, which few experts seem to agree upon, is how the potential trade war will Mexico will impact the markets and U.S. economy. In his first few days in office, President Trump has made his intentions clear to follow through on his campaign promise that he is not going to allow countries to take unfair advantage of the U.S. in trade. Mexico is his first target.
In two bold moves, first the President has drawn a line in the sand with the President of Mexico in stating that “either Mexico agrees to pay for the construction of the border wall, or he is going to begin working towards taxing Mexican imports to pay for it”. Mexico has refused to agree to this so Trump is indicating he is going to begin the process to make changes to how Mexican imports are taxed.
Secondly, the President has already put countries on notice that the U.S. will no longer participate in North American Free Trade Agreement in its current form. This too will have a major impact on trade with Mexico. Both of these declarations on trade can have significant ramifications on the markets and consumers, however there is little agreement by experts on exactly what the impact will be.
There was a time where experts could fairly accurately predict market behavior on economic moves such as the one’s Trump is implementing. However, to date nothing Trump has done, either before or after the election, has resulted in the market outcomes most economists predicted. One thing is for sure, time will tell exactly what will happen. While we wait, there guaranteed to be no shortage of concern as to the results of these potential unprecedented policy changes.
Challenges to the real estate market continue to exists. Existing home sales in December declined 2.8 percent from the prior month. Demand is NOT the issue. Housing inventory is at the lowest level since 1999. Current inventory is rated at 3.6 months, down from 3.9 in November. Adding to the inventory challenge is the number of buyers jumping into the market to purchase before mortgage rates rise.
On the positive side of housing, home prices remain strong. The Federal Housing Finance Agency reported that home prices in November rose 0.5 percent. Compared to the same time last year, prices are higher by 6.1%. Agents around the country are reporting increased seller activity as well, however it is not near enough to satisfy the current buyer demand.
Next week’s many potential market moving reports are:
· Monday January 30th – Pending Home Sales
· Tuesday January 31st – S&P Corelogic Case-Shiller HPI and FOMC Meeting Begins
· Wednesday February 1st - MBA Applications, Construction Spending, and ADP Employment
· Thursday February 2nd - First Time Jobless Claims
· Friday February 3rd – National Employment Data
As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (707) 455-7070.