Home Prices Expected to Moderate by Ron Schulz

For the week of January 29, 2018 — Vol. 16, Issue 5

>> Market Update

QUOTATION OF THE WEEK…“A lot of people ask me if I were shipwrecked, and could only have one book, what would it be? I always say ‘How to Build a Boat.'” –Steven Wright, American comedian

INFO THAT HITS US WHERE WE LIVE… Just like Housing Starts the prior week, New Home Sales closed out 2017 at their highest annual total in a decade, 14.1% ahead of a year ago. They were down 9.3% in December, but the post-hurricanes boost is over. Read more.

Existing Home Sales ended the year in even better shape, posting their best totals since 2006. They slipped 3.6% in December, but still finished 1.1% up from a year ago. Demand stays strong, but inventories are a concern in many markets.

The latest Mortgage Bankers Association Weekly Applications Survey reported the seasonally adjusted Purchase Index up 6%, to its highest level since April 2010.

BUSINESS TIP OF THE WEEK… Always follow up. Respond promptly to emails, voice mails and online comments from everyone–current, potential and past clients, your community and referral network.

>> Review of Last Week

WHAT? ANOTHER RECORD-BREAKING WEEK?… Yup! Investors pushed stocks to new record highs, as the Dow, S&P 500 and Nasdaq all bested 2% gains for the week, powered by companies’ stronger-than-expected earnings reports, with 81% beating sales expectations!

The Q4 GDP-Advance estimate showed 2.6% economic growth, lower-than-expected, but a nice improvement over the 1.8% Q4 growth a year ago. Plus, consumer spending (about 70% of GDP) was up 3.8%, while business spending on equipment shot up 11.4%.

That investment in equipment was reflected in December’s Durable Goods Orders, up an unexpected 2.9%, which economists said confirms an improving economy. Finally, both weekly initial jobless claims and continuing claims remain historically low.

The week ended with the Dow UP 2.1%, to 26617; the S&P 500 UP 2.2%, to 2873; and the Nasdaq UP 2.3%, to 7506.

Many bonds ended in negative territory, though the damage wasn’t too bad to the 30YR FNMA 4.0% bond we watch, down just .02, to $103.56. Freddie Mac’s latest Primary Mortgage Market Survey had national average 30-year fixed mortgage rates up for the third week in a row, but still below rates a year ago. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… Trulia’s latest rental analysis says rents went up 3.1% overall in 2017, even as “the number of households renting has been declining while homeownership increased.”

>> This Week’s Forecast

EVERYTHING UP BUT THE FED RATENo change is expected with the FOMC Rate Decision. The Pending Home Sales index of contracts signed on existing homes is forecast up, foretelling higher sales a few months out. Jobs are key to housing, so predicted gains in Nonfarm Payrolls and Hourly Earnings are welcome. The ISM Index and Chicago PMI may slip, but still show strong manufacturing growth.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Jan 29 – Feb 2

Date Time (ET) Release For Consensus Prior Impact
M
Jan 29
08:30 Personal Income Dec 0.4% 0.3% Moderate
M
Jan 29
08:30 Personal Spending Dec 0.5% 0.6% HIGH
M
Jan 29
08:30 Core PCE Prices Dec 0.2% 0.1% HIGH
Tu
Jan 30
10:00 Consumer Confidence Jan 124.0 122.1 Moderate
W
Jan 31
08:30 Employment Cost Index Q4 NA 0.7% HIGH
W
Jan 31
09:45 Chicago PMI Jan 61.0 67.6 HIGH
W
Jan 31
10:00 Pending Home Sales Dec 0.6% 0.2% Moderate
W
Jan 31
10:30 Crude Inventories 01/27 NA -1.1M Moderate
W
Jan 31
14:00 FOMC Rate Decision 01/31 1.25%- 1.50% 1.25%- 1.50% HIGH
Th
Feb 1
08:30 Initial Unemployment Claims 01/27 238K 233K Moderate
Th
Feb 1
08:30 Continuing Unemployment Claims 01/20 NA 1.937M Moderate
Th
Feb 1
08:30 Productivity – Prelim. Q4 1.0% 3.0% Moderate
Th
Feb 1
08:30 Unit Labor Costs – Prelim. Q4 1.0% -0.2% Moderate
Th
Feb 1
10:00 ISM Index Jan 58.5 59.7 HIGH
F
Feb 2
08:30 Average Workweek Dec 34.5 34.5 HIGH
F
Feb 2
08:30 Hourly Earnings Dec 0.3% 0.3% HIGH
F
Feb 2
08:30 Nonfarm Payrolls Dec 180K 148K HIGH
F
Feb 2
08:30 Unemployment Rate Dec 4.1% 4.1% HIGH
F
Feb 2
10:00 U. of Michigan Consumer Sentiment – Final Jan 95.0 94.4 Moderate

 

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… The probability for a rate hike at this Wednesday’s Fed meeting remains very low. But the futures market sees a hike in March, but no move in May. Note: In the lower chart, a 4% probability of change is a 96% certainty the rate will stay the same.

Current Fed Funds Rate: 1.25%-1.50%

After FOMC meeting on: Consensus
Jan 31 1.25%-1.50%
Mar 21 1.50%-1.75%
May 2 1.50%-1.75%

 

Probability of change from current policy:

After FOMC meeting on: Consensus
Jan 31          4%
Mar 21        80%
May 2        24%
Ron Schulz
Senior Loan Officer
NMLS# 266128

6060 North Central Exp #438
Dallas, TX 75206

Office: 214-346-5279
Mobile: 214-794-4014
ron.schulz@supremelending.com
www.ronschulz.com

This post is an advertisement for Ron Schulz. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice, or a commitment to lend. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in this message is the property of Supreme Lending and cannot be reproduced for any use without prior written consent. This message is intended for business professionals only and is not intended for distribution to consumers or other third parties. The material does not represent the opinion of Supreme Lending. EVERETT FINANCIAL, INC. D/B/A SUPREME LENDING NMLS ID #2129 (www.nmlsconsumeraccess.org) 14801 Quorum Dr., #300, Dallas, TX 75254. 877-350-5225. Copyright © 2018. Not an offer or agreement. Information, rates, & programs are subject to change without prior notice. Not available in all states. Subject to credit & property approval. Not affiliated with any government agency. AZ Mortgage Banker License 0925918, AZ Principal Office: 25030 S 190th Street, Queen Creek, AZ 85142. Licensed by the Department of Business Oversight under the CA Residential Mortgage Lending Act License 4130655. CO Mortgage Company – Regulated by the Division of Real Estate. Delaware Lender License 10885. GA Mortgage Lender License 22114– Georgia Residential Mortgage Licensee. IL Residential Mortgage License MB.6760323-DBA1– Illinois Residential Mortgage Licensee. MA Mortgage Broker License MC2129. MA Mortgage Lender License MC2129. Licensed by the N.J. Department of Banking and Insurance – New Jersey Residential Mortgage Lender License. Licensed Mortgage Banker-NYS Department of Financial Service. NY Mortgage Banker License B501049. Ohio Mortgage Broker Act Certificate of Registration MB.804158.000. Ohio Mortgage Loan Act Certificate of Registration SM.501888.000. OR Mortgage Lending License ML-4265. Licensed Mortgage Banker by the PA Department of Banking – Pennsylvania Mortgage Lender License 45048. Rhode Island Licensed Lender 20142998LL.

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