Inside Lending Market Update: Good Things in Housing Market

For the week of February 13, 2017 – Vol. 15, Issue 6

>> Market Update

QUOTE OF THE WEEK… “There are no traffic jams on the extra mile.” –Zig Ziglar, American author, salesman and motivational speaker

INFO THAT HITS US WHERE WE LIVE … Put in that extra effort and good things will happen. Good things are happening in the housing market, as Fannie Mae’s Home Purchase Sentiment Index (HPSI) reported that housing confidence in December reversed its five-month decline, heading up 2 percentage points, with personal finance optimism reaching a seven-year high. Their chief economist noted: “Three months after the presidential election, measures of consumer optimism regarding personal financial prospects and the economy are at or near the highest levels we’ve seen in the nearly seven-year history of the National Housing Survey.”

Reflecting that increased housing confidence among consumers, the Mortgage Bankers Association reported purchase mortgage applications up 2% for the week ending February 3. The National Association of Realtors (NAR) report for Q4 of 2016 saw the best quarterly sales pace for the year, which drove inventory to record lows. But the NAR president pointed out this should boost sales activity now: “There are fewer listings…but also a little less competition than what’s expected this spring. The prospect of higher mortgage rates and more home shoppers in coming months should be enough of an incentive for those serious about buying to start their search now.”

BUSINESS TIP OF THE WEEK… Be passionately dedicated to serving the spoken and unspoken needs of your clients. This dedication produces a high level of value to clients, which will differentiate you in the marketplace.

>> Review of Last Week

TAX RALLY… Last Thursday President Donald Trump said he would deliver on his campaign pledge to move quickly on tax reform, promising to announce a “phenomenal” tax policy in a few weeks. What was “phenomenal” immediately was Wall Street’s reaction. Investors sent the three main stock indexes to record highs by the end of the day–and followed that by pushing all three indexes up to another set of record highs on Friday. Many observers believe tax reform has the potential to jolt the economy out of the frustratingly slow growth we’ve seen since the recession–by boosting personal incomes, corporate earnings and well-paying jobs.

All those things would be good for the housing market. There wasn’t a lot of economic data to chew on, but we did have a nice $1.4 billion decrease in the Trade Deficit. The Treasury Budget came in just north of $51 billion in the black in January, though the 12-month budget was almost $584 billion in the red in December.
The Preliminary University of Michigan Consumer Sentiment reading for February slipped from January, but it’s still up there, as we’ve only seen five higher readings in the last ten years. Initial Unemployment Claims dropped by 13,000 for the week, while Continuing Claims edged up but remain just above the two million level. Not bad.

The week ended with the Dow UP 1.0%, to 20269; the S&P 500 UP 0.8%, to 2316; and the Nasdaq UP 1.2%, to 5734.

As investors scurried over to stocks on Thursday, bond prices fell, but recovered Friday thanks to some dip-buying. The 30YR FNMA 4.0% bond we watch finished the week UP .06, at $104.95. National average 30-year fixed mortgage rates dropped in Freddie Mac’s Primary Mortgage Market Survey for the week ending February 9, their chief economist noting, “rates are at about the same level at which they started the year.” Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… The homeownership rate for Hispanics increased to 46% in 2016, up from 45.6% in 2015. This happened while the overall homeownership rate dropped to 63.4% in 2016, from 63.7% in 2015. 

>> This Week’s Forecast

HOME BUILDING OK, INFLATION AND RETAIL UP, MANUFACTURING SO-SO… January reports are expected to show Housing Starts off, but Building Permits increasing, indicating builders are ramping up for the spring selling season. CPI and Core CPI inflation should rise, but consumers are still spending. Retail Sales are forecast up a tad overall and Retail Sales ex-auto, excluding volatile auto sales, up by a bigger amount. Pretty good for January. Manufacturing has mixed predictions, down by the Philadelphia Fed Index, but up or flat in other reports.

>> 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 Feb 13 – Feb 17

 Date Time (ET) Release For Consensus Prior Impact
Tu
Feb 14
08:30 Producer Price Index (PPI) Jan 0.3% 0.3% Moderate
Tu
Feb 14
08:30 Core PPI Jan 0.2% 0.2% Moderate
W
Feb 15
08:30 Consumer Price Index (CPI) Jan 0.3% 0.3% HIGH
W
Feb 15
08:30 Core CPI Jan 0.2% 0.2% HIGH
W
Feb 15
08:30 NY Empire Manufacturing Index Feb 7.0 6.5 Moderate
W
Feb 15
08:30 Retail Sales Jan 0.1% 0.6% HIGH
W
Feb 15
08:30 Retail Sales ex-auto Jan 0.4% 0.2% HIGH
W
Feb 15
09:15 Industrial Production Jan 0.0% 0.8% Moderate
W
Feb 15
09:15 Capacity Utilization Jan 75.5% 75.5% Moderate
W
Feb 15
10:00 Business Inventories Dec 0.4% 0.7% Moderate
W
Feb 15
10:30 Crude Inventories 2/11 NA +13.8M Moderate
Th
Feb 16
08:30 Initial Unemployment Claims 2/11 245K 234K Moderate
Th
Feb 16
08:30 Continuing Unemployment Claims 2/4 NA 2.078M Moderate
Th
Feb 16
08:30 Housing Starts Jan 1.220M 1.226M Moderate
Th
Feb 16
08:30 Building Permits Jan 1.230M 1.210M Moderate
Th
Feb 16
08:30 Philadelphia Fed Index Feb 17.5 23.6 HIGH
F
Feb 17
10:00 Leading Economic Indicators (LEI) Jan 0.5% 0.5% Moderate

 

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… Most economists can’t see a rate hike at the next two meetings, but the majority does expect a quarter percent bump in June. Note: In the lower chart, a 13% probability of change is an 87% certainty the rate will stay the same.

Current Fed Funds Rate: 0.5%-0.75%

After FOMC meeting on: Consensus
Mar 15 0.5%-0.75%
May 3 0.5%-0.75%
Jun 14 0.75%-1.0%

Probability of change from current policy:

After FOMC meeting on: Consensus
Mar 15       13%
May 3       34%
Jun 14       67%
 Ron Schulz
Senior Loan Officer
NMLS# 266128
13140 Coit Rd # 502
Dallas, TX 75240
Office: 214-346-5279
Mobile: 214-794-4014
Fax: 972-284-0715
ron.schulz@supremelending.com
www.ronschulz.comThis information 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 © 2017. This is not an offer to enter into an agreement. Information, rates, & programs are subject to change without prior notice and may not be available in all states. All products are subject to credit & property approval. Supreme Lending is not affiliated with any government agency. Supreme Lending is required to disclose the following license information: 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. GA Mortgage Lender License 22114– Georgia Residential Mortgage Licensee. IL Residential Mortgage License MB.6760323-DBA1– Illinois Residential Mortgage Licensee. NV Division of Mortgage Lending Mortgage Banker License 4063. 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. 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. TX – SML Mortgage Banker Registration – Residential Mortgage Loan Originator.

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