Inside Lending Market Update: DOW Hits Historic Landmark

For the week of January 30, 2017 – Vol. 15, Issue 5

>> Market Update

QUOTE OF THE WEEK… “In the middle of every difficulty lies opportunity.” –Albert Einstein, German-born American theoretical physicist

INFO THAT HITS US WHERE WE LIVE … Last week, two parts of the housing market seemed to have difficulties. We start with Existing Home Sales, which dipped 2.8% in December, to a 5.49 million unit annual rate. But even with this monthly decline, 2016 was the best year in a decade for existing home sales. Sales of these single-family homes, townhomes, condominiums and co-ops came in at 5.45 million units, their highest level since 2006. This happened even though supplies were low in many areas. Opportunity lies in rates still being near historically low, growing incomes and analyst expectations that the upward sales trend will continue.

Later in the week, New Home Sales came in down 10.4% for December, to a 536,000 annual rate. At first, this seemed like another difficulty. But home sales are volatile month-to-month (ask any realtor), and the year showed a different picture. In 2016, there were 563,000 new single-family home sales, up 12.2% from 2015 and the highest level for these sales since 2007. December’s glitch can be seen as one more example of a housing market that’s been recovering in fits and starts. Analysts see a shift back toward single-family homes and expect that any headwinds from modest rate and price increases will be offset by faster economic growth.

BUSINESS TIP OF THE WEEK… Your most powerful piece of technology is your mobile phone, which research shows is way more efficient than emails. One recent study reports it takes an average of five emails to accomplish what you can in one phone call.

>> Review of Last Week

DOW HITS HISTORIC LANDMARK… Last Wednesday the Dow Jones Industrial Average broke through 20,000 for the first time in history. This closely watched index of 30 blue chip stocks soared into this new territory capping weeks of strong market performance following the election. The S&P 500, which covers a wide range of companies, ended the week nicely ahead, while the Nasdaq, dominated by technology firms, went up the most. The stock market is seen as a leading indicator of the economy, so the recent performance of these indexes shows that investors clearly expect faster economic growth with the new leadership in Washington.

But for the moment, we can only ponder data on economic performance under the prior administration, and most reports last week disappointed. In addition to the monthly housing misses, the GDP (Advanced) reading for Q4 of 2016 put economic growth at a 1.9% annual rate. That’s the same rate we’ve seen the last two years, reflecting the slow pace of this economic recovery. Durable Goods Orders also under performed, contracting in December. But
University of Michigan Consumer Sentiment in January hit its highest level in more than a decade, as Americans on Main Street seem as economically optimistic as traders on Wall Street.

The week ended with the Dow UP 1.3%, to 20094; the S&P 500 UP 1.0%, to 2295; and the Nasdaq UP 1.9%, to 5661.

Friday’s disappointing Q4 GDP reading gave bonds a boost. The 30YR FNMA 4.0% bond we watch finished the week UP .03, at $104.80. For the first time since December 29, national average 30-year fixed mortgage rates rose in Freddie Mac’s Primary Mortgage Market Survey for the week ending January 26, though rates are still near historically low. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… A real estate database reported that nearly one in five people who bought a home in the last year purchased it sight unseen.

>> This Week’s Forecast

PENDING HOME SALES, INFLATION, MANUFACTURING, JOBS ALL UP, THE FED MEETS… Economists expect a spate of decent reports for a change. They predict Pending Home Sales up in December after sliding the month before. The Core PCE Prices inflation measure should also be up, along with the Employment Cost Index, a forward looking inflation indicator (when worker costs go up, prices eventually follow). Manufacturing is predicted up in the Midwest by the Chicago PMI and nationally as well, by the ISM Index. And a few more Nonfarm Payrolls are forecast for January. But none of this good news shows the kind of economic strength the Fed needs to hike again, so the FOMC Rate Decision should be, “no change.”

>> 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 30 – Feb 3

 Date Time (ET) Release For Consensus Prior Impact
M
Jan 30
08:30 Personal Income Dec 0.4% 0.0% Moderate
M
Jan 30
08:30 Personal Spending Dec 0.4% 0.2% HIGH
M
Jan 30
08:30 Core PCE Prices Dec 0.2% 0.0% HIGH
M
Jan 30
10:00 Pending Home Sales Dec 1.3% -2.5% Moderate
Tu
Jan 31
08:30 Employment Cost Index Q4 0.6% 0.6% HIGH
Tu
Jan 31
09:45 Chicago PMI Jan 55.0 54.6 HIGH
Tu
Jan 31
10:00 Consumer Confidence Jan 112.5 113.7 Moderate
W
Feb 1
10:00 ISM Index Jan 55.0 54.7 HIGH
W
Feb 1
10:30 Crude Inventories 1/28 NA +2.840M Moderate
W
Feb 1
14:00 FOMC Rate Decision Feb 0.5%-0.75% 0.5%-0.75% HIGH
Th
Feb 2
08:30 Initial Unemployment Claims 1/28 250K 259K Moderate
Th
Feb 2
08:30 Continuing Unemployment Claims 1/28 NA 2.100M Moderate
Th
Feb 2
08:30 Productivity – Prelim. Q4 1.0% 3.1% Moderate
Th
Feb 2
08:30 Unit Labor Costs Q4 1.9% 0.7% Moderate
F
Feb 3
08:30 Average Workweek Jan 34.3 34.3 HIGH
F
Feb 3
08:30 Hourly Earnings Jan 0.3% 0.4% HIGH
F
Feb 3
08:30 Nonfarm Payrolls Jan 170K 156K HIGH
F
Feb 3
08:30 Unemployment Rate Jan 4.7% 4.7% HIGH
F
Feb 3
10:00 ISM Services Jan 57.0 57.2 Moderate

 

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… It would be a big surprise to virtually all economists if the Fed raised rates this week. And the majority still doesn’t see a hike before June. Note: In the lower chart, a 4% probability of change is a 96% certainty the rate will stay the same.

Current Fed Funds Rate: 0.5%-0.75%

After FOMC meeting on: Consensus
Feb 1 0.5%-0.75%
Mar 15 0.5%-0.75%
May 3 0.5%-0.75%

Probability of change from current policy:

After FOMC meeting on: Consensus
Feb 1         4%
Mar 15       25%
May 3       43%
Ron Schulz
Senior Loan Officer
Supreme Lending
Direct Phone 214-346-5279
Cell Phone 214-794-4014
Website www.ronschulz.com13140 Coit Rd # 502
Dallas TX 75240
NMLS # 266128
This 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. 潲⹮捳畨穬獀灵敲敭敬摮湩⹧潣m攣ㅤ㉥7〣〰〰0溩ᤓ崢䐞㺝䫽敭扭牥1 䦐á⓰ೃ⣐్㈤挻䝜䇪
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