More Loan Limits Go Higher by Ron Schulz

QUOTATION OF THE WEEK…“You miss 100 percent of the shots you never take.” –Wayne Gretsky, Canadian former professional ice hockey player and head coach

INFO THAT HITS US WHERE WE LIVE… Last week we got the good news that both New and Pending Home Sales are heading in the right direction–UP. October New Home Sales rose 6.2%, to a 685,000 annual rate, soundly beating forecasts for the second month in a row. That puts sales of new single family homes up 18.7% over a year ago, at their highest level since 2007. And this isn’t just an artificial rebound from the hurricanes. All major regions saw sales gains, with the smallest actually coming from the south. The average sales pace for the past three months is also the highest since 2007.

For October, the Pending Home Sales measure of contracts signed on existing homes rebounded to a 3.5% gain following the 0.4% dip in September. This suggests existing homes sales should move up in November and December. Prices in many markets edge higher, as national measures continue to go up. Consequently, Fannie Mae and Freddie Mac are increasing the conforming loan limits in 2018 for most of the mortgages they insure. The baseline limit will go to $453,100, while the limit in “high-cost areas” will be $679,650. These conforming loan limits vary by county, so check with your mortgage professional.

BUSINESS TIP OF THE WEEK… Successful people are good listeners. They take the time to understand their clients needs and wants and make sure their clients feel they’re being heard. 

>> Review of Last Week

BULLISH ON TAX CUTS… The Senate kept sending signals it would pass its tax reform bill by the end of the week. While the vote didn’t happen by Frida

There was no stronger evidence of an improving economy thancome was up 0.4% and Personal Spending up 0.3%, while Core PCE inflation is up only 1.4% the past year.

The week ended with the Dow UP 2.9%, to 24232; the S&P 500 UP 1.5%, to 2642; and the Nasdaq down 0.6%, to 6848.

With the tax bill vote delayed in the Senate, bond traders pushed Treasuries higher, though other bonds lost ground. The 30YR FNMA 4.0% bond we watch finished the week down .25, at $104.53. Freddie Mac’s Primary Mortgage Market Survey for the week ending December 7 showed national average 30-year fixed mortgage rates rising, but remaining lower than where they were this time last year. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… Fannie Mae reports that nearly 70% of mortgage borrowers surveyed said their most influential mortgage shopping sources of information were professionals–loan officers, real estate agents and financial advisers–with only 13% citing online sources.

>> This Week’s Forecast

INFLATION TAME, RETAIL SALES AND FED RATE RISE… The big data this week will be Friday’s November Employment Report, and economists predict another istorically high numbers.

>> 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 Dec 11 – Dec 15

Date Time (ET) Release For Consensus Prior Impact
Tu
Dec 12
08:30 Producer Price Index (PPI) Nov % 0.4% Moderate
Tu
Dec 12
08:30 Core PPI Nov % 0.4% Moderate
W
Dec 13
08:30 Consumer Price Index (CPI) Nov % 0.1% HIGH
W
Dec 13
08:30 Core CPI Nov 0.2% 0.2% HIGH
W
Dec 13
10:30 Crude Inventories 12/09 NA -5.6M Moderate
W
Dec 13
14:00 FOMC Rate Decision 12/13 1.00%-1.25% 1.25%-1.50% HIGH
Th
Dec 14
08:30 Initial Unemployment Claims 12/09 240K 236K Moderate
Th
Dec 14
08:30 Continuing Unemployment Claims 12/02 NA 1.908M Moderate
Th
Dec 14
08:30 Retail Sales Nov % 0.2% HIGH
Th
Dec 14
08:30 Retail Sales ex-auto Nov 0.3% 0.1% HIGH
Th
Dec 14
10:00 Business Inventories Oct % 0.0% Moderate
F
Dec 15
08:30 NY Empire Manufacturing Index Dec 4.1 19.4 Moderate
F
Dec 15
09:15 Industrial Production Nov 9% 0.9% Moderate
F
Dec 15
09:15 Capacity Utilization Nov % 77.0% Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… The only surprise that could come out of this week’s FOMC meeting is if the Fed Funds Rate DOESN’T go up. And the Fed Funds Futures market sees another quarter percent bump come March. Note: In the lower chart, a 100% probability of change is a 100% certainty the rate will rise, while an 11% probability of change is an 89% certainty the rate will stay the same.

Current Fed Funds Rate: 1.00%-1.25%

After FOMC meeting on: Consensus
Dec 13 1.25%-1.50%
Jan 31 1.25%-1.50%
Mar 21 1.50%-1.75%

Probability of change from current policy:

After FOMC meeting on: Consensus
Dec 13      100%
Jan 31        11%
Mar 21        51%

 

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