New and Pending Home Sales Up by Ron Schulz

QUOTATION OF THE WEEK…“If everything seems under control, you’re just not going fast enough.” –Mario Andretti, Italian-born American former racing driver

INFO THAT HITS US WHERE WE LIVE… We keep hearing concerns that tight existing home inventories and rising prices will shrink sales, but the latest data lays those worries to rest. October Existing Home Sales increased 2.0%, to a 5.48 million annual rate. Sales grew in every major region, with single family homes leading the way, although condos/coops went up a bit too. Yes, sales are down (less than 1%) versus a year ago, but we’re still seeing the effects of Hurricanes Harvey and Irma, which sidelined home buyers. Once we start getting reports not colored by these storms, many expect an upward sales trend.

Nearly half the homes sold In October were on the market less than a month, indicating demand is there. This is put to increasing incomes, a strengthening economy, near historically low mortgage rates and a growing appetite for home ownershipFreddie Mac’s November 2017 Outlook expects this to be the best year for housing in a decade, with 6.13 million homes sold and 1.2 million housing starts. Their chief economist said, “construction will gradually pick up, helping to supply more homes in inventory-starved markets.” The Fed’s latest data reveals home equity hit $13.9 trillion in mid-2017, an all-time high.

BUSINESS TIP OF THE WEEK… If there aren’t enough hours in the day for everything you want to do, get to bed earlier so you can get up earlier. Then use that quiet time for the things that make you happy and healthy–reading, meditating, yoga, the gym, whatever.

>> Review of Last Week

HAPPY HOLIDAYS… The holiday season kicked off nicely on Wall Street, with the three main indexes returning to their winning ways. The broadly-based S&P 500 and the tech-heavy Nasdaq, in fact, finished Thanksgiving week at new all-time highs, while the Dow ended less than half a percent off its all-time record. There’s no question stock prices are up both because a high percentage of corporate earnings reports are beating expectations, and because the economy appears to be in solid territory. The evidence? Higher wages, lower unemployment, high consumer confidence and rising home values.

Consumers are even continuing their big-ticket spending on things such as vehicles, appliances and home renovations. Last week’s economic data pretty much surprised to the upside, including the Leading Economic Index (LEI), Existing Home Sales covered above, and University of Michigan Consumer Sentiment. Durable Goods Orders Excluding Transportation moved up too, 0.4% in October, following an upwardly revised 1.1% September gainSome analysts expect household holiday spending to be up about 4% over last year. Heck, online shoppers spent $1.52 billion, just on Thanksgiving Day.

The week ended with the Dow UP 0.9%, to 23558; the S&P 500 UP 0.9%, to 2602; and the Nasdaq UP 1.6%, to 6889.

In the bond market, Treasuries ended lower, but other bonds inched ahead. The 30YR FNMA 4.0% bond we watch finished the week UP .05, at $104.78. In Freddie Mac’s Primary Mortgage Market Survey for the week ending November 22, national average 30-year fixed mortgage rates dipped slightly. This  put them below their year-ago level for the first time in 2017. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… Overall, 25% of people surveyed said they use their dining room for other purposes, such as an office, game room or craft room. And among Millennials, 65% use it that way.

>> This Week’s Forecast

NEW HOME SALES OFF; PENDING HOME SALES, CONSUMER SPENDING, INFLATION ALL UP; MANUFACTURING SOLID… A week full of data will kick off with New Home Sales, forecast a tad off for October. But after that, analysts expect a series of key “up” reads, including Pending Home Sales, Personal Spending, and Core PCE Prices, the Fed’s favorite gauge of inflation. The Chicago PMI and the ISM Index, two important manufacturing measures, are also predicted to remain solidly in growth territory, well above 50.

>> 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 Nov 27 – Dec 1

Date Time (ET) Release For Consensus Prior Impact
Nov 27
10:00 New Home Sales Oct 629K 667K Moderate
Nov 28
10:00 Consumer Confidence Nov 124.0 125.9 Moderate
Nov 29
08:30 GDP – 2nd Estimate Q3 3.2% 3.0% Moderate
Nov 29
10:00 Pending Home Sales Oct 0.6% 0.0% Moderate
Nov 29
10:30 Crude Inventories 11/25 NA -1.9M Moderate
Nov 29
14:00 Fed’s Beige Book Nov NA NA Moderate
Nov 30
08:30 Initial Unemployment Claims 11/25 238K 239K Moderate
Nov 30
08:30 Continuing Unemployment Claims 11/18 NA 1.904M Moderate
Nov 30
08:30 Personal Income Oct 0.3% 0.4% Moderate
Nov 30
08:30 Personal Spending Oct 0.3% 1.0% HIGH
Nov 30
08:30 Core PCE Prices Oct 0.2% 0.1% HIGH
Nov 30
09:45 Chicago PMI Nov 63.0 66.2 HIGH
Dec 1
10:00 ISM Index Nov 58.3 58.7 HIGH

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… There’s literally no chance the Funds Rate will stay where it is in December, according to the Fed futures market. And there’s now a 50.1% probability we’ll see another small hike in March. Note: In the lower chart, a 100% probability of change is a 100% certainty the rate will rise, while a 9% probability of change is a 91% 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          9%
Mar 21        50%
Ron Schulz
Senior Loan Officer
NMLS# 266128

6060 North Central Exp #438
Dallas, TX 75206

Office: 214-346-5279
Mobile: 214-794-4014

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