Strong year for existing home sales by Ron Schulz

For the week of January 2, 2018 — Vol. 16, Issue 1

>> Market Update

QUOTATION OF THE WEEK…“My wife and I were happy for twenty years. Then we met.” –Rodney Dangerfield, American comedian, actor, producer and screenwriter

INFO THAT HITS US WHERE WE LIVE… The last week of the year gave us the encouraging report that Pending Home Sales, the National Association of Realtors (NAR) index of contracts signed on existing homes, edged ahead 0.2% in November. The chief economist of a major financial services firm said this suggests that “December existing sales will also rise…to their highest annual sales pace since 2006.” Indeed, even though the monthly gain was modest, the index notched its highest read since June, and is 0.8% ahead of last year.

The NAR chief economist concurred: “The housing market is closing the year on a stronger note…backed by solid job creation and an economy that has kicked into a higher gear.” The NAR predicts existing home sales will end the year at 5.54 million, up 1.7% from 2016’s 5.45 million sales. But they see 2018 sales at 5.52 million, with price growth moderating to around 2%. However, the senior economist of a national listing site expects continued demand: “An economy that keeps adding jobs, and wages that continue to grow, both have consumers feeling confident.” 

BUSINESS TIP OF THE WEEK… Some keys to success–always follow up; put clients’ interests first; listen closely; communicate clearly; hone negotiating skills; stay in contact with clients and your business sphere.

>> Review of Last Week

HAPPY OLD YEAR!… Four days of trading on Wall Street ended with the three major market indexes down for the week, largely from a late-Friday sell-off at very light volumes, as many investors took off for the holidays. This ended a year that was anything but down. In 2017, the Dow went up 25.1% after setting 71 closing records the past twelve months, a record in itself. The S&P 500 went up 19.4% during the year, while the Nasdaq gained 28.2%. This was its sixth straight yearly increase, its longest streak since the one from 1975 to 1980.

We follow where stock prices go because over the years market performance has proven to be a leading indicator of where the U.S. economy is headed. And as the economy goes, especially jobs and incomes, so goes the housing market. We also have economic data to consider. Last week saw Consumer Confidence hit a 17-year high, and the Chicago PMI measure of Midwest manufacturing reach 67.6, the best read in more than six years. Its New Orders Index was the highest in three and a half years and its Production Index the highest since 1983! 

The week ended with the Dow down 0.1%, to 24719; the S&P 500 down 0.4%, to 2674; and the Nasdaq down 0.8%, to 6903.

Bonds, led by Treasuries, ended the year broadly higher. The 30YR FNMA 4.0% bond we watch finished the week UP .31, at $104.59. National average 30-year fixed mortgage rates edged higher in Freddie Mac’s Primary Mortgage Market Survey for the week ending December 28. But their deputy chief economist noted, “rates are still below the levels we saw at the end of last year and early part of 2017. Mortgage rates have remained relatively low all year.” Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… The NAR reports that sellers’ use of real estate agents hit an all time high in 2017. For-sale-by-owner (FSBO) transactions were only 8% of sales, their lowest share since the NAR began tracking this in 1981.

>> This Week’s Forecast

HOLIDAY CHEER: MANUFACTURING, SERVICES, JOBS GROW IN DECEMBERBoth sectors of the economy are expected to show growth in December, with the ISM Index of manufacturing and the ISM Services index well above 50, indicating expansion. Jobs should also continue to expand, with just under 200,000 new Nonfarm Payrolls forecast for December, and the Unemployment Rate dipping to 4.0%. Yesterday the stock and bond markets were closed for New Year’s Day.

We wish you a happy, healthy and prosperous New Year! 

>> 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 1 – Jan 5

Date Time (ET) Release For Consensus Prior Impact
W
Jan 3
10:00 ISM Index Dec 58.0 58.2 HIGH
Th
Jan 4
08:30 Initial Unemployment Claims 12/30 239K 245K Moderate
Th
Jan 4
08:30 Continuing Unemployment Claims 12/23 NA 1.943M Moderate
Th
Jan 4
11:00 Crude Inventories 12/29 NA -4.6M Moderate
F
Jan 5
08:30 Average Workweek Dec 34.5 34.5 HIGH
F
Jan 5
08:30 Hourly Earnings Dec 0.3% 0.2% HIGH
F
Jan 5
08:30 Nonfarm Payrolls Dec 188K 228K HIGH
F
Jan 5
08:30 Unemployment Rate Dec 4.0% 4.1% HIGH
F
Jan 5
08:30 Trade Balance Nov -$47.9B -$48.7B Moderate
F
Jan 5
10:00 ISM Services Dec 57.6 57.4 Moderate

 

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… The Fed’s December rate hike should hold until the March 21 meeting. Then, another quarter percent raise is anticipated, but the rate should stay at that level through the May meeting. Note: In the lower chart, a 2% probability of change is a 98% 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          2%
Mar 21        57%
May 2        45%
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

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