Home Prices Expected to Moderate by Ron Schulz

For the week of January 8, 2018 — Vol. 16, Issue 2

>> Market Update

QUOTATION OF THE WEEK…“Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy.” –Groucho Marx, American comedian, writer, stage, film, radio and television star

INFO THAT HITS US WHERE WE LIVE… CoreLogic reports November home prices were up 7.0% over a year ago, but forecasts a slowing of that pace, seeing only a 4.2% hike in prices by November 2018. Thanks to price gains, a major real estate listing site put the total value of the U.S. housing market at a record $31.8 trillion in 2017, up from $29.6 trillion in 2016. The site also says renters spent a record $485.6 billion in 2017, $4.9 billion more than in 2016. And this was with the rental population decreasing for the first time since 2004, according to an apartment listing service.

Need evidence of how a hike in the short-term Fed Funds Rate doesn’t automatically boost long-term mortgage rates? Freddie Mac’s Deputy Chief Economist reports, “Despite increases in short-term interest rates, long-term rates remain subdued. The 30-year mortgage rate is down a quarter of a percentage point from where it was a year ago…. With the FOMC minutes showing continued support for gradual increases in policy rates…and inflation rates remaining low, there isn’t much upward pressure on long-term rates.” But he did caution, that could change.

BUSINESS TIP OF THE WEEK… Connecting with prospects and clients at a personal level is an important aspect of any business process. Look for shared likes, interests and experiences.

>> Review of Last Week

DOW CRACKS 25000, FIRST TIME EVER… The blue-chip Dow broke through 25000 for the first time in history, capping a spectacular week on Wall Street. The broadly-based S&P 500 closed at new records the first four trading days of the new year, for the first time since 1964. The tech-y Nasdaq also set four straight closing records. The December jobs report came in with 148,000 new Nonfarm Payrolls, less than expected. Investors liked that it’s a good number, yet shows the economy isn’t overheated, which should keep the Fed from raising rates too fast.

November’s number was revised up to 252,000 new jobs, and the three-month average remains above 200,000. Plus, the unemployment rate, at 4.1%, stays at a 17-year low, testimony to the ongoing health of the labor market, important to the housing market. Also important, last month’s 30,000 new construction jobs meant 2017 ended with 35% more construction jobs added than the year before. This should start to relieve the supply challenges seen in many markets. Finally, the ISM manufacturing index averaged the highest reading for a calendar year since 2004!               

The week ended with the Dow UP 2.3%, to 25296; the S&P 500 UP 2.6%, to 2743; and the Nasdaq UP 3.4%, to 7137.

There was enough positive economic data to keep bond prices in check. The 30YR FNMA 4.0% bond we watch finished the week down .06, at $104.53. Freddie Mac’s Primary Mortgage Market Survey for the week ending January 4 showed national average 30-year fixed mortgage rates dropping to kick off the year. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… According to Realtor Magazine, the average down payment in 2016 was 11%, and for borrowers under 35, just 8%.

>> This Week’s Forecast

CONSUMER PRICES EDGE UP, RETAIL SALES GAIN NICELY… Inflation data is all the rage these days, because the Fed says it will be slow to hike rates until there’s a stronger pickup in prices. This week’s Consumer Price Index (CPI) is forecast to edge up, but probably not as much as the central bank would like. However, Retail Sales are expected to go up nicely in December, after a very strong November performance.

>> 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 8 – Jan 12

Date Time (ET) Release For Consensus Prior Impact
Jan 10
10:30 Crude Inventories 01/06 NA -7.4M Moderate
Jan 11
08:30 Initial Unemployment Claims 01/06 248K 250K Moderate
Jan 11
08:30 Continuing Unemployment Claims 12/30 NA 1.914M Moderate
Jan 11
08:30 Producer Price Index (PPI) Dec 0.2% 0.4% Moderate
Jan 11
08:30 Core PPI Dec 0.2% 0.3% Moderate
Jan 12
14:00 Treasury Budget Dec -$47.5B -$27.3B Moderate
Jan 12
08:30 Consumer Price Index (CPI) Dec 0.2% 0.4% HIGH
Jan 12
08:30 Core CPI Dec 0.2% 0.1% HIGH
Jan 12
08:30 Retail Sales Dec 0.4% 0.8% HIGH
Jan 12
08:30 Retail Sales ex-auto Dec 0.4% 1.0% HIGH
Jan 12
10:00 Business Inventories Nov 0.3% -0.1% Moderate


>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… The probability of another quarter percent raise in March has increased, but there is little likelihood of any further upward movement in May. 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        63%
May 2        40%
Ron Schulz
Senior Loan Officer
NMLS# 266128

6060 North Central Exp #438
Dallas, TX 75206

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

This post 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 © 2018. Not an offer or agreement. Information, rates, & programs are subject to change without prior notice. Not available in all states. Subject to credit & property approval. Not affiliated with any government agency. 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. Delaware Lender License 10885. GA Mortgage Lender License 22114– Georgia Residential Mortgage Licensee. IL Residential Mortgage License MB.6760323-DBA1– Illinois Residential Mortgage Licensee. MA Mortgage Broker License MC2129. MA Mortgage Lender License MC2129. 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. Ohio Mortgage Broker Act Certificate of Registration MB.804158.000. Ohio Mortgage Loan Act Certificate of Registration SM.501888.000. 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.

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