Pending home sales dip, affordability increases by Ron Schulz

QUOTATION OF THE WEEK… “It is during our darkest moments that we must focus to see the light.” –Aristotle, ancient Greek philosopher and scientist

INFO THAT HITS US WHERE WE LIVE Our thoughts remain with the people of Texas recovering from Hurricane Harvey’s dramatic devastation and tragic loss of life. Their acts of heroism have touched us all. Damage is estimated to be at least $35 billion, with much of it outside Special Flood Hazard Areas identified by the Federal Emergency Management Agency (FEMA). This means only about 20% of affected homeowners are expected to have FEMA flood insurance. But the outpouring of help from across the country has been phenomenal. And relief is being offered to homeowners from Fannie Mae, Freddie Mac, FHA and mortgage servicers. Good stuff.

Pending Home Sales dipped just 0.8% in July, their fourth slip in five months. This National Association of Realtors (NAR) measure of contracts signed on existing homes is currently suffering from tight supply, not weak demand. The NAR chief economist explained, “The pace of new listings is not catching up with what’s being sold at an astonishingly fast pace.” He added, “the typical listing has gone under contract within a month since April.” Some say rising prices are reducing affordability, but First American’s Real House Price Index reports increased affordability, thanks to “falling rates for 30-year, fixed-rate mortgages and modest wage gains.”

BUSINESS TIP OF THE WEEK… Never lose sight of where you’re headed. Start every project keeping in mind your overall goals–for your work, and life! Keep those goals in mind, fitting today’s to-do list into your long-term plans.

>> Review of Last Week

BACK TO BREAKING RECORDS... The stock market moved up again for another week, as investors felt good enough about our economic prospects to buy up some of the bargains created by the mid-August dip from previous record levels. Spurred on by decent economic data, investors pushed all three major stock indexes up for the week, with the tech-heavy Nasdaq reaching a new record high. The GDP-2nd Estimate for Q2 showed the economy growing at an unexpected 3.0%. And the ISM Manufacturing index came in with a strong 58.8 growth reading for July, its highest level in more than six years.

This good news
could have made Wall Street, and us, fearful the Fed would soon go for a rate hike. But those fears were calmed when Core PCE Prices showed inflation decelerated in July to 1.4% annually, far below the Fed’s 2% target for boosting rates. August jobs data also helped, with 156,000 new Nonfarm Payrolls. This was seen by many as a “Goldilocks” report, strong enough to advance the economy but weak enough to check the Fed. Meanwhile, Consumer Confidence stays near its 16-year high, and Michigan Consumer Sentiment’s chief economist reports that index “has been higher during the first eight months of 2017 than in any year since 2000.”

The week ended with the Dow UP 0.8%, to 21988; the S&P 500 UP 1.4%, to 2477; and the Nasdaq UP 2.7%, to 6435.

Bond investors had a more negative take on August jobs than equity traders and pushed prices up. The 30YR FNMA 4.0% bond we watch finished the week UP .10, at $105.55. In Freddie Mac’s Primary Mortgage Market Survey for the week ending August 31, national average 30-year fixed mortgage rates fell again, to a new yearly low. But the chief economist cautioned: “recent releases of positive economic data could halt the downward trend.” Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW? Experts predict that by 2025, there will be 5.2 million more homeowners in the U.S. Not surprisingly, Millennials born in the 1980’s and 1990’s will dominate the market.

>>This Week’s Forecast

SERVICES SECTOR AND PRODUCTIVITY GROW, WE HEAR FED STORIES With the services sector providing the majority of jobs in the U.S., it’s encouraging that the ISM Services index is forecast to report even more growth. Worker productivity is key to the economy, so it’s also good that the Q2 Productivity – Revised reading is expected to edge up. The Fed’s Beige Book will give anecdotal evidence of economic conditions in Fed Districts across the country. Could be interesting.

U.S. financial markets were closed yesterday, September 4, in observance of Labor Day.

>> 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 Sep 4 – Sep 8


 Date Time (ET) Release For Consensus Prior Impact
Sep 06
08:30 Trade Balance Jul -$44.6B -$43.6B Moderate
Sep 06
10:00 ISM Services Aug 55.2 53.9 Moderate
Sep 06
10:30 Crude Inventories 09/02 NA -5.4M Moderate
Sep 06
14:00 Fed’s Beige Book Mar NA NA Moderate
Sep 07
08:30 Initial Unemployment Claims 09/02 239K 236K Moderate
Sep 07
08:30 Continuing Unemployment Claims 08/26 NA 1.942M Moderate
Sep 07
08:30 Productivity-Rev. Q2 1.2% 0.9% Moderate
Sep 07
08:30 Unit Labor Costs-Rev. Q2 0.3% 0.6% Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… The Fed futures market sees no rate increases, near term. The next hike is currently projected for June. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 1.0%-1.25%


After FOMC meeting on: Consensus
Sep 20 1.0%-1.25%
Nov 1 1.0%-1.25%
Dec 13 1.0%-1.25%

Probability of change from current policy:


After FOMC meeting on: Consensus
Sep 20         1%
Nov 1         5%
Dec 13       44%
Ron Schulz
Senior Loan Officer
NMLS# 266128
13140 Coit Rd # 502
Dallas, TX 75240

Office: 214-346-5279
Mobile: 214-794-4014
Fax: 972-284-0715

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