|For the week of January 15, 2018 — Vol. 16, Issue 3
>> Market Update
QUOTATION OF THE WEEK…“I have enough money to last me the rest of my life. Unless I buy something.” –Jackie Mason, American stand-up comedian and film and television actor
INFO THAT HITS US WHERE WE LIVE… The latest Black Knight Mortgage Monitor report says tappable home equity shot up to an all-time high of $5.5 trillion in Q3 of 2017. Black Knight, a mortgage data and analytics firm, defines tappable equity as the amount homeowners can borrow before they reach the maximum 80% of a home’s value. Significantly, this number is up $3 trillion from its 2012 bottom. The firm also reports that four out of five mortgage holders now have equity they can tap into through either HELOCs or cash-out refinances.
Mortgage applications for those refinances kicked up 11% from two weeks ago, according to the latest Mortgage Bankers Association Applications Survey, with the Purchase Index up a healthy 5%. Realtor.com’s 2018 housing forecast for builders advises them to take advantage of strong buyer demand, greater millennial involvement and healthier wage growth, and boost entry-level home construction. Most American workers will soon see bigger paychecks, as employers must implement new withholding amounts dictated by the tax cuts by February 15.
BUSINESS TIP OF THE WEEK… When creating a video, don’t wing it–practice before you record. You don’t need to memorize a written script. Just run through what you’re saying to build up your confidence, which will make your video way more effective.
>> Review of Last Week
NEW YEAR RALLY ROLLS ON… The mood on Wall Street stayed positive during the second week of the new year, which ended with all three major stock indexes again reaching record highs. The Dow, S&P 500 and the Nasdaq have now scored between 4.2% and 5.2% gains, just over the last two weeks. That pace can’t last, but it looks like investor optimism about the economy will. Fourth quarter earnings season unofficially began Friday, and although analysts expect mixed performances from financials, earnings overall should be strong.
Although the Producer Price Index (PPI) showed wholesale prices dipped a smidge in December (first time in more than a year), they’re up 2.6% from a year ago. That’s visibly above the Fed’s 2% inflation target. The Consumer Price Index (CPI) put consumer prices up 2.1% for the year, with Core CPI, excluding volatile food and energy numbers, 1.8% ahead for the year. The Fed may also get more comfortable about raising rates after seeing that December’s Retail Sales report showed 5.4% growth for the year, a decent sign of an economy picking up.
The week ended with the Dow UP 2.0%, to 25803; the S&P 500 UP 1.6%, to 2786; and the Nasdaq UP 1.7%, to 7261.
Bonds hate inflation, so this week’s reads in that department spelled price dips in the credit market. The 30YR FNMA 4.0% bond we watch finished the week down .44, at $104.09. For the week ending January 11, Freddie Mac’s Primary Mortgage Market Survey showed national average 30-year fixed mortgage rates rose a few basis points, but remain below where they were a year ago. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW?…The National Association of Realtors reports 88% of all buyers financed their homes the past year, but 98% of younger buyers financed, showing finding financing is especially key for young homebuyers.
>> This Week’s Forecast
HOME BUILDING, PHILLY FACTORIES, OFF FOR THE HOLIDAYS… It’s expected that home building activities took time off for the holidays, as Housing Starts and Building Permits are predicted to come in down for the month, yet remain well about the 1.2 million annual rate. Likewise, regional factory activity is forecast off a tad by the Philadelphia Fed Index, though at a still healthy 24.5 read.
U.S. stock and bond markets are closed today, January 15, in observance of Martin Luther King Jr. 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 Jan 15 – Jan 19
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months… The Fed is expected to keep rates where they are this month. But there’s been enough good economic news that the probability of a March hike keeps increasing, but no further move come 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%
Probability of change from current policy:
Senior Loan Officer
6060 North Central Exp #438
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