Tappable Home Equity Hits All-Time High by Ron Schulz

For the week of April 9, 2018 — Vol. 16, Issue 15

>> Market Update

QUOTATION OF THE WEEK…“I’d asked around 10 or 15 people for suggestions. Finally, one asked the right question, ‘Well, what do you love most?’ That’s how I started painting money.” –Andy Warhol, American artist

INFO THAT HITS US WHERE WE LIVE… Black Knight reports tappable equity hit $5.4 trillion in February, 10% higher than its 2005 all-time high. This is the amount a homeowner can borrow against before reaching an 80% loan-to-value ratio.

First mortgage balances climbed to $8.8 billion, close to their pre-recession peak. But the report’s economist noted, “the market…is in a much healthier place than in 2008, with low interest rates and normalized home prices.”

The corporate strategy head for the Ellie Mae mortgage platform says, “Millennials are now officially the largest group of homebuyers…they represent 45% of total closed purchase loans in February.”

BUSINESS TIP OF THE WEEK… A marketing piece should drive to a single point. Gear the message to the one action you want the reader or viewer to take–forget about accomplishing a bunch of other goals.

>> Review of Last Week

TRADE DEFICIT… Investors on Wall Street live with risk, so they prefer certainty everywhere else. There isn’t much certainty with global trade, as the U.S. seeks better deals from China and others, so trade worries helped drive a weekly deficit in the major stock indexes.

Rising interest rates are also a worry, though the Fed is hiking thanks to the strengthening economy. First quarter corporate earnings growth should be the strongest in seven years, while the ISM manufacturing and services indexes showed solid expansion.

The March jobs report delivered a less-than-expected 103,000 new Nonfarm Payrolls, but Hourly Earnings jumped 0.3%, to a 2.7% annual gain, and the first three months of 2018 saw a very healthy average of 201,000 jobs created. Good stuff.

The week ended with the Dow down 0.7%, to 23933; the S&P 500 down 1.4%, to 2604; and the Nasdaq down 2.1%, to 6915.

Bonds finished on a stronger note as stocks suffered aggressive selling. The 30YR FNMA 4.0%, bond we watch ended the week UP .04, at $102.59. Now two weeks in a row, national average 30-year fixed mortgage rates fell in Freddie Mac’s Primary Mortgage Market Survey. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… Freddie Mac reports that as Millennials and Generation Z age, “they will add around 20 million households to the U.S. economy, driving housing demand over the next decade.”

>> This Week’s Forecast

INFLATION GROWS SLOWLY; WE LISTEN IN ON THE FED’S LAST MEET The key read will be on inflation, and the consensus expects the Consumer Price Index (CPI) to show slow price growth in March. Analysts will scrutinize FOMC Minutes from the Fed’s last meet to glean how many more rate hikes we’ll see this 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 Apr 9 – Apr 13

Date Time (ET) Release For Consensus Prior Impact
Apr 10
08:30 Producer Price Index (PPI) Mar 0.2% 0.2% Moderate
Apr 10
08:30 Core PPI Mar 0,2% 0.2% Moderate
Apr 11
08:30 Consumer Price Index (CPI) Mar 0.1% 0.2% HIGH
Apr 11
08:30 Core CPI Mar 0,2% 0.2% HIGH
Apr 11
10:30 Crude Inventories 04/07 NA -4.6M Moderate
Apr 11
14:00 FOMC Minutes 03/21 NA NA HIGH
Apr 11
14:00 Treasury Budget Mar NA -$176.2B Moderate
Apr 12
08:30 Initial Unemployment Claims 04/07 230K 242K Moderate
Apr 12
08:30 Continuing Unemployment Claims 03/31 NA 1.808M Moderate
Apr 13
10:00 U. of Michigan Consumer Sentiment Apr 100.6 101.4 Moderate


>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… There’s almost no chance the Fed will hike rates in May, but the Fed Futures market expects the year’s second hike in June. Note: In the lower chart, a 2% probability of change is a 98% certainty the rate will stay the same.

Current Fed Funds Rate: 1.50%-1.75%

After FOMC meeting on: Consensus
May 2 1.50%-1.75%
Jun 13 1.75%-2.00%
Aug 1 1.75%-2.00%


Probability of change from current policy:

After FOMC meeting on: Consensus
May 2          2%
Jun 13        85%
Aug 1        21%
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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