This year we should have 357 of the best days ahead of us, if most of the housing market forecasts come true. One online real estate firm expects a fast sales pace, thanks to millennials surging into the market, helping to push existing home sales up by 2.8% in 2017. The National Association of Realtors (NAR) currently estimates existing home sales will rise by 2.0%, their lower estimate based on increasing home prices.A financial services company whose house price index looks at inflation, wage growth and other factors, says prices are still more affordable now than during the housing boom.
Speaking of home prices, a real estate tech and data firm reported prices in November up 7.1% versus a year ago. The property economist for a research consultancy put this to continued low inventories and the rise in housing demand after the election. Of course, the situation varies by market. That data firm forecasts the year will show a 5% increase in prices overall. But some areas may hit double-digit gains, while others decline. Last week, Case-Shiller reported home prices were finally above their all-time highs. Now a listing site notes that the value of housing stock nationally hit an all-time high in 2016, though some markets are still below their peak prices.
Review of Last Week
You could call 2016 the year of the upstart as British voters who wanted to leave the European Union unexpectedly prevailed, and Donald Trump surprisingly won our Presidential election. Well, 2017 began in the same spirit, with an upstart move in the stock market. The S&P 500 and the Nasdaq finished the year's first week at new record levels, while the blue-chip Dow came within a point of the 20,000 threshold before closing just 36 points below it. Friday's December jobs report inspired some of the euphoria as encouraging Hourly Earnings, up 0.4% for the month and 2.9% for the year, compensated for a lackluster 156,000 new Nonfarm Payrolls.
There were other good economic data points. The ISM Index of manufacturing rose in December to 54.7, staying nicely above 50, signaling growth. This was followed by the ISM Services index coming in unchanged at 57.2, which was better than the predicted decline. The services sector of the economy provides the vast majority of jobs, so this is a good thing. We also saw Initial Unemployment Claims drop by 28,000, to 235,000, though Continuing Claims increased by 16,000. The most disappointing report revealed the U.S. Trade Deficit shot up almost 7% in November, with imports outstripping exports by $45.2 billion.
The week ended with the Dow UP 1.0%, to 19964; the S&P 500 UP 1.7%, to 2277; and the Nasdaq UP 2.6%, to 5521.
The gain in Hourly Earnings was enough good news to drop bond prices on Friday, but not enough to erase gains made earlier in the week. The 30YR FNMA 4.0% bond we watch finished the week UP .11, at $105.17. In Freddie Mac's Primary Mortgage Market Survey for the week ending January 5, national average 30-year fixed mortgage rates moved down for the first time in ten weeks, remaining near historical lows.
This Week’s Forecast
The December Retail Sales report is forecast to show a nice boost thanks to both holiday sales and rising prices at the pump. The University of Michigan Consumer Sentiment index is also expected to show that folks are continuing to feel better about their economic futures.
The stock and bond markets are closed next Monday January 16 for 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 9 – Jan 13
Jan 11 Crude Inventories
Jan 12 Initial Unemployment Claims
Jan 12 Continuing Unemployment Claims
Jan 12 Federal Budget
Jan 13 Producer Price Index
Jan 13 Core PPID
Jan 13 Retail Sales
Jan 13 Business Inventories
Jan 13 Univ. of Michigan Consumer Sentiment
Federal Reserve Watch
Speculative Forecasting Federal Reserve policy changes in coming months:
A few more economists say we'll see another rate hike in March and even more say May, but most still expect the Fed to stand pat.
Note: In the lower chart, a 3% probability of change is a 97% certainty the rate will stay the same.
Current Fed Funds Rate: 0.5%-0.75%
After FOMC meeting on:
Probability of change from current policy:
After FOMC meeting on:
Feb 1 3%
Mar 15 24%
May 3 39%
Where are interest rates headed?
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