Mortgage Blog - February 26, 2018

Following their December decline, Existing Home Sales dipped again in January by 3.2%, to a 5.38 million annual rate. Though volatile month to month, home sales in 2017 racked up their best year since 2006, and, are expected to maintain that upward trend.

An IRS bulletin explains interest on home equity loans may still be deductible. The loan must be used to "buy, build or substantially improve" a home, and to deduct interest, all loans on the home cannot exceed a $750,000 limit ($350,000 if married filing separately).

As with all tax matters, always consult a tax or financial professional before making any tax-related decisions.


Review of Last Week

A crazy week on Wall Street, thanks to the Fed. Stocks went south on Wednesday after the Fed's Minutes from its last meeting revealed most members see stronger growth in the economy and inflation. This could necessitate more rate hikes, which investors don't much like.

But Friday, the Fed's semi-annual monetary policy report also noted broad improvement in the economy and increasing inflation, but did not suggest that rising prices dictated more aggressive rate hikes. Happy with that, the market rallied to another weekly gain.

GDP averaged 2.9% the last three quarters (after averaging 2.1% since 2010), unemployment is at a 17-year low, and wages, consumer confidence, and business investment are rising. A few rate hikes (which, remember, are starting from a very low level) may be a small price to pay for this progress.

The week ended with the Dow UP 0.4%, to 25310; the S&P 500 UP 0.6%, to 2747; and the Nasdaq UP 1.4%, to 7337.

Bond prices suffered from the inflation worries, but recovered a bit on Friday. The 30YR FNMA 4.0% bond we watch ended unchanged, at $102.47. National average 30-year fixed mortgage rates in Freddie Mac's latest Primary Mortgage Market Survey edged up.

Where are interest rates headed?

This Week's Forecast

Expect to see New Home Sales up in January, along with the Pending Home Sales index of contracts signed on existing homes. The Q4 GDP-2nd Estimate should show the economy growing at a 2.5% annual rate, enough to spur additional growth in Core PCE Prices, the Fed's favorite inflation read.

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 February  26, 2018 - March 2, 2018

Feb 26    08:30    New Home Sales
Feb 27    08:30    Durable Goods Orders
Feb 27    10:00    Consumer Confidence
Feb 28    08:30    Q4 GDP - 2nd Estimate
Feb 28    09:45    Chicago PMI
Feb 28    10:00    Pending Home Sales
Feb 28    10:30    Crude Inventories
Mar 1    08:30    Initial Unemployment Claims
Mar 1    08:30    Continuing Unemployment Claims
Mar 1    08:30    Personal Income
Mar 1    08:30    Personal Spending
Mar 1    08:30    Core PCE Prices
Mar 1    10:00    ISM Index 
Mar 2    10:00    U. of Michigan Consumer Sentiment - Final

Federal Reserve Watch

Speculative Forecasting Federal Reserve policy changes in coming months:

In the Fed futures market, they still see a March rate hike as a near certainty. May gets a hold, then we go up another quarter percent in June.

Note: In the lower chart, an 83% probability of change is an 83% certainty the rate will move higher.

Current Fed Funds Rate: 1.25%-1.50%

After FOMC meeting on:   

Mar 21    1.50%-1.75%
May 2    1.50%-1.75%
Jun 13    1.75%-2.00%

Probability of change from current policy:

After FOMC meeting on:  

Mar 21           83%
May 2           22%
Jun 13           69%

Where are interest rates headed?

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Cheers!

Scott Synovic
Nations Reliable Lending, LLC
Colorado's Mortgage Expert
www.coloradosmortgageexpert.com
303.668.3350 Direct

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The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial
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