Mortgage Blog - January 8, 2018

CoreLogic reports November home prices were up 7.0% over a year ago, but forecasts a slowing of that pace, seeing only a 4.2% hike in prices by November 2018. Thanks to price gains, a major real estate listing site put the total value of the U.S. housing market at a record $31.8 trillion in 2017, up from $29.6 trillion in 2016. The site also says renters spent a record $485.6 billion in 2017, $4.9 billion more than in 2016. This was with the rental population decreasing for the first time since 2004, according to an apartment listing service.

Freddie Mac's Deputy Chief Economist reports, "Despite increases in short-term interest rates, long-term rates remain subdued. The 30-year mortgage rate is down a quarter of a percentage point from where it was a year ago, with the FOMC minutes showing continued support for gradual increases in policy rates. Inflation rates remaining low, there isn't much upward pressure on long-term rates." He did caution, that could change.

Review of Last Week

The blue-chip Dow broke through 25000 for the first time in history, capping a spectacular week on Wall Street. The broadly-based S&P 500 closed at new records the first four trading days of the new year, for the first time since 1964. The tech heavy Nasdaq also set four straight closing records. The December jobs report came in with 148,000 new Non farm payrolls, less than expected. Investors liked that it's a good number, yet shows the economy isn't overheated, which should keep the Fed from raising rates too fast.

November's number was revised up to 252,000 new jobs and the three-month average remains above 200,000. The unemployment rate, at 4.1%, a 17-year low, is testimony to the ongoing health of the labor market, important to the housing market. Also important, last month's 30,000 new construction jobs meant 2017 ended with 35% more construction jobs added than the year before. This should start to relieve the supply challenges seen in many markets. Finally, the ISM manufacturing index averaged the highest reading for a calendar year since 2004!               

The week ended with the Dow UP 2.3%, to 25296; the S&P 500 UP 2.6%, to 2743; and the Nasdaq UP 3.4%, to 7137.

There was enough positive economic data to keep bond prices in check. The 30YR FNMA 4.0% bond we watch finished the week down .06, at $104.53. Freddie Mac's Primary Mortgage Market Survey for the week ending January 4 showed national average 30-year fixed mortgage rates dropping to kick off the year.

Where are interest rates headed?

This Week's Forecast

Inflation data is all the rage these days, because the Fed says it will be slow to hike rates until there's a stronger pickup in prices. This week's Consumer Price Index (CPI) is forecast to edge up, but probably not as much as the central bank would like. However, Retail Sales are expected to go up nicely in December, after a very strong November performance.

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 January 8, 2018 - January 12, 2018

Jan 10    10:30    Crude Inventories
Jan 11    08:30    Initial Unemployment Claims
Jan 11    08:30    Continuing Unemployment Claims
Jan 11    08:30    Producer Price Index (PPI)
Jan 11    08:30    Core PPI
Jan 12    14:00    Treasury Budget
Jan 12    08:30    Consumer Price Index (CPI)
Jan 12    08:30    Core CPI
Jan 12    08:30    Retail Sales
Jan 12    08:30    Retail Sales ex-auto
Jan 12    10:00    Business Inventories

Federal Reserve Watch

Speculative Forecasting Federal Reserve policy changes in coming months:

The probability of another quarter percent raise in March has increased, but there is little likelihood of any further upward movement in 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%

After FOMC meeting on:   

Jan 31    1.25%-1.50%
Mar 21    1.50%-1.75%
May 2    1.50%-1.75%

Probability of change from current policy:

After FOMC meeting on:   

Jan 31             2%
Mar 21           63%
May 2           40%

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
services and other professionals only. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is without errors.

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