Mortgage Blog - July 17, 2017

The National Association of Realtors (NAR) 2017 National Housing Pulse Survey reports 84% of respondents believe buying a home is a wise financial decision. The NAR president summarized the findings: "Building equity, wanting a stable and safe environment and having the freedom to choose their neighborhood remain the top reasons to own a home." The survey also revealed buyers need to be educated about down payment options: 40% think they have to put at least 15% down. Black Knight reported total "lendable" equity increased $695 billion in the last year.

The chief economist at property information firm CoreLogic says "the market continues to benefit from improved economic growth." Their CEO adds, "the rebound in the U.S. housing market continues to gather steam." A national listing site found that the biggest homeowner regret was not choosing a larger home, while the biggest renter regret was continuing to rent instead of buying. Credit scores are rising, as the national average FICO score hit 700 for the first time in history. FICO's Vice President for scores and analytic's said a 700 score is considered "very good credit." Better credit scores can get buyers more favorable mortgage terms.

Review of Last Week

Wednesday Fed Chair Janet Yellen made her semiannual appearance in Congress and Wall Street interpreted her testimony as more dovish than expected, implying rates will stay pretty low. This ignited a rally that held through Friday. The major indexes enjoyed solid gains, the S&P 500 posting its largest weekly increase since the end of May, hitting a new all-time high. Yellen's magic words acknowledged "the federal funds rate would not have to rise all that much further to get to a neutral policy stance." Investors say that means the Fed will keep the longer term neutral level of the fed funds rate lower than it's been in past decades.

Although the economy is doing better, it still isn't booming, so the Fed should go easy on hiking rates. Retail Sales were down 0.2% in June although they're up 2.8% compared to a year ago. Inflation is nowhere near the Fed's 2% annual target rate as the Consumer Price Index (CPI) is up only 1.6% year-over-year. Dallas Fed President Robert S. Kaplan commented that he would need to see signs of higher inflation before voting for another rate increase. Not surprisingly, Wall Street is taking a December hike off the table: the probability that won't happen is now above 50. Industrial Production and Capacity Utilization were up nicely in June.

The week ended with the Dow UP 1.0%, to 21638; the S&P 500 UP 1.4%, to 2459; and the Nasdaq UP 2.6%, to 6312.

Friday's weaker than expected economic data sparked a rally in government notes and bonds. The 30YR FNMA 4.0% bond we watch finished the week UP .19, at $105.03. Freddie Mac's Primary Mortgage Market Survey for the week ending July 13 reported national average 30-year fixed mortgage rates edged up for the second week in a row.

Where are interest rates headed?

This Week’s Forecast

June Housing Starts are expected to move up from the month before to a 1.160 million unit annual rate. Likewise, Building Permits, a good gauge of home builder activity going forward, should rise to 1.196 million. Factory activity is forecast to slip in the two regions measured by the New York Empire Manufacturing Index and the Philadelphia Fed Index, although both in positive growth territory.

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 July 17th – July 21st

Jul 17     08:30     NY Empire Manufacturing Index
Jul 19     08:30     Housing Starts
Jul 19     08:30     Building Permits
Jul 19     10:30     Crude Inventories
Jul 20     08:30     Initial Unemployment Claims
Jul 20     08:30     Continuing Unemployment Claims
Jul 20     08:30     Philadelphia Fed Index
Jul 20     10:00     Leading Economic Index (LEI)
                                                                                                          
Federal Reserve Watch   

Speculative Forecasting Federal Reserve policy changes in coming months:

Fed Chair Janet Yellen's Congressional testimony left Wall Street more certain than ever there will be no rate hike for the next three FOMC meetings.

Note: In the lower chart, a 3% probability of change is a 97% certainty the rate will stay the same.

Current Fed Funds Rate: 1.0%-1.25%

After FOMC meeting on:     

Jul 26     1.0%-1.25%
Sep 20     1.0%-1.25%
Nov 1     1.0%-1.25%

Probability of change from current policy:

After FOMC meeting on:  

Jul 26             3%
Sep 20             8%
Nov 1           12%

Where are interest rates headed?

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Cheers!

Scott Synovic
Nations Reliable Lending, LLC
Colorado's Mortgage Expert
www.scottsynovic.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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