Last Thursday we got the news that Existing Home Sales were down 3.2% in July, as the annual rate skidded below 5.5 million, settling at 5.39 million units.

This put existing home sales 1.6% lower than they were a year ago. But inventories have been falling on a year-over-year basis for 14 months in a row, so tight supply and the rising prices that go with it are constraining sales in many markets. But there was good news on the demand side: in July, 47% of the homes sold in less than a month.Last week's better housing report was in fact spectacular.

New Home Sales shot up 12.4% in July, putting them at a 654,000 unit annual rate, 31.3% ahead of where they were a year ago. This was the fastest sales pace since before the recession. We saw gains in the Northeast, South and Midwest, while the usually strong West cooled to a merely flat monthly performance. Supply remains tight, at 4.3 months, yet the median new home sales price is down 0.5% versus a year ago. Other home price measures continue to show gains, so this price dip merely reflects a shift by builders to lower priced homes, considered good for the market.

Analysts call comments from Fed members "hawkish" when they're in favor of raising rates, "dovish" when they sound reluctant to do so. Friday, at a yearly symposium in Jackson Hole, Wyoming, Fed Chair Janet Yellen said the case for a rate hike had recently strengthened, although soft business investment and weakening exports were concerns. Investors took these remarks as slightly more dovish than hawkish until Fed Vice Chair Stanley Fischer told CNBC two rate increases were still possible this year. He said their decisions would be "data dependent," but investors didn't miss the hawkish message. Stocks tanked.

The Fed's decisions about rates may be data dependent, but their comments don't seem to be especially influenced by economic reports. For example, the strengthening economy Chair Yellen sees was nowhere to be found in the latest GDP read. The GDP - 2nd Estimate for the second quarter (April, May, June) revised U.S. economic growth down to a 1.1% annual rate, pathetic by historical standards. We did get a 4.4% bump in July Durable Goods Orders, and Initial Unemployment Claims logged their 77th straight week below 300,000. However, regular folks are skeptical about the economy, as Michigan Consumer Sentiment fell in August.

The week ended with the Dow down 0.8%, to 18397; the S&P 500 down 0.7%, to 2169; and the Nasdaq down 0.4%, to 5219.

Fears of a Fed rate hike battered bond prices on Friday. Treasuries got it the worst, while the 30YR FNMA 4.0% bond we watch finished the week down just .03, at $107.03. National average 30-year fixed mortgage rates were unchanged in Freddie Mac's Primary Mortgage Market Survey for the week ending August 25. This keeps them near historical lows. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

Analysts expect the Pending Home Sales measure of contracts signed on existing homes up again in July, presaging sales gains when those deals close in September and October. Core PCE Prices should show weak inflation, which ought to keep the Fed quiet on rates. Unfortunately, forecasters see slippage in both the Chicago PMI for Midwest manufacturing and the nationwide ISM Index. Also predicted to slip are new Nonfarm Payrolls, falling back below 200,000, and Hourly Earnings growth.

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 Aug 29 – Sep 2

Aug 29     08:30     Personal Income
Aug 29     08:30     Core PCE
Aug 30     10:00     Consumer Confidence
Aug 31     09:45     Chicago PMI
Aug 31     10:00     Pending Home Sales
Aug 31     10:30     Crude Inventories
Sep 1     08:30     Initial Unemployment Claims
Sep 1     08:30     Continuing Unemployment Claims
Sep 1     08:30     Productivity - Rev.
Sep 1     08:30     Unit Labor Costs - Rev.
Sep 1     10:00     ISM Index
Sep 2     08:30     Average Workweek
Sep 2     08:30     Hourly Earnings
Sep 2     08:30     Nonfarm Payrolls
Sep 2     08:30     Unemployment Rate
Sep 2     08:30     Trade Balance
                                                                                                          
Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... Fed watchers are lining up like ducks in a row in the camp of those who expect a December rate hike. Note: In the lower chart, a 33% probability of change is a 67% certainty the rate will stay the same.

Current Fed Funds Rate: 0.25%-0.5%

After FOMC meeting on:    

Sep 21     0.25%-0.5%
Nov 2     0.25%-0.5%
Dec 14     0.5%-0.75%

Probability of change from current policy:

After FOMC meeting on: 

Sep 21           33%
Nov 2           39%
Dec 14           59%

Apply Now!
Get the Insider Track on Interest Rates!

Cheers!

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

NMLS: 253799 / NRL NMLS: 181407
Regulated by the Division of Real Estate

Rates in the 3% Range Rates Makes Extra Payments a Viable Option

Paying extra can make financial sense. It means a guaranteed return on investment, which isn't the case for investments like mutual funds or stocks. If your current mortgage interest rate is 5%, you are guaranteed to "earn" 5% by saving interest on any amount of principal you pay off.

Most conventional, FHA, VA and USDA mortgages allow you to make extra payments without penalty.

Making extra mortgage payments is not the right strategy for everyone. Homeowners often choose to refinance instead into a 15 or even 10 year mortgage. This drastically cuts the interest rate and slices several years off their mortgage.

Today's mortgage rates for shorter term loans or shorter amortization schedules make refinancing a very attractive proposition.

Deciding to refinance or make additional payments takes some examination but the right choice could help you save thousands and get you closer to a mortgage free life. Call me, 303.668.3350, to discuss all of the options available to you or apply now.

How Much Could You Save By Making Extra Payments?

The savings could be huge.

A 30 year fixed rate mortgage at 4% and $200,000 borrowed would require about $140,000 in interest over the life of the loan.

But if you were to prepay just an additional $100 a month toward principal, you would save about $30,000 in interest, and pay off that loan five years quicker.

Here’s another prepayment perk: unlike the capital gains and dividends earned on other types of investments like stocks and bonds, the savings earned from prepayments are not taxable.

The prepayment process is relatively simple. Take the time to write a separate check or send a separate electronic payment to your lender and explicitly state in the memo or on a separate note that this extra payment is to be applied toward the principal on your loan. Otherwise, the bank could possibly apply your extra payment to the next month’s interest.

In a quick call or online query, homeowners can find out how their mortgage servicer handles additional funds combined with a regular payment.

Should Extra Mortgage Payments Take First Priority?

Before embarking on a prepayment plan, you might want to consider more advantageous alternatives, says Jeff Rose, a certified financial planner in Carbondale, Ill.

A mortgage is just about the cheapest money you will ever borrow, with today’s rates at or below 4%. If you have other high interest debt such as credit cards or personal loans I would pay those off first before prepaying my mortgage. Mortgage interest you pay is tax deductible by prepaying your principal, you’ll pay less interest and, thus, get less of a tax write-off over the life of your loan.

In addition, homeowners with low rates might make more money in other investments than they could by paying down their sub 4% mortgage.

Refinancing Is An Effective Cost Saving Strategy

Another option is to refinance your mortgage to a shorter term, especially if you can lock in at rate lower than your existing rate.

This is like a forced savings plan where you’ll be committed to a monthly payment for a shorter term instead of only making occasional prepayments on your current term.

Here is a compelling scenario. A homeowner is two years into their thirty year mortgage of $200,000. He then refinances into a 15 year, dropping his rate by one percent. He would save over $85,000 in interest.

“If you need to keep cash liquid and you want to pursue other investment opportunities, you might not want to pay the mortgage down faster, especially if you have a low interest rate however, if you are staying in your home for the long term or you plan on keeping the home as a rental property, savings tens sometimes hundreds of thousands of dollars in interest can be a smart move

Paying Extra On Your Mortgage Ties Up Cash

The best prepayment prospects are usually young or older homeowners who aren’t raising children.

With children at home, you have a lot more expenses and things to save for, so paying the minimum on the mortgage and putting the rest into retirement and college savings funds usually makes the most sense.

However if a borrower has the available funds, I usually recommend they make at least one prepayment amount each year. And for anyone close to retirement, they should focus on prepaying to get their house paid off before they retire, which can make a huge difference in their standard of living down the road.

Before sending extra payments to your lender, make sure your mortgage is eligible for extra payments without penalty.

Examine all your options and determine which strategy – making extra payments or investing in other things – works best for your situation.

What Are Today’s Rates?

Mortgage rates are hitting new lows. Many homeowners will discover that a refinance will save them significant amounts in interest, even if they decide not to make extra payments.

Call today, 303.668.3350 and we can review all of the options available to you!

Apply Now!
Get the Insider Track on Interest Rates!

Cheers!

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

NMLS: 253799 / NRL NMLS: 181407
Regulated by the Division of Real Estate

It's nice to see home builders aren't just sitting there. In fact, thanks to their activities, Housing Starts went up 2.1% last month, to a five-month high 1.211 million unit annual rate. Starts are now 5.6% above a year ago, remaining a bright spot in an otherwise dark U.S. economy. With weather and other considerations, housing starts can be volatile from month to month, so it's good to look at the 12-month moving average - its highest level since 2008.

This should help alleviate the tight housing supply occurring in many parts of the country as we head to the 1.5 million annual start rate experts say we need to meet demand.

Building Permits dipped 0.1% in July, but single family ones are up 2.4% versus a year ago. Builders certainly are hopeful. The National Association of Home Builders (NAHB) confidence index moved up to 60 this month from 59 in July, as positive sentiment grows. The NAHB chairman explained, "New construction and new home sales are on the rise in most areas of the country." The latest National Appraisal Volume Index for the week of August 7 put appraisals up 5.5% above the prior week's 1.4% gain. As an indicator of market strength, appraisals have less fallout than mortgage applications, since they occur later in the process and there are fewer multiple orders.

Review of Last Week

Folks on Wall Street spent the summer week treading water just like some of them once did at the old swimmin' hole. But the hole they're focused on now is Jackson Hole, Wyoming, where Fed chair Janet Yellen will speak at a symposium this Friday. Her words will be duly scrutinized for when the next rate hike will occur. This week, traders could only mull over minutes from the Fed's July meeting, showing members almost evenly split over whether a rate hike should be near-term or later. The Dow ended down and the S&P 500 flat, but the Nasdaq eked out its eighth weekly gain in a row, its longest win streak in six years.

Economic reports were mixed, which is now the norm. We got the good housing data covered above, but manufacturing was all over the place. The New York Empire Manufacturing Index showed contraction in that region, while the Philadelphia Fed Index crawled back into expansion territory in that neck of the woods. Industrial Production and Capacity Utilization wound up better than forecast. Inflation logged in at 0.0% by July's Consumer Price Index (CPI), and Core CPI, taking out food and energy prices, was a barely visible 0.1%. This constrains the Fed from boosting rates, but shows the economy treading water--just like stocks did on Wall Street.

The week ended with the Dow down 0.1%, to 18553; the S&P 500 just below its flat line, at 2184; and the Nasdaq UP 0.1%, to 5238.

Thursday, a Fed member who doesn't vote said they should hike rates "sooner rather than later." This roiled Treasuries, but the 30YR FNMA 4.0% bond we watch finished the week UP .16, at $107.08. Freddie Mac's Primary Mortgage Market Survey for the week ending August 18 showed national average 30-year mortgage rates edging back down, erasing last week's tiny move up and remaining near historical lows. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

This Week’s Forecast

Analysts expect to see the annual rates of New Home Sales and Existing Home Sales drop a bit in July. So we need to keep an eye on the longer term trend. U.S. economic growth is also slipping, with the GDP - 2nd Estimate  forecast at 1.1% for Q2. That trend is pretty well established, as economic growth has been proceeding at a snail's pace for the last eight years.

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 Aug 22 – Aug 26

Aug 23     10:00     New Home Sales
Aug 24     10:00     Existing Home Sales
Aug 24     10:30     Crude Inventories
Aug 25     08:30     Initial Unemployment Claims
Aug 25     08:30     Continuing Unemployment Claims
Aug 25     08:30     Durable Goods Orders
Aug 26     08:30     GDP - 2nd Estimate
Aug 26     10:00     U. of Michigan Consumer Sentiment
                                                                                                          
Federal Reserve Watch   

In spite of the July FOMC Minutes and recent comments from Fed members, Fed watchers still don't expect a rate hike this year. Note: In the lower chart, a 12% probability of change is an 88% certainty the rate will stay the same.

Current Fed Funds Rate: 0.25%-0.5%
After FOMC meeting on:

Sep 21     0.25%-0.5%
Nov 2     0.25%-0.5%
Dec 14     0.25%-0.5%

Probability of change from current policy:

After FOMC meeting on:

Sep 21           12%
Nov 2           19%
Dec 14           46%

Please call me direct with any questions I can answer at 303.668.3350! Apply Now!

Have a great day!

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

303.668.3350 Direct
www.scottsynovic.com

 DTI Reveals True Home Affordability

Credit scores usually get the biggest headlines.

Your three digit FICO score is a key factor for mortgage qualification and mortgage rates however there is another number that is a better indicator when determining what you can afford each month: your debt to income ratio, or "DTI."

Your DTI is a comparison between your monthly payment obligations and your income. A low DTI denotes you are buying a home well within your affordability range.

Lenders want to see that you are taking on a sustainable housing payment. That’s good for you and them.

Knowing your DTI before you apply is by no means necessary however it can help buyers form an educated estimate of their price range.

Many buyers will discover that homes in their area are very affordable as they look at their income, current payments, and future housing costs to determine their DTI.

No Two Buyers' Are Alike

The lender never looks at the amount of debt independent of the applicant’s income.

A certain amount of payments can be too much for one consumer and no burden at all for another.

Here is a good way to think of it: $4,000 worth of monthly debt obligations are a problem for consumers who earn a gross monthly income of $6,000 but that same $4,000 of debt isn’t nearly as problematic for consumers who earn $18,000 a month.

Calculating your debt to income ratio is not difficult and rather simple - divide your recurring monthly debt obligations into your gross monthly income.

For instance, you would have a 25% DTI with an income of $10,000 and payments of $2,500.

While the formula is easy, it helps to think like a lender when you calculate your debt payments.

Calculate Your Debt to Income Ratio  Like A Lender

Mortgage lenders are the final decision maker. It’s important to understand how they calculate DTI.

The lender will look at your recurring payments for anything financed, such as cars, student loans, and credit card purchases. If you have monthly child care or alimony payments, these also count as part of your recurring monthly debt.

They will not include non debt monthly payments such as utility payments, cell phone bills, and gym memberships.

If you are not sure which of your bills the lender will consider debt payments, obtain a free credit report. Consumers have access to a free report once per year from each of the three major bureaus, Transunion, Experian, and Equifax.

Go through the report and add the payment amounts listed. This is exactly how the lender will calculate your non housing payment total.

Estimate All Parts Of Your Future Housing Cost

After calculating your non housing debt, the lender will estimate your new monthly housing expenses.

Your future payment amount will consist of a number of pieces:

• Principal
• Interest
• Mortgage insurance, if any
• Property taxes
• Homeowner’s insurance
• Homeowner association (HOA) dues

You can determine your principal and interest payment with my mortgage calculator. Some even estimate your mortgage insurance cost. Property taxes can vary widely by region of the country.

Search for homes in your area and price range on a real estate website. Each listing should state the amount of taxes, which you can alsouse for your estimate.

Homeowner’s insurance can be anywhere from $65 to $250 or more per month but for the typical house and borrower, should be around $95.

HOA dues almost always apply when buying a condo but often when buying a single family home in some neighborhoods too. Search for homes in desired neighborhoods to check common HOA dues, if any.

Use All Your Income

Most U.S. workers’ paychecks bear little resemblance to their actual income.

A large amount is removed for income taxes, Medicare, and Social Security taxes. In addition, many workers voluntarily contribute to a 401k plan and pay medical insurance premiums too. The end result is take home pay that is significantly less than gross income.

Fortunately, the lender will use all of your income or gross income to calculate your DTI.

In addition, you can also include monthly rental income, alimony payments you receive, pension income, disability income and many other payments you receive each month.

However, lenders may calculate these income types differently than you would. For instance, only 75 percent of your rental income “counts” toward qualifying income.

Likewise, self employed income can be difficult to calculate on your own. The lender will deduct any write offs from total business income.

The point is, be conservative when estimating non salaried income. Lenders will provide an income analysis as part of the prequalification process. If you are self employed, this may be the only way to know your lender calculated income.

Many Exceptions To The 43% DTI Rule

When applying for a mortgage loan, you want to aim for a debt to income ratio that is lower than 43%. That’s because 43% is the highest DTI many loan types can hit and still be considered a Qualified Mortgage.

A Qualified Mortgage is one that the Consumer Financial Protection Bureau considers sustainable by the buyer. The rule came out of the 2010 Dodd-Frank Act as an effort to protect consumers after the housing downturn of last decade.

But the forty-three-DTI rule is by no means hard-and-fast.

For instance, Fannie Mae’s new program, HomeReadyTM, allows a 50 percent DTI when non borrower household members are contributing to home ownership costs.

Likewise, FHA loans and VA home loans which receive approvals are considered Qualified Mortgages despite their DTI.

Borrowers who do apply for a loan with a 43% cap have options if they are above the DTI threshold. Borrowers can target a lower priced home, which would reduce their estimated new monthly mortgage payment and debt to income ratio.

Home buyers can also refinance their auto loan, or consolidate student loans and credit cards to reduce the monthly payment. The lender does not factor in the loan balance but rather only the minimum amount due each month. Reducing payments helps even if loan balances don’t change.

Let Your Budget Make The Decision

The key is to get your debt to income ratio to a level that is not only attractive to lenders but is also comfortable for you. Your lender might approve you with a debt to income ratio of 40% but you might not feel comfortable with monthly obligations that consume that much of your monthly income.

Your payment comfort level may be much lower than the housing expense the lender approves.

Before you apply for a mortgage, take the time to roughly calculate your debt to income ratio. This number will tell you plenty about how much of a monthly mortgage payment you can comfortably afford.

Do not be afraid to be more conservative when it comes to your debt to income ratio. Enjoying home ownership starts with sustainable, comfortable costs.

Low rates are decreasing the cost of home ownership. Falling rates help home buyers receive approvals, even if their applications were not accepted just a few months ago.

Get a rate quote for your upcoming home purchase! All rate quotes come with a home-buying eligibility check and access to your credit scores.

Apply Now!
Get the Insider Track on Interest Rates!

Cheers!

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

NMLS: 253799 / NRL NMLS: 181407
Regulated by the Division of Real Estate

Analysts felt a few rain drops when the Census Bureau announced the home ownership rate fell to 62.9% in Q2, a level not seen in half a century. Explanations for this began with the growing amount of student loan debt. Yet the chairman of the Council of Economic Advisors says this debt is high because there are many more borrowers, and more than 40% of them owe less than $10,000. So it must be affordability. But a house price index that adjusts for the impact of income and interest rate changes on consumer buying power reveals homes are 40% less costly that at the housing peak. Let's hear it for low mortgage rates!

Actually, the home ownership rate is low because there are so many more renters. Since the start of the recession, there are 8.4 million new rental households, a 22% jump, but only 2% fewer owner occupied households. So home ownership fell because of the added renters, many of them millennials right out of college. And when millennials do go for home ownership, since they're the biggest demographic group in our history, it should spur quite a housing boom. The latest research from Fannie Mae already shows that as millennials get older, they're increasing homeownership rates faster than in previous years. Rainbow on the way?

Review of Last Week

Thursday, all three major stock market indexes closed at new record highs, the first time that's happened since 1999. In the interim, we've seen the dot-com bubble burst, plus the Great Recession we're still recovering from, so Thursday's triple record was a welcome development. Unfortunately, Friday saw weak July Retail Sales (flat overall, down 0.3% excluding auto sales), and the Producer Price Index down 0.4%, indicating dreaded wholesale price deflation. These pulled the Dow and the S&P 500 down from their records, though they ended ahead for the week, while the Nasdaq had no trouble closing at another all-time high.

Offsetting Friday's bad data were some good reports. University of Michigan Consumer Sentiment registered an uptick in August from its not bad reading in July. In addition, Business Inventories grew a better-than-expected 0.2% in June showing a slightly more positive outlook in the world of commerce. Even oil prices strengthened, with West Texas crude settling north of $44 a barrel. But we keep getting evidence all is still not well with the U.S. economy. Productivity declined at a 0.5% annual rate in Q2 and Continuing Unemployment Claims went up by 14,000, though Initial Unemployment Claims dipped by 1,000, staying under 300,000 for the 75th week in a row.

The week ended with the Dow UP 0.2%, to 18576; the S&P 500 UP 0.1%, to 2184; and the Nasdaq UP 0.2%, to 5233.

In the bond market, Treasuries traded higher on Friday's weak data, then backed off. The 30YR FNMA 4.0% bond we watch finished the week down .22, at $106.92. For the week ending August 11, Freddie Mac's Primary Mortgage Market Survey reported national average 30-year fixed mortgage rates little changed from the week before. They're still near historical lows, well under where they were a year ago. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

This Week’s Forecast

Like the Queen of England, U.S. home building is expected to keep calm and carry on in July, with Housing Starts down a tad but Building Permits unchanged, both nicely above the one million unit threshold. Inflation should be low, measured by the Consumer Price Index (CPI) and Core CPI (excluding volatile food and energy prices). This is not the level of inflation the Fed wants to see in order to raise interest rates. We may get some insight on this Wednesday in the FOMC Minutes from the Fed's last meeting.

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 Aug 15 – Aug 19

Aug 15     08:30     NY Empire Manufacturing Index
Aug 16     08:30     Housing Starts
Aug 16     08:30     Building Permits
Aug 16     08:30     Consumer Price Index (CPI)
Aug 16     08:30     Core CPI
Aug 16     09:15     Industrial Production
Aug 16     09:15     Capacity Utilization
Aug 17     10:30     Crude Inventories
Aug 17     14:00     FOMC Minutes
Aug 18     08:30     Initial Unemployment Claims
Aug 18     08:30     Continuing Unemployment Claims
Aug 18     08:30     Philadelphia Fed Index
Aug 18     10:00     Leading Economic Indicators (LEI)
                                                                                                          
Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... A few more economists think the Fed will dial up a rate hike in December, but the majority still says no. Note: In the lower chart, a 9% probability of change is a 91% certainty the rate will stay the same.

Current Fed Funds Rate: 0.25%-0.5%

After FOMC meeting on:

Sep 21     0.25%-0.5%
Nov  2     0.25%-0.5%
Dec 14     0.25%-0.5%

Probability of change from current policy:

After FOMC meeting on:

Sep 21             9%
Nov  2           11%
Dec 14           45%

Please call me direct with any questions I can answer at 303.668.3350! Apply Now!

Have a great day!

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

303.668.3350 Direct
www.scottsynovic.com

We may be able to do anything, but some things are more difficult than others. Take predicting when the Fed will next hike rates. Even Fed members can't forecast their own actions. San Francisco Fed President John Williams told Reuters: "There is definitely a data stream that could come through in the next couple of months that I would think would be supportive of two rate increases." He added:

"There's data we could get that wouldn't be supportive of that and it could be supportive of one maybe, or of none." By the way, the majority of economists are betting on "none." Then again, the Fed, like we, can do anything.

What's not doing much is the economy, expanding only 1.2% in Q2. The National Association of Realtors chief economist said this "shows the economy barely above water...the third consecutive quarter of near 1% growth, as opposed to the historical long term average of 3%." He thinks housing has an answer: "More homes need to be built and that in turn will lead to faster economic growth." Hope also came from Freddie Mac's CEO who said 42% of non-refinance purchase loan buys they made in Q2 were to fund loans to first time homebuyers, the highest level in 10 years. But with no home to sell, first timers aren't helping supply. Can't do everything.

Review of Last Week

Friday's July Employment Report gave us all an upside surprise, coming in with 255,000 new Nonfarm Payrolls for the month, plus 18.000 more jobs thanks to upward revisions to May and June numbers. We also saw Hourly Earnings up 0.3% in July, and up 2.6% over a year ago. This was good stuff, but not so good that investors thought the very cautious Fed would be moved to hike rates in September. So the S&P 500 hit an all-time high, scoring its fifth weekly gain in the last six weeks. The tech-heavy Nasdaq also closed the week at an all-time high, its first record in more than a year, while the blue-chip Dow ended ahead as well.

One analyst explained that while the July jobs numbers were good, they hadn't reached "escape velocity." By that, he meant a level that would show enough economic strength to let the Fed hike. He said 150,000 new jobs a month takes care of population growth, while economic growth is indicated above that figure. And wage growth needs to be 3% annually in order to push inflation up to where the Fed wants it. Other news of the day included the June Trade Deficit jumping 8.7%, to $44.5 billion, a 10-month high. Earlier in the week we saw both ISM Manufacturing and ISM Services indexes dipping in July, though still showing slow expansion.

The week ended with the Dow UP 0.6%, to 18544; the S&P 500 UP 0.4%, to 2184; and the Nasdaq UP 1.1%, to 5221.

As usual, the good jobs report was bad for bonds, sending Treasury prices down sharply. The 30YR FNMA 4.0% bond we watch finished the week down .03, at $107.14. In Freddie Mac's Primary Mortgage Market Survey for the week ending August 4, national average 30-year fixed mortgage rates fell back near their yearly lows after inching up for three weeks. This was put to "a disappointing advance estimate for second quarter GDP." Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

This Week’s Forecast

It's a light week for economic data, with the big report being Retail Sales, forecast up again in July though not by as much as June. The Producer Price Index (PPI), gauging wholesale price inflation, is expected to be at a standstill in July. But Core PPI, which excludes volatile food and energy prices, is predicted up, though less than it was in June. We watch wholesale price inflation because it's often a leading indicator of consumer price inflation. And that's what the Fed wants to see more of before it raises rates.

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 Aug 8 – Aug 12

Aug 9     08:30     Productivity - Prelim.
Aug 9     08:30     Unit Labor Costs
Aug 10     10:30     Crude Inventories
Aug 10     14:00     Federal Deficit
Aug 11     08:30     Initial Unemployment Claims
Aug 11     08:30     Continuing Unemployment Claims
Aug 12     08:30     Producer Price Index (PPI)
Aug 12     08:30     Core PPI
Aug 12     08:30     Retail Sales
Aug 12     10:00     Univ. of Michigan Consumer Sentiment
Aug 12     10:00     Business Inventories
                                                                                                          
Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... Well, this week a few more Fed watchers think the central bank will hike the rate in November or December, but the majority still say it stays where it is through the end of the year. Note: In the lower chart, a 15% probability of change is an 85% certainty the rate will stay the same.

Current Fed Funds Rate: 0.25%-0.5%

After FOMC meeting on:     

Sep 21     0.25%-0.5%
Nov 2     0.25%-0.5%
Dec 14     0.25%-0.5%

Probability of change from current policy:

After FOMC meeting on:    

Sep 21           15%
Nov 2           15%
Dec 14           43%

Please call me direct with any questions I can answer at 303.668.3350! Apply Now!

Have a great day!

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

303.668.3350 Direct
www.scottsynovic.com

Having dreams, a strong character and a sense of humor are keys to success for those of us who make our living in the housing market. Fortunately, we continue to see the housing recovery making further strides overall. Last week, new single-family home sales were up 3.5% for June, hitting a 592,000 unit annual rate. We're still not where we need to be, but we are 25.4% ahead of sales last year ago.

There were 3,000 new homes added to inventory, though that's still very low by historical standards. The 6.1% boost in the median sales price of a new home should keep builders motivated.

The Pending Home Sales index of contracts signed on existing homes was up 0.2% in June following its 3.7% drop in May. The two numbers indicate existing home sales in July and August will let up a bit. But those sales rose considerably earlier in the year, so the trend remains positive. Let us remember too that home ownership is down, with a bigger part of the population renting. This should create a growing pool of potential buyers as economic conditions slowly improve while rents relentlessly rise. The national Case-Shiller home price index was up 1.2% in May, 5.0% ahead of a year ago. Sellers ought to take note of this--and the low mortgage rates they'll pick up as buyers.

Review of Last Week

Investors were treated to lots of variety, starting with a mixed bag of Q2 corporate earnings. A couple of companies in the Dow disappointed, sending the blue chip index south for the week. But the tech-y Nasdaq saw upside surprises from some big players (bet you can guess the names), pushing it to its highest level in more than a year. There was no dramatic earnings news from companies in the broadly-based S&P 500, so that index finished just a tick below the prior week's all-time closing high. The Fed met Wednesday and quietly left interest rates alone, while offering a lukewarm outlook on the U.S. economy.

Regular Inside Lending readers should be well versed in the details of the painfully slow economic recovery of the last eight years. Friday, we saw evidence that recovery has slowed even more. The Commerce Department's GDP report said the economy skidded to a 1.2% annual growth rate in Q2 (April-June). Oh, and it turns out they overestimated Q1 (January-March) GDP growth, revising that down to a barely visible 0.8%. Well, at least we had the decent housing data covered above, and the Chicago PMI showed Midwest manufacturing activity slipped only a little. But University of Michigan Consumer Sentiment weakened in July.

The week ended with the Dow down 0.7%, to 18432; the S&P 500 down 0.1%, to 2174; but the Nasdaq UP 1.2%, to 5162.

When Q2 GDP growth disappointed dismally on Friday, prudent investors fled to the safety of bonds, sending prices higher. The 30YR FNMA 4.0% bond we watch finished the week UP .14, at $107.17. National average 30-year fixed mortgage rates increased slightly in Freddie Mac's Primary Mortgage Market Survey for the week ending July 28, but still remain near historical lows.

This Week’s Forecast

The nationwide ISM Index should show slow growth for manufacturing, as well as for consumer Personal Spending, not good for the economy. But the expected slow growth of inflation, measured by Core PCE Prices, is good for consumers and for keeping interest rates down. Before the Fed hikes rates, it wants higher inflation, as well as a better jobs picture. It's predicted they'll get that, sort of--a moderate 185,000 new Non farm Payrolls in July, though little gain in Hourly Earnings.  

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 Aug 1 – Aug 5

Aug 1    10:00    ISM Inde
Aug 2    08:30    Personal Income
Aug 2    08:30    Personal Spending
Aug 2    08:30    Core PCE Prices
Aug 3    10:00    ISM Services
Aug 3    10:30    Crude Inventories
Aug 4    08:30    Initial Unemployment Claims
Aug 4    08:30    Continuing Unemployment Claims
Aug 5    08:30    Average Workweek
Aug 5    08:30    Hourly Earnings
Aug 5    08:30    Nonfarm Payrolls
Aug 5    08:30    Unemployment Rate
Aug 5    08:30    Trade Balance
                                                                                                          
Federal Reserve Watch    

The majority of economists do not expect the Fed to go for a rate hike this year, but there's slightly more sentiment for a post-election December increase. Note: In the lower chart, a 12% probability of change is an 88% certainty the rate will stay the same.

Current Fed Funds Rate: 0.25%-0.5%

After FOMC meeting on:

Sep 21    0.25%-0.5%
Nov 2    0.25%-0.5%
Dec 14    0.25%-0.5%

Probability of change from current policy:

After FOMC meeting on:   

Sep 21    12%
Nov 2    12%
Dec 14    33%

Please call me direct with any questions I can answer at 303.668.3350! Apply Now!

Have a great day!

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

303.668.3350 Direct
www.scottsynovic.com