Those who work in the housing market love what we do however success as measured by the economic reports is not too consistent. For example, Housing Starts slipped 5.8% in August, to a 1.142 million unit annual rate but this follows strong reports for June and July and even with the August dip, starts are up 0.9% over a year ago. Home building activity is tempered by the weather in many parts of the country so the numbers can be volatile month to month. That is why it's important to track the underlying trend by looking at the 12-month moving average. This is now the highest it's been since 2008.

New Building Permits dipped down 0.4% in August to a 1.139 million annual rate however compared to a year ago, single-family permits are up 3.8%. The overall rise in home building that began in 2011 is not over and should continue. The NAHB builder confidence index shot up from 59 in August to 65 in September, equaling the highest reading so far during the economic recovery. Existing Home Sales were off 0.9% in August, to a 5.33 million annual rate, but are still up 0.8% from a year ago. Finally, the FHFA index of prices for homes financed with conforming mortgages edged up 0.5% in July, reaching a 5.8% gain versus a year ago.

Hawks are FOMC (Federal Open Market Committee) members who are in favor of a rate hike, and doves are those who think the Fed should wait until employment and inflation targets are met.

Last week, the FOMC met and did not raise rates, as expected but some central bankers seemed to fear that both the U.S. and global economies were nowhere near strong enough to withstand even a quarter percent increase in rates. One commentator called these folks chickens, but their fears were based on facts. Chair Janet Yellen said, "overall consumer price inflation was less than 1% over the last 12 months," a far cry from the 2% Fed target.

The unemployment rate is low, but wage growth is slack: although average household income has picked up recently, it has yet to return to where it was back in 2007, before the recession. In addition, the rate of job growth has slowed from last year. Yellen thinks that one rate increase this year could be "appropriate," but added, "we feel the economy will allow only gradual increases." All this drove a two-day 'relief rally' by Wall Street investors who love low rates as much as we do. That was enough to ward off a Friday slump triggered by a slide in oil prices, so the three major stock indexes posted weekly gains for the second week in a row.

The week ended with the Dow UP 0.8%, to 18262; the S&P 500 UP 1.2%, to 2165; and the Nasdaq UP 1.2%, to 5306.

Bond traders were happy to hear the European Central Bank would keep spending around 80 billion euros a month on bonds with only minor adjustments to the program. The 30YR FNMA 4.0% bond we watch finished the week UP .09, to $107.34. National average 30-year fixed mortgage rates headed back down in Freddie Mac's Primary Mortgage Market Survey for the week ending September 22.

This Week’s Forecast

Analysts expect August New Home Sales to take a hit but Pending Home Sales for existing homes should be up. Core PCE Prices are forecast to indicate inflation is growing very slowly. Unfortunately, the economy is growing slowly as well, with the GDP - 3rd Estimate seen to remain just above 1%. The Chicago PMI read on Midwest manufacturing is predicted above 50, showing a small rate of expansion.

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 Sep 26 – Sep 30

Sep 26     10:00     New Home Sales
Sep 27     10:00     Consumer Confidence
Sep 28     08:30     Durable Goods Orders
Sep 28     10:30     Crude Inventories
Sep 29     08:30     GDP-3rd Estimate
Sep 29     08:30     Initial Unemployment Claims
Sep 29     08:30     Continuing Unemployment Claims
Sep 29     10:00     Pending Home Sales
Sep 30     08:30     Personal Income
Sep 30     08:30     Personal Spending
Sep 30     08:30     Core PCE Prices
Sep 30     09:45     Chicago PMI
Sep 30     10:00     U. of Michigan Consumer Sentiment
                                                                                                          
Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months. Given Chair Janet Yellen's comments last week, most Fed watchers expect the Fed will vote a small rate hike in December, then stay there a while.

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:

Nov 2     0.25%-0.5%
Dec 14     0.5%-0.75%
Feb 1     0.5%-0.75%

Probability of change from current policy:

After FOMC meeting on:

Nov 2           12%
Dec 14           54%
Feb 1           58%

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

The U.S. Home Flipping Report from ATTOM Data Solutions saw home flipping reach its highest level since 2010. They define a flip as a property sold in an arms length sale for the second time in a 12-month period. The 51,434 homes and condos flipped in Q2 were 14% more than in Q1, putting the annual gain up 3% over last year. The firm's senior vp pointed out that "an increasing number of flippers are financing their purchases," so a "favorable lending environment" has fueled the "frenzy we've seen over the past five quarters."

The report also said flippers are realizing a much bigger gross ROI this year, averaging 49% so far, versus just 27% back in 2006. A strong majority of home owners and renters also feel now is a good time to buy, according to the National Association of Realtors latest HOME (Housing Opportunities and Market Experience) Survey. However, the NAR's chief economist found that young adults can be hesitant because they don't realize there are mortgage options "that do not require a 20% down payment." In fact, NAR data reveals that over the last 35 years, "the average median down payment has been 5% for first-time buyers." Gotta get the word out.

Review of Last Week

It was a volatile week on Wall Street, as investors were kept on edge prognosticating over this week's Fed meeting. In addition to wondering if our central bank was going to increase interest rates come Wednesday, traders were also stressed about the Bank of Japan's policy meeting the same day. (It's a global economy!) As the week wore on, stocks recovered, fears of a September rate hike evaporating after the report that Retail Sales dropped -0.3% in August when they should have been boosted by back-to-school spending. Versus a year ago, Retail Sales are up 1.9%, pretty much matching the tepid growth of the overall economy.

Friday we saw the Consumer Price Index (CPI) go up 0.2% in August. You might think this higher than expected inflation reading would have rekindled fears of a Fed rate hike, but the CPI is up only 1.1% from a year ago, far from the Fed's 2% target. The Producer Price Index (PPI) reported non-existent inflation for wholesale prices. Other reads on the economy were mixed. Factory capacity and output remain down nationally, with both Capacity Utilization and Industrial Production slipping in August. But the Philly Fed index vaulted to +12.8, showing manufacturing expansion at least in that region. Finally, University of Michigan Consumer Sentiment did not improve in September. Surprised?

The week ended with the Dow UP 0.2%, to 18123; the S&P 500 UP 0.5%, to 2139; and the Nasdaq UP 2.3%, to 5245.

Bonds hate inflation, so Friday's hot CPI number sent Treasuries and other bonds mostly lower. The 30YR FNMA 4.0% bond we watch finished the week down .02, at $107.25. Freddie Mac's Primary Mortgage Market Survey for the week ending September 15 reported the national average 30-year fixed mortgage rate up a tad to pre-Brexit levels, but still well below where it was 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

This week's key data goes up, down and nowhere at all. Analysts predict Housing Starts will dip in August and Building Permits will go up. August Existing Home Sales are also forecast up, to a 5.5 million annual rate. But the Fed isn't expected to go anywhere with their FOMC Rate Decision. Nonetheless, every word in the policy statement and Chair Janet Yellen's presser will be heavily scrutinized.

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 Sep 19 – Sep 23

Sep 20     08:30     Housing Starts
Sep 20     08:30     Building Permits
Sep 21     10:30     Crude Inventories
Sep 21     14:00     FOMC Rate Decision
Sep 22     08:30     Initial Unemployment Claims
Sep 22     08:30     Continuing Unemployment Claims
Sep 22     10:00     Existing Home Sales
                                                                                                          
Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... In spite of last week's weak economic reports, a slight majority of economists still feel there will be a rate hike after the election. 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     0.5%-0.75%

Probability of change from current policy:

After FOMC meeting on:

Sep 21           12%
Nov 2           21%
Dec 14           55%

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

Here is something that perhaps is not worth worrying about - the current low inventory of starter homes.

A recent survey reported that there is actually weaker underlying demand for starter homes and among those who want to buy a home in the future, 75% said they'd prefer to skip purchasing a starter and instead go for one that meets future needs. Specifically, 69% would rather save money now to buy a nicer home in the future, More than a third revealed they want to retire in the first home they buy.

Another thing people worry about is the rise in home prices. Yet a leading real estate technology and data firm reported that home prices are finally leveling off. CoreLogic's Home Price Index and HPI Forecast had home prices up 1.1% in July over June, but predict a slowdown to 0.4% monthly growth in August. Similarly July's 6% year-over-year price rise is projected to fall to a 5.4% annual gain in August. Finally, mortgage originations have been up this year, though many worry that it's mostly refis grabbing today's low rates. But Black Knight's Mortgage Monitor Report had purchase loan originations in Q2 up 52% from Q1, to their highest volume and dollar levels since 2007.

Review of Last Week

For the first three days of the holiday shortened week, everything was fine on Wall Street, the S&P 500 trading inside a 14-point range. Then came Friday's freaky sell off, the Dow losing 394 points and a 2.2% drop for the week, while the S&P 500 and the Nasdaq each ended down 2.4%. This was blamed on hawkish comments from Fed members hinting at a possible near-term rate hike. Boston Fed President Eric Rosengren said "a reasonable case can be made for continuing to pursue a gradual normalization of monetary policy." Dallas Fed President Robert Kaplan said the case for a rate hike has strengthened, though he added the Fed can afford to be patient and deliberate.

Fed Governor Daniel Tarullo sounded more dovish, content to wait for inflation to reach the Fed's 2% target. He's also concerned that "ISM surveys suggest some ground for questioning" the strength of the U.S. economy, as if the dismal 1% GDP rate of economic growth isn't evidence enough. Indeed, Tuesday's ISM Services index took a deep dive in August to its lowest level since early 2010, now barely registering expansion in this dominant sector of our economy. Investor worries over tighter money were also fueled when European Central Bank (ECB) President Mario Draghi revealed that they hadn't considered extending their easy money policies beyond March.

The week ended with the Dow down -2.2%, to 18085; the S&P 500 down -2.4%, to 2128; and the Nasdaq also down -2.4%, to 5126.

Draghi's comments made traders feel the ECB was losing its appetite for bond purchases, so Treasuries fell sharply on Friday. Nevertheless, the 30YR FNMA 4.0% bond we watch finished the week UP .18, at $107.27. After edging higher the week before, national average 30-year fixed mortgage rates headed slightly lower in Freddie Mac's Primary Mortgage Market Survey for the week ending September 8. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

This Week’s Forecast

Surprisingly, August Retail Sales are expected to shrink--not helped at all by back-to-school buying, even with week-long sales tax holidays in many states. The Consumer Price Index (CPI) and Core CPI are forecast to show consumer inflation quiet, which should keep the Fed quiet as well. Quiet is also the prediction for factory activity, with the Philadelphia Fed Index showing zero growth in that key region.

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 Sep 12 – Sep 16

Sep 14     10:30     Crude Inventories
Sep 15     08:30     Initial Unemployment Claims
Sep 15     08:30     Continuing Unemployment Claims
Sep 15     08:30     Retail Sales
Sep 15     08:30     Producer Price Index (PPI)
Sep 15     08:30     Core PPI
Sep 15     08:30     Philadelphia Fed Index
Sep 15     08:30     NY Empire Manufacturing Index
Sep 15     09:15     Industrial Production
Sep 15     09:15     Capacity Utilization
Sep 15     10:00     Business Inventories
Sep 16     08:30     Consumer Price Index CPI
Sep 16     08:30     Core CPI
Sep 16     10:00     U. of Michigan Consumer Sentiment
         
Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... Well, Fed watchers now are piling on for a post-election rate hike in December, assuming the economy will be strong enough to take it. Note: In the lower chart, a 24% probability of change is a 76% 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           24%
Nov 2           29%
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

The National Association of Realtors (NAR) Pending Home Sales index for July was up 1.3% over June, 1.4% higher than a year ago, registering its second highest reading this year. This is a measure of contracts signed on existing homes, so NAR analysts see those closings picking up in the Fall, driving a strong finish to the year. The current NAR forecast is for a 2.8% jump in existing home sales for 2016, to 5.38 million units. That's what the NAR believes we can achieve.

Another nice read came when the Mortgage Bankers Association reported that for the week ending August 26, mortgage applications rose 2.8%. And it wasn't just from people refinancing--purchase applications were up 1%. June's Case-Shiller Home Price index held the annual increase at 5.1%. The Index Committee's chairman feels, "Overall, residential real estate and housing is in good shape." Wall Street agrees. Thursday, the S&P 500 stock index gave real estate its own industry sector. Real estate stocks had been lumped with banks and insurance firms, but they're now a bigger player, accounting for 3.5% of the global equities market.

Review of Last Week

Friday's jobs report was disappointing. Only 151,000 non farm payrolls were added in August. This is basically no job growth, since economists say we need 150,000 new jobs per month just to keep up with population gains. Wage growth disappointed too, hourly earnings up only 0.1%, leaving the 2.4% annual rate heading in the wrong direction, down from 2.6% in July. Jobs failed, but stocks sailed, as investors felt the report was bad enough to keep the Fed from hiking rates later this month. Wall Street likes low rates because they mean cheaper borrowing costs for U.S. companies and they keep things moving in the housing market.

Of course it would be best to see strong economic growth, but for the last eight years, the economy has been lackluster at best. Instead of well-paying jobs, we get a mixed bag of data. Last week's batch included Personal Income up a tick in July, good because consumers need to make more in order to spend more to help the economy. But Productivity dropped to a -0.6% annual rate in Q2 and is -0.4% versus last year. The ISM Index, at 49.4, showed manufacturing activity contracted in August, its biggest one-month decline in more than two years. Ending on an up note, exports rose and imports declined in July, driving the Trade Deficit down to $39.5 billion.

The week ended with the Dow UP 0.5%, to 18492; the S&P 500 UP 0.5%, to 2180; and the Nasdaq UP 0.6%, to 5250.

In spite of the disappointing jobs report, bond investors were worried enough about a September rate hike to sell off longer-dated Treasuries, sending prices down and yields up. But the 30YR FNMA 4.0% bond we watch finished the week UP .06, at $107.09. Freddie Mac's Primary Mortgage Market Survey for the week ending September 1 showed national average 30-year fixed mortgage rates edging slightly higher, though still 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

Summer vacations may be over, but there won't be much economic data to work through this week. The ISM Services index for August is expected to drop, yet remain above 50, showing that sector of the economy is still slowly expanding. Additional interest may be found in the Fed's Beige Book. This contains economic surveys from Federal Reserve Districts across the country, which could influence the Fed's rate decision in a couple of weeks..

U.S. stock and bond markets were closed yesterday in observance of the Labor Day holiday.

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 Sep 5 – Sep 9

Sep 6     10:00     ISM Services    
Sep 7     10:30     Crude Inventories
Sep 7     14:00     Fed's Beige Book
Sep 8     08:30     Initial Unemployment Claim
Sep 8     08:30     Continuing Unemployment Claims
                                                                                                          
Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... Most economists see no movement in rates through the next two Fed meets, but a very slim majority expects a 0.25% bump come December. Note: In the lower chart, a 21% probability of change is a 79% 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           21%
Nov 2           26%
Dec 14           51%

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