It's a little early for New Year's celebrations but we can still existing home sales. Celebrate as the November report had Existing Home Sales handily beat expectations, up 0.7% for the month to a 5.61 million unit annual rate. This is the third month in a row existing home sales have gained and they are now at their fastest pace since 2007. Sales are up 15.4% over a year ago and even though inventories are low, prices are edging up and demand remains strong. In November 42% of the properties sold in less that one month.

Another thing to celebrate are New Home Sales, up 5.2% for November, to a 592,000 unit annual rate, 16.5% ahead of a year ago. Inventories went up too, but supply dropped to 5.1 months with the faster sales rate. The median new home price is down 3.7% from a year ago, a sign that builders are seeking a larger market. Overall prices are up 6.2% annually by October's FHFA index of homes financed by conforming mortgages, just 0.2% higher than the year before. Some analysts worry about rising mortgage rates, but others point out that rates remain historically low, and are being offset by growing incomes and expectations of a faster growing economy.

Review of Last Week

The week before the Christmas holiday, Wall Streeters seemed in a daze. Stocks traded in a narrow range absent the volatility we've seen for much of the year and the week ended on very light volume. Friday, more investors were off buying presents instead of equities. Nonetheless, since the election, the S&P 500 is now up more than 5% and the Dow more than 8%, so observers felt that taking it easy for a week to digest those moves was healthy. In any case, no one's foot was completely off the gas. All three major stock indexes ended the week up, the blue chip Dow matching its longest weekly winning streak in more than two years.

Economic data continued with up and down readings. The ups included the housing reports covered above. But Durable Goods Orders dropped 4.6% in November, while Initial and Continuing Unemployment Claims both increased. A good up read was the final Q3 GDP number, which pegged the economy growing at a 3.5% annual rate, the fastest in two years. Personal Income was up 3.5% the past year, Personal Spending up 4.2% and Core PCE Prices up only 1.6%, still short of the Fed's 2% inflation goal. Yet Michigan Consumer Sentiment hit its highest level since January 2004, reflecting a post-election boost in consumer confidence.

The week ended with the Dow UP 0.5%, to 19934; the S&P 500 UP 0.3%, to 2264; and the Nasdaq UP 0.5%, to 5463.

The bond market also saw a quiet Friday heading into the holiday, but the investor money in play brought the 10-year Treasury its first weekly gain in seven weeks. The 30YR FNMA 4.0% bond we watch finished the week UP .36, to $104.31. Freddie Mac's Primary Mortgage Market Survey for the week ending December 22 showed national average 30-year fixed mortgage rates moving higher again. This only takes them to the level they were in April 2014. Remember, mortgage rates can be extremely volatile, so contact me direct at 303.668.3350 with any questions  you might have.

This Week’s Forecast

We close out the year with the Pending Home Sales gauge of contracts signed on existing homes. This indicates actual existing home sales a few months out and no dramatic moves are expected. The only other thing to watch is the Chicago PMI measure of factory activity in the Midwest. This should still show growth, though at a slightly slower pace. Stock and bond markets were closed yesterday for Christmas. The bond market closes 2 p.m. Friday and stock and bond markets are closed Monday for New Year's Day.

Wishing you a happy, healthy and prosperous New Year!

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 Dec 26 – Dec 30

Dec 27     10:00     Consumer Confidence
Dec 28     10:00     Pending Home Sales
Dec 28     10:30     Crude Inventories
Dec 29     08:30     Initial Unemployment Claims
Dec 29     08:30     Continuing Unemployment Claims
Dec 30     09:45     Chicago PMI
                                                                                                          
Federal Reserve Watch   

Speculative Forecasting Federal Reserve policy changes in coming months:

The overwhelming majority of economists see the Fed leaving rates alone come February but sentiment is mounting for another hike as we move into Spring.

Note: In the lower chart, a 4% probability of change is a 96% certainty the rate will stay the same.

Current Fed Funds Rate: 0.25%-0.5%

After FOMC meeting on:

Feb 1     0.5%-0.75%
Mar 15     0.5%-0.75%
May 3     0.5%-0.75%

Probability of change from current policy:

After FOMC meeting on:
   
Feb 1             4%
Mar 15           25%
May 3           36%

Where are interest rates headed?

Call me now, 303.668.3350 or click here to apply!

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

Last week the Fed hiked the Funds Rate and many in the media were busy misinforming us about the dire implications for the housing market but, sane voices were also heard.

A chief economist for a financial services company said, "higher interest rates will choke off a little bit of demand, but more jobs and more income should stimulate housing."

The chief economist for a real estate database explained that the Fed's investment in mortgage bonds keeps mortgage rates low, and "Chair Yellen promised that this buying program would remain in effect."

The Fed's "dot plot" went from two to three projected rate hikes next year which worried observers who forgot that the 2016 dot plot had four rate hikes, but only one occurred. The Fed must go slow, as the economy is not booming just yet. Housing Starts fell 18.7% in November, to 1.090 million annual units. This followed October's nine year high, with most of the dip on the volatile multi family side. Still, single family starts are up 5.3% the past year, single family homes under construction at an eight year high and single family permits at a nine year high. Plus, December's NAHB index of home builder confidence reached its loftiest reading in 11 years.

Review of Last Week

Last week, the three major stock indexes traveled in the horizontal direction. The broadly-based S&P 500 and the tech-heavy Nasdaq ended slightly down for the week. But the blue-chip Dow finished slightly up, scoring a six-week winning streak, its longest in more than a year. The Dow also wound up fewer than 160 points below the psychologically significant 20,000 level. Downward pressure on stock prices came Wednesday after the Fed finally hiked the Funds Rate as expected, but unexpectedly announced there could be three more rate hikes in 2017 instead of the two they projected in September.

Economic data presented the familiar mix of good stuff and not so good stuff. Retail Sales increased a less than expected 0.1% in November. The Producer Price Index (PPI) had wholesale prices moving ahead 0.4% in November, but only 1.3% the last year. The Consumer Price Index (CPI) was up 0.2% in November and up 1.7% the past year. The Fed's target inflation rate is 2%, but their favorite measure is the Core PCE Prices read coming this Thursday. Manufacturing continues to baffle, as Industrial Production and Capacity Utilization dipped, but the Philly Fed Index of East Coast factory activity zoomed to its highest reading in more than two years.

The week ended with the Dow UP 0.4%, to 19843; the S&P 500 down 0.1%, to 2258; and the Nasdaq down 0.1%, to 5437.

Bonds did not benefit much from the quieter week in the stock market. The 30YR FNMA 4.0% bond we watch finished the week down 1.03, at $103.95. National average 30-year fixed mortgage rates edged a little higher in Freddie Mac's Primary Mortgage Market Survey for the week ending December 15. They're still less than a quarter percent above a year ago. Remember, mortgage rates can be extremely volatile, so please call me at 303.668.3350 for up-to-the-minute information.

This Week’s Forecast

November is expected to show a small drop in Existing Home Sales, happily still at a 5.5 million annual rate. New Home Sales should march up a bit for the month. But the Core CPE Prices measure of inflation is forecast to come in at a quiet 0.1%, which should keep the Fed from getting too frisky with rate hikes. Financial markets are open all five days, as Christmas falls on the weekend.

I wish you and yours all the best this holiday season!

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 Dec 19 – Dec 23

Dec 21     10:00     Existing Home Sales
Dec 21     10:30     Crude Inventories
Dec 22     08:30     Initial Unemployment Claims
Dec 22     08:30     Continuing Unemployment Claims
Dec 22     08:30     GDP - 3rd Est.
Dec 22     08:30     Durable Goods Orders
Dec 22     10:00     Leading Economic Indicators (LEI)
Dec 22     10:00     Personal Income
Dec 22     10:00     Personal Spending
Dec 22     10:00     Core PCE Prices
Dec 23     10:00     U. of Michigan Consumer Sentiment - Final
Dec 23     10:00     New Home Sales
                                                                                                          
Federal Reserve Watch   

Speculative Forecasting Federal Reserve policy changes in coming months:

Now that the Fed said there could be three more rate hikes next year, economists are busy guessing when the next one will come. The majority see nothing happening before June.

Note: In the lower chart, a 4% probability of change is a 96% certainty the rate will stay the same.

Current Fed Funds Rate: 0.25%-0.5%

After FOMC meeting on:   

Feb 1     0.5%-0.75%
Mar 15     0.5%-0.75%
May 3     0.5%-0.75%

Probability of change from current policy:

After FOMC meeting on:    

Feb 1             4%
Mar 15           25%
May 3           38%

Call me now, 303.668.3350 or click here to apply!

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

In the housing market we are in the business of making people's dreams come true.

Lately, some are saying that fewer people may have those dreams realized and the housing recovery may stall. Why? Because mortgage rates have crept up a little. This is patently absurd.Average interest rates are about where they were in 2014 yet the housing recovery was fine. Some say, yes, but home prices were lower, well, so were wages. Plus, it looks like the newly elected administration may remove some of the constraints on lenders that have made it difficult for home buyers to qualify for mortgages.

Pundits may be pessimistic but not so the public. Fannie Mae's chief economist said their latest study revealed "there is evidence of an increase in consumer optimism in the immediate aftermath of the election." Investor's Business Daily reported that their measure of "Economic Optimism rose 3.4 points to 54.8, the highest since November 2006" and even though the vast majority of economists expect a Fed rate hike this week, one prominent international investment strategist feels that if the dollar "continues to strengthen, in anticipation of higher Fed rates, the Fed may actually hold off." Now wouldn't that be a dream come true.

Review of Last Week

The market rally they are calling the Trump Bump resumed in earnest last week after taking a breather the week before. The blue chip Dow ended Friday at a new record, less than 250 points shy of the 20,000 threshold! The broadly based S&P 500 also finished at a record high, while the tech-heavy Nasdaq shot up a none too shabby 3.6%. One portfolio manager explained that the "outlook for lower regulatory hurdles, lower taxes and higher infrastructure investments all paint the picture of a resurgence in growth prospects." She described this as "euphoria surrounding higher cyclical growth after years of stagnation."

The week's economic data included final Q3 Productivity holding at a 3.1% annual rate. This data point might inspire the Fed to hike rates this week. However, as usual, all economic players were not on the same page. Imports grew while exports dipped so the October Trade Deficit ballooned to a larger than expected $42.6 billion. To be fair, this can be explained by the above mentioned stronger dollar, which made our products more costly over there and their products cheaper here. But Michigan Consumer Sentiment vaulted from 93.8 in November to 98.0 for December. Apparently consumers, like investors, expect an upturn in our economic situation.

The week ended with the Dow UP 3.1%, to 19757; the S&P 500 UP 3.1%, to 2260; and the Nasdaq UP 3.6%, to 5445.

Bond prices suffered as investors were lured away by buoyant stocks, higher prices for West Texas crude and the European Central Bank's decision to trim its bond buying program. The 30YR FNMA 4.0% bond we watch finished the week down .21, at $104.98. Freddie Mac's Primary Mortgage Market Survey for the week ending December 8 had national average 30-year fixed mortgage rates edging up. But rates are barely above 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

Yes we know most Fed watchers are treating this week's FOMC Rate Decision as a done deal hike, but they also felt that way last May. The latest data should still indicate a crawling economy. November Housing Starts are forecast down and although Retail Sales should be up, they're growing more slowly. The Consumer Price Index is expected to show inflation slowing as well. We'll see whether this will be enough to restrain the Fed, who'd like to see the economy a bit hotter before subjecting it to higher 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 Dec 12 – Dec 16

Dec 12     14:00     Federal Deficit
Dec 14     08:30     Retail Sales
Dec 14     08:30     Producer Price Index (PPI)
Dec 14     08:30     Core PPI
Dec 14     09:15     Industrial Production
Dec 14     09:15     Capacity Utilization
Dec 14     10:00     Business Inventories
Dec 14     10:30     Crude Inventories
Dec 14     14:00     FOMC Rate Decision
Dec 15     08:30     Initial Unemployment Claims
Dec 15     08:30     Continuing Unemployment Claims
Dec 15     08:30     Consumer Price Index (CPI)
Dec 15     08:30     Core CPI
Dec 15     08:30     Philadelphia Fed Index
Dec 15     08:30     NY Empire manufacturing Index
Dec 16     08:30     Housing Starts
Dec 16     08:30     Building Permits
                                                                                                          
Federal Reserve Watch   

Speculative Forecasting Federal Reserve policy changes in coming months.

It's hard to find an economist who thinks the Fed won't hike this Wednesday. It's also hard to find one that thinks it'll go up more than a quarter percent and most feel it will stay there for a while.

Note: In the lower chart, a 95% probability of change is only a 5% certainty the rate will stay the same.

Current Fed Funds Rate: 0.25%-0.5%

After FOMC meeting on:    

Dec 14     0.5%-0.75%
Feb 1     0.5%-0.75%
Mar 15     0.5%-0.75%

Probability of change from current policy:

After FOMC meeting on:

Dec 14           95%
Feb 1           95%
Mar 15           96%

Call me now, 303.668.3350 or click here to apply!

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

Those of us who are optimistic about the housing market were well looked after last week. The National Association of Realtors (NAR) reported Pending Home Sales in October hit their highest pace since July. This was only a slight gain over September, but 1.8% ahead of a year ago. The NAR's chief economist pointed out, "buyer demand has remained strong in a majority of metro areas."

The evidence? Of the homes purchased in October, 40% sold at or above list price, versus 33% a year ago and the NAR predicts existing home sales will end the year at a 5.36 million annual pace, up from 5.25 million in 2015.

Fannie and Freddie already announced they were raising conforming loan limits for 2017, and last week the Federal Housing Administration (FHA) did likewise. The FHA national loan limit ceiling will go up to $636,150 in high-cost areas and the floor will go to $275,665. Limits are set by county, and for next year, 2,948 of them will see increases, none will get a decrease and only 286 counties will have their FHA loan limits unchanged. Of course, home price increases drive these higher loan limits. In line with this, the Case-Shiller National Home Price Index registered a 5.5% annual gain in September, up from 5.1% the prior month.

Review of Last Week

After three weeks of healthy climbs, stocks took a breather. The blue-chip Dow eked out a fourth weekly gain, rising by 0.1%. The broadly-based S&P 500 and the tech-heavy Nasdaq both dipped even though investors are still betting President-elect Trump will push policies, such as tax cuts and deregulation, that could spur faster growth but it may take time for those policies to show results, so investors could be putting on the brakes to avoid getting ahead of where we still are. Friday's jobs report provided a good example. November saw 178,000 new Nonfarm Payrolls, fewer than expected, while Hourly Earnings fell 0.1%.

The Unemployment Rate slid to 4.6%, but mostly from a labor force drop. Nevertheless, no one thinks the negatives are bad enough to discourage the Fed from hiking rates next week. Other reports painted a prettier economic picture. The ISM Index had manufacturing growing a bit more in November. Personal Income and Personal Spending were up in October but the Fed's favorite inflation measure, Core PCE Prices, is up only 1.4% the past year, nowhere near their 2% long-term target. Will this restrain Fed rate hikers? We will see. The second estimate of Q3 GDP pegged a 3.2% annual growth rate, although GDP has grown just 1.6% over a year ago.
 
The week ended with the Dow UP 0.1%, to 19170; the S&P 500 down 1.0%, to 2192; and the Nasdaq down 2.7%, to 5256.

The worse than expected hourly earnings number for November was all bonds needed to rebound on Friday. The 30YR FNMA 4.0% bond we watch finished the week UP .06, at $105.19. National average 30-year fixed mortgage rates edged higher again in Freddie Mac's Primary Mortgage Market Survey for the week ending December 1. This puts rates just slightly higher than a year ago.

Get the Insider Track on Interest Rates!

This Week’s Forecast

Expect a week of relatively upbeat economic reports, although none of them biggies. The ISM Services index should edge up a little more into growth territory, and revised Q3 Productivity is predicted higher, something the Fed wants to see. Unfortunately, the Trade Deficit is also forecast to increase, the trade balance continuing to tip in favor of foreign countries.

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 Dec 5 – Dec 9

Dec 5     10:00     ISM Services
Dec 6     08:30     Productivity - Rev.
Dec 6     08:30     Unit Labor Costs - Rev.
Dec 6     08:30     Trade Deficit
Dec 7     10:30     Crude Inventories
Dec 8     08:30     Initial Unemployment Claims
Dec 8     08:30     Continuing Unemployment Claims
Dec 9     10:00     U. of Michigan Consumer Sentiment
                                                                                                          
Federal Reserve Watch   

Speculative Forecasting Federal Reserve policy changes in coming months:

A week from Wednesday we will know for sure what the Fed will do but right now the vast majority of economists believe we'll see a small rate hike at that meeting.

Note: In the lower chart, a 93% probability of change is only a 7% certainty the rate will stay the same.

Current Fed Funds Rate: 0.25%-0.5%

After FOMC meeting on: 

Dec 14     0.5%-0.75%
Feb 1     0.5%-0.75%
Mar 15     0.5%-0.75%

Probability of change from current policy:

After FOMC meeting on: 

Dec 14           93%
Feb 1           93%
Mar 15           94%

Call me now, 303.668.3350 or click here to apply!

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