The big news last week wasn't actually news to anyone, as virtually no one was surprised that the Fed hiked rates a quarter percent at the FOMC meeting, to the range of 1.25%-1.50%.

The Fed's "dot plot," released at the last meeting every quarter, projects three more rate hikes next year. The latest increase was widely seen as reflecting the Fed's confidence in the U.S. economy. Their policy statement said: "the labor market has continued to strengthen" and "economic activity has been rising at a solid rate," plus they revised their GDP growth projection higher.

In fact, GDP has grown at better than 3% for two quarters, job growth is at a 10-year high and unemployment at a 17-year low. In addition, economists say low unemployment means businesses have to pay more for labor, putting upward pressure on wages, and this is good for the housing market. Also good news, national average 30-year mortgage rates went down last week. Truth is, the Fed Funds Rate does not always lead to higher mortgage rates. Economists say it's tied to short-term consumer interest rates, although next year's three projected Fed hikes should nudge mortgage rates higher.

Review of Last Week

Investors were clearly lifted by the prospect that tax-cut legislation would soon be passed by both houses of Congress. The three major stock market indexes closed at record highs, with the Dow and the S&P 500 registering weekly gains for the fourth week in a row. By Friday afternoon, it appeared that Republicans had enough support to pass their tax reform bill, but the final vote will not happen until early this week. Once both the House and Senate vote on the finalized bill, it will go to the President, who has already said it's his intention to sign it before Christmas.

One portfolio analyst noted, "There is definitely a momentum in the market thanks to the prospect of tax cuts, but let's not forget that the economic growth is also pretty good and has been supporting the market all year." More evidence of that growth came last week as Retail Sales shot up in November by 0.8%, following upwardly revised gains of 0.5% in October and 2.0% in September. Retail Sales are now up 5.8% from a year ago. Manufacturing continues to grow steadily, with factory capacity utilization at its highest level since 2008. Plus, both weekly and continuing jobless claims fell for the week.

The week ended with the Dow UP 1.3%, to 24652; the S&P 500 UP 0.9%, to 2676; and the Nasdaq UP 1.4%, to 6937.

It was a mixed week in the bond market, with shorter dated Treasuries down, but the long bond up. The 30YR FNMA 4.0% bond we watch finished the week down just .04, at $104.66. In Freddie Mac's Primary Mortgage Market Survey for the week ending December 14, national average 30-year fixed mortgage rates edged lower, remaining measurably down from a year ago.

Where are interest rates headed?

This Week's Forecast

We get a complete look at the November housing market in a single week. Home building is forecast to slip a tad in both Housing Starts and Building Permits. Likewise, New Home Sales are predicted off for the month. Analysts see Existing Home Sales back up over the 5.5 million annual rate. The GDP - Third Estimate is expected to show economic growth still a solid 3.3%. Core PCE Prices, the Fed's favorite inflation measure, is forecast to barely budge.

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 December 18, 2017 - December 22, 2017

Dec 19    08:30    Housing Starts
Dec 19    08:30    Building Permits
Dec 20    10:00    Existing Home Sales
Dec 20    10:30    Crude Inventories
Dec 21    08:30    Initial Unemployment Claims
Dec 21    08:30    Continuing Unemployment Claim
Dec 21    08:30    GDP - Third Estimate
Dec 21    08:30    Philadelphia Fed Index
Dec 22    08:30    Personal Income
Dec 22    08:30    Personal Spending
Dec 22    08:30    Core PCE Prices
Dec 22    08:30    Durable Goods Orders
Dec 22    08:30    Durable Goods Orders ex-trans. 
Dec 22    10:00    New Home Sales
Dec 22    10:00    U. of Michigan Consumer Sentiment - Final

Federal Reserve Watch

Speculative Forecasting Federal Reserve policy changes in coming months:

The consensus on Wall Street is the Fed Funds Rate will hold where it is in January, but there's a good chance we'll see another hike in March, with that one holding 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           57%
May 2           45%

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.coloradosmortgageexpert.com
303.668.3350 Direct

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

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.

Last week we received good news that both New and Pending Home Sales are heading in the right direction, upwards. October New Home Sales rose 6.2%, to a 685,000 annual rate, soundly beating forecasts for the second month in a row. That puts sales of new single family homes up 18.7% over a year ago, at their highest level since 2007, and, this isn't just an artificial rebound from the hurricanes. All major regions saw sales gains, with the smallest actually coming from the south. The average sales pace for the past three months is also the highest since 2007.

For October, the Pending Home Sales measure of contracts signed on existing homes rebounded to a 3.5% gain following the 0.4% dip in September. This suggests existing homes sales should move up in November and December. Prices in many markets edge higher, as national measures continue to go up. Consequently, Fannie Mae and Freddie Mac are increasing the conforming loan limits in 2018 for most of the mortgages they insure. The baseline limit will go to $453,100, while the limit in "high-cost areas" will be $679,650. Call me today, 303.668.3350 as some of these loan limits could vary by county.

Review of Last Week

The week ended with the Dow UP 2.9%, to 24232; the S&P 500 UP 1.5%, to 2642; and the Nasdaq down 0.6%, to 6848.

With the tax bill vote delayed in the Senate, bond traders pushed Treasuries higher, though other bonds lost ground. The 30YR FNMA 4.0% bond we watch finished the week down .25, at $104.53. Freddie Mac's Primary Mortgage Market Survey for the week ending December 7 showed national average 30-year fixed mortgage rates rising, but remaining lower than where they were this time last year.

Where are interest rates headed?

This Week's Forecast

Inflation is tame, Retail sales and Fed rate rise. The big data this week will be Friday's November Employment Report. Economists predict more historically high numbers.

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 December 11th - December 15th

Dec 12    08:30    Producer Price Index (PPI)
Dec 12    08:30    Core PPI
Dec 13    08:30    Consumer Price Index (CPI)
Dec 13    08:30    Core CPI
Dec 13    10:30    Crude Inventories   
Dec 13    14:00    FOMC Rate Decision
Dec 14    08:30    Initial Unemployment Claims
Dec 14    08:30    Continuing Unemployment Claims
Dec 14    08:30    Retail Sales
Dec 14    08:30    Retail Sales ex-auto
Dec 14    10:00    Business Inventories
Dec 15    08:30    NY Empire Manufacturing Index
Dec 15    09:15    Industrial Production
Dec 15    09:15    Capacity Utilization

Federal Reserve Watch

Speculative Forecasting Federal Reserve policy changes in coming months:

The only surprise that could come out of this week's FOMC meeting is if the Fed Funds Rate does not go up, and the Fed Funds Futures market sees another quarter percent bump come March.

Note: In the lower chart, a 100% probability of change is a 100% certainty the rate will rise, while an 11% probability of change is an 89% certainty the rate will stay the same.

Current Fed Funds Rate: 1.00%-1.25%

After FOMC meeting on:   

Dec 13    1.25%-1.50%
Jan 31    1.25%-1.50%
Mar 21    1.50%-1.75%

Probability of change from current policy:

After FOMC meeting on:    

Dec 13         100%
Jan 31           11%
Mar 21           51%

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.coloradosmortgageexpert.com
303.668.3350 Direct

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

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.