Inside Lending - January 2, 2017

Happy New Year!

In the housing market we hope this year will be full of new transactions that help poeple across the state and across the country realize the dream of homeownership, however, with recent interest rate increases, some question whether this will happen.The National Association of Realtors (NAR) Pending Home Sales index dipped in November, 2.5% below its October reading. This measure of contracts signed on existing homes points to actual sales a few months out.

The National Association of Relators  said higher borrowing costs could somewhat "cloud" the housing market outlook for 2017, yet their chief economist noted that the effect of higher rates will be "partly neutralized" by stronger growth in wages and this year's expected two million net new job additions.

Meanwhile, the Case-Shiller National Home Price Index (HPI) came in with an annual gain of 5.6% in October. This report put prices past the all-time highs set more than ten years ago. Since the National HPI bottomed out in February 2012, it climbed to a peak yearly rate just shy of 11% before falling to its present 5% range of annual gains. Case-Shiller's managing director noted "the current high consumer confidence numbers and low unemployment rate do not suggest an immediate reversal in home price trends." however some observers point out that more buyers and sellers might get off the fence given the new market conditions.

Review of Last Week

The last week of 2016 ended with the three major stock indexes a bit off after the four trading days but up for the month and the quarter. The blue-chip Dow's 13.4% annual gain was its best since 2013, while the broadly based S&P 500 shot up 9.5% and the tech-heavy Nasdaq ended 7.5% ahead for those 12 remarkable months. The year began with the Dow's worst start in history and ended with the best performance from Election Day to year end since Eisenhower won in 1952. Investors clearly think President-elect Donald Trump's policies should speed up economic growth.

We look at stock market performance because it's a leading indicator of where the economy might be heading. We follow the bond market to get insight into where interest rates may go. No one knows for sure what 2017 will deliver but things are looking better economically than they did a year ago and it's not just Wall Street that's upbeat. Consumer Confidence in December came in at its highest level since August 2001. The Conference Board's report said American households are more upbeat about the prospects for the economy, the labor market and their incomes, and as we all know, that's good news for the housing market.

The week ended with the Dow down 0.9%, to 19,763; the S&P 500 down 1.1%, to 2,239; and the Nasdaq down 1.5%, to 5,383.

Treasuries gained three days in a row and bonds overall did well after Friday's lower than expected read on Midwest manufacturing. The 30YR FNMA 4.0% bond we watch finished the week UP .75, to $105.06. For the week ending December 29, Freddie Mac's Primary Mortgage Market Survey reported national average 30-year fixed mortgage rates edged up again. Yet for 2016, they posted the lowest annual average going back to 1971. 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

A few new looks at the old year should reveal key economic data moving slowly ahead as usual. The ISM Index is expected to report manufacturing activity still growing in December, though only a tad more than it did the month before. Friday's December jobs report will be the big focus, but analysts forecast only a modest gain in Nonfarm Payrolls. The good part? Hourly Earnings are expected to resume showing 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 Jan 2 – Jan 6

Jan 3     10:00     ISM Index
Jan 5     08:30     Initial Unemployment Claims
Jan 5     08:30     Continuing Unemployment Claims
Jan 5     10:00     ISM Services
Jan 5     11:00     Crude Inventories
Jan 6     08:30     Average Workweek
Jan 6     08:30     Hourly Earnings
Jan 6     08:30     Nonfarm Payrolls
Jan 6     08:30     Unemployment Rate
Jan 6     08:30     Trade Balance
                                                                                                         
Federal Reserve Watch   

Speculative Forecasting Federal Reserve policy changes in coming months:

Fed watchers by and large feel the Funds Rate will stay where it is, following the December hike, well into the year.

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

Current Fed Funds Rate: 0.5%-0.75%

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           21%
May 3           34%

Where are interest rates headed?

Call me now, 303.668.3350 or click here to apply!

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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

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