Mortgage Blog - May 1, 2017

March New Home Sales zoomed up a way better than expected 5.8%, and are now 15.8% ahead of their pace a year ago hitting a 621,000 unit annual rate.

Sales rose for the third month in a row, demonstrating unusual stability in what can be very volatile numbers, month to month. Keep in mind, multi-family homes (town homes, urban condos) are not counted in this report.There were 3,000 more unsold new homes where construction had yet to start however the inventory of completed homes was unchanged.

Pending Home Sales took a slight dip in March. This National Association of Realtors (NAR) index of contracts signed on existing homes had put up a string of impressive reads, so tight inventory was the problem, as demand is still strong. The NAR's chief economist observed, "Home shoppers are coming out in droves this spring," noting 42% of homes sold for asking price or more. He forecast existing home sales at 5.64 million for the year, up 3.5% over 2016. The chief economist at a major insurance firm sees sales rising thanks to "solid job gains, faster wage growth, still low, albeit rising, mortgage rates, and faster household formations."

Review of Last Week

 "Thank you very much," said Wall Street to the voters of France as the week began. Sunday's first round of that country's presidential election narrowed the race to Emmanuel Macron, who wants tighter integration with the European Union, enjoying a comfortable lead over Marine Le Pen, who wants a referendum on EU membership. The EU is a positive to investors so this result spurred a stock buying binge the first two days. That was enough, despite some later slumping, to send the three major market indexes up, as the Dow scored its best week of the year, and the techy Nasdaq crossed the 6,000 threshold for the first time ever.

Investor caution came Wednesday with President Trump's outline for tax cuts, encouraging, but lacking details. We also had continuing geopolitical tension about North Korea, and the GDP-Advanced read--up just 0.7% in Q1. Average Q1 growth is just 0.9% since 2011, followed by stronger numbers the rest of the year plus the report said business fixed investment shot up at a 9.4% annual rate, this is a sign of improving economic growth, just like the solid Q1 corporate earnings reports we saw. The Dow has just booked the best performance in the postwar era from Election Day through the 100th day in office for a first term president.

The week ended with the Dow UP 1.9%, to 20941; the S&P 500 UP 1.5%, to 2384; and the Nasdaq UP 2.3%, to 6048.

Bond prices overall ended a tick down for the week, suffering from the good feelings driving up stocks. The 30YR FNMA 4.0% bond we watch finished the week down .03, at $105.30. For the week ending April 27, Freddie Mac's Primary Mortgage Market Survey reported national average 30-year fixed mortgage rates rising ever so slightly for the first time in five weeks.

Where are interest rates headed?

This Week’s Forecast

The economic data flow will be heavy this week. Key reads will be Personal Spending, predicted up a bit, expected growth in Non farm Payrolls and a nice boost in Hourly Earnings. The ISM Index should also stay in growth territory, solidly above 50, while the Core PCE Prices inflation measure should come in flat. Flat is the forecast for the FOMC Rate Decision, thank you very much, Fed governors.

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.

Where are interest rates headed?

Economic Calendar for the Week of May 1st – May 5th

May 1 Personal Income
May 1 Personal Spending
May 1 Core PCE Prices
May 1 ISM Inde
May 3 ISM Services
May 3 Crude Inventories
May 3 FOMC Rate Decision
May 4 Initial Unemployment Claims
May 4 Continuing Unemployment Claims
May 4 Trade Balance
May 4 Productivity - Prelim.
May 4 Unit Labor Costs-Rev.
May 5 Average Workweek
May 5 Hourly Earnings
May 5 Nonfarm Payrolls
May 5 Unemployment Rate
                                                                                                          
Federal Reserve Watch   

Speculative Forecasting Federal Reserve policy changes in coming months:

Few observers expect a rate hike at this week's FOMC meeting, but the markets are figuring we'll see a quarter percent gain come June.

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

Current Fed Funds Rate: 0.75%-1.0%

After FOMC meeting on:

May 30.75%-1.0%
Jun 141.0%-1.25%
Jul 261.0%-1.25% 

Probability of change from current policy:

After FOMC meeting on: 

May 3         5%
Jun 14       66%
Jul 26       71%

Where are interest rates headed?

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Cheers!

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

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