Mortgage Blog - November 13, 2017

The news media is filled with coverage of tax reform proposals from the Administration and both houses of Congress. Politicians and pundits offer opinions on what should be done about deductions for mortgage interest, property taxes, and taxes on capital gains from the sale of a home, however, the fact is, there is no new tax law yet. When one emerges, we'll scope out its impact on the housing market. Meanwhile, the National Association of Realtors (NAR) forecast 2017 will end with 5.47 million existing home sales, up 0.4% from 2016 and the fastest sales pace since 2006.

Even better, the NAR expects 2018 sales up a solid 3.7%, to 5.67 million units. The median home price should be up 5.5% this year and next. Some fret over affordability, but recently, both the Urban Institute and the First American Real House Price Index found affordability historically high. Last week, mortgage data firm Black Knight reported "affordability in most areas, while tightening, remains favorable to long-term norms." The CEO of real estate data firm CoreLogic explained, "a strengthening economy, healthy consumer balance sheets and low mortgage interest rates are supporting the continued strong demand."

Review of Last Week

If you are ever wondering how investors respond to uncertainty, look no further than last week's stock market performance. What's uncertain is when the Administration's promised corporate tax cuts will happen. The thinking is that those cuts will support company earnings and boost wages, jobs and the economy. Problem is, the Senate version of a tax bill, released Thursday, delays cutting the corporate rate from 35% to 20% by one year, differing from the House version the week before. It's now unclear when a tax bill will pass and cuts will be implemented, so, a result, the three major stock indexes lost ground for the week.

It wasn't all about taxes. Many investors were simply taking profits after the Dow and S&P 500 went up eight weeks in a row and the Nasdaq delivered a six-week run-up. On the plus side, there were some strong corporate earnings to feel good about, and, following October's 100.7 final read, November's preliminary University of Michigan Consumer Sentiment slipped to 97.8 but the consumers' anticipated wage gains part of the survey logged the highest two-month level in a decade. Even oil prices rallied, West Texas crude finishing at $56.75 per barrel, its highest level in more than two years.

The week ended with the Dow down 0.4%, to 23422; the S&P 500 down 0.2%, to 2582; and the Nasdaq down 0.2%, to 6751.


Bonds performed well earlier in the week but gains were erased as Treasuries ended the week lower. Most U.S. banks were closed Friday for Veterans Day, which may have trimmed participation. The 30YR FNMA 4.0% bond we watch finished the week down .43, at $104.63. Freddie Mac's Primary Mortgage Market Survey for the week ending November 9 showed a slight dip in national average 30-year fixed mortgage rates, which hadn't budged the week before.

Where are interest rates headed?

This Week's Forecast

Home builders continue to dial up their activities, sending Housing Starts and Building Permits north for October. Consumers keep shelling out more, as Retail Sales grew in October, albeit at a more modest pace. It seems, price hikes aren't slowing things down, the Consumer Price Index (CPI) up barely a blip. Nice to see manufacturing back on track, with the Philadelphia Fed Index and other factory measures growing.

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 November 13th - November 17th

Nov 14 08:30 Producer Price Index (PPI)
Nov 14 08:30 Core PPI
Nov 15 08:30 Consumer Price Index (CPI)
Nov 15 08:30 Core CPI
Nov 15 08:30 NY Empire Manufacturing Index
Nov 15 08:30 Retail Sales Oct
Nov 15 08:30 Retail Sales ex-auto
Nov 15 10:00 Business Inventories
Nov 15 10:30 Crude Inventories
Nov 16 08:30 Initial Unemployment Claims
Nov 16 08:30 Continuing Unemployment Claims
Nov 16 08:30 Philadelphia Fed Index
Nov 16 09:15 Industrial Production
Nov 16 09:15 Capacity Utilization
Nov 17 08:30 Housing Starts
Nov 17 08:30 Building Permits

Federal Reserve Watch

Speculative Forecasting Federal Reserve policy changes in coming months:

Expect a quarter percent hike in the Fed Funds Rate next month, then steady as she goes through March.

Note: In the lower chart, a 100% probability of change is a 100% certainty the rate will rise.

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 1.25%-1.50%

Probability of change from current policy:

After FOMC meeting on:

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

Where are interest rates headed?

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Cheers!

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

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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
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