Mortgage Blog - November 6, 2017

In spite of rising home prices in many markets, homes remain affordable. A report from the Urban Institute highlighted it's housing affordability index, which measures median household income against a standard mortgage for a median-priced home. It found that the median household today can afford a house that's $70,000 above the median price. The First American Real House Price Index, which factors home prices, rates and income, found real home prices are 38.4% below the 2006 peak.

Their chief economist confirmed, "affordability, remains high by historic standards."

Many people are indeed finding homes affordable. The Census Bureau reports the home ownership rate rose in Q3 to its highest level since 2014. It's now risen for several quarters, so it appears growth is back. What is definitely back is the American Dream. Now 82% of Americans "say they have achieved the American Dream or are on their way to achieving it," according to the Pew Research Center, a nonpartisan fact tank subsidiary of The Pew Charitable Trusts.

Review of Last Week

We watch Wall Street because the stock market is a reliable forward-looking indicator of the economy, and as the economy goes, so goes jobs, wages and the housing market, so we're happy to report that last week, once again, all three major stock indexes set new records. It was the eighth straight weekly gain for the Dow and S&P 500, while the Nasdaq's 63rd record close this year was the most in any calendar year. Ever. The ISM Index showed manufacturing activity slowing, but at 58.7, it's still, at well above 50, expanding at a healthy rate. Other economic news was even better.

Inflation was up 0.1% in September and 1.3% annually, well below the Fed's 2% target. The Fed met, didn't hike, but hinted they might soon, because "the labor market has continued to strengthen and economic activity has been rising at a solid rate despite hurricane-related disruptions." Hurricanes disrupted the October jobs report, with a lower-than-forecast 261,000 new Nonfarm Payrolls and no wage growth. Yet prior month revisions netted 351,000 new jobs, and the 4.1% Unemployment Rate was the lowest since 2000. ISM Services hit 60.1, its highest level in 12 years, corresponding to 4.3% growth in real GDP.  

The week ended with the Dow UP 0.4%, to 23516; the S&P 500 UP 0.3%, to 2588; and the Nasdaq UP 0.9%, to 6764.

Bond traders focused on the lower than expected October jobs numbers and sent prices up. The 30YR FNMA 4.0% bond we watch finished the week UP .25, at $105.06. National average 30-year fixed mortgage rates didn't budge in Freddie Mac's Primary Mortgage Market Survey for the week ending November 2. This followed their uptick the week before.

Where are interest rates headed?

This Week's Forecast

Not much economic data on the way, a nice breather from last week's avalanche of reports. Weekly Initial Unemployment Claims and Continuing Unemployment Claims are both forecast to be historically low. That's probably part of the reason why the University of Michigan Consumer Sentiment read for November is forecast to be historically high.

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 6th - November 10th

Nov 8    10:30    Crude Inventories    11/04
Nov 9    08:30    Initial Unemployment Claims
Nov 9    08:30    Continuing Unemployment Claims
Nov 10    10:00    U. of Michigan Consumer Sentiment - Prelim    Nov
Nov 10    14:00    Treasury Budget    Oct    NA    -$45.8B    Moderate


Federal Reserve Watch

Speculative Forecasting Federal Reserve policy changes in coming months:

The financial market sees the Fed raising the Funds Rate a quarter percent next month but doesn't expect another hike for the next two FOMC meetings.

Note: In the lower chart, a 97% probability of change is a 97% 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           97%
Jan 31         100%
Mar 21         100%

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.

---