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Busy December on Tap: The Weekly Market Update

Interest Rates & Taxes
Interest Rates & Taxes

Interest Rates & Taxes

As we approach December, we can see that we are in for a busy month with regard to the economy. With the recovery continuing from the Hurricanes, the Federal Reserve Board’s Open Market Committee will also be meeting with the consensus pointing to another increase in short-term interest rates. Outside of major shocks, the only factor which seems like it has the potential to change the Fed’s mind would be a very weak employment report. This report is due out in early December.

Meanwhile, all eyes will be on Congress as they continue to hash out details of the tax reform proposals. There is an overwhelming amount of media stories streaming from this effort and for good reason. This effort to enact such a radical change will have a profound affect upon businesses and consumers. No industry seems to be more in the cross-hairs than real estate — one of the last remaining tax havens.

Just to make things more interesting, the markets will be watching reports from on-line and bricks and mortar retailers. Traditionally, Black Friday kicks off the buying frenzy for the holiday season. Sales made during this season will tell us much about the state of the economy moving into 2018. From there we will see speculation about how many times the Fed intends to raise rates in the coming year. They keep using the word “gradual,” but that word is too nebulous and won’t keep market analysts from speculating.

The Weekly Market Update

Rates were down slightly in the past week, with the survey being released one-day early because of Thanksgiving. For the week ending November 22, Freddie Mac announced that 30-year fixed rates fell to 3.92% from 3.95% the week before. The average for 15-year loans increased one tick to 3.32%. The average for five-year adjustables also increased one tick to 3.22%. A year ago, 30-year fixed rates averaged 4.03%, slightly higher than today.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "Rates dipped slightly in a short week leading up to the Thanksgiving holiday. The 10-year Treasury yield fell roughly 4 basis points, while 30-year fixed rates dropped 3 basis points to 3.92 percent. Rates on home loans continue to remain low."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

House Prices in Focus: The Weekly Market Update

Happy Thanksgiving
Happy Thanksgiving

Happy Thanksgiving

Every year it seems like the months go by more quickly than before. Here we are wishing everyone a happy Thanksgiving already. Where did the summer go? Though the year passed quickly, there is plenty for us to give thanks for. This has been another year of economic growth and another year of positive stock growth. We have witnessed over eight years without a recession, and even though growth has not been robust, the total results of economic, stock price and house price growth has been impressive.

Speaking of which, many are starting to ask this question — how long can housing prices keep rising before they become unaffordable? One factor propping up house prices for the past eight years has been incredibly low interest rates. But these rates can’t last forever — or might they? Five years ago, the median home price in the U.S. was around $210,000. Now median prices are closer to $250,000. At what point does this increase affect housing demand?

Besides interest rates, affordability is influenced by increased growth in wages. If wages double, then everyone can afford more. Though wage growth is a positive factor for workers, a large increase in salaries would contribute to inflationary pressure and this would put upward pressure on interest rates. The last jobs report showed tame wage growth and therefore, until wage growth accelerates, the pressure for higher interest rates has not appeared. The best of all worlds would be a very gradual increase in home prices, wage growth and interest rates. That is a future we would be thankful for.

The Weekly Market Update

Rates moved higher in the past week. For the week ending November 16, Freddie Mac announced that 30-year fixed rates rose to 3.95% from 3.90% the week before. The average for 15-year loans increased to 3.31%. The average for five-year adjustables decreased one tick to 3.21%. A year ago, 30-year fixed rates averaged 3.94%, virtually the same as today.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "Rates increased this week. The 10-year Treasury yield ticked up 6 basis points, while 30-year fixed rate loans jumped 5 basis points to 3.95 percent. Today's survey rate is the highest rate in nearly four months."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Lobbyists Galore: The Weekly Market Update

Taxes: Long Road to Travel
Taxes: Long Road to Travel

Taxes: Long Road to Travel

The tax reform proposal is now in print. For a year we have been hearing about the concept of tax reform. But now that there is ink on paper — Can we still use that expression today? — the stark reality has hit. When talking about changing the tax system, it is not a zero-sum game. There will be winners and losers in the end. And if you look at the reaction of industry groups such as the National Associations of Realtors® and Home Builders, as well as the Mortgage Bankers Association, they certainly feel that the initial proposals will make real estate less attractive.

Certainly, further limiting the mortgage interest and state/local tax deductions, as well as increasing the standard deduction, are proposals in the package which have these industry associations concerned. And as always, we are not here to predict the future with regard to what final impact these proposals would have upon homeownership in the United States. Our purpose today is to say that the process still has a long distance to travel still. Adding the Senate alternatives to the mix is just one extra step.

Right now, these associations and thousands of additional lobbyists have descended upon Washington, and they will represent their special interests. The proposal is likely to undergo several reiterations before it is finished. The finished product may or may not resemble what is being proposed initially. And even after these changes are made, the final proposal may or may not pass. Thus, while we don’t like trying to predict the future, we are certain about one result — the lobbyists in Washington will be making a lot of money this holiday season.

The Weekly Market Update

Rates moved lower in the past week. For the week ending November 9, Freddie Mac announced that 30-year fixed rates fell to 3.90% from 3.94% the week before. The average for 15-year loans decreased to 3.24%. The average for five-year adjustables also decreased one tick to 3.22%. A year ago, 30-year fixed rates averaged 3.57%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "After holding steady last week, rates dipped slightly this week. The 10-year Treasury yield fell roughly 7 basis points, while 30-year fixed rate loans dropped 4 basis points to 3.90 percent."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Weathering The Storms: The Weekly Market Update

Damage Assessment
Damage Assessment

Damage Assessment

The storms are over. The regions hit by the storms are recovering to various degrees. We all thought that the third quarter would see a pause because of the storms’ devastation. However, with a preliminary reading of 3.0% economic growth, a lot of forecasters were surprised. What this number tells us is one of two things. First, the national economy could be a lot stronger than we were thinking and should sprint in the fourth quarter. Or, since the hurricanes hit during the second half of the quarter, we may see a downward revision of this preliminary number.

We do know that the storms negatively affected the jobs numbers for September. We felt that October’s numbers would give us a better reading of the storms’ damage — with the revision of September’s numbers just as telling as the October results. It is hard to accomplish accurate surveys when people are in shelters and the power is out. So, how did the report come out? Indeed, the numbers for October were as expected, with an upward revision to September’s dismal numbers and a bounce back for October.

Looking at the two months together, we had approximately 140,000 jobs added each month, which is about 50,000 less than the previous year’s average. Wage growth for the month was dismal but the unemployment rate dropped one more time. Again, we expect additional recovery as the year ends, which is important because the latest meeting of the Federal Reserve indicated that they are still on track to raise rates one more time this year, and that means December, which is the only remaining meeting date. Add that to a new Fed Chairman nomination and haggling over the tax plan — especially the mortgage interest deduction — and it should be a very, very busy end of the year.

The Weekly Market Update

Rates were flat in the past week, with the markets on hold before the jobs report and Federal Reserve releases. For the week ending November 2, Freddie Mac announced that 30-year fixed rates remained at 3.94%. The average for 15-year loans rose two ticks to 3.27%. The average for five-year adjustables also increased two ticks to 3.23%. A year ago, 30-year fixed rates averaged 3.54%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "Following a strong surge last week, rates held relatively flat this week. The rate on 30-year loans remained unchanged at 3.94 percent, while the 10-year Treasury yield dipped roughly 4 basis points. The markets' reaction to the upcoming announcement of the next Fed chair may impact the movement of rates in next week's survey."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

The Real Meaning of Holidays: The Weekly Market Update

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Trick-or-Treat

We rarely get to publish on Halloween (technically once every seven years) and thus we could not resist the headline. There are many theories about the origins of Halloween and evidence of somewhat similar practices go back as far as the Middle Ages. Like other holidays in the United States, Halloween has evolved and grown and become a big commercial — or dare we say “sweet” — success. For some it is the real start of the holiday season in which our economy has grown so dependent upon.

Like every jobs report, every holiday season is a very important indicator of the direction of our economy. Consumer spending makes up about 70 percent of gross domestic product, and a solid chunk of it takes place in November and December, mainly in the form of gift purchases. A fifth of all retail sales occur in the year’s last two months, according to the National Retail Federation. Thus, these holidays are very, very important to our economy.

Speaking of the jobs report, the time has come for another reading. Last month the numbers were skewed as expected because of two major hurricanes. During this month’s statistical period we added another major hurricane and also devastating wildfires in Northern California. Thus, we are expecting major volatility in the numbers. This volatility may not only apply to the October numbers, but also to the revision of the September numbers already released. It will be hard for the markets to interpret these numbers, and therefore reactions may be muted as well.

The Weekly Market Update

Rates were up across the board in the past week, with 30-year fixed rates approaching the 4.0% mark. For the week ending October 26, Freddie Mac announced that 30-year fixed rates rose to 3.94% from 3.88% the week before. The average for 15-year loans rose as well, to 3.25%. The average for five-year adjustables increased to 3.21%. A year ago, 30-year fixed rates averaged 3.47%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "The 10-year Treasury yield surged this week, jumping 12 basis points. The 30-year fixed rate followed suit, increasing 6 basis points to 3.94 percent. Today's survey rate is the highest rate in three months."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

The Market's Passion: The Weekly Market Update

Tax Reform Looms Large
Tax Reform Looms Large

Tax Reform Looms Large

Sure, the stock market has risen for over eight years. But the run which started in October of 2016 is quite extraordinary, to say the least. Usually when bull markets get older, they fluctuate and run out of steam, but this one seems to have gotten quite a second wind. The question is — where is the excitement coming from?

When you look at the economy as a whole, the economy has gotten slightly stronger as the year goes on. Though, we should keep in mind that we may see a pause in this quarter with the natural disasters that have hit our country. Slightly stronger does not explain the jubilance the market seems to be experiencing. We believe that the passion is coming from not today’s performance, but is a response to hope for a major corporate tax cut. It is simple math. If a corporation’s tax liability goes down by 10 to 30 percent, their profits will go up barring other unforeseen circumstances. Higher profits make companies more valuable.

We caution that tax reform has not been enacted yet, and even if it is, we don’t know the final result. Regardless of what “side” you were on, the health care debate reminded us of how tough it is to implement changes in Washington — even when everyone knows something needs to be done. If our theory about tax reform is true, then any failure to enact significant tax reforms could be seen as a negative by the markets. Even if reforms are enacted, the markets might correct initially because the good news was built into the prices of stocks. We are not trying to predict the future, but when the markets have moved this far, it always is a good idea to be ready for at least a correction.

The Weekly Market Update

Rates ticked down in the past week, but trended higher towards the end of the survey period. For the week ending October 19, Freddie Mac announced that 30-year fixed rates fell to 3.88% from 3.91% the week before. The average for 15-year loans decreased as well, to 3.19%. The average for five-year adjustables moved up one tick to 3.17%, bucking the trend. A year ago, 30-year fixed rates averaged 3.52%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "Rates came down slightly this week, ending a brief, two-week streak of increases. The 10-year Treasury yield dipped 6 basis points, while 30-year fixed rates fell 3 basis points to 3.88 percent."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Clouded Jobs Report: The Weekly Market Update

Hurricane Damage
Hurricane Damage

Hurricane Damage

The jobs report is a very significant economic indicator. Yet, it seems that every monthly jobs report takes on some extra form of significance. This one is certainly no exception, with the report coming in the midst of the recovery from two natural disasters hitting major population centers within the United States. Hurricanes Irma and Harvey caused major damage to some of the largest states in America — Florida and Texas — as well as affecting several other population areas.

Along with major damage, lives were changed radically. It is anticipated that we will certainly see the effects of these disasters in our economic numbers, and the jobs report should be the first major indicator. It was no surprise that initial claims for unemployment were up in the weeks after the hurricanes hit and that these additional claims were concentrated in the affected areas. The numbers may not be affected radically on a national level, but there are likely to be major changes regionally and these will affect the national numbers. How much? We will know by Friday.

The good news is that these numbers should be temporary, as many jobs will be created in the rebuilding of affected areas. So, the markets will be prepared for one or two down months, but should be anticipating a rebound pretty quickly. The Federal Reserve Board meets two more times this year and most are expecting one more rate increase in December. The size and extent of the damage and rebound may very well be one of the determining factors in this decision.

The Weekly Market Update

Rates were flat in the past week, but rates were rising at the end of the survey period. This would make rates susceptible to an increase in the next survey week, unless there is a reversal of trends. For the week ending September 28, Freddie Mac announced that 30-year fixed rates remained at 3.83%. The average for 15-year loans was at 3.13%, also the same as the previous week. The average for five-year adjustables moved up to 3.20%. A year ago, 30-year fixed rates averaged 3.42%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "Rates held relatively flat this week. The 10-year Treasury yield fell just 1 basis point, while 30-year fixed rates remained unchanged at 3.83 percent."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Amazing Resiliency: The Weekly Market Update

Bull Keeps Roaring
Bull Keeps Roaring

Bull Keeps Roaring

Earlier this month, the bull market in stocks became the second strongest in history with a gain of over 260% from the bottom reached in 2009. It was already the second longest bull market in history. This is still way short of the strongest bull market in history, which achieved gains of almost 600% for the period of 1987 to 2000, but still very, very impressive. The secret to this market’s success? Steady growth with low inflation. Of course, you can also add that this bull market followed precipitous drops during the financial crisis and thus much of it was clawing its way back up.

Regardless of where it has come from, stocks have moved a long way through significant challenges and the question on everyone’s mind is — how long can this rally go on? As you would guess, there are opinions on both sides, with many analysts saying there is room to run, and others saying that stocks are being inflated by artificially low rates courtesy of the Federal Reserve Board.

The Fed met last week amid this rally, but at the same time also had to consider additional challenges, such as national disasters and a ramp-up of international tensions. The Fed’s decision to keep short-term interest rates unchanged and begin the paring of assets in October was right in line with pre-meeting expectations, though some had hoped for a delay based upon the recent challenges. Is the Fed justified in keeping rates so low, or should they hold off on the next hike expected in December — until they see how well our economy recovers longer-term from the hurricanes which have hit so hard? Only time will tell, as we cannot predict the future any better now than we could in 2009.

The Weekly Market Update

As we predicted last week based upon trends, rates on 30-year fixed loans rose from their lowest levels of the year. For the week ending September 21, Freddie Mac announced that 30-year fixed rates rose to 3.83% from 3.78%. The average for 15-year loans increased to 3.13%, and the average for five-year adjustables moved up to 3.17%. A year ago, 30-year fixed rates averaged 3.48%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "The 10-year Treasury yield continued its upward trend, rising 7 basis points this week. As we expected, the rate on 30-year loans followed suit, increasing 5 basis points to 3.83 percent. This week's uptick in the 30-year rate ends a nearly two-month streak of declines."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Amazing Resiliency: The Weekly Market Update

Bull Keeps Roaring
Bull Keeps Roaring

Bull Keeps Roaring

Earlier this month, the bull market in stocks became the second strongest in history with a gain of over 260% from the bottom reached in 2009. It was already the second longest bull market in history. This is still way short of the strongest bull market in history, which achieved gains of almost 600% for the period of 1987 to 2000, but still very, very impressive. The secret to this market’s success? Steady growth with low inflation. Of course, you can also add that this bull market followed precipitous drops during the financial crisis and thus much of it was clawing its way back up.

Regardless of where it has come from, stocks have moved a long way through significant challenges and the question on everyone’s mind is — how long can this rally go on? As you would guess, there are opinions on both sides, with many analysts saying there is room to run, and others saying that stocks are being inflated by artificially low rates courtesy of the Federal Reserve Board.

The Fed met last week amid this rally, but at the same time also had to consider additional challenges, such as national disasters and a ramp-up of international tensions. The Fed’s decision to keep short-term interest rates unchanged and begin the paring of assets in October was right in line with pre-meeting expectations, though some had hoped for a delay based upon the recent challenges. Is the Fed justified in keeping rates so low, or should they hold off on the next hike expected in December — until they see how well our economy recovers longer-term from the hurricanes which have hit so hard? Only time will tell, as we cannot predict the future any better now than we could in 2009.

The Weekly Market Update

As we predicted last week based upon trends, rates on 30-year fixed loans rose from their lowest levels of the year. For the week ending September 21, Freddie Mac announced that 30-year fixed rates rose to 3.83% from 3.78%. The average for 15-year loans increased to 3.13%, and the average for five-year adjustables moved up to 3.17%. A year ago, 30-year fixed rates averaged 3.48%.

Attributed to Sean Becketti, chief economist, Freddie Mac — “The 10-year Treasury yield continued its upward trend, rising 7 basis points this week. As we expected, the rate on 30-year loans followed suit, increasing 5 basis points to 3.83 percent. This week’s uptick in the 30-year rate ends a nearly two-month streak of declines.”

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Rebuilding Again: The Weekly Market Update

Rebuilding Again
Rebuilding Again

Rebuilding Again

All through our economic commentaries we always are fearful of making predictions. No matter how much information we have, there are always unknown factors which can change the future to a significant degree. There is no better example of this than what Texas and Louisiana just faced with Hurricane Harvey. An entire region of our country devastated with an amazing amount of support pouring in throughout the country.

There is no doubt about the fact that this natural disaster will have a major effect upon our economy — as well as Irma and whichever storms follow. From the devastation of local economies to gas prices, there will be a multitude of factors we will be facing. In the long-term there will be an economic revival as we rebuild lives, houses and infrastructure. We have rebuilt successfully before and we will rebuild again. America has always demonstrated our resiliency.

However, there are major questions which will remain far beyond this event. For example, we all know that houses are expensive to build and “excessive” regulations are part of that equation. On the other hand, as the insurance companies continue to point out, the lack of adequate building and zoning standards in some areas of the country have increased the cost of rebuilding significantly. In other words, we have some very hard questions to address, questions which are very difficult to answer. And coming out with the right answers will help us pass this test in the future long after we rebuild this time around.

The Weekly Market Update

Rates on 30-year fixed loans hit their lowest levels of the year for the third straight week. For the week ending September 7, Freddie Mac announced that 30-year fixed rates fell to 3.78% from 3.82% the week before. The average for 15-year loans decreased to 3.08%, and the average for five-year adjustables moved up one tick to 3.15%. A year ago, 30-year fixed rates averaged 3.44%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "The 10-year Treasury yield fell 9 basis points this week, reaching a new 2017-low for a second consecutive week. The rate on 30-year loans followed, dropping 4 basis points to a year-to-date low of 3.78 percent."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

More Jobs News: The Weekly Market Update

Labor Day & Jobs
Labor Day & Jobs

Labor Day & Jobs

Last month we spoke about the data that will be coming out before the Federal Reserve Board meets towards the end of September. These economic reports included jobs, inflation, the quarterly reading on economic growth and more. The August job numbers released just before the Labor Day weekend was expected to be one of the major determinants contributing to the decision by the Fed.

Until now, most analysts were betting that the September Fed announcement would include an October start to the Fed’s previously announced program of paring down mortgage and government bonds. While the markets are dreading such a plan, because it could potentially raise long-term interest rates — the paring down is expected to be gradual. In addition, the Fed is not expected to raise short-term rates in September, but leave open the possibility of such a move before the end of the year.

Did the numbers released strengthen these assessments, or could there be another course for the Fed? The increase in jobs of 156,000 was seen as disappointing, especially when coupled with the downward revision of the numbers for the previous two months. The unemployment rate moved up slightly to 4.4% and wage inflation continued to be tame. The bottom line? Along with the devastating effects of the storm, this further decreases chances for a rate hike this month, but may not deter the Fed from starting to pare down their assets.

The Weekly Market Update

Last week 30-year fixed rates were slightly lower, continuing a trend which started four weeks ago. For the week ending August 17, Freddie Mac announced that 30-year fixed rates fell one tick to 3.89% from 3.90% the week before. The average for 15-year loans decreased to 3.16%, and the average for five-year adjustables moved up slightly to 3.16%. A year ago, 30-year fixed rates averaged 3.43%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "Following a mild decline last week, the 10-year Treasury yield rose 1 basis point this week. The rate on 30-year fixed loans similarly remained relatively flat, falling just 1 basis point to 3.89 percent. Rates on home loans are continuing to hold at low levels amidst ongoing economic uncertainty."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Fall Forward: The Weekly Market Update

Jobs Numbers Come Early
Jobs Numbers Come Early

Jobs Numbers Come Early

Though the calendar states that fall comes later in September, Labor Day weekend is actually the real end of summer for most Americans. It means back to school for the kids and the end of vacation season. Congress is back in session after their August recess. Though many think that Congressmen go on vacation during recesses, most are back in their districts meeting with their staffers and gauging the temperature of their constituents.

Fall starts the second homebuying season of the year. Though not as strong as the spring season, the fall is a time that people list their homes and want to be settled in a new home before the holiday season arrives. This fall we are hopeful that more are listing their homes because the market has been constrained by a listing shortage.

Before we go out to enjoy the Labor Day weekend, we will have something of an economic report anomaly. Since the first day of September is on Friday, the employment report will be released early before the holiday weekend starts. Many will be on vacation this week and others will be leaving early for the holiday. Thus, the markets may be prone towards more volatility if there is a surprise in the report. If there is a surprise, it will be like saying — Surprise, we had ___ jobs added. Have a nice holiday weekend to think about it!

The Weekly Market Update

Rates on 30-year fixed loans hit their lowest levels of the year last week. For the week ending August 24, Freddie Mac announced that 30-year fixed rates fell to 3.86% from 3.89% the week before. The average for 15-year loans remained at 3.16%, and the average for five-year adjustables moved up slightly to 3.17%. A year ago, 30-year fixed rates averaged 3.43%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "The 10-year Treasury yield fell 6 basis points this week amid concerns over lagging inflation. The rate on 30-year loans also declined for the fourth consecutive week, dropping 3 basis points to a new year-to-date low of 3.86 percent." Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Quiet Ends: The Weekly Market Update

Saber Rattling
Saber Rattling

Saber Rattling

Last week we spoke about the Dog Days of Summer when things are expected to be quiet. On the other hand, we also indicated that the world does not take vacation in August and unexpected events can have a greater affect upon the markets when so many are on vacation. And so it is with regard to the North Korean situation. Thankfully, thus far this is not an event, but a heightened course of saber rattling threatening all sorts of things.

Of course, we were all hopeful there would be no event, and that the sabers would quiet down. But we have seen more volatility in the markets as a result of all of the noise. And the events in Europe late last week just added to the consternation. Even so, the drop in stocks has been miniscule as compared to the rally we have witnessed over the past nine months. Even without these events, one would be quite surprised if there are not more mini-corrections in store for the markets because of how far they have moved to the upside.

Another area affected by the noise is interest rates. It is hard to tell whether the recent moderate drop in long-term rates is due to a flight to safety in anticipation of a possible crisis, or a reaction to the news that the economy continues to grow along with reports that are showing inflation continues to be contained. With the markets, we never know why they move, and in this case the easing of long-term rates could be a result of several factors. The move could also be quite temporary. Thus, if you are house or car shopping, you may only have a small window of opportunity.

The Weekly Market Update

Last week 30-year fixed rates were slightly lower, continuing a trend which started four weeks ago. For the week ending August 17, Freddie Mac announced that 30-year fixed rates fell one tick to 3.89% from 3.90% the week before. The average for 15-year loans decreased to 3.16%, and the average for five-year adjustables moved up slightly to 3.16%. A year ago, 30-year fixed rates averaged 3.43%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "Following a mild decline last week, the 10-year Treasury yield rose 1 basis point this week. The rate on 30-year fixed loans similarly remained relatively flat, falling just 1 basis point to 3.89 percent."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

The Dog Days of Summer: The Weekly Market Update

Hopeful Quiet Time
Hopeful Quiet Time

Hopeful Quiet Time

August 15 is supposed to be right in the middle of the dog days of August. But we learned recently that the phrase “dog days of August” relates to the period that Sirius, a star known as the “Dog Star,” rises at the same time as the sun. This period is typically in late July until early August. Thus, the phrase is also known more generally as the “dog days of summer.”

What does the dog days of summer mean for the markets? Not only are families taking vacations, so are institutions. The Federal Reserve Board’s Open Market Committee does not meet in August. Congress is in recess and the President is on a long working vacation. Even equity traders and market analysts are on vacation, which typically results in lower trading volume for stocks, bonds and more. Thus, everyone should be taking a long-deserved break during August.

Does that mean that the month will be completely quiet? We can’t really predict a complete time of rest for the markets. Traditionally, during times of lower trading volume, any type of major event could produce more volatility than usual. And, though it seems that everyone in D.C. is on vacation, the world does not go to sleep. Nor does the weather. For our part, we do hope that everyone has a restful remainder of the summer and that the quiet enables those economic sleeping dog days to lie about as well.

The Weekly Market Update

Last week, 30-year fixed rates fell to their lowest level in the past six weeks. For the week ending August 10, Freddie Mac announced that 30-year fixed rates fell to 3.90% from 3.93% the week before. The average for 15-year loans remained at 3.18%, and the average for five-year adjustables moved down slightly to 3.14%. A year ago, 30-year fixed rates averaged 3.45%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "After holding relatively flat last week, the 10-year Treasury yield fell 4 basis points this week. The 30-year rate on home loans moved in tandem with Treasury yields, dropping 3 basis points to 3.90 percent. Recently, Federal Reserve officials highlighted the influence of continued weak inflation data on rates."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Recovery Hits Eight Year Mark: The Weekly Market Update

The Economic Expansion Continues
The Economic Expansion Continues

The Economic Expansion Continues

The long road back from the Great Recession began in mid-2009 and July marked the 96th month of recovery. This makes it the third longest expansion on record and if we continue at the present pace, this recovery will become the second longest expansion in history in the middle of next year. There are two reasons for the length of this recovery. First, the Great Recession was a very deep recession, thus we had a very long road back.

Second, the recovery has been slow and steady. Even though our growth has not been strong, we have stayed out of a recession partly because the economy has not overheated. If the economic expansion did heat up, then interest rates would be much higher and this could endanger the recovery. We have enjoyed very low interest rates for the past decade — and this year is no exception.

Nowhere is the length of the recovery more evident than the jobs market. The economy lost close to nine million jobs in a very short period of time. In the decade that has followed, we have added approximately 17 million jobs. While these are really strong numbers, we have only added eight million jobs net of the recession, and this averages out to less than one million per year over the past decade. This helps us put July’s job numbers in perspective. We added just over 200,000 jobs for the month with an unemployment rate of 4.3%, both solid numbers. We still have some work to do in creating better paying jobs and taking care of those who have left the workforce but did not retire. However, we have come a long, long way.

The Weekly Market Update

Rates were stable in the past week. For the week ending August 3, Freddie Mac announced that 30-year fixed rates rose slightly to 3.93% from 3.92% the week before. The average for 15-year loans decreased to 3.18%, and the average for five-year adjustables moved down to 3.15%. A year ago, 30-year fixed rates averaged 3.43%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "The 10-year Treasury yield was relatively flat this week, as was the rate on 30-year fixed loans, which rose 1 basis point to 3.93 percent. Despite a strong advance estimate for second quarter GDP, markets are erring on the side of caution."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Summer of Change: The Weekly Market Update

Jobs and The Fed
Jobs and The Fed

Summer of Change?

Last week’s meeting of the Federal Reserve Board’s Open Market Committee was not so much about what they would do when they met. It was more about what they would say about the future. The two topics of interest were future interest rate hikes and selling off their stockpile of assets, which is comprised of bonds and home loans. Obviously, both of these topics might affect the direction of rates and are subject to change based upon the direction of the economy and any intervening factors.

The Fed does not meet again until September and that leaves more time to access the state of the economy. This week we have the first major data release since the meeting. The July jobs numbers are all important with regard to their decision-making process and we will also have the August jobs numbers released before they meet again. The preliminary growth estimate for the second quarter was released last Friday and these numbers will be revised at the end of this month.

Of course, we can’t predict what intervening factors might arise. In the past, we have had major world-wide economic, political and weather events which have affected the markets. And we certainly are not trying to predict the occurrence of a particular event. Whatever the Fed said, we are just pointing out that their statements are subject to change as the summer comes to a close in the next several weeks.

The Weekly Market Update

Rates moved lower for the second week in a row. For the week ending July 27, Freddie Mac announced that 30-year fixed rates fell to 3.92% from 3.96% the week before. The average for 15-year loans decreased to 3.20%, and the average for five-year adjustables moved down to 3.21%. A year ago, 30-year fixed rates averaged 3.48%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "The 10-year Treasury yield rose 5 basis points this week, while the rate on 30-year fixed loans dropped 4 basis points to 3.92%. Home loan rates in next week's survey would depend on how the market reacts to the Fed's balance sheet unwinding announcement."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Jobs and The Cost of Housing: The Weekly Market Update

Jobs and The Cost of Housing
Jobs and The Cost of Housing

Raises and Housing Prices

Last week we counted our blessings with regard to the shape of the economy. This week we will talk about the release of the June jobs numbers which give us another reading regarding the health of the economy. Overall this reading was stronger than forecasts. Thus far this year, job growth has been solid, with just over one million jobs created in the first half of the year. This compares to 2.2 million jobs created in 2016, which puts the economy on track to match last year’s numbers. Despite strong jobs growth for the month, the unemployment rate rose to 4.4% last month, but that is not necessarily a bad thing, as it typically means that more long-term unemployed are re-entering the workforce.

Just as important as the jobs created, wages increased by 0.2% last month and 2.5% over the last year, which was slightly lower than economists expected. Higher wages are important, because they positively influence consumer spending for big ticket items. For example, if wages do not go up as fast as the cost of housing, this provides a burden on renters and discourages home buying as well. Recently, home price data for April, as measured by the S&P CoreLogic Case-Shiller National Home Price Index, showed another record high — the fifth consecutive month of new peaks. Does that mean that housing will become unaffordable?

We caution you against reaching that conclusion. The First American Real Home Price Index currently shows that housing prices are still around 33% below their peak. To calculate the “real” cost of housing under the Real Home Price Index, incomes and mortgage rates are used to inflate or deflate house prices which are unadjusted for inflation in order to better reflect consumers’ purchasing power and capture the true cost of housing. It should be noted that lower interest rates do not directly benefit renters. The message? As long as rates stay low, housing is still more affordable today than it was when peak prices were achieved a decade ago.

The Weekly Market Update

Rates moved off their lows for the year for the first time in several weeks. For the week ending July 6, Freddie Mac announced that 30-year fixed rates rose to 3.96% from 3.88% the week before. The average for 15-year loans increased to 3.22%, and the average for five-year adjustables moved up to 3.21%. A year ago, 30-year fixed rates averaged 3.41%. Attributed to Sean Becketti, chief economist, Freddie Mac -- "Global interest rates turned up sharply over the last week. The 10-year Treasury yield was no exception, increasing 10 basis points in a holiday-shortened week. The rate on 30-year fixed loans followed suit, rising 8 basis points to 3.96 percent."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Our Country Leads

Our Country Leads
Our Country Leads

Counting Our Blessings

Today is July 4th. Our country is almost 250 years old. If you read the headlines, you would think that our country is in more trouble than it has ever has been. True, our country is not perfect, and certainly the fighting emanating from our Nation’s Capital does not make us the envy of the world politically. On the other hand, if you take a look at the numbers, our country is again leading the western world with regard to the recovery from the deep world recession.

After peaking at over 10% during the recession, our present unemployment rate is less than 5.0%. The average unemployment rate of the European Member countries is well over 7.0%. During the latter stages of the recovery we have been consistently adding between 150,000 and 200,000 jobs per month. Concurrently, our real estate market has regained just about all of the losses sustained during the recession.

Some are wary that the Federal Reserve Board has raised interest rates four times during the past 18 months. The fact that the Fed is comfortable raising rates for the first time in a decade is evidence that they are getting more comfortable regarding the state of the economy. That does not mean that our economy, our jobs picture and our real estate market does not have room for improvement — which is why rates continue to be historically very low. But we have come a long way and we continue to improve. Hopefully we will see more of this improvement when the jobs report is released this Friday. In the meantime, happy 4th of July.

The Weekly Market Update

Rates were down slightly last week, but rose after the survey was released. For the week ending June 29, Freddie Mac announced that 30-year fixed rates fell to 3.88% from 3.90% the week before. The average for 15-year loans remained at 3.17%, and the average for five-year adjustables moved up to 3.17%. A year ago, 30-year fixed rates averaged 3.48%. Attributed to Sean Becketti, chief economist, Freddie Mac -- "The 30-year fixed rate fell 2 basis points to 3.88 percent this week. However, much of our survey was conducted prior to Tuesday's sell-off in the bond market which drove Treasury yields higher. Rates on home loans may increase in next week's survey if Treasury yields continue to rise."

Attributed to Sean Becketti, chief economist, Freddie Mac -- "The rate on 30-year loans rose 2 basis points over the week to 3.91 percent. However, our survey was conducted before investors drove Treasury yields sharply lower in a reaction to the surprisingly weak CPI release. If that drop in yields sticks, rates on home loans are likely to follow in next week's survey."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Rates Benefit From Uncertainty: The Weekly Market Update

Half-Way There
Half-Way There

Half-Way There

We are approaching the half-way point of 2017. We can make an observation that it has been a very strange year. And we are not just talking about the political turmoil. For example, despite the fact that the Federal Reserve Board has raised short-term interest rates for the third consecutive quarter, we still do not have a fix on how strong the economy is right now. In their statement accompanying the increase two weeks ago, the Fed expressed optimism that the economy was getting stronger. Yet, every economic report released that week was disappointing, including readings on retail sales and industrial production.

Even though just about everyone was expecting rates on home loans to rise significantly this year, this uncertainty is one reason that mortgage rates are lower than the analysts expected. One would hope that the upcoming June jobs report would lend some certainty to the equation, but thus far this year, we have even seen ambiguity within the employment sector. The unemployment rate is dropping, but the pace of jobs added has not accelerated from last year.

Despite this uncertainty, the stock market has remained strong this year as the post-election rally has continued. Does this mean that the markets are optimistic that it is only a matter of time before the economy shows signs that it is picking up? Or is this rally merely a reaction to improved corporate profits? We feel that the picture will become clearer over the next several weeks, as we see additional jobs reports and a reading on the growth of the economy for the second quarter. For now, the lower long-term rates should be helping the economy in conjunction with higher stock prices.

The Weekly Market Update

Rates were stable last week, again remaining near their lowest levels of the year. For the week ending June 22, Freddie Mac announced that 30-year fixed rates fell one tick to 3.90% from 3.91% the week before. The average for 15-year loans also fell slightly to 3.17%, and the average for five-year adjustables moved down one tick to 3.14%. A year ago, 30-year fixed rates averaged 3.56%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "Following last week's sharp decline, the 10-year Treasury yield rose 3 basis points this week. The rate on 30-year fixed loans remained relatively flat, falling 1 basis point to 3.90 percent. Rates on home loans are continuing to hold at year-to-date lows amidst ongoing economic uncertainty."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

The Deed is Done: The Weekly Market Update

The Fed Speaks

The Fed Speaks

The Federal Reserve Board’s Open Market Committee met last week to consider raising short-term interest rates. As we approached the meeting, the consensus was that the Fed would move their Discount and Federal Funds Rate higher by one-quarter of one percent. The weaker than expected jobs report put a bit of doubt in some analysts’ minds; however, most were still expecting the increase to be approved.

Thus, no increase would have been somewhat of a surprise and an increase of more than one-quarter of a percent would have been a major surprise. Therefore, the fact that the Fed moved by one-quarter of one percent was seen as somewhat of a non-event. Just as importantly, their statement released at the conclusion of the meeting provided us clues as to what the members thought of the state of the economy. The statement lauded the progress of the economy and downgraded their forecast for inflation. They continue to espouse a gradual rise in rates and, in the fourth quarter, the Fed expects to start selling off some of the assets they have amassed in the past to help the economy.

Anytime we are focused upon actions by the Federal Reserve Board, we have to remind our readers which interest rates the Fed controls directly. The Federal Funds Rate and the Discount Rate are rates the Fed charges member banks and member banks charge each other for overnight funds to balance their sheets. Thus, when we indicated that these are short-term rates, they are very short term. In reaction, other short-term rates such as three- and six-month T-Bills are affected most directly. On the other side of the coin, long-term rates, such as home loans, can move in tandem or have a different reaction, especially if the markets feel that the Fed is staying ahead of any threat of inflation. Thus, an increase in interest rates for home loans are not guaranteed to follow suit, though certainly the Fed’s action last week does pose that possibility.

The Weekly Market Update

Rates were up slightly last week, remaining near their lowest levels of the year. For the week ending June 15, Freddie Mac announced that 30-year fixed rates rose two ticks to 3.91% from 3.89% the week before. The average for 15-year loans also rose slightly to 3.18%, and the average for five-year adjustables moved up to 3.15%. A year ago, 30-year fixed rates averaged 3.54%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "The rate on 30-year loans rose 2 basis points over the week to 3.91 percent. However, our survey was conducted before investors drove Treasury yields sharply lower in a reaction to the surprisingly weak CPI release. If that drop in yields sticks, rates on home loans are likely to follow in next week's survey."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.