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Inside Lending from Mel Patterson
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Mel Patterson

Mel Patterson
Loan Officer - MLO 71633
NMLS - CO. ID 42661
3324 N Visscher St
Tacoma, WA 98407
253-761-2929 – Direct
253-988-8809 - Cell
253-761- 2930 – Fax
mel@melpatterson.com
www.melpatterson.com

The Patterson Company

For the week of October 9, 2017 — Vol. 15, Issue 40

>> Market Update

QUOTATION OF THE WEEK..."The only person wise about the future is the person who keeps silent." --John Kenneth Galbraith, Canadian-born American economist, public official and diplomat

INFO THAT HITS US WHERE WE LIVE... Home prices continued to rise in August, up 0.9% from July, in the latest Home Price Index and HPI Forecast from CoreLogic, a global information and analytics firm. Prices are up 6.9% from the year before, but are forecast to rise only 4.7% by August next year. Lack of inventory has stalled sales in many markets, but according to CoreLogic's chief economist, "the tight inventory has actually helped stabilize price growth." The First American Real House Price Index (RHPI) reported that "while affordability is lower than a year ago, it remains high by historic standards." The RHPI is 38.4% below its housing boom peak of July 2006.

The RHPI adjusts for the impact of income and interest rate changes on consumer house-buying power. One property database noted "Falling interest rates in the third quarter provided enough of a cushion to counteract rising home prices in most U.S. markets." Further helping affordability, the firm reported that "wage growth is outpacing home price growth in about half of all local markets so far this year." We're even seeing Millennials becoming a bigger factor in housing demand. A study by a national real estate site says Millennials put about $514 billion into the U.S. housing market in the past year, becoming the largest generation of home buyers. 

BUSINESS TIP OF THE WEEK... Once a month, take time to evaluate what is and isn't working in your business. Going forward, put 90% of your time against the top 50% of your revenue producing activities.

>> Review of Last Week

JOBS DOWN, WAGES AND STOCKS UP... The September jobs report showed Nonfarm Payrolls shrank by 33,000, but wages were up a solid 0.5%, so stocks went in the same direction. All three major market indexes scored weekly gains. Wages grew 2.9% year-over-year, the highest level since the financial crisis and a welcome increase over the 2.6% average wage gain of the past two years. Higher wages boost personal spending, the largest contributor to growth. The payroll decline was blamed on hurricanes Harvey and Irma, since workers in the affected areas couldn't get to jobs. For example, restaurant and bar payrolls fell by 105,000, versus 20,000 gains in prior months.

In any case, payroll gains are averaging 148,000 a month this year, as 1.3 million jobs have been added the last nine months. The unemployment rate fell to 4.2%, a 16-year low, even though there are more workers, with the labor force participation rate now at 63.1%. The U-6 unemployment rate, which includes part-timers who would prefer full-time work and workers not actively looking, dropped to 8.3%, its lowest level since 2007. In addition, the ISM manufacturing index shot up to 60.8 in September, its highest level since 2004. And the ISM services index grew to a 59.8 read, its fastest pace since 2005. Finally, the August trade deficit was a lower-than-expected $42.4 billion.

The week ended with the Dow UP 1.6%, to 22774; the S&P 500 UP 1.2%, to 2549; and the Nasdaq UP 1.5%, to 6590.

The week saw modest losses in the bond market, as the wage growth spike in the jobs report firmed up expectations for a December rate hike. The 30YR FNMA 4.0% bond we watch finished the week down .09, to $105.13. Freddie Mac's Primary Mortgage Market Survey for the week ending October 5 reported national average 30-year fixed mortgage rates went up a tick after holding steady the week before. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?... Experts say living in a home more than seven years could lower home buyers' exposure to market fluctuations. But among Millennials, only 37% plan to live in their next home more than six years.

>> This Week's Forecast

RETAIL REBOUNDS, INFLATION MILD... After its negative dip in August, Retail Sales should bounce back into positive territory for September. Inflation doesn't seem to be firing up to what the Fed wants to see for a rate hike. The Consumer Price Index (CPI) is forecast to edge up just a little, and Core CPI, which excludes volatile food and energy prices, is expected to stay at the same low level.

Todayin observance of Columbus Day, the U.S. Treasury market is closed but the stock market is open.

>> 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 Oct 9 - Oct 13

DateTime (ET)ReleaseForConsensusPriorImpact
W
Oct 11
10:30Crude Inventories10/07NA-6.0MModerate
Th
Oct 12
08:30Initial Unemployment Claims10/07255K260KModerate
Th
Oct 12
08:30Continuing Unemployment Claims09/30NA1.938MModerate
Th
Oct 12
08:30Producer Price Index (PPI)Sep
0.4%0.2%Moderate
Th
Oct 12
08:30
Core PPISep
0.2%0.1%Moderate
Th
Oct 12
14:00Federal BudgetSepNA$33.4BModerate
F
Oct 13
08:30
Retail SalesSep
1.5%-0.2%HIGH
F
Oct 13
08:30
Retail Sales ex-autoSep
0.8%0.2%HIGH
F
Oct 13
08:30Consumer Price Index (CPI)Sep
0.6%0.4%HIGH
F
Oct 13
08:30Core CPISep
0.2%0.2%HIGH
F
Oct 13
10:00U. of Michigan Consumer Sentiment - Prelim.Oct95.695.1Moderate
F
Oct 13
10:00Business InventoriesAug
%0.2%Moderate


>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months...Wall Street feels a quarter percent rate hike in December is pretty much a certainty, but that should be it for a whileNote: In the lower chart, a 2% probability of change is a 98% certainty the rate will stay the same.

Current Fed Funds Rate: 1.00%-1.25%

After FOMC meeting on:Consensus
Nov 11.00%-1.25%
Dec 131.25%-1.50%
Jan 311.25%-1.50%

Probability of change from current policy:

After FOMC meeting on:Consensus
Nov 1         2%
Dec 13       91%
Jan 31       91%


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This e-mail is an advertisement for Mel Patterson. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice, or a commitment to lend. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in this message is the property of The Patterson Company and cannot be reproduced for any use without prior written consent. This message is intended for business professionals only and is not intended for distribution to consumers or other third parties. The material does not represent the opinion of The Patterson Company. The Patterson Company NMLS 42661. MLO 71633



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