MARKET UPDATE
Following the increase in conforming loan limits, the FHA has bumped its loan limit for 2019 to $314,827 and the VA went to $484,350, in most U.S. counties, and both limits are even higher in pricier counties
Data aggregator CoreLogic sees higher mortgage rates softening buyer demand and slowing price gains. But they also see a strong economy with 3.1% growth in 2018 moderating to a still respectable 2.4% this year.
That should help boost income and affordability, which ATTOM Data says has already improved in Q4 “in more than half of all local markets, and one in five markets saw annual wage growth outpace annual home price appreciation.”
REVIEW OF LAST WEEK
JOBS HOT, FED COOL… Fueled by a blockbuster December jobs report and soothing comments from Fed Chair Jerome Powell, stocks shook off a shaky New Year start to post huge gains Friday.
Everyone flinched at December’s 312,000 new Nonfarm Payrolls, a total of 370,000 new jobs with October/November upward revisions. Earnings shot up 0.4%, and with total hours rising, total cash earnings are up 5.2% the past year.
Investors who worry good economic news might raise rates were comforted by Powell’s comments Friday that the Fed has no set path for interest rate hikes or balance sheet cuts, something we were all glad to hear.
The week ended with the Dow UP 2.7%, to 23062; the S&P 500 UP 2.9%, to 2486; and the Nasdaq UP 4.0%, to 6585.
The bond market saw wild swings matching investor sentiment, with Treasuries off but other bonds ahead at the end. The 30YR FNMA 4.0% bond went UP .26, to $102.06. The national average 30-year fixed mortgage rate kicked off the New Year by dropping again in Freddie Mac’s Primary Mortgage Market Survey. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW?
FEMA announced it will resume selling and renewing flood insurance policies, reversing its initial guidance to suspend these activities during the government shutdown.
THIS WEEK’S FORECAST
SERVICES SECTOR GAINS, INFLATION WANES, WHAT THE FED SAID… ISM Services should show continued growth in the sector that provides almost 80% of our jobs. Inflation is forecast to drop, according to the Consumer Price Index (CPI), and Fed Minutes from December may shed more light on the rate picture.
NOTE: Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and higher loan rates.
FEDERAL RESERVE WATCH
Forecasting Federal Reserve policy changes in coming months… After the Fed’s December hike, Wall Street is quite sure the central bankers won’t touch rates through May. Note: In the lower chart, a 1% probability of change is a 99% probability the rate will stay the same.
Current Fed Funds Rate: 2.25%-2.50%
| AFTER FOMC MEETING ON: | CONSENSUS |
| Jan 30 | 2.25%-2.50% |
| Mar 20 | 2.25%-2.50% |
| May 1 | 2.25%-2.50% |
Probability of change from current policy:
| AFTER FOMC MEETING ON: | CONSENSUS |
| Jan 30 | 1% |
| Mar 20 | 6% |
| May 1 | 6% |
