PrimeLending December 16th Newsletter

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Geralann Tabet
Production Manager
619 S. Bluff St. Tower 1, Ste 2012
St. George, UT 84770
Direct: 435.215.7342
Fax: 877.371.4777
Cell: 435.619.2452

For the week of December 16th, 2013 – Vol. 11, Issue 50

>> Market Update

QUOTE OF THE WEEK… “It is always wise to look ahead, but difficult to look further than you can see.” —Winston Churchill

INFO THAT HITS US WHERE WE LIVE… Keeping Sir Winston’s words in mind, let’s consider some prognostications coming out now about the real estate market in 2014. A national online listing site sees housing becoming a little less affordable and repeat buyers emerging as the market’s dominant players. The site’s chief economist explained, “repeat buyers will be able to offset the higher price of the home they buy with the higher price from the home they sell.” This expert also sees mortgage rates creeping up, although he feels that should make the mortgage process easier, as lenders shift resources from refinancings to purchase loans.

Freddie Mac’s chief economist revealed that “single family mortgage debt outstanding increased for the first time since 2008.” He further explained: “This is a positive sign, as it reflects that the pick-up in new purchase-money originations has offset loan paydowns and led to a net increase in principal outstanding.” The Mortgage Bankers Association chimed in with a report that purchase loan applications were up a seasonally adjusted 1% for the week ending December 6, compared to a week earlier.

BUSINESS TIP OF THE WEEK… Despite the popularity of videos and social media, e-newsletters remain very useful marketing tools. Use your Facebook page and website to get sign-ups by offering freebies containing useful information.

>> Review of Last Week

FED FEARS STALL SANTA… Anyone hoping for an end-of-the-year Santa Claus rally to begin early had those hopes dashed last week, as Wall Street investors sent stock prices down, fearing the Fed will start tapering its bond buying program at this week’s FOMC meeting. The Dow and S&P 500 sailed south for the second week in a row, and this time they were joined by the tech-heavy Nasdaq. There wasn’t a lot of economic news, so traders were free to obsess over the coming Fed meeting. Now, a growing number of investors and economists think the central bank will announce the beginning of tapering on Wednesday.

In addition to sending stock prices up, the extra money the Fed has been pouring into the economy was intended to stimulate it. So tapering would be a sign our central bankers have become more confident about the recovery. Evidence to support that confidence came last week in the form of a Retail Sales Report that came in UP 0.7% for November and UP 4.7% over a year ago. This was joined by Wholesale Inventories and Business Inventories registering larger than expected build-ups. Even the monthly Federal Deficit came in lower than expected, while Core PPI wholesale prices remained within the Fed’s target.

The week ended with the Dow down 1.7%, to 15755; the S&P 500 down 1.6%, to 1775; and the Nasdaq down 1.5%, to 4001.

Greater concerns that the Fed could announce tapering as early as this week’s meeting sent bond prices skidding down. The FNMA 3.5% bond we watch ended the week down .80, to $99.24. This might have pushed mortgage rates up, but national average mortgage rates actually dipped slightly for the week ending December 12 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?… Realtor.com reports that more than half of all page views of listings, nationwide, now occur through a mobile device, as opposed to a desktop computer.

>> This Week’s Forecast

MANUFACTURING AND HOUSING STARTS UP, INFLATION OK, BUT WILL THE FED START TO TAPER?… Manufacturing activity is forecast to continue expanding in December by both the New York Empire and Philadelphia Fed Indexes. We’ll finally have Housing Starts for September and October, as well as for November, with steady growth expected. The Consumer Price Index (CPI) is predicted to show inflation well within the Fed’s target range.

The big focus will be on the FOMC Meeting on Wednesday. With recent improvements in some economic data, the Fed could begin tapering its $85 billion dollar a month bond buying program.

>> 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 Dec 16 – Dec 20

Date	Time (ET)	Release	For	Consensus	Prior	Impact
M Dec 16	08:30	New York Empire Manufacturing Index	Dec	5.0	–2.2	Moderate
M Dec 16	08:30	Productivity–Rev.	Q3	2.7%	1.9%	Moderate
M Dec 16	9:15	Industrial Production	Nov	0.4%	–0.1%	Moderate
M Dec 16	9:15	Capacity Utilization	Nov	78.4%	78.1%	Moderate
Tu Dec 17	08:30	Consumer Price Index (CPI)	Nov	0.1%	–0.1%	HIGH
Tu Dec 17	08:30	Core CPI	Nov	0.1%	0.1%	HIGH
W Dec 18	08:30	Housing Starts	Sep	915K	891K	Moderate
W Dec 18	08:30	Housing Starts	Oct	920K	NA	Moderate
W Dec 18	08:30	Housing Starts	Nov	950K	NA	Moderate
W Dec 18	08:30	Building Permits	Nov	983K	1034K	Moderate
W Dec 18	10:30	Crude Inventories	12/14	NA	–10.585M	Moderate
W Dec 18	14:00	FOMC Rate Decision	12/18	0%–0.25%	0%–0.25%	HIGH
Th Dec 19	08:30	Initial Unemployment Claims	12/14	333K	368K	Moderate
Th Dec 19	08:30	Continuing Unemployment Claims	12/7	2.760M	2.791M	Moderate
Th Dec 19	10:00	Existing Home Sales	Nov	5.00M	5.12M	Moderate
Th Dec 19	10:00	Philadelphia Fed Index	Dec	5.0	6.5	HIGH
Th Dec 19	10:00	Leading Economic Indicators (LEI) Index	Nov	0.6%	0.2%	Moderate
F Dec 20	08:30	GDP–3rd Est.	Q3	3.6%	3.6%	Moderate
F Dec 20	08:30	GDP Deflator–3rd Est.	Q3	2.0%	2.0%	Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… The debate has intensified over whether the Fed will begin tapering at this week’s meeting, but economists expect the Funds Rate to stay at its super low level well into next year. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%