For the week of november 18, 2019

Everything you want is just outside your comfort zone.--Robert G. Allen, author and business mentor

At the National Association of Realtors convention, their chief economist predicted new home sales will hit a 13-year high in 2020, up 11%, to 750,000. Existing home sales, at 5.56 million, will be the highest since 2017.

Freddie Mac's chief economist feels "the steady improvement of the housing market is a reassuring sign that the economy is on solid ground heading into next year," noting "purchase mortgage applications rose 15% over...a year ago."

Friday, the National Association of Home Builders blog posted,"lower mortgage rates...and a healthy job market" helped push the minority homeownership rate almost a percent higher than a year ago, to 48.3% in Q3.

TRADE WINDS BLOW DOW PAST 28,000... Investor expectations that the U.S. is close to a phase one trade deal with China sent the Dow over 28,000 for the first time ever, with the S&P 500 and the Nasdaq also reaching new highs.

White House economic advisor Larry Kudlow called negotiations between the two countries "very constructive," but added that although the President "likes what he sees, he's not ready to make a commitment...just yet."

Meanwhile, consumers are still willing to spend, with Retail Sales up 3.1% over last year. Industrial Production declined, but at a slower rate, and the Consumer Price Index drifted closer to the Fed's target 2% inflation rate. 

The week ended with the Dow UP 1.2%, to 28,005; the S&P 500 UP 0.9%, to 3,120; and the Nasdaq UP 0.8%, to 8,541.

The bond market stayed cautious on trade, which helped support prices. The 30YR FNMA 4.0% bond ended UP .23, at $103.75. The national average 30-year fixed mortgage rate gained a smidge, but is more than 1% below a year ago, 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?... RealPage reports that since 1850, the U.S. household size has been shrinking, but that trend has finally reversed. The number of people in the average U.S. household rose to 2.63 in 2018, up 6% since 2010.

HOME BUILDING, EXISTING HOME SALES UP, FED MINUTES OUT... The forecasts call for Housing Starts and Building Permits to keep gaining for October, while Existing Home Sales move up to 5.5 million. We'll also look at the FOMC Minutes from the Fed's last meet for insight on rates.

NOTE: Weaker economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and higher loan rates.

Forecasting Federal Reserve policy changes in coming months... The futures market is taking the Fed at its word, expecting the Funds Rate to stay where it is till the first crocuses come back in the spring. Note: In the lower chart, a 1% probability of change is a 99% probability the rate will stay the same.

Current Fed Funds Rate: 1.50%-1.75%

Probability of change from current policy:

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