For the week of November 13, 2017 — Vol. 15, Issue 45

>> Market Update

QUOTATION OF THE WEEK..."Often you just have to rely on your intuition." --Bill Gates, American business magnate, philanthropist and co-founder of Microsoft

INFO THAT HITS US WHERE WE LIVE... The news media is filled with coverage of tax reform proposals from the Administration and both houses of Congress. Politicians and pundits offer opinions on what should be done about deductions for mortgage interest and property taxes, and taxes on capital gains from the sale of a home. But the fact is, there is no new tax law just yet. When one emerges, we'll scope out its impact on the housing market. Meanwhile, the National Association of Realtors (NAR) forecast 2017 will end with 5.47 million existing home sales, up 0.4% from 2016 and  the fastest sales pace since 2006.

Even better, the NAR expects 2018 sales up a solid 3.7%, to 5.67 million units. The median home price should be up 5.5% this year and next. Some fret over affordability. But recently, both the Urban Institute and the First American Real House Price Index found affordability historically high. And last week, mortgage data firm Black Knight reported "affordability in most areas, while tightening, remains favorable to long-term norms." The CEO of real estate data firm CoreLogic explained, "A strengthening economy, healthy consumer balance sheets and low mortgage interest rates are supporting the continued strong demand."

BUSINESS TIP OF THE WEEK... When you need to get something done, put your smartphone in Airplane mode. This suspends the phone's signal transmission, disabling calls, Bluetooth and Internet connections.

>> Review of Last Week

TAXING... If you're ever wondering how investors respond to uncertainty, look no further than last week's stock market performance. What's uncertain is when the Administration's promised corporate tax cuts will happen. The thinking is that those cuts will support company earnings and boost wages, jobs and the economy. Problem is, the Senate version of a tax bill, released Thursday, delays cutting the corporate rate from 35% to 20% by one year, differing from the House version the week before. It's now unclear when a tax bill will pass and cuts will be implemented, so the three major stock indexes lost ground for the week.

But it wasn't all about taxes. Many investors were simply taking profits after the Dow and S&P 500 went up eight weeks in a row and the Nasdaq delivered a six-week run-up. On the plus side, there were some strong corporate earnings to feel good about. And following October's 100.7 final read, November's preliminary University of Michigan Consumer Sentiment slipped to 97.8, but the consumers' anticipated wage gains part of the survey logged the highest two-month level in a decade. Even oil prices rallied, West Texas crude finishing at $56.75 per barrel, its highest level in more than two years.

The week ended with the Dow down 0.4%, to 23422; the S&P 500 down 0.2%, to 2582; and the Nasdaq down 0.2%, to 6751.

Bonds performed well earlier in the week, but gains were erased as Treasuries ended the week lower. Most U.S. banks were closed Friday for Veterans Day, which may have trimmed participation. The 30YR FNMA 4.0% bond we watch finished the week down .43, at $104.63. Freddie Mac's Primary Mortgage Market Survey for the week ending November 9 showed a slight dip in national average 30-year fixed mortgage rates, which hadn't budged 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?... A new survey shows the least affordable North American market isn't even in the U.S. It's Vancouver, Canada, where the median home sale price is more than $1.1 million, but the median family income is under $64,000. 

>> This Week's Forecast

HOME BUILDING UP, CONSUMERS SPEND, INFLATION QUIET, FACTORIES HUM... Home builders continue to dial up their activities, sending Housing Starts and Building Permits north for October. Consumers keep shelling out more, as Retail Sales grew in October, albeit at a more modest pace. At least price hikes aren't slowing things down, the Consumer Price Index (CPI) up barely a blip. Nice to see manufacturing back on track, with the Philadelphia Fed Index and other factory measures growing. 

>> 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 Nov 13 - Nov 17

DateTime (ET)ReleaseForConsensusPriorImpact
Tu
Nov 14
08:30
Producer Price Index (PPI)Oct0.1%0.4%Moderate
Tu
Nov 14
08:30
Core PPIOct
0.2%0.4%Moderate
W
Nov 15
08:30
Consumer Price Index (CPI)Oct
0.1%0.5%HIGH
W
Nov 15
08:30
Core CPIOct
0.2%0.1%HIGH
W
Nov 15
08:30
NY Empire Manufacturing IndexNov26.030.2Moderate
W
Nov 15
08:30
Retail SalesOct
0.1%1.6%HIGH
W
Nov 15
08:30
Retail Sales ex-autoOct
0.2%1.0%HIGH
W
Nov 15
10:00Business InventoriesSep0.0%0.7%Moderate
W
Nov 15
10:30Crude Inventories11/11NA+2.2MModerate
Th
Nov 16
08:30Initial Unemployment Claims11/11234K239KModerate
Th
Nov 16
08:30Continuing Unemployment Claims11/04NA1.901MModerate
Th
Nov 16
08:30
Philadelphia Fed IndexNov
24.627.9HIGH
Th
Nov 16
09:15Industrial ProductionOct0.5%0.3%Moderate
Th
Nov 16
09:15
Capacity UtilizationOct
76.3%76.0%Moderate
F
Nov 17
08:30
Housing StartsOct
1.198M1.127MModerate
F
Nov 17
08:30
Building PermitsOct
1.243M1.215MModerate


>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months... Expect a quarter percent hike in the Fed Funds Rate next month, then steady as she goes through March. Note: In the lower chart, a 100% probability of change is a 100% certainty the rate will rise.

Current Fed Funds Rate: 1.00%-1.25%

After FOMC meeting on:Consensus
Dec 131.25%-1.50%
Jan 31
1.25%-1.50%
Mar 211.25%-1.50%

Probability of change from current policy:

After FOMC meeting on:Consensus
Dec 13
     100%
Jan 31
     100%
Mar 21     100%