It’s the last work day for the whole year.  I like to take to take a few minutes every year and think about what has happened over the last 12 months and contemplate what I’d like to see happen in the coming 12.  I call it a period of reflection.  That’s why there is a photo of a reflection here.  Reflection in this instance is a homograph because the same word has two different meanings.  It’s been awhile since I was in the third grade so I actually had to look that up.  It’s also nice to look things up that I don’t understand. but I do that way more than once a year.  Where I am the only body in the whole building right now,  I have the perfect environment to sit and think.

So mortgage rates for 2016 finished higher than they began.  I expect the same thing to happen next year and will even go out on a limb and forecast that we’ll finish the next year with 30 year rates at 4.75%.  I am giving myself a good spread here by not saying whether that’s for government or conventional loans, but 4.75% would be a whole point hike higher for FHA and only 5/8% for conventional products.  As a point of clarification, that little forecast is something that I think will happen, not something that I’d like to see happen.  Keep rates low forever I say.

Have a Happy New Year!


I used to watch David Letterman a lot.  I miss those days.  His golden age was during the Bush and Clinton administrations.  President Obama just didn’t provide him with enough material and I think that he retired too soon.  I have a feeling that President Trump will be single-handedly keep late-night TV living high on the hog for at least four years.  And other than that, I have no idea what to say about this huge chicken statue just erected outside a shopping mall in China.  I suppose that it should be insulting, but I can’t seem to not find it humorous.

Pending Home Sales fell 2.5% last month, while there was a 0.5% gain expected.  The decline is thought to be tied to higher interest rates and lower inventory levels.  The DOW has been flirting with 20,000 for over a week now and just can’t seen to hit that historic level.

Merry Christmas!

I wish you a peaceful and purposeful Christmas weekend.  As the year 2016 winds down, I hope that you get to enjoy some down time surrounded by the ones you love and cherish!

Stuff That Costs a Lot

The third and final look of 3rd quarter GDP came in today at an annualized 3.5%, stronger than the 3.3% estimated and much improved from the first 2.2% reading. That should bring the year 2016 GDP to right around 2.0%.  That’s great; growth is a good thing.  The Fed has been wanting to see a 2% GDP to start raising rates and the timing seems to be working out perfectly for them.  They must be super smart.

Durable goods orders won’t be helping GDP; the marker was down 4.6% for the month of November.  The loss is tied directly to transportation, because when you strip it our, there was a net gain of 0.5%.  Again, you need to talk to them smart folks that get to take the last two weeks of the year off to be sure, but the way I see it, it looks like Trump’s demand to make Boeing keep the cost of the next Air Force One under $4 billion is already having an effect.

Glass More Full

There is always more than one way to look at something.  For example, today is the winter equinox, which means the first full day of winter.  Some might bemoan the fact that winter is just starting and the cold has set in for the next three months.  I on the on the other hand prefer to celebrate the fact that we start gaining more daylight each and every day all the way into summer, starting today!

Existing Home Sales, which tracks closings on homes that are over a year old, rose 0.7% last month and 15.4% from this time last year.  We are now on pace this year to see the most sales in almost ten years at 5.61M transactions. Available homes for sale though are declining; listings are down 9.3% from this time last year.  There are currently only 1.84M homes available for sale across the country, representing a four month supply (that’s NAR’s math, not mine).  Declining inventory continues to push sales prices higher: the Median Home Price rose 6.8% this year to $234,900.  Utah’s forecasted appreciation for 2017 is at 4.6%.  The consensus is that higher interest rates will make appreciation tighter going forward, as 88% of home buyers obtain financing to consummate their purchase.  That means that as a lender, I have a shot at participating in 88% of all transactions out there.  That glass just became more full!

First-time home buyers make up a pretty good chunk of the market, and a good percentage of my own business.  So when Utah Housing announced today that they are lowering their income limits by $15,000 to be able to qualify for their best program, I pay attention.  The argument that only the poorest individuals should receive loans with zero down is an interesting discussion with political overtones.  Let’s be clear here though, Utah Housing is not a government agency that costs taxpayers money.  Utah Housing is a for-profit corporation, sponsored by the state of Utah.  Back when they were an agency, their interest rates were better than the going FHA market rates, and their fees were lower.  Since they have been a corporation, their fees have increased and so have their interest rates, so that a home buyer will pay an additional $1,000 or so in fees and pay 0.25%–0.375% higher in rate than they would have if they had a down payment.  On the flip side, they used to run out of money every three weeks or so until they received a new issue of funds from the federal government.  Where UHC now uses their own funds that they buy at market rates, they no longer have that problem.

Sure it costs more to get a zero down loan, but it also costs more to finance a property in general than it would if you could just pay cash; it’s all a relative argument.  If you just inherited enough money to buy a home, lucky you!  But if someone was to save their money at home until they had enough to pay cash for a home, they would lose out on that many years of appreciation and tax deductible interest.  Depending on how quickly they could save up, they may never be able to afford a home.  So I always tell people to buy a home as quickly as you can using any and all available resources to do it.  But if you make more than $50,000 per year, you’d better save your money.

So the Feds raised rates 1/4% this week, and committed to another three hikes next year in their press conference.  While stocks took the announcement in stride, mortgage interest rates have ticked up another notch, and are on uneasy ground at the highest rates of 2016.

This morning, we saw weak housing numbers in the new construction arena, as Building Permits dropped 18%.  That may come as a surprise given all of the homes under construction, but it is cold outside and who likes to pour concrete in the cold?  At any rate it’s Christmas time and I for one am going to try and work as little as possible for the next 10 days.


The Consumer Price Index rose this morning by 0.2%, and 1.7% YOY, indicating that the stuff we are now buying is more expensive than it was a few months ago.  There was something else that also rose.  Let’s see what was that?  It’s on the tip of my tongue…oh yes, that’s it: the Fed raised rates yesterday by 0.25% and also said that they are planning on three rate hikes next year.  The bump yesterday was not a surprise; the three-peat announcement was a shocker.

So outside of the increased cost of borrowing money, Rent is up 0.3% last month and 3.9% from last year, and Medical Costs are up 4.0% from last year.  In her prepared statement yesterday, Ms. Yellen forecast the Unemployment Rate to stay close to the current 4.6% through 2017, and also predicted a 2.0% average GDP growth through 2019.

The mortgage bond market had a pretty rough go yesterday, which, depending on the maturity, lost almost 100 points.  Perhaps we bounce back today and perhaps rates continue pushing higher…

November’s Retail Sales increased last month by only 0.1%, less that the 0.3% expected. That brings the year-over-year number to an increase of 3.4% from last November, and right in line with the average over the last five years.  An interesting sidebar here is that online retail business increased 15% year-over-year, while big-box sales are down 6.1% over the same period.

Another interesting statistic is that the cost to produce goods rose 0.4% last month and is only up 1.3% from this time last year.  The Consumer Price Index will be released tomorrow, but will most likely be drown out with the scrutiny over today’s Fed rate hike and subsequent policy statement.

Where it’s a given that the Fed will raise their rate, I don’t see it impacting our 30 year mortgage rates much.

It’s the Thought that Counts

There is virtually a unanimous sentiment that the Fed will raise interest rates 0.25% at the conclusion of tomorrow’s Open Market Committee meeting, but it’s the tone of the statement that is now being debated.  Some argue that the rate hike will be counterbalanced by a message of comfort and a plea for patience as they gradually increase the federal funds index.  Others contend that the message will focus on a strong labor market setting the foundation for a string of hikes to return to economic normalcy–whatever that is.

Of course, interest rates move all the time without any Fed manipulation.  The 10 year Treasury notes are up a full percentage point from just a few months ago.  The rate hike tomorrow, should it happen, will be just the second one in the last decade.  And so what really matters to the future of long term interest rates is not whether the Fed hikes tomorrow or not, but how it’s done.  After all, it’s the thought that counts, right???