Weekly Economic Update – 12.04.17

BIG NEWS YOU LIKELY HEARD:  the regulator for Fannie Mae and Freddie Mac, announced new conforming loan limits for 2018. The baseline limit, which affects most markets, will increase by 6.8% to $453,100.  This is up $29,000 from the current loan limit!

Political headlines were the main influence on mortgage rates last week and caused a great deal of volatility.  Stronger than expected economic data also was a factor.  However, the positive and negative news was offsetting, and mortgage rates ended the week with little change.

On Friday, it was reported that former National Security Advisor Michael Flynn would plead guilty to one charge and would cooperate fully with the Special Prosecutor.  There is speculation that he will testify about President Trump.  The resulting uncertainty caused investors to shift from riskier assets such as stocks to safer assets such as bonds, including mortgage-backed securities (MBS).  The added demand for MBS was positive for mortgage rates.

In recent weeks, signs of progress of tax reform have been viewed as negative for mortgage rates and good for stocks.  This is because tax reform is expected to stimulate economic activity, which would raise the outlook for future inflation.  On Tuesday, the Senate Finance Committee passed its tax reform plan, which was unfavorable for mortgage rates.

A series of stronger than expected economic reports released during the week were also negative for mortgage rates.  Third quarter gross domestic product (GDP), the broadest measure of economic activity, was revised higher from 3.0% to 3.3% and the Consumer Confidence index jumped to the highest level since 2000.  Sales of new homes in October rose 6.2% from September, reaching the highest level since 2007.

Looking ahead this week, investors will be focused on political news that could influence mortgage rates.  On the economic front, the important monthly Employment report will be released on Friday.  As usual, this data on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month (and CAN be a big rate mover).

Please let me know if you have any questions in regards to this, or if there is anything we can do for you and your valued clients.

Thank you for your continued support, have a productive week.

Stuart Crawford
SVP, Regional Manager
V.I.P. Mortgage, Inc.

AZ: LO0911271
NM: 156166