Saturday, March 4, 2017

With roaring stock market, Fed suggests rate hikes soon

The Dow Jones industrial average broke another record this week, surpassing 21,000 for the first time.


So far, it seems there is no limit to the "Trump effect" on the stock market reaching new heights. Since the November election, the stock market has gained about 10 percent, with the Dow Jones shattering the historic 20,000 point record last month. Then it broke past the 21,000 mark this week following President Trump's speech promising tax repeals, deregulation and more infrastructure spending.

The stock market highs come at a time when the U.S. unemployment rate is low, at 4.8 percent, and wages finally climbed in 2016, pushing inflation rates to rise. These are some of the key economic indicators Federal Reserve officials will weigh to consider adjusting the central bank's interest rate at their mid-March meeting. Based on current data, it is likely Fed officials wil raise the 0.5 percent rate to 0.75 percent, which also influences other interest rates including mortgage rates.

How long will stock market boom continue?


There are still few details known about Trump's economic proposals, and unclear how many policies will garner Congressional support to become law. Thus far the markets are moving based on Trump's pro-business rhetoric coupled with stronger economic activity. The Fed has suggested there may be multiple rate hikes in 2017, but that will depend on continued economic strength.

Currently interest rates remain at relatively low levels by historic standards. If you are looking to purchase a new home or refinance your mortgage, call a Loan Advisor at 877-939-0339.

Monday, January 23, 2017

President Trump moves to suspend FHA insurance premium rate cut

FHA mortgages are backed by the federal government, offering less restrictive credit
and down payment standards to get loan approval. 

In one of his first acts as U.S. president, Donald Trump signed an executive order to suspend a scheduled 0.25 percent rate cut to the FHA program's mortgage insurance premium.

The rate reduction, which would have lowered FHA loan borrowers' mortgage insurance premium rate from 0.85 percent to 0.60 percent, was scheduled to go into effect on Friday. Former President Obama had signed the order earlier this month.

Trump's nominee for the new HUD Secretary, Dr. Ben Carson, has said he will further examine the policy if his nomination is confirmed by the Senate.

Post-election stock rally slows after inauguration


Following Trump's election in November, stocks hit new record highs on expectations that as president he would promote tax cuts, increase infrastructure spending and reduce regulations. The stock rally has slowed in recent weeks, tempered by Trump's recent comments endorsing "protectionist" policies of introducing a border tax on imported goods to the United States.

With more signs of economic strength - lower unemployment rates, increased consumer spending and homebuilder growth - inflation is also on the rise. Some economic analysts are expecting Fed board members to raise central interest rates again by the end of the second quarter of 2017.


Wednesday, December 14, 2016

Fed raises interest rates for first time in a year

This chart shows the change in unemployment rate compared with the number of monthly jobs added 
from 2009 through early 2016. The current unemployment rate has dropped to about 4.6%.
By Ben Moore - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=30968718

The Federal Reserve's open market committee began its much anticipated December meeting Wednesday with some much anticipated news: Yes, committee members unanimously voted to raise the central bank's interest rate by 0.25 percent. This matches the increase made at last December's meeting, which was the benchmark interest rate's first increase in nearly a decade.

Since the election of Donald J. Trump as the U.S. president-elect in November, the stock markets have been rapidly rising following the expectation of pro-growth policies. Trump has indicated he intends to promote corporate tax cuts and increased spending for infrastructure projects, which are projected to boost inflation. The Fed has been seeking higher inflation rates closer to 2 percent before raising interest rates too aggressively - inflation is currently at about 1.5 percent.

Fed expecting more growth, gradual rate increases


Fed officials said they expect to raise interest rates a few more times throughout 2017, dependent on continued economic growth. The national unemployment rate is currently about 4.6 percent and the GDP expanded by about 3.2 percent in the 3rd quarter of 2016.

Mortgage interest rates have been rising since the Nov. 8 election but were not dramatically affected by the Fed's announcement this week since markets have long factored a bump into projections. To learn more about rates available to purchase a home or refinance, contact a Vertex Loan Advisor at 877-939-0339.

Tuesday, September 27, 2016

Median income shows solid gains, stock markets close higher

U.S. Census bureau data shows median U.S. income gained more than 5 percent in 2015 to about $56,500, as reported at fivethirtyeight.com.

The Census Bureau released some positive economic data earlier this month, finding that the median U.S. income rose to $56,516 in 2015, more than 5 percent higher than a year prior. The bureau also found that the number of Americans living in poverty dropped by 3.5 million, the highest amount reduced since 1968.

These are significant milestones for post-Recession economic progress, as wages have not increased as quickly as the number of jobs added since 2009. This newer income data suggests that wages are finally catching up.

Fed stalls again on rate hike; stocks respond to U.S. presidential debates


A more sluggish August jobs report, however, prevented Federal Reserve members from raising the central bank's benchmark rates at its September meeting once again - there has been no rate hike yet in 2016. To members of the Fed, 151,000 new jobs added in August and a steady unemployment rate at 4.9 percent is acceptable, but not strong enough to validate raising rates yet. The next Fed meeting will be held in December, following the 2016 general election.

Monday night's first U.S. presidential debate proved to be a boon to the stock market, reacting favorably to a perceived debate victory by Democratic candidate Hillary Clinton. The former first lady is viewed by stock investors as a more predictable option compared to her Republican opponent, real estate maven Donald Trump. The stock markets will likely see more fluctuation leading up to the election in early November.

Friday, August 12, 2016

July consumer spending cools, stalling chance of rate hike

Sporting goods retailer Sports Authority, headquartered in Englewood, Co., closed its last standing stores in July.

Oil and gas profits down, online spending up


Retail sales across the U.S. remained flat in July, suggesting that Federal Open Market Committee members will refrain from raising the central bank's interest rates for some time until more tangible growth is seen.

Lower gasoline prices in July were one reason for the tepid sales following stronger growth in June. Cheaper gas did boost car sales, which may have pulled consumers away from spending on other products.

Another area of strength was online shopping, while brick and mortar stores struggled. Consumers are increasingly spending more online than in department stores, as retailer Macy's slashes its number of stores. Locally in Colorado, sporting goods powerhouse (and namesake of the Denver Broncos' stadium) Sports Authority shuttered its last stores nationwide in July after filing Chapter 11 bankruptcy.

The coming weeks and months will tell whether July was an anomaly in spending - especially following several reports of solid jobs data - or if there is a larger American spending shortage. The U.S. dollar continues to stay strong compared with other currencies, also helping to temper inflation.

As long as consumer spending is stunted and inflation is well under the benchmark of 2 percent, most economic analysts expect no significant change in interest rates, currently at near all-time lows.

Friday, May 6, 2016

As rates remain low, borrowing on the rise

The average wage rose 8 cents in April to $25.53 per hour, according to the latest U.S. jobs report.

The U.S. April jobs report is in and it bears less than stellar news: only 160,000 new jobs added to the economy, much lower than the 200,000 jobs expected. While The Atlantic described it in a single word, "meh," the tradeoff is that jobs that were added are higher paying. Unemployment remained even at 5 percent.

The most positive news for job holders is that wages increased 8 cents an hour to a nationwide average of $25.53. Large job gains were seen in more "white collar" positions, i.e. tech-related industries. Wage growth has been considered a key benchmark to signify real economic improvement.

A poorer jobs report does translate to continued low interest rates. Lower rates encourage more loans and credit taken out, and as proof, consumer borrowing has hit its highest point in nearly 15 years. More borrowing also indicates stronger confidence in financial growth and ability to pay off future debt balances.

This month's job numbers make a rate hike by the Fed less likely at their June meeting. With higher home values and low interest rates, it's a great time to contact your Loan Advisor to see if you can take advantage of current market opportunities.

Wednesday, March 16, 2016

Fed votes to keep rates steady

The consumer price index showed modest growth in February, according a recent U.S. Labor Department report.

The economy is showing growth, but more will be needed before raising the benchmark interest rates again, the Federal Open Market Committee decided Wednesday.

Fed chairwoman Janet Yellen said Wednesday that based on economic projections for continued steady growth, she expects the FOMC to approve slight rate increases twice before the end of 2016. For now though, rates are staying put.

Among the positive U.S. economic signs noted were continued low unemployment and slight gains in consumer prices, indicating some inflation. The consumer price index, excluding food and oil, increased 0.3% in February for the second month straight.

The marked drop in oil prices over the past year and half have been a major factor in preventing inflation gains. The gasoline index plunged 13.0% in February. Conversely, however, economists including Yellen expect money that consumers save at the gas pump will eventually be circulated back into the economy, boosting consumer spending and GDP growth.