Economic Growth Remained Solid in the Third Quarter of 2017

Economic growth remained solid in the third quarter of 2017, spurred on by robust business spending that was well above the weak levels experienced at the beginning of the year. The final read on third quarter Gross Domestic Product rose 3.2%, just above the 3.1% from second quarter. However, within the report it showed that consumer spending, which accounts for two-thirds of economic activity, rose 2.2%, down from 3.3% in the second quarter. Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period. It is considered the broadest measure of economic activity.

Home price gains continue to make the headlines as low mortgage rates, a strong U.S. economy and low inventories of homes for sale continue to drive prices higher. The Federal Housing Finance Agency (FHFA) reports that its October Home Price Index (HPI) rose 0.5% from September. On an annual basis, prices jumped 6.6%. The FHFA monthly HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac.

With the Christmas holiday on Monday, many Americans will travel to their destinations between now and January 1. Motor club AAA says that more than 107.3 million Americans are predicted to travel between December 23 and January 1, which would be a new record and the ninth consecutive year of increased year-end travel. In addition, AAA says about 97.4 million people are expected to travel by car, 6.4 million people will take plane rides and 3.6 million others will travel by train, bus, rails and cruise ships. Just remember, if you travel via automobile, be sure to have an emergency kit that consists of a flashlight with extra batteries, jumper cables, first aid kits, water, nonperishable food items, matches, blankets and warning devices. Your car should also have an ice scraper and a small shovel in case you get stuck in snow.

Housing Market Continues To Improve

Monday – December 18

The housing market continues to improve as home builders report strong optimism as the year comes to a close. The National Association of Home Builders Housing Market Index jumped to its highest level in 18 years, up 5 points to 74 and above the 70 expected. Builder confidence has improved in 2017 on hopes of an improved regulatory environment for firms in the residential construction sector. The NAHB said that home buyer traffic and current sales conditions both increased in December. The NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months.

Retail Sales surge. Fed hikes rates

Thursday – December 14

The Commerce Department reported on Wednesday that retailers saw consumer spending jump in November to kick off the holiday shopping season. November Retail Sales rose 0.8%, well above the 0.3% expected, while October was revised higher to 0.5% from 0.2%. Since November 2016, Retail Sales grew by 5.8%. A strong labor market coupled with an improving economy were the catalysts behind the gains.

The Federal Reserve raised the benchmark short term Fed Funds Rate by 0.25% yesterday bringing that rate to 1.50%. The hike in rates now leaves the Prime Rate at 4.5%, which is calculated by taking the Fed Funds Rate and adding three points. On the inflation front, the Fed said that “both overall inflation and inflation for items other than food and energy have declined this year and are running below 2%.

Fed Meeting Kicks off Tuesday.

The two-day Fed meeting kicks off on Tuesday and ends Wednesday with the 2:00 p.m.ET release of the Fed statement. Fed Chair Yellen will hold a press conference immediately following the release at 2:30 p.m. ET in what will be her last as Fed Chair. The Fed Funds Rate is expected to rise by 0.25% to 1.50%. The statement could reveal more rhetoric on the Fed’s balance sheet and will reveal the current state of the economy. The Fed statement always carries a big headline risk.

Rising home prices across the U.S. lifted many underwater mortgages into positive equity between the second and third quarters of 2017. Analytics firm CoreLogic reports that 260,000 mortgaged properties regained equity between the second and third quarters of 2017. CoreLogic Chief Economist Frank Nothaft said, “Homeowner equity increased by almost $871 billion over the last 12 months, the largest increase in more than three years. This increase is primarily a reflection of rising home prices, which drives up home values, leading to an increase in home equity positions and supporting consumer spending.” Negative equity means your home’s current fair market value is less than your outstanding loan balance (i.e you owe more on your home than it’s worth).

November Job Growth Solid

Job growth remained solid in November after the brief hiccup in September due to Hurricanes Harvey and Irma. The Bureau of Labor Statistics reports that 228,000 workers were hired last month, above the 190,000 expected. Within the report it showed that the Unemployment Rate remained at 4.1 %, which is considered full employment. However, average hourly earnings disappointed, growing by 0.2% from October to November, below the 0.3% expected. Year-over-year, earnings rose 2.5%, again below the 2.7% expected. In 2017, average monthly job growth eased to 174,000 new jobs per month from 187,000 in 2016.

Mortgage credit availability loosened a bit in November driven in part by a net increase in investor offerings. The Mortgage Bankers Association reports that mortgage credit availability index increased to 182.4 last month, an uptick of 0.8%. An increase in the index indicates that credit availability is loosening, while a decrease signals that lending standards are tightening. The index was bench marked to 100 in March 2012.

The House and Senate approved a measure Thursday to avert a partial government shutdown ahead of the midnight deadline tonight. The bill, also known as a continuing resolution, would keep federal agencies functioning for an additional two weeks through Dec. 22.