The Tidwell Report

I hope you and your family had a Happy New Year!

I’ve continued to modify this week’s report based on the latest political event involving Iran that has been unfolding over the past few days but I wanted to get this out without further delay.  This is a very serious situation that needs to be monitored closely.  With that said, here is the Tidwell Report, recapping 2019 and last week’s events:

Goodbye 2019
If you like 2019’s home mortgage rates, 2020’s rates could be lower according to a report by Fannie Mae.  There is speculation that the average fixed rate will be 3.6% over the next 12 months, which would set the record for the lowest annual average ever recorded in records dating back to 1973.  In 1981, the annual average was above 16%!?!?

A forecast by Corelogic predicted continued home price appreciation of 5.4%, and other experts suggested that there was a minimal probability that home prices will move lower in the next two years.

The month of January became the hottest new month for home sales, according to a report by Realtor.com. Between 2015 and 2018, April was the peak month for the average views per listing on its website while January lagged behind April by a full 16% during that period.

That changed in 2019 when January became the busiest month on the site in 20 of the largest 100 metros, including Los Angeles, San Jose, San Francisco, Seattle, Denver, Dallas, Houston, Atlanta, Chicago, and New York.  This is likely due to a trend by homebuyers who are modifying their home buying strategy to avoid rising prices and the intense competition that occurs in markets suffering from housing supply issues.

Meanwhile, Los Angeles took the award for the hottest housing market in California, which kicked off in November when the median price increased 7.4% from a year earlier, according to a report by the California Association of Realtors.

Hello 2020
With a Kaboom!, Donald Trump exercised his Commander-In-Chief role at the start of the year, which sent investors to the sidelines, i.e. investing in less risky assets, like bonds.

This incident drove down the rate on 30-year fixed mortgages an eighth of a percentage point.  This is normal when there is a big scare like this.  What happens next will determine whether rates will stay down, or possibly continue lower should more investors pile into bond markets based on the news and rhetoric of the various factions.

While this could be a short term gain for homebuyers, it could be a long term loss for both sides of the housing market since people tend to avoid engaging in big-ticket transactions, like home purchases, if they feel uncertain about their economic prosperity.

If this incident with Iran bubbles into a larger conflict, we could see inflation return and mortgage rates spike up because the government would most likely need to significantly add to the preexisting deficit load by borrowing more money to finance a traditional war effort—let’s hope that is not the case at all!

Geopolitical uncertainties, supply constraints, local income & employment, plus consumer sentiment will likely be the strongest influences on what happens this year.

Further recap of 2019:

2019 STOCK MARKET RECAP 
*had a banner year in 2019*
The year began with many fearing a recession was looming, but after three rate drops by the Federal Reserve, stellar job growth that reduced the unemployment rate to a 50 year low, a North American trade deal, a preliminary trade deal with China, strong corporate earnings, and increased retail spending, the year ended with consumer confidence at an all-time high erasing fears of a pending recession. The S&P recorded 34 record highs in 2019.  2019 may be a year we look back on and hope to duplicate

By The Numbers:

• The Dow Jones Industrial Average ended the year up 22.3% at the close of 2018.
• The S&P 500 closed the year up 28.9% from at the end of 2018.
• The NASDAQ closed up 35.2% from 6,635.28 on December 31, 2018.

TREASURY YIELDS
*dropped sharply in 2019*
The 10-year U.S. treasury bond yield closed the year at a 1.92%, down from 2.69% On December 31, 2018.
The 30-year treasury yield ended the year at 2.30%, down from 3.02% on Dec. 31, 2018.

MORTGAGE RATES
*dropped to near historic lows in 2019*
The January 2, 2020 Freddie Mac Primary Mortgage Survey reported that:

• The 30 year fixed mortgage rate average was 3.72%, down from 4.55% on December 28, 2018.
• The 15 year fixed was 3.16%, down from 4.01% last December.
• The 5-year ARM was 3.46%, down from 4.00% at the close of 2018.

A more complete update will follow after the December job growth figures are announced next Friday and December home sales are released on January 21.

Below is the market update for the week ending January 4, 2019

STOCK MARKET
*closed the week mixed*

• The Dow Jones Industrial Average closed the week at 28,634.88, down from 28,645.26 last week.
• The S&P 500 closed the week at 3,234.85, down from 3,240.02 last week.
• The NASDAQ closed the week at 9,020.77, up from 9,006.62 last week.

TREASURY YIELDS
*slightly lower this week — we watch yields because mortgage rates often follow bond yields*

• The 10-year treasury bond closed the week yielding 1.80%, down from 1.88% last week.
• The 30-year treasury bond yield ended the week at 2.26%, down from 2.32%  last week.

MORTGAGE RATES
*steady this week*
The January 2, 2010 Freddie Mac Primary Mortgage Survey reported mortgage rates for the most popular loan products as follows:

• The 30-year fixed mortgage rate average was 3.72%, almost unchanged from 3.74% last week.
• The 15-year fixed was 3.16%, almost unchanged from 3.19% last week.
• The 5-year ARM was 3.46%, almost unchanged from 3.45%  last week.

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