President Donald Trump basked in a stronger economy, lobbied for overhauling immigration policy and called for bipartisan support to rebuild the nation's infrastructure in his first State of the Union address this week.

In a lengthy primetime address, Trump credited his policies — particularly, the $1.5 trillion tax reform package — with paving the way for the improving economy and impressive stock market gains. He lauded falling unemployment as a hallmark of his leadership. And he vowed to bring together Republicans and Democrats to craft a massive infrastructure plan and make substantive progress on immigration reform, particularly creating a path to citizenship for the so-called Dreamers, young people who were brought to the U.S. illegally as children.

 

Despite shows of disapproval at what he was saying (some Democratic lawmakers were stone-faced for most of the speech; others jeered), Trump championed the beginning of a "new American moment."

"There has never been a better time to start living the American Dream," Trump said.

He didn't say anything about housing when praising the vitality of the economy. The national homeownership rate this week achieved a three-year high and rose for the first time since 2004. And even though interest rates are rising, they're still historically low.

Challenges remain. Housing inventory is disappointingly low and home prices are growing three times faster than the rate of inflation and household income.

Still, some industry advocates, such as Randy Noel, chairman of the National Association of Home Builders, applauded Trump's tax reform plan for its potential to boost Americans' wealth and energize the housing market.

"NAHB looks forward to working with the White House to continue to promote policies that will spur job and economic growth and promote homeownership and rental housing opportunities for all Americans," he said.

Jobs up by 200k

 The Trump administration's anthem of economic vitality comes on the heels of a banner year for jobs and the economy. About 2.1 million jobs were added to the economy in 2017, a modest decline from the 2.2 million added in 2016.

On Friday, the Labor Department said 200,000 jobs were created in January — a robust start for the labor market that sets the table for what the Trump administration has vowed will be a bumper crop year for jobs. The unemployment rate remained unchanged at 4.1 percent and average earnings rose by 2.9 percent year over year.

Economists expected a 180,000-job increase in the labor market last month. The overflow comes just as economists and policymakers have made additional forecasts about the U.S. economy's projected growth. This week, the Atlanta Federal Reserve said it was expecting gross domestic product to grow by 5.4 percent in the first quarter — the best upswing since recovery from the recession started in 2009.

In an interview with National Public Radio, Deputy Press Secretary Raj Shah stressed that job creation, employers expanding benefits and giving bonuses, rising wages and a soaring stock market prove that Trump's economic strategies are working.

"The economic record of this president and what's happened over the past year is tremendous," he said. "Tens of millions of Americans have a lot to be optimistic about when it comes to the economy."

Passing the baton

 Policymakers are feeling optimistic, as well.

The Federal Reserve left interest rates unchanged when it met Wednesday during Janet Yellen's final meeting as the central bank's chair. She'll step down on Saturday and pass the mantle to Jerome Powell, a former Fed governor who Trump appointed as her replacement.

Policymakers took a hawkish tone as they detailed expectations that inflation will rise this year and settle around the Fed's 2-percent target over the medium term. Inflation has been strangely sluggish for the past five years and has consistently missed the Fed's target.

Still, the Fed indicated it plans to raise rates three times this year beginning in March. Its next policy-setting meeting will be March 20-21.

Powell is inheriting leadership of the Fed at a time the economy is white hot. Unemployment is at a 17-year low. The labor market is strengthening. The stock market has experienced historic gains. And sweeping tax cuts are expected to boost Americans' paychecks.

Powell could make his public debut in mid-February when the House and Senate hold biannual hearings on monetary policy.

Global stocks take a hit

Global stocks on Friday appeared poised to plummet to their lowest weekly drop since late 2016 as talk of central bank policy tightening and expectations of higher inflation lifted borrowing costs globally, according to Reuters.

The MSCI world equity index, which tracks shares in 47 countries, fell 0.4 percent. The yield on the 10-year U.S. Treasury note increased throughout the week on increased volatility to 2.83 percent, its highest level since early 2014. That means mortgage rates, which follow the direction of the 10 year yield, will likely follow.

 

Several factors across the globe may have contributed to the activity. The European Central Bank is expected to end its bond-buying program in September. That pushed five-year German bond yields above zero for the first time since 2015, Reuters reported. The Bank of Japan pledged to buy as many bonds it would take to keep yields low.

The dollar index gained slightly — 0.2 percent — by noon in Europe but still had not moved above its lowest level in three years.

In other mortgage news…

• The national homeownership rate reached its highest level in three years and moved up for the first time since 2004, according to the U.S. Census Bureau. The rate moved up slightly to 64.2 percent in the fourth quarter of 2017, up from 63.7 percent a year earlier.
• A massive sell-off in the bond market pushed mortgage rates to their highest levels since 2014. A crop of bond market supply is coming on the horizon and will push Treasury yields higher, meaning mortgage rates will follow.
• Mortgage applications fell 2.6 percent from last week, according to the Mortgage Bankers Association.
• Pending home sales rose in December (increasing 0.5 percent to 110.1 percent), suggesting that 2017 was the best year for new-home and existing-home sales in a decade. But the National Association of Realtors warns that tax reform might hurt home buying if inventory remains low while job creation ramps up and wages rise.
• Consumers are more confident in the state of the economy, according to the Conference Board's measure of consumer confidence, which rose by more than expected last month. The index rose to 125.4 in January, rebounding from 122.1 in December 2017.
• Home prices rose by 6.2 percent in November 2017 as they continue to rise three times faster than the rate of inflation, according to the S&P Case-Shiller home price index.