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Daily Rate Update: January 25th-29th

Friday – January 29, 2021

Inflation pressures rose in December as Fed members look for a general increase in prices and fall in the purchasing value of money. The Fed’s favorite inflation gauge, the Core PCE, rose 1.5% annually in December, up from 1.4% in November and above the 1.3% expected. Monthly Core PCE was up 0.3% versus the 0.1% expected. Inflation has been slowly rising with commodity prices steadily increasing. Lumber prices are surging to near $900 from $264 in March 2020 and up from $478 at the end of October. Oil prices have also surged from negative territory in April to $53/barrel today. And that’s just two of the vast amount of commodities traded each day.

The National Association of REALTORS® reports that Pending Home Sales fell a meager 0.3% in December from November while annual contract signings jumped 21% to 125.5. A sale is listed as pending when the contract has been signed but has not closed. Sales were up in the Northeast and South, down in the Midwest and flat in the West. Chief economist Lawrence Yun said, “There is high demand for housing and a great number of would-be buyers, and therefore sales should rise with more new listings.”

Consumer Sentiment was unchanged in the final reading of January up from the early number in the month and just below the 80.7 in December. The index is well below the 2017-2019 average of 97. Also, the Chicago Manufacturing Index rose 5 points to 63.8 in January and is at the highest level since July 2018. With the manufacturing report, it showed that production saw the biggest monthly gain followed by new orders while the employment component declined.

Courtesy of Mortgage Market Guide 

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Thursday – January 28, 2021

Home borrowing costs edged lower this week and remain at historically low levels. Freddie Mac reports that the 30-year fixed-rate mortgage fell six basis points to 2.73% with 0.7 in points and fees. A year ago at this time, the rate averaged 3.51%. Sam Khater, Freddie Mac’s Chief Economist. “Even as house prices increase at the fastest rate we’ve seen in years, competition to buy is strong given the low inventory that exists across the country. The fact that there are not enough homes to meet demand is going to be an ongoing issue for the foreseeable future.”

Americans filing for first-time unemployment benefits fell in the latest week to 847,000 from 914,000. Continuing claims, or those receiving benefits for at least two weeks straight, fell to 4,71,000 from 4,974,000. The lockdowns in several states have increased recently but now those states are starting to reopen. When the economy fully reopens many workers should be able to go back to work.

The U.S. Census Bureau reports that New Home Sales rose 1.6% in December from November to an annual rate of 842,000 units. This is 15.2% above the December 2019 estimate of 731,000. An estimated 811,000 new homes were sold in 2020. The median sales price sold in December was $355,900 while the average sales price was $394,000. Unsold inventory is seen at a 4.3 month supply. Sales soared in the Midwest, rose in the West with losses seen in the Northeast and South. The housing sector continues to be a bright light for the U.S. economy.

Courtesy of Mortgage Market Guide 

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Wednesday – January 27, 2021

Mortgage rates remained at record lows in the latest survey but inched higher last week. The MBA reports that the 30-year fixed-rate mortgage rose three basis points to 2.95% with 0.32 in points for the week ended January 20, 2021. The Market Composite Index, a measure of total mortgage loan application volume, fell 4.1%, the Purchase Index fell 4% while the Refinance Index declined by 5%. “In a sign that borrowers are increasingly more sensitive to higher rates, large declines in government purchase applications and refinance applications pulled overall activity lower,” said spokesperson Joel Kan.

It’s Fed Day! The Federal Reserve will release its monetary policy statement at 2:00 p.m. ET with a zero percent chance of a hike to the near 0.0% short-term Fed Funds Rate. The Fed is expected to reiterate its dovish position and ongoing commitment to asset purchases. Mr. Powell may also be clear that the Fed is not tapering purchases anytime soon, Some Fed members have said as much, but the Fed Chair will most likely set the record straight today on asset purchases. Fed Chair Powell will hold a press conference at 2:30 and this always leaves the potential for a stray remark.

Courtesy of Mortgage Market Guide 

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Tuesday – January 26, 2021

Home prices continue to move higher due in part to the shift from urban apartments to suburban homes. The November S&P Case-Shiller 20-City Home Price Index saw a annual gain of 9.1% from November 2019. There was a 1% monthly increase from October to November. The National Index saw a 9.5% increase. Spokesperson Craig J. Lazzara said, “Recent data are consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes. This may represent a true secular shift in housing demand, or may simply represent an acceleration of moves that would have taken place over the next several years anyway. Future data will be required to address that question.”

The housing market continues to be a beacon of light for the U.S. economy and is expected to carry that torch in 2021. Zillow recently forecasted that home sales growth will be at the fastest pace in 2021 since the early 1980’s. Zillow is forecasting near 22% year over year growth for a total of almost 6.9 million homes sold this year – the fastest pace in annual sales growth since 1983. But don’t count city living out just yet due to the vaccine rollout and as local economies reopen. Zillow is predicting that people who left in 2020 will come back to the cities in 2021, especially young people who may have moved back home when the pandemic hit.

The Federal Housing Finance Agency also released robust house price gains today. The Home Price Index rose monthly by 1% from October 2020 to November 2020 while seeing an 11% gain annually from November 2019 to November 2020. Dr. Lynn Fisher, FHFA’s Deputy Director of the Division of Research and Statistics said, “The acceleration has been slowing but annual gains now outpace the prior housing boom. Current conditions can be explained by fundamentals, including low rates and tight housing supply, which have been intensified by the pandemic.”

Courtesy of Mortgage Market Guide 

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Monday – January 25, 2021

The Fed kicks off the two-day meeting on Tuesday and ends Wednesday at 2:00 p.m. ET with the release of the monetary policy statement. There is a zero percent chance of a hike to the short-term Fed Funds Rate but the market may look for clues on possible inflation pressures as well as the state of its asset purchase program. Fed Chair Powell will hold a press conference immediately following the statement release at 2:30.

This is the biggest week of earnings with Apple, Microsoft and Tesla a few of the names set to release. Of the S&P 500 companies that have already reported earnings, 73% have beaten on both revenues and earnings per share. There are no economic reports due for release today but the rest of the week features housing, consumer attitudes, manufacturing, Q4 2020 first read on Gross Domestic Product, the Core Personal Consumption Expenditures (inflation) and consumer spending.

Housing data will be front and center this week as the sector has been on fire since late spring 2020 when the country began to reopen after the shutdowns in March. The S&P Case-Shiller Home Price Index, FHFA Housing Price Index and New and Pending Home Sales will be released this week. The latest read on Existing Home Sales for December showed the best sales pace since 2006. The one big obstacle potential buyers will have to deal with is record low houses on the market for sale.

Courtesy of Mortgage Market Guide 

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