Daily Rate Update: October 13-16

Tuesday – October 13

As the nation continues to reopen, small business optimism increases despite several states not fully back to business. The NFIB Small Business Optimism Index rose 3.8 points to 104.0, just below record highs after the low levels seen in March, April and May. The report went on to read that owners expecting better business conditions over the next 6 months increased 8 points to a net 32% while real sales expectations in the next 3 months rose 5 points to a net 8%. NFIB Chief Economist Bill Dunkelberg said, “Some small businesses are still struggling financially to operate at full capacity while navigating state and local regulations and are uncertain about what will happen in the future.”

Corporate quarterly earnings season kicked off this week with JPMorgan Chase reporting better-than-expected earnings with slightly weaker revenues. Citigroup and investment firm Black Rock also delivered good numbers. The numbers will continue to stream in over the course of the next month and will give investors a look into what lies beyond the financial devastation caused by the pandemic-induced shutdown.

Gas prices at the pumps remained unchanged this week and below levels seen last year due to an abundance of oil supply flowing through the world’s pipelines which is outweighing demand. The national average price for a regular gallon of gasoline is $2.18, down from $2.63 a year. The all-time high price was seen in July 2008. The price for a barrel of West Texas Intermediate oil is at $40. In January 2020, the price was $66.

Courtesy of Mortgage Market Guide

Wednesday – October 14

The MBA reports that mortgage rates remained at record lows in the latest week which continues to support the housing market. The 30-year fixed-rate mortgage held at a record low 3.0% with 0.32 in points for the week ending October 9, 2020. The Market Composite Index, a measure of total mortgage loan application volume, fell 0.7%, the Purchase Index declined 2% while the Refinance Index fell 0.3%. Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting said, “Refinance and purchase activity continue to run well ahead of last year’s pace, fueled by record-low rates and strong homebuyer demand.”

The luxury home market got a boost in the third quarter of 2020 jumping 42% from the third quarter of 2019. That is the largest increase since 2013 when record-keeping began. However, sales of medium-priced homes rose just 3% while sales of affordable homes fell 4.2%, due in part to the pandemic-induced impact on potential home buyers at lower levels of wealth. Redfin chief economist Daryl Fairweather said, “Remote work, record-low mortgage rates and strong stock prices during the pandemic are allowing America’s wealthy families to gobble up expensive houses with home offices and big backyards in the suburbs.”

Courtesy of Mortgage Market Guide

Thursday – October 15

Home borrowing costs hit fresh record lows in the latest survey and continue to buoy the housing market. Freddie Mac reports that the 30-year fixed-rate mortgage fell to 2.81% this week from 2.87% last week with 0.6 in points and fees. A year ago at this time, the rate averaged 3.69%. Sam Khater, Freddie Mac’s Chief Economist said, “As we hit yet another record low, the tenth record this year, many people are benefiting as refinance activity remains strong.”

Americans filing for first-time unemployment benefits continued to run stubbornly high in the latest week. Weekly Initial Jobless Claims came in at 898,000 for the week ended October 10, down from the 845,0000 in the previous week. The 898,000 is well below the 6 million seen in late March and early April at the height of the pandemic. Continuing claims, which measures those receiving benefits for at least two weeks straight, fell to 10,018,000 from 11,979,000.

The housing sector remains strong and a workhorse for the U.S. economy. The MBA reports that mortgage applications to purchase new homes surged 38% in September from a year ago while a 5% decline was seen month over month from August. The MBA estimates that new single-family home sales were running at an annual pace of 869,000 units in September. The MBA broke down the numbers as such. Conventional loans composed 71.3% of loan applications, FHA loans 17.85, RHS/USDA loans 0.8% and VA loans 10.1%. The average loan size of new homes increased from $348,576 in August to $354,316 in September.

Courtesy of Mortgage Market Guide