Daily Rate Update: April 30th-May 4th

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Friday – May 4, 2018

The Bureau of Labor Statistics reported on Friday that U.S. employers added 164,000 new workers in April, below the 190,000 expected. This was up, however, from the 135,000 recorded in March (which was revised higher from 103,000). The Unemployment Rate fell to an 18-year low of 3.9% while the total unemployment number, or the U6, fell to 7.8%, down from 8.6% from a year ago.

Wage growth fell to 2.6% on an annual basis, down from the 2018 high of 2.9% recorded in January. Month-over-month hourly earnings rose 0.1% versus the 0.2% expected. This is a soft reading and does prevent the Fed from hiking the Fed Funds Rate more aggressively. The Fed will most likely hike rates in June and the market is expecting it. Despite the growing economy, wage growth has been soft for quite some time.

Courtesy of Mortgage Market Guide

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Thursday – May 3, 2018 

A recent survey by First American Financial Corp. reveals that there is no housing affordability crisis. One of the reasons given in the survey is that while home prices have been increasing, so have incomes. The report went on to show that most states have reached their peak home price at 2007 levels, while incomes are much higher than they were in last decade.

U.S. Stocks are lower today as investors remain on edge about the U.S.-China trade talks coupled with less than impressive corporate earnings released this morning. Treasury Secretary Mnuchin is in Beijing today spearheading two days of trade talks between the two countries. The closely watched S&P 500 has fallen below a key technical level, which is ushering in more selling.

Mortgage rates edged slightly lower this week after three straight weeks where borrowing costs have risen, after being in an upward pattern since the year began. Freddie Mac reports that the 30-year fixed-rate mortgage fell three basis points to 4.55% with an average 0.5 in points and fees. Despite the higher rates this year, Freddie Mac reports that its data through April shows that first-time home buyers represent 46% of purchase loans, up from 43% over the same period a year ago.

Courtesy of Mortgage Market Guide

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Wednesday – May 2, 2018 

The first of two key labor market reports was released this morning showing that ADP Private Payrolls rose 204,000 in April, down from the 228,000 recorded in March, which was revised lower from 241,000 and below the 225,000 expected. However, expectations ranged from 200,000 to 240,000. This is a good reading in what is already a tight labor market that is getting tighter. The report comes ahead of the Non-Farm Payroll report from the government which will be released Friday morning.

It’s Fed day! The Fed will release its monetary policy statement at 2:00 p.m. ET this afternoon where it is expected that the Fed Funds Rate will remain at current levels. The text within the statement will be closely dissected by the investing community. The Fed Funds Rate is currently at the 1.75% range, marking the Prime Rate at 4.75%. Fed Funds Rate + 3 points = current Prime Rate of 4.75%. The question is whether or not the statement will lean towards dovish or hawkish for the members’ views on inflation and the economy.

The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage rose 7 basis points to 4.80%, jumbo up 5 basis points to 4.69%, both at highs seen in September 2013. FHA jumped 10 basis points to 4.81%, its highest since July 2011. Those rates carry at least an average 0.50 point added on top. And where the rates have increased, they are still historically low. In addition, refinance index decreased 4% from the previous week while the purchase index fell 2%.

Courtesy of Mortgage Market Guide

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Tuesday – May 1, 2018

High demand, limited supply of homes for sale on the market, along with new home construction running below historically normal levels pushed home prices higher in March. CoreLogic reports that home prices, including distressed sales, rose 7% from March 2017 to March 2018, while there was a 1.4% month-over-month gain from February to March. Looking ahead, CoreLogic forecasts a 5.2% rise in home prices from March 2018 to March 2019. CoreLogic went on to report that half of the top 50 markets in the country are overvalued because home prices in those areas have risen so much faster than incomes.

The two-day Fed meeting kicks off today, and while there is a near 0% chance of a hike to the short-term Fed Funds Rate, the accompanying monetary policy statement always has the potential to be a market mover. There will be no headlines out of the meeting today. The monetary policy statement will be released tomorrow at 2:00 p.m. ET and will come along with the Fed’s economic projections.

U.S. construction spending fell in March due in part to weak home building during the month. The Commerce Department reported on Tuesday that construction spending declined 1.7% in March from February, below the 0.5% gain expected. Within the report it revealed that private construction projects fell 2.1%, the largest decline since January 2011 while public construction projects were unchanged. In addition, government construction jumped 2.2%.

Courtesy of Mortgage Market Guide

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Monday – April 30, 2018 

The Fed’s favorite inflation measure showed that consumer inflation was on the rise in March. Annual Core Personal Consumption Expenditures (PCE), which excludes volatile food and energy prices, rose 1.9 percent in the 12 months through March. This was the biggest increase since February 2017, and it brings annual Core PCE closer to the Fed’s target of 2.0 percent. This data could strengthen the Fed’s case to raise its benchmark Fed Funds Rate at its June meeting.

Personal Income also increased 0.3 percent in March, though February’s figure was downwardly revised to a 0.3 percent increase (from 0.4 percent). March Personal Spending rose 0.4 percent, with February’s figure also revised lower to 0.0 percent (from 0.2 percent).

Keep a look out for two other potential market movers this week. The Fed’s two-day meeting begins tomorrow, with the Monetary Policy Statement releasing at 2:30 p.m. ET Wednesday. Plus, the Jobs Report for April releases at 8:30 a.m. ET Friday. Both have the potential to cause extra volatility in the markets.

Courtesy of Mortgage Market Guide

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