Daily Rate Update: August 12th-16th

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Friday – August 16, 2019

New home construction across the US in July declined from June falling for the third straight month, due in part to a drop in multi-family dwellings. US housing starts fell nearly 4% in July from May to an annual rate of 1.191 million units. From a year ago, starts were up 0.6%. Multi-dwelling units plunged 17% month-over-month and were down 4.7% annually. Single-family starts, which make up the bulk of the housing market, rose 1.3% from June and up almost 2% year-over-year.

Rental prices edged higher in July due to household numbers rising while apartment development has not kept up with demand. RentCafe reports that the nation’s average rent rose $48 from a year ago to $1,469, up 0.2% from June and higher by 3.4% from a year ago. “A slow recovery in construction has led to a nationwide housing shortage,” said Doug Ressier at Yardi Matrix. “The number of households is now rising at the same level as in the 1990s and early 2000s, but apartment development is not keeping up with demand, leading to rising prices.”

Courtesy of Mortgage Market Guide

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Thursday – August 15, 2019

The consumer is alive and kicking due to a strong labor market. July retail sales rose 0.7%, well above the +0.3% expected, the biggest gain in four months. When stripping out autos, sales jumped 1% versus a gain of 0.3%. Within the report, the control group number rose 1% well above expectations. The control group is all sales, excluding receipts from auto dealers, building-materials retailers, gas stations, office supply stores, mobile homes and tobacco stores. This filtered number is a more precise method of gauging consumer spending, and consumer spending makes up nearly 70% of US GDP.

After declining since the year began, mortgage rates held steady in the latest week and remain at multi-year lows. Freddie Mac reports that the 30-year fixed-rate mortgage was unchanged this week at 3.60% with an average point of 0.50. A year ago this time, the rate averaged 4.53%. Sam Khater, Freddie Mac’s chief economist, says, “The decline in mortgage rates over the last month is causing a spike in refinancing activity – as homeowners currently have $2 trillion in conventional mortgage loans that are in the money – which will help support consumer balance sheets and increase household cash flow. On top of that, purchase demand is up seven percent from a year ago.”

The Mortgage Bankers Association reports that its Builder Application Survey for July showed that mortgage applications to purchase new homes surged 31% from last year. On a month-over-month basis, applications rose 11%. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors. “July’s strong new home sales increase on a monthly and annual basis was driven by the ongoing decline in mortgage rates, combined with steady housing demand and a still-healthy job market,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.

Courtesy of Mortgage Market Guide

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Wednesday – August 14, 2019

Mortgage application activity surged in the latest week as mortgage rates fell again and remain at multi-year lows. The Mortgage Bankers Association reports that the Market Composite Index, a measure of total mortgage loan application volume, rose 22% in the latest week. The Refinance Index soared by 37% while the Purchase Index rose 2%. The 30-year fixed-rate mortgage fell eight basis points to 3.93%, the lowest since November 2016, with 0.35 in points. The jumbo 30-year fell to 3.88% from 3.96% with 0.24 in points.

Sale prices for newly built homes fell in Q2 2019 while supplies of new homes declined in the latest report from real estate brokerage Redfin. The company reported that supply of new homes was down 1%, which the largest annual decline since the first quarter of 2013. In the same time, the sales price for newly built homes dropped 0.5% year over year to a median price of $372,900. “I expect to see new-home inventory stay low overall. But low mortgage rates and more affordable prices for new homes mean sales could strengthen a bit in the coming months,” said Redfin chief economist Daryl Fairweather.

US stocks are plunging today after weak economic data from Germany and China stoked global recession fears. The Dow Jones Industrial Average was down over 600 points this morning at its worst level. Global economies continue to weaken but here in the US, the economy is still solid and as consumer confidence remains near all-time highs. In addition the US labor market is the strongest it’s been in 50 years, as evidenced by the 3.7% unemployment rate.

Courtesy of Mortgage Market Guide

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Tuesday – August 13, 2019

From the positive news department, the NFIB Small Business Optimism Index rose to 104.7 in July, just below all-time highs as expectations for business conditions, real sales, and expansion made solid gains. “While many are talking about a slowing economy and possible signs of a recession, the 3rd largest economy in the world continues to defy expectations, generating output, creating value, and expanding the economy,” said NFIB President and CEO Juanita D. Duggan. “Small business owners want to grow their operations, and the only thing stopping them is finding qualified workers.” Small businesses are the lifeblood of the US economy and from all signs, it is generating a solid working environment.

Consumer inflation edged higher in July due in part to rising gasoline and housing costs. A bit warmer-than-expected Core Consumer Price Index (CPI) for July was reported as it rose 0.3% from June versus the 0.2% expected while year-over-year it increased 2.2% from 2.1%. Headline CPI rose 1.8% from 1.6% in the 12 months ended in July. Not a big surge higher but above the July numbers. Inflation remains on the cool side which has helped to keep interest rates historically low.

Many pundits continue to talk of a recession indicator in the closely watched 2- and 10-year yield spread, as it narrowed to three basis points yesterday. If an inversion were to occur, where long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality, a recession comes in about 22 months on average after the curve inverts. That would be almost two-years from now, where in that time span anything can take place. The Federal Reserve Bank of the US has said it will use all of its power to avoid an economic slowdown.

Courtesy of Mortgage Market Guide

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Monday – August 12, 2019

There are no economic reports due for release today, but the rest of the week the markets will receive data from CPI, housing, manufacturing, retail sales and consumer sentiment. Earnings season will be coming to an end with 90% of the S&P 500 companies having reported their numbers. Of those companies that have reported, 73% have beaten analyst estimates.
The markets will continue to ebb and flow with the trade and currency issues this week while economic data could also impact trading.

Mortgage credit availability decreased in July led by declines in conforming and government indices, reports the Mortgage Bankers Association. The Mortgage Credit Availability Index (MCAI) fell by 0.4% to 189.0 last month. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012.

Courtesy of Mortgage Market Guide

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