Daily Rate Update: August 13th-17th

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Friday – August, 17, 2018

Ellie Mae released its Origination Insight Report for July this week showing that the percentage of closed purchase loans held steady at 71% of total loans closed in July for the second straight month. Ellie Mae reports the average 30-year interest rate for all loans edged higher to 4.91% from 4.90% in June and a new Origination Insight Report high. “The purchase market remained solid in July and as we see inventories rise, we might begin to see a transition to a buyer’s market,” said Jonathan Corr, president and CEO of Ellie Mae. “The summer home buying season is still in full swing and while interest rates have risen, we expect to see a continued increase in purchase percentages.”

Consumer sentiment edged lower in early August and slipped to its lowest level since September 2017 concentrated in the bottom third of the income distribution. The Consumer Sentiment Index in August fell to 95.3, below the 97.8 expected and down from 97.9 in July. Consumers said that buying conditions for large households durable items fell to the lowest levels in four years. Home buying conditions were viewed less favorably in early August than anytime in the past 10 years, with home prices judged less favorably than anytime since 2006.

The pay rates between top chief executive officers and the average worker continued to widen in 2017. There was a 17% increase for the top guy with an average of $18.9 million a year compared with hardly a budge in wages for the average worker. The $18.9 million includes salaries, bonuses, restricted stock grants and other forms of compensation. The average worker pay grew by 0.2%.

Courtesy of Mortgage Market Guide

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Thursday – August 16, 2018

After hitting a nine-month low in June, new home construction bounced back in July. Housing Starts improved to a seasonally adjusted annual rate of 1.168 million units, up 0.9%from June’s downwardly revised estimate of 1.158 million. However, from July 2017, Housing Starts were down 1.4%, likely due to higher construction costs for materials, and shortages of land and labor this year. While the Midwest and South saw increases, Starts declined in the West and Northeast.

Building Permits, a sign of future construction, had better results in July, increasing 1.5% from June and up 4.2% from a year ago.

Optimism that trade tensions between the U.S. and China are easing helped Stocks rebound in early trading. Continued uncertainty overseas in Turkey also has the potential to increase market volatility.

Courtesy of Mortgage Market Guide

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Wednesday – August 15, 2018

Consumers splurged in July as evidenced by the strong Retail Sales number, which rose 0.5% from June, exceeding the 0.1% expected. This solid number signals that the U.S. economy is doing well. Sales were led by clothing and accessories stores and gasoline station sales. However, June Retail Sales were revised lower to 0.2% from 0.5%, which took some of the luster from the July number. On an annual basis, Retail Sales were up 6.4% from July of last year. The U.S. economy depends on consumer spending to keep the motor running, and with back-to-school season upon us, Halloween not far away, and the holiday shopping season down the road, retailers could be looking at strong sales in the coming months.

Home builder confidence remained strong in August due in part to solid demand for new housing, a strong labor market and increasing wage growth along with rising household formations. The National Association of Home Builders reports that its Housing Market Index for newly-built single-family homes fell one point to 67 in August, where any number over 50 indicates that more builders view conditions as good rather than poor. “However, builders are increasingly focused on growing affordability concerns, stemming from rising construction costs, shortages of skilled labor and a dearth of buildable lots,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La.

Mortgage rates remained essentially unchanged in the latest week as they hover just a percentage point above all-time lows. The Mortgage Bankers Association (MBA) reports that its Market Composite Index, a measure of total mortgage loan application volume, fell 2% for the week ended August 10, 2018. The MBAs refinance index was unchanged, while the purchase index fell 3%. The 30-year fixed-rate mortgage fell 3 basis points to 4.81% with points decreasing to 0.43 from 0.45. The 30-year fixed-rate mortgage with jumbo loan balances was unchanged at 4.73% with an average 0.29 point. The survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990.

Courtesy of Mortgage Market Guide

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Tuesday – August 14, 2018

Small business owners continue to express optimism due in part to a strong U.S. economy. The NFIB Small Business Optimism Index rose to its second highest level in the survey’s 45-year history to 107.9 in July, just a whisker away from its record-high of 108 set back in July 1983. Small businesses are one of the backbones of the U.S. economy and employ millions of Americans. “Small business owners are leading this economy and expressing optimism rivaling the highest levels in history,” said NFIB President and CEO Juanita Duggan. “Expansion continues to be a priority for small businesses who show no signs of slowing as they anticipate more sales and better business conditions.”

The world’s largest home improvement center, Home Depot, posted blowout earnings in its latest quarter due in part to strong home-improvement activity and a robust U.S. economy in the second quarter. Home Depot reported earnings per share of $3.05 versus the $2.84 expected while revenues came in at $30.46 billion, above the $30.03 billion expected. A slow start to the spring season, due to cooler weather pushed shoppers to purchase their spring gardening needs in the second quarter. The company has raised its earnings forecast for the full year.

The Congressional Budget office (CBO) reports that economic growth will be strong in 2018 but will ease in 2019 as fiscal stimulus eases. The CBO predicts that Gross Domestic Product will grow 3.1% in 2018, above the 2.2% recorded in 2017 due to increased government spending, reduction in taxes, and faster growth in private investment. The CBO went on to say that in 2019, the pace of GDP growth slows to 2.4% in the agency’s forecast as growth in business investment and government purchases slows.

Courtesy of Mortgage Market Guide

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Monday – August 13, 2018

U.S. Stocks are rebounding to start the week shrugging off the trade headlines and a bit of the Turkey dilemma because of the ongoing stream of good economic data here in the U.S. Given the limited size of Turkey’s economy, and the likelihood of this being a short-term “pain,” there shouldn’t be a major problem for the U.S. equity markets. There are no economic reports due for release today to impact trading. However, the rest of the week flares up with Retail Sales, Consumer Sentiment, Housing Starts/Building Permits/NAHB Housing Market Index, Philly Fed and the Empire Manufacturing hitting the wires.

The Labor Department reports that in June 2018, there were 5.50 million Americans that had their employment end by either quitting, being laid off or getting discharged from work. In June 2018, there were also 5.65 million Americans that were hired into new jobs. Separate from the 5.65 million Americans that were hired, there were still 6.66 million job openings that were unfilled, the second highest monthly total ever for a statistic tracked since December 2000.

The size of the U.S. Federal Reserve’s balance sheet continues to shrink as outlined in its reduction plan announced on September 20, 2017. U.S. Treasury debt and Mortgage-Backed Securities held by the Federal Reserve as of 8/01/18 was $4.04 trillion, down from $4.24 trillion as of 8/02/17. The reduction plan called for a $200 billion reduction that started in October 2017 and involved $10 billion of bonds maturing each month without reinvesting the principal. That monthly amount will increase by $10 billion each quarter before peaking at $50 billion per month in October 2018. The plan comes as the U.S. economy is less dependent on the Federal Reserve as economic growth continues to strengthen.

Courtesy of Mortgage Market Guide

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