Daily Rate Update: August 20th-24th

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Friday – August 24, 2018

The U.S. economy has been growing at a strong pace in 2018 with second quarter Gross Domestic Product at a robust 4.1%. This week, Target CEO said, “We’re currently benefiting from a very strong consumer environment, perhaps the strongest I’ve seen in my career.” Retailers have recently reported the strongest sales in over a decade. Consumer spending makes up two-thirds of economic activity and as Americans spend money, economic growth should continue.

The Federal Housing Finance Agency reports that home prices rose 1.1% in the second quarter of 2018 in its House Price Index (HPI), as low inventories continue to push prices higher. House prices were up 6.5% from the second quarter of 2017 to the second quarter of 2018. On a monthly basis, prices were up 0.2% from May to June. The HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac.

Fed Chair Powell spoke at the Fed sponsored Jackson Hole Economic Symposium today, which was eagerly anticipated this week. Mr. Powell said that gradual rate hikes seem appropriate and he expects strong economic growth to continue. The Federal Reserve will do whatever it takes on inflation but there are no clear signs of it accelerating above its target range of 2%. Mr. Powell went on to say that the U.S. economy does not seem to be showing signs of overheating. Most people who want jobs can find them.

Courtesy of Mortgage Market Guide

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Thursday – August 23, 2018

Freddie Mac reports that the 30-year fixed-rate mortgage fell two basis points this week to 4.51% with an average 0.5 in points and fees. It was the lowest rate since mid-April. Freddie Mac said, “It is clear that affordability constraints have cooled the housing market, especially in expensive coastal markets. Many metro areas desperately need more new and existing affordable inventory to break out of this slump.”

New Home Sales declined 1.7% in July from June to an annual rate of 627,000, below the 645,000 expected. June’s number was revised higher to 638,000 from 631,000. While sales were down month over month, they were up 12.8% from July of last year. July sales plunged in the Northeast, fell in the South, while the Midwest and West saw solid gains. The median sales price was $328,700. There was a 5.9 month supply of new homes on the market, near the 6-month levels considered normal.

Americans filing for first-time unemployment benefits continue to hover near the lows seen in 1969 as the labor market is near full employment. The Labor Department reported that Weekly Initial Jobless Claims fell 2,000 in the week ended August 18 to 210,000. The four-week moving average of claims, which strips out volatile food and energy, declined 1,750 to 213,750. Some pundits feel that Weekly Initial Jobless Claims could fall below the 200,000 mark in the near future.

Courtesy of Mortgage Market Guide

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Wednesday – August 22, 2018

Existing Home Sales fell for the fourth straight month in July. The National Association of REALTORS reported that Existing Home Sales decreased 0.7 percent to a seasonally adjusted annual rate of 5.34 million in July from 5.38 million in June. This was their slowest pace in more than two years.

Existing Home Sales are 1.5 percent lower than July 2017, and they have declined on an annual basis for five straight months. Unsold inventory is at a 4.3-month supply, well below the 6-month supply seen as normal.

The minutes from the Fed’s July 31-August 1 Federal Open Market Committee meeting will be released today. It will be important to hear the Fed’s take on inflation and wage growth, since soft inflation and smaller wage growth has been keeping the Fed from hiking its benchmark Fed Funds Rate more aggressively.

Courtesy of Mortgage Market Guide

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Tuesday – August 21, 2018

Luxury homebuilder Toll Brothers reported strong earnings and forecasted solid guidance going forward in yesterday’s corporate earnings release. Rising orders along with a healthy economy sent completed sales up 18% from a year earlier. The company reported earnings per share of $1.26, well above the $1.03 expected. Douglas C. Yearley, Jr., Toll Brothers’ chief executive officer said, “Our double-digit growth in revenues, contracts and backlog and our strong earnings reflect the health of the new home industry in general and our unique position in the luxury market.”

U.S. Stocks are in the midst of the longest-ever bull market in American history. Fueled by tax cuts, solid economic growth, relatively low interest rates, strong corporate earnings and sky-high consumer confidence, the current bull-market that began on March 9, 2009, has lasted nine years, five months and 13 days … the longest stretch ever. The closely watched S&P 500 Stock Index is just six points below its all-time closing high of 2,872, hit back on January 26.

Courtesy of Mortgage Market Guide

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Monday – August 20, 2018

Home price gains continued in July though at a slightly slower pace than what the market has been seeing the past few years. Real estate brokerage Redfin reports that home prices rose 5.3% from July 2017 to July 2018 to a median price of $307,400. The rate of price gains has been declining for the past five months and it is the slowest annual increase since September 2016. In addition, home sales rose 4.1% year over year.

This week features just a few economic reports and no Treasury Bond or Note offerings. There are a couple of big events the financial markets must hurdle this week, including the annual Jackson Hole Economic Policy Symposium Thursday through Saturday. The Symposium focuses on important economic issues facing the U.S. and world economies. Fed Chair Powell will be speaking on Friday and could offer up some insight on the U.S. economy. On Wednesday at 2:00 p.m. ET, the Fed will release the minutes from the recent August 1 Federal Open Market Committee meeting.

U.S. Stocks are higher to begin the week buoyed by positive headlines surrounding trade talks between the U.S. and China. The two nations are scheduled to meet this Wednesday and Thursday with lower-level delegations from both countries. The Dow Jones Industrial Average is up 100 points as the week unfolds. The Dow, S&P and NASDAQ are just below all-time high levels due in part to a strong economy, a tight labor market, solid corporate earnings and sky-high consumer confidence.

Courtesy of Mortgage Market Guide

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