Daily Rate Update: August 26th-30th

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Friday – August 30, 2019

US consumer spending surged in July as Americans spent on an assortment of goods and services, which could further diminish the chances of a recession here in the US. Personal spending rose 0.6% in July, up from the 0.3% gain in June and above the 0.5% expected. Within the report, the annual Core PCE, the Fed’s favorite inflation gauge, held at 1.6%, below the Fed’s target range of 2.0%. With consumer spending making up nearly 70% of US economic activity, this bodes well for 3rd quarter gross domestic product.

The turbulent stock market in August coupled with the trade war between the US and China pushed consumer sentiment to 89.8 in the second of two readings. The was below the 92.4 expected and down from 98.4 in July.It was the largest decline in six years. “The recent decline is due to negative references to tariffs, which were spontaneously mentioned by one in three consumers,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement.

Courtesy of Mortgage Market Guide

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Thursday – August 29, 2019

Mortgage rates inched higher in the latest week, though they remain near multi-year lows and almost a full percentage point lower than last year this time. Freddie Mac reports that the 30-year fixed-rate mortgage rose five basis points to 3.60% this week with an average 0.5 in points and fees. Sam Khater, Freddie Mac’s Chief Economist says, “Low mortgage rates along with a strong labor market are fueling the consumer-driven economy by boosting their purchasing power, which will certainly support housing market activity in the coming months.”

Tappable home equity hit an all-time high in the second quarter of 2019 as home price gains have made real estate more valuable. Black Knight reports that tappable equity hit $6.3 trillion in the second quarter, 26% above the previous high hit back in 2006. The average homeowner has $140,000 available to borrow against with about 55% have a mortgage rate that is 0.75% above current rates. And with mortgage rates at multi-year lows, it is a good time to purchase or refinance a home.

Courtesy of Mortgage Market Guide

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Wednesday – August 28, 2019

Mortgage rates inched higher in the latest week rising for the first time since the week of July 12. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage rose just four basis points to 3.94% with 0.38 in points for the week ended August 23 but remain 80 basis points below the beginning of 2019. The MBA also reported that the Market Composite Index, a measure of total mortgage loan application volume, decreased 6.2%. The Refinance Index fell 8% while the Purchase Index declined 4%.

A report out this week by Fitch Ratings revealed that lower mortgage rates are not expected to be a boon for the US housing market and refinance activity as seen in prior rate cycles. Fitch cites three reasons for the lack of activity with the first being not enough supply on the markets. Second is that lenders may not be able to handle the big increase in refiancing while rising input costs for builders, due to tariff considerations, could be a negative for the housing sector. In conclusion, home prices are expected to rise 2%-3% this year, down from the approximate 6% average growth seen annually since 2012.

Courtesy of Mortgage Market Guide

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Tuesday – August 27, 2019

Home price gains continued to slow in June after the big gains seen annually a year ago. The S&P Case/Shiller 20-City Home Price Index rose 2.1% from June 2018 to June 2019, down from 2.4% in May. That is well below the near 7% gains seen last year this time. On a monthly basis from May to June, there were no gains. “Home price gains continue to trend down, but may be leveling off to a sustainable level,” says Philip Murphy, Managing Director and Global Head of Index Governance at S&P Dow Jones Indices.

Consumer strength remained lofty in August due in part to a strong job market along with a positive economic environment. The Conference Board reports that its Consumer Confidence Index came in at 135.1 in August versus the 129.6 expected and just below the 135.8 recorded in July. The present index or the read on current conditions improved further in August and is at its highest level since November 2000. “While other parts of the economy may show some weakening, consumers have remained confident and willing to spend,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.

With the Labor Day weekend upon us, gas prices at the pumps across the nation are the lowest in three years. Motor club AAA reports that the average prices for a regular gallon of gasoline is at $2.58, down from $2.83 a year ago.“For Americans who bookend summer with road trips, they will find gas prices this coming weekend that are cheaper than this past Memorial Day and last year’s Labor Day holiday,” said Jeanette Casselano, AAA spokesperson. “At the start of the week, two-thirds of all states have gas price averages that are nearly a quarter cheaper than last year.”

Courtesy of Mortgage Market Guide

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Monday – August 26, 2019

The New York Federal Reserve reports that total household debt rose to an all-time high in Q2 2019 marking the twentieth consecutive quarter with an increase. Total household debt rose $192 billion to $13.86 trillion. The previous peak was $12.68 trillion in Q3 2008. Within the numbers it showed that mortgage debt also reached a peak of $9.4 trillion. In addition, credit card balances rose to $868 billion while student debt came in at $1.48 trillion.

In economic news, July Durable Orders rose 2.1% versus the 1.2% expected. The ex-transportation number came in light. Overall, the US consumer remains solid though the manufacturing sector is slowing due in part to the US/China trade issues. This week the markets will receive data on the inflation reading Core PCE and personal spending along with the closely watched Consumer Confidence Index, which is just below all-time highs. There will also be a few manufacturing reports. The second read on Q2 Gross Domestic Product will be released this week.

Courtesy of Mortgage Market Guide

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