Daily Rate Update: August 27th-31st

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Friday – August 31, 2018

Consumer Sentiment slipped in August to its lowest level since January as its current economic conditions component declined. The final Consumer Sentiment Index for August came in at 96.2, below the 97.9 recorded in July but above expectations of 95.5. The report went on to reveal that future income and job certainty have become the main reasons cited by consumers for their positive spending views.

U.S. Stock markets are near record highs as measured by the closely watched S&P 500 Stock Index. The S&P hit an all-time closing high of 2,914.04 on Wednesday of this week due in part to a robust economy, strong labor market along with sky-high consumer confidence. This week, consumer confidence hit an 18-year high as both business and labor market conditions improved even further in August. Given the strong labor market, many consumers are planning on buying a house or purchasing big ticket items in the near future.

Courtesy of Mortgage Market Guide

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Thursday – August 30, 2018

Mortgage rates were essentially unchanged this week as they hover near the same levels for the past three weeks. Freddie Mac reports that the 30-year fixed-rate mortgage is at 4.52% for the week ended today with an average 0.5 in points and fees. Freddie Mac says that while sales and price growth have softened these last few months, this leveling of rates may be helping more buyers reach the market. Last year this time the rate was 3.82%.

In economic news, the Fed’s favorite inflation gauge, the annual Core PCE, ticked up to the Fed’s target range of 2% in July from 1.9% in June. Month over month, Core PCE rose 0.2%, in line with estimates. Personal Incomes and Spending came in near expectations while Weekly Initial Jobless Claims hover near lows seen in 1969. Inflation seems to be under control but that won’t stop the Fed from raising rates next month. Fed Fund Futures are pricing in an almost 100% chance of a hike to the Fed Funds Rate at the September 25-26 Federal Open Market Committee meeting.

Americans filing for first-time unemployment benefits continue to hover near lows seen back in 1969, when the labor market was smaller. Weekly Initial Jobless Claims rose 3,000 in the latest week to 213,000 while the job market continues to tighten. It is said that there are more jobs available than there are people to fill those positions. The Bureau of Labor Statistics reported this week that unemployment rates were lower in July than a year earlier in 323 of the 388 metropolitan areas, higher in 41 areas, and unchanged in 24 areas. Next week, Friday, September 7, the monthly Jobs Report will be released for August.

Courtesy of Mortgage Market Guide

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Wednesday – August 29, 2018

After moving higher from the beginning of the year until mid-June, mortgage rates have pushed lower and continued to edge even lower in the latest week. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage fell three basis points to 4.78% with an average 0.46 point in the week ended August 24. The MBA went on to report that the purchase index fell 1% while the refinance index decreased 3%.

Economic growth remained strong in the second quarter of 2018 with consumer spending at a robust pace. The second reading on Q2 2018 Gross Domestic Product ticked up to 4.2% from 4.1% in the first reading and came and went without much fanfare. The 4.2% was the best reading since the 4.9% recorded in Q3 2014. GDP measures the total market value of the goods and services produced within the United States in a year.

The National Association of REALTORS® reports that signed contracts to purchase homes in July fell on an annual basis, making this the seventh straight month of declines. Pending Home Sales fell 0.7% in July from June and are down 2.3% year over year. The index was lower in the South and West, with modest gains seen in the Northeast and Midwest. Lawrence Yun, NAR chief economist said, “The reason sales are falling off last year’s pace is that multiple years of inadequate supply in markets with strong job growth have finally driven up home prices to a point where an increasing number of prospective buyers are unable to afford it.”

Courtesy of Mortgage Market Guide

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Tuesday – August 28, 2018

Home prices continued to rise in June, but at a slightly slower pace than in the past. The S&P/Case-Shiller 20-City Home Price Index rose 6.3% from June 2017 to June 2018. This was slightly below the 6.4% expected and down from the 6.5% recorded in May. Month over month, prices rose 0.1% from May to June. “We are seeing signs that growth is easing in the housing market … 30-year fixed rate mortgages rose from 4% to 4.5% since January – and the rise in home prices are affecting housing affordability,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices.

Americans attitudes surrounding the U.S. economy and its components soared to levels not seen in 18 years in August. The Conference Board reports that its Consumer Confidence Index increased in August to 133.4, up from 127.9 and above the 126.5 expected. Consumers’ assessment of the business and labor markets rose, which suggests high confidence levels should continue to support healthy consumer spending in the near term.

Freddie Mac released its August forecast on the housing market showing that “ongoing supply and demand imbalances and weakening affordability conditions, particularly in markets out West, are expected to keep a lid on home sales growth through the rest of the year.” Freddie Mac predicts that the 30-year fixed-rate mortgage will average 4.6% in 2018. The report also showed that total home sales are to increase modestly this year to 6.14 million while home price growth will rise 6%. In addition, total originations are forecasted at $1.655 trillion, down 8.4% from 2017.

Courtesy of Mortgage Market Guide

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Monday – August 27, 2018

U.S. Stocks are higher to begin the week on news that the U.S. and Mexico are trying to reach a deal on the North American Free Trade Agreement (NAFTA). The Dow Jones Industrial Average is up 200 points in early trading. In addition, Fed Chair Powell said that gradual interest rate hikes will continue to assure protection of the U.S. economic growth, maintain a strong job market and to keep inflation under control. The S&P 500 Stock Index closed at a record high of 2,874.69 on Friday.

The end of summer unofficially takes place this Labor Day weekend as Americans get in their last vacations before heading back to school or back to work. Demand for gasoline is expected to spike around the holiday, leading to a likely, but brief price jump, as drivers take to the nation’s roads one last time before fall arrives. The national average price for a regular gallon of gasoline is at $2.83 as of today, Monday, August 27. Last year this time the price was $2.36.

With back to school and college shopping winding down before the new year starts, the numbers are in. Total spending for K-12 schools and college combined is expected to hit $82.8 billion, almost as high as 2017’s $83.6 billion. Families with children heading to elementary through high school plan to spend an average $684.79 while families with college bound kids will spend an average $942.17. “The biggest change we are seeing in back-to-school spending this year is coming from electronics, such as items like laptops, tablets and smartphones,” said Mark Matthews, National Retail Federation vice president for research.

Courtesy of Mortgage Market Guide

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