Daily Rate Update: December 10th-14th

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Friday – December 14, 2018

The consumer continued to spend in November after some impressive numbers in October. November Retail Sales rose 0.2%, which was inline with expectations, but that doesn’t tell the whole story. When looking under the hood, there was a 0.5% decline in receipts at gas stations, which is good for the consumer as we are paying less at the pumps to fill our vehicles. October Retail Sales were revised higher to 1.1% from 0.8%. The national average price for a regular gallon of gasoline at the pumps is $2.39, down from $2.67 a month ago.

The two-day Federal Open Market Committee meeting kicks off on Tuesday and ends Wednesday at 2:00 p.m. ET with the release of the monetary policy statement. The benchmark short-term Fed Funds Rate is expected to increase by 0.25% to 2.75% but what is in the statement is key. The Fed has come under fire by some on Wall Street and the White House for too many hikes, which could slow the economy in the near future. However, recent chatter from Fed members is signaling rate hikes may begin to slow in 2019 or maybe even not a hike at all next year.

After years of low numbers of homes for sale on the market, housing inventories have begun to increase. Online real estate brokerage Redfin reports that housing inventory rose 5% from November 2017 to November 2018, the fastest pace since June 2015. The report also revealed that home prices rose 3.3% year-over-year to a median price of $298,800. “The tide has turned,” said Redfin Chief Economist Daryl Fairweather. “Sellers are now competing for buyers, but they haven’t all realized it yet. Sellers who have adjusted their price expectations downward are still finding plenty of willing buyers.”

Courtesy of Mortgage Market Guide

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Thursday – December 13, 2018

Applications to purchase new homes plunged in November from October due in part to affordability issues and as wage growth continues to trail behind home-price growth. The Mortgage Bankers Association (MBA) reports that its Builder Application Survey fell 14% in November from October and declined 11% from a year ago. The MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country.

Mortgage rates declined this week falling to their lowest levels in three months and have either declined or remained flat for five consecutive weeks. Freddie Mac reports that the 30-year fixed-rate mortgage fell 12 basis points this week to 4.63% with an average 0.50 in points and fees added on top of the rate. Freddie Mac says, “While the housing market softened in response to higher rates through most of this year, the combination of a low unemployment and recent downdraft in rates should support home sales heading into the early winter months.”

Americans filing for first-time unemployment benefits continue to hover near 50-year lows as the labor market is now at or just above full employment. Weekly Initial Jobless Claims fell by 27,000 to 206,000, just above the 49-year low of 202,000 hit in mid-September. The four-week moving average of claims, which irons out seasonal abnormalities, fell 3,750 to 224,750. Employers have said that it has been hard finding workers to fill positions in this tight labor market.

Courtesy of Mortgage Market Guide

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Wednesday – December 12, 2018:

Consumer inflation remained contained in November due in part to declining energy prices. The November Consumer Price Index was unchanged while year-over-year fell to 2.2% from 2.5% in October. The Core CPI, which strips out food and energy, was also inline at 0.2%, while year over year rose 2.2% from 2.1%. The Fed will break down the inflation numbers when considering interest rate policy at next week’s Federal Open Market Committee meeting that begins on Tuesday and ends Wednesday at 2:00 p.m. ET when the monetary policy statement is released.

Mortgage rates had their biggest weekly decline since 2017 in the latest survey as Bond prices rose and Stocks declined. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage fell 12 basis points last week to 4.96% with an average 0.50 in points and fees. The report showed that the refinance index rose 1.8% while the purchase index increased 2.5%. The MBA’s 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 – December 11, 2018:

Fannie Mae released its Home Purchase Sentiment Index (HPSI) showing that the index rose slightly in November due in part to rising incomes. The HPSI rose 0.5 points to 86.2. Within the report it showed that Americans who said it is a good time to buy a home rose 2 percentage points, while the net share who said it was a good time to sell was unchanged. Doug Duncan, senior vice president and chief economist at Fannie Mae said, “Consumers’ perceptions of growth in their household income reached a survey high this month, helping to absorb some of the impact of increasing mortgage rates on housing market activity.”

Wholesale inflation from the Producer Price Index (PPI) declined in November to 0.1% from 0.6% and just above expectations of 0.0% due to falling energy prices. The Core Rate, which excludes volatile food and energy, fell to 0.3% from 0.5%. On an annual basis, headline PPI fell to 2.5% from 2.9%. Inflation is not getting hotter, but it may actually be getting cooler, like in other parts of the globe. Tomorrow, the more closely watched Consumer Price Index will be released. The Fed will be watching this number for any signs of consumer inflation.

Volatility is the name of the game in the stock markets for the past few months and it hasn’t been easing up one bit. Yesterday, the Dow Jones Industrial Average fell by 507 points only to close with a modest 34 point gain. This morning, the index was up 350 points then gave back two-thirds of the gains. The big swings have been caused by trade headlines between the U.S. and China and fears of slowing global growth along with uncertainty surrounding the interest rate hikes from the Federal Reserve.

Courtesy of Mortgage Market Guide

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Monday – December 10, 2018:

Homeowners looking to tap into equity from the homes will be surprised that equity fell in October for the first time since the housing recovery. Black Knight reports that tappable equity declined by $140 billion in the third quarter of 2018 due in part to an ease in the pace of rising home prices. The company reports that a total of 43.6 million homeowners have tappable equity available, which is 272,000 fewer than in the second quarter of 2018. “Of course, there is still $9.8 trillion in total home equity in the market, some $5.9 trillion of which is tappable. That’s $571 billion more than in Q3 2017, and tappable equity remains near an all-time high,” reports Ben Graboske, executive vice president of Black Knight’s Data & Analytics division.

Stocks are falling to begin the new week led lower by declining shares of Apple as well as shares in the banking sector. The Dow Jones Industrial Average, S&P and NASDAQ fell 4.5% or more last week for their biggest weekly losses since March due to trade issues, fears of slowing global growth along with uncertainty surrounding future rates hikes by the Fed. At its worst level, the Dow was down 300 points this morning. However, the closely watched S&P 500 Stock Index rose nearly 40% from November 2016 to its all-time closing high of 2,929 hit on September 21 of this year and have given back 10% up until today. Always remember, markets don’t go straight up or straight down.

What has been declining, to the delight of motorists, has been the price of gas at the pumps across the country. Motor club AAA reports that the national average price for a regular gallon of gasoline is at $2.42, the lowest price for 2018. Declining oil prices, the switch to cheaper refining costs in the winter and less drivers on the road are some of the reasons for the decline. AAA predicts that gas prices could fall a few more cents by the end of the year.

Courtesy of Mortgage Market Guide

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