Daily Rate Update: December 17th-21st

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Friday – December 21, 2018

Inflation pressures remained contained in November as evidenced by a key barometer that the Federal Reserve closely watches. The Core Personal Consumption Expenditure (PCE) came in at 1.9% year-over-year in November, just above the 1.8% recorded in October. The Federal Reserve has a target of 2% on the Core PCE and for the most part, it has remained below that level for six years with the exception of the 2% hit in May of this year. The Core PCE measures the movements of prices paid by consumers and strips out volatile food and energy prices.

The U.S. Bond markets will close early on Monday, December 24 for Christmas Eve while Stocks close at 1:00 p.m. ET. All U.S. markets will be closed on Tuesday for the Christmas holiday. The markets will generally be quiet next week given the holiday shortened week and is usually on of the slowest weeks of the year.

Holiday drivers will begin to hit the roads this Saturday, December 22 with a 4.4% rise expected from 2017 and the eighth consecutive yearly increase. Motor Club AAA expects 102.1 million to travel by car over the river and through the woods to their favorite holiday destination. The holiday travel period is from December 22 through January 1. A strong economy and sky-high consumer confidence along with relatively low gas prices are a few reasons behind this year’s increase.

Courtesy of Mortgage Market Guide

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Thursday – December 20, 2018

Mortgage rates continued to edge lower in the latest week as U.S. Stocks declined which pushed Bond prices higher. As Bond prices rise, interest rates tend to move lower with an inverse relationship. Freddie Mac reports that the 30-year fixed-rate mortgage fell two basis points to 4.62% this week with an average 0.50 in points and fees. Freddie Mac said given the recent rise in Existing Home Sales in November after six monthly declines, lower rates could boost the housing market in the months ahead.

Manufacturing activity in the Philadelphia, Pennsylvania region declined this month to the lowest reading since August 2016. The Philadelphia Fed Index fell to 9.4 in December from 12.9 in November and well below the 17.5 expected. The report said that the ‘surveys broad indicators were positive, but their movements were mixed.’ The firms that were surveyed remained generally optimistic about future growth. On the employment front, firms continued to report overall higher employment.

U.S. Stocks slid lower yesterday after the Federal Reserve signaled a more hawkish statement when the FOMC meeting was adjourned. Stocks have had a rough year of trading given the recent correction in the closely watched S&P 500. The index has fallen 15% since September due in part to tariffs, slowing global growth, uncertainty surrounding the Federal Reserve’s interest rate policy and good old-fashioned profit taking. A correction is seen as 10%. But remember, the S&P rose nearly 40% from November 2016 to this past September and markets always fall more quickly than they rise.

Courtesy of Mortgage Market Guide

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Wednesday – December 19, 2018

The National Association of REALTORS® (NAR) reports that Existing Home sales in November rose 1.9% from October to an annual rate of 5.32 million units versus the 5.20 million expected. Gains were seen in the Northeast, Midwest and South with losses in the West. Existing Home Sales include transactions on single-family homes, townhomes, condominiums and co-ops. Sales were down 7% from November 2017.

Inventories of previously owned homes for sale on the market is at 3.9 months, up from 3.5 a year ago. Lawrence Yun, NAR’s chief economist, says two consecutive months of increases is a welcomed sign for the market. “The market conditions in November were mixed, with good signs of stabilizing home sales compared to recent months, though down significantly from one year ago. Rising inventory is clearly taming home price appreciation.”

The U.S. Transportation Security Administration (TSA) reports that more travelers will be flying this holiday season than last year. The TSA says that between December 19 and January 5, 41 million passengers will travel through security screening checkpoints nationwide, an increase of 6% from 2017. The TSA recommends that travelers arrive extra early to check in and get through the security screening process. “We have experienced several record-breaking travel days this year, to include the busiest travel day this past Thanksgiving, so we are prepared for a very busy period leading up to Christmas and through the New Year holiday,” said TSA Administrator David Pekoske.

Courtesy of Mortgage Market Guide

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Tuesday – December 18, 2018

November Housing Starts rose 3.2% from October to an annual rate of 1.256 million units versus the 1.230 million expected. October was revised lower to 1.217 million from 1.228 million. Housing Starts were down 3.6% from November 2017. Building Permits jumped 5% percent from October to an annual rate of 1.328 million versus the 1.270 million expected. We here at the Mortgage Market Guide feel that the housing market remains solid and with long-term rates not likely to rise too quickly, 2019 could be a better year for housing.

Oil prices continue to push lower on oversupply across the globe. WTI oil hit $47.84/barrel this morning, down from $77 hit back on October 3, the lowest since September 2017. Lower prices at the pumps have also taken place with the national average price for a regular gallon of gasoline at $2.36 with $2.20 seen in parts of New Jersey, down from $2.63 a month ago. Lower gas prices put extra cash in the pockets of consumers to spend on holiday shopping.

The latest national housing report from ReMax was released on Monday showing that extremely low housing inventory improved in November as sales declined for the fourth straight month. November saw the second consecutive month of year-over-year growth in the number of homes for sale on the market. ReMax reports that across the 53 metro areas surveyed, inventories rose 3%, the highest annual gain in the 10-year history of the report. In addition, November’s median sales price of $235,000 was 4.0% higher than November 2017 and was the highest November price in the report’s history.

Courtesy of Mortgage Market Guide

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Monday – December 17, 2018

It’s Fed week! The Fed kicks off its two-day Federal Open Market Committee meeting tomorrow and will end on Wednesday at 2:00 p.m. ET with the monetary policy statement and a projection of economic indicators. The Fed’s Powell will hold a press conference at 2:30. The Fed is expected to hike the short-term Fed Funds Rate by 0.25% to 2.75%. The key headlines will be derived from the monetary policy statement, which may reveal the path of interest rate movements for 2019.

Home builder confidence slipped in December to its lowest level since May 2019 due in part to affordability issues. The NAHB Housing Market Index fell to 56 in December, down from 60 in November. Within the report, it showed that current sales conditions, expectations and buyer traffic all declined. NAHB Chief Economist Robert Dietz says, “This housing slowdown is an early indicator of economic softening, and it is important that builders manage supply-side costs to keep home prices competitive for buyers at different price points.”

Fannie Mae predicts that the housing market is expected to stabilize in 2019 as economic growth slows. Fannie Mae released its December Economic Outlook revealing that it sees Gross Domestic Product averaging 3.1% in 2018 before slowing to 2.3% in 2019 and 1.6% in 2020. The labor market will continue to be a strong point into 2019. Doug Duncan Fannie Mae’s chief economist says, “If mortgage rates trend sideways next year, as we anticipate, and home price appreciation continues to moderate, improving affordability should breathe some life into the housing market. We also expect residential fixed investment to resume a positive growth trajectory amid continued rising housing starts and stabilizing home sales. However, affordability is likely to remain an industry concern, particularly among first-time homebuyers.”

Courtesy of Mortgage Market Guide

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