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Daily Rate Update: December 9th-13th

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Friday – December 13, 2019

Home equity increased which is providing a source of wealth for homeowners in the U.S., CoreLogic reports. Borrower equity increased by $457 billion in the third quarter of 2019 compared with the third quarter of 2018, a 5.1% increase. CoreLogic went on to report that borrowers have gained $6 trillion in equity since the end of 2011 when equity stopped declining. During this same time period, homeowners have been staying in their homes longer, preferring to make remodeling updates as their home ages.

The long-awaited Phase One trade deal has been reached between the U.S. and China this morning as confirmed by both countries. The deal will scale back exiting tariffs on Chinese imports and cancel the new tariffs that were scheduled to go into effect on Sunday. President Trump said that the two sides will immediately begin on a Phase Two deal and that will begin before the 2020 U.S. elections.

The Mortgage Bankers Association (MBA) reports that new home purchases mortgage applications surged 27% in November from November 2018. On a monthly basis, applications decreased by 17% from October to November. The MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 688,000 units in November 2019. Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting said, “The healthy job market, increased new home construction, and rising household formation support growth heading into 2020, but affordability challenges in many markets and economic uncertainty pose as headwinds.”

Courtesy of Mortgage Market Guide

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Thursday – December 12, 2019

Mortgage rates inched higher this week and have steadily increased since September. Freddie Mac reports that the 30-year fixed-rate mortgage rose five basis points this week to 3.73% with 0.7 in points and fees. In early September the rate was 3.49%. Freddie Mac says, “The risk of an economic downturn has receded and, combined with the very strong job market, it should lead to a slightly higher rate environment. Often, while higher mortgage rates are deleterious, improved economic sentiment is the reason that these higher rates have not impacted mortgage demand so far.”

The National Association of REALTORS® (NAR) hosted its first-ever Real Estate Forecast Summit recently at the NAR headquarters in Washington, D.C. Economists who attended expect the U.S. economy to ‘continue expanding next year while projecting real estate prices will rise and reiterates that a recession remains unlikely. Forecasters see 2% Gross Domestic Product in 2020 with an annual unemployment rate of 3.7%. In addition, the average annual 30-year fixed-rate mortgage will average 3.8% and in 2020 and 4.0% in 2021. Annual median home prices are forecasted to increase by 3.6% in 2020 and by 3.5% in 2021.

Courtesy of Mortgage Market Guide

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Wednesday – December 11, 2019

Mortgage rates were essentially unchanged in the latest week and remain just above historic lows, reports the Mortgage Bankers Association (MBA). The 30-year fixed-rate mortgage rose one basis point to 3.98% with 0.33 points in the week ending December 6, 2019. The Market Composite Index, a measure of total mortgage loan application volume, rose 3.8%, the Purchase Index declined 0.4% while the Refinance Index gained 8.7%. The MBA said that the November jobs data showed increased payroll gains and low unemployment, which means conditions remain favorable for steady purchase growth in the coming months.

Inflation at the consumer level was a bit warmer than expected in November though overall inflation remains subdued in the current environment. The Consumer Price Index (CPI) rose 0.3% in November on higher costs for gasoline. On an annual basis, CPI rose 2.1% from the 1.8% reading in October. When stripping out volatile food and energy, the Core CPI was inline with the 0.2% estimate while year-over-year it saw a 2.3% gain, which was unchanged from October. The modest uptick in inflation coupled with a solid economy will hold the Federal Reserve from a change in interest rates in the near future.

It’s Fed Day! The Federal Reserve is expected to hold the short-term Fed Funds Rate steady when the monetary policy statement is released at 2:00 p.m. ET this afternoon. The statement will be accompanied by a set of economic projections while Fed Chair Powell will hold a press conference at 2:30. Mr. Powell will most likely say that the economy is on a stable course and that the Fed will do all in its power to keep the expansion going.

Courtesy of Mortgage Market Guide

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Tuesday – December 10, 2019

The good news continues to stream in from the small business sector of the economy. The NFIB Small Business Optimism Index saw its largest month-over-month gain since May 2018, up 2.3 points to 104.7 in November. The NFIB said that overall, the Main Street economic machine continued to push the economy forward. “Owners are aggressively moving forward with their business plans, proving that when they’re given relief from the government, they put their money where their mouth is, and they invest, hire, and increase wages,” said NFIB Chief Economist William Dunkelberg.

Mortgage credit availability increased across all loan types in November, reports the Mortgage Bankers Association. The mortgage credit availability index rose by 2.1% to 188.9 last month. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012. Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting said, “Expanding credit availability will continue to support active levels in mortgage lending, even as refinance activity starts to level off.”

The December 15 tariff deadline on Chinese exports into the U.S. could be delayed as the two sides continue to negotiate. The White House continues to stress that Beijing commit to large purchases of U.S. farm products in order for the tariffs to be delayed. The headlines are supporting the U.S. stock markets though the gains are modest at best as the market looks ahead to the Federal reserve’s release of its monetary policy statement on Wednesday afternoon.

Courtesy of Mortgage Market Guide

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Monday – December 9, 2019

The housing sector continues to receive positive news and is being supported by strong employment along with low mortgage rates. Fannie Mae released its November Home Sentiment Index showing that it rose 2.7 points to 91.5, revising the decline from October and re-approached the survey high set in August. The percentage of Americans who say it is a good time to buy increased in November, while the percentage who say it is a bad time to buy declined. Doug Duncan, Senior Vice President and Chief Economist said, “Looking ahead, we continue to expect a steady but modest pace of growth in home purchase activity.”

The Federal Housing Administration reported last week that loan limits will increase in 2020 and comes after the FHFA increased limits for 2020 in the past few weeks. The FHA 2020 loan limit for most of the country will increase by almost $17,000 to $331,760 from 2019’s loan limit of $314,827. The new limits will be effective for FHA loans assigned on or after January 1, 2020.

Fed members will gather on Capitol Hill beginning tomorrow and ending Wednesday with the release of the monetary policy statement and a set of economic projections. At 2:30, Fed Chair Powell will hold a press conference. There is no chance of a change to the short-term Fed Funds Rate and we are not expecting any dramatic headlines. He will most likely say that the economy is on a stable course and that the Fed will do all in its power to keep the expansion going.

Courtesy of Mortgage Market Guide

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