Daily Rate Update: February 19th-22nd

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Friday – February 22, 2019

Lower mortgage rates coupled with an increase in refinance application volume spurred an increase in refinance closings in January, reports Ellie Mae. The January Ellie Mae Origination Insight Report showed the percentage of refinance closings increased to 35% of total applications, up from 29% in December. Ellie Mae went on to report that the time to close all loans dropped to 45 days in January, down from 47 days in December. Jonathan Corr, president and CEO of Ellie Mae said, “We anticipate that as we move into the traditionally busier spring months, the percentage of home purchases will increase relative to refinances.”

Given the light economic calendar this week, next week there are several hurdles for the markets to contend with. The main event will be Fed Chair Powell in front of Congress on Tuesday and Wednesday giving his semi-annual testimony on the U.S. economy and monetary policy. The Bond markets will have to digest a whopping total of $113 billion of Treasury securities which could impact trading.

A slew of economic data will also be released next week which will cover a wide range of the U.S. economic landscape and culminates with Friday’s Core PCE data. The Core PCE, currently at 1.9%, is the Fed’s favorite inflation gauge with a target of 2%. The Fed has forecasted that the Core PCE will stay close to current levels for three years out, which should hold interest rates relatively low.

Courtesy of Mortgage Market Guide

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Thursday – February 21, 2019

Mortgage rates continued to decline this week and are at 12-month lows falling for the third consecutive week. Freddie Mac reports that the 30-year fixed-rate mortgage fell two basis points to 4.35% with an average 0.5 in points and fees. Last year this time, the rate was 4.40%. Sam Khater, Freddie Mac’s chief economist says,”Wages are growing on par with home prices for the first time in years, and with more inventory available, spring home sales should help the market begin to recover from the malaise of the last few months.”

The National Association of REALTORS® (NAR) reports that sales of existing homes fell in January for the third straight month but greener pastures could be ahead, says the NAR. Existing Home Sales fell 1.2% from December to an annual rate of 4.94 million annualized units vs the 5.05 million expected, the lowest since November 2015. Compared to last year, sales are down 8.5%. The Midwest, South and West all saw declines in sales while the Northeast had gains. The median home price rose 2.8% from January 2018 to $247,500. Inventories are at a 3.9-month supply, below the normal level of six months. “Moderating home prices combined with gains in household income will boost housing affordability, bringing more buyers to the market in the coming months,” said Lawrence Yun, NAR’s chief economist.

The January Fed minutes were released yesterday with the keyword being “patient” regarding any interest rate hikes in 2019. Most likely, the Fed will be on hold for 2019 and not raise the benchmark Fed Funds Rate, unless there is a big surprise spike in inflation. As far as the Fed’s balance sheet, policy makers seem to have united around a plan to stop the balance sheet runoff at year’s end. The U.S. markets may get additional clues at the March Federal Open Market Committee meeting.

Courtesy of Mortgage Market Guide

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Tuesday – February 20, 2019

The National Association of REALTORS® (NAR) released its February 2019 U.S. Economic Outlook showing a decline in economic growth in 2019 while home price gains ease a bit. The NAR forecasts that Gross Domestic Product will rise 1.7% in 2019 from 3.1% in 2018 with a 1.6% increase in 2020. The median price for Existing Homes is expected to rise 2.2% to $264,700 in 2019 from 2018 while sales are estimated to decline 1.7% this year with a 4% gain seen in 2020.

The minutes from the January Federal Open Market Committee meeting will be released this afternoon at 2:00 p.m. ET. The minutes could reveal the path of the winding down of the Fed’s massive balance sheet which is worth a little over $4T. The minutes signal that the Fed may not hike interest rates in the near future and any movement in monetary policy would be data dependent. The last meeting and Fed Statement were rather dovish and it will be interesting to see if the minutes confirm that dovish feeling. A dovish stance is an economic policy which promotes monetary policies that involve low interest rates, hawkish the opposite.

Mortgage rates were unchanged in the latest week having edged lower in the past three months after the highs seen in November 2018. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage was near unchanged at 4.66% in the week ended February 13 with an average 0.42 in points. The 30-year jumbo rate rose eight basis points to 4.56 with an average 0.23 in points. The report also showed that the refinance index rose 6% while the purchase index increased 2%.

Courtesy of Mortgage Market Guide

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Monday – February 19, 2019

Declining mortgage rates along with frothy consumer confidence and a strong job market boosted home builder sentiment in February. The National Association of Home Builders reported on Tuesday that its Housing Market Index rose four points this month to 62, above the 59 expected. Any number over 50 indicates that more builders view conditions as good than poor. NAHB Chairman Randy Noel, a custom home builder from LaPlace, LA said, “In the aftermath of the fall slowdown, many builders are reporting positive expectations for the spring selling season.”

Consumer spending bellwether Walmart reported both earnings and revenues beat expectations in its quarterly earnings statement released on Tuesday. The retail giant said there was a 43% increase in e-commerce sales while overall sales were up 4.2% over last year this time. The big jump in e-commerce sales were due in part to its growing grocery pickup and delivery business. Walmart reported earnings per share of $1.41 versus the $1.33 expected.

U.S. Stocks are trading in mixed fashion to begin the week after the big move higher that has taken place since a low hit on December 24, 2018. The closely watched S&P 500 Stock Index has risen seven out of the last eight weeks and is up 18% since the Christmas Eve low and just 5% below its all-time closing high of 2,930, which was hit back on September 20, 2018. That low on Christmas Eve ended up being the exact bottom of the market. It’s remarkable to see when headlines are overly bearish or bullish – you should consider strongly betting the way.

Courtesy of Mortgage Market Guide

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