Daily Rate Update: February 25th – March 1st

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Friday – March 1, 2019

The Fed’s favorite inflation gauge, the Core Personal Consumption Expenditures (PCE) was unchanged year-over-year at 1.9% this morning as inflation remains in check. 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. Within the report it showed that Personal Incomes fell for the first time in three years in January while Personal Spending declined 0.5%, the biggest drop since September 2009.

Freddie Mac reports that the mortgage market is expected to see modest growth in 2019 buoyed by lower mortgage rates. Rates should stay relatively low in 2019 averaging 4.6% before rising to 4.9% in 2020. Total housing starts are expected to increase to 1.29 million units in 2019 and 1.36 million in 2020 while total home sales should increase to 6.10 million this year and 6.12 next year. Freddie is forecasting U.S. GDP growth at 2.5% in 2019 and 1.8% in 2020. Lastly, single-family mortgage originations are expected to increase 2.1% percent to $1.68 trillion in 2019 and remain at a similar volume in 2020.

Courtesy of Mortgage Market Guide

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Thursday – February 28, 2019

The Bureau of Economic Analysis (BEA) reported Gross Domestic Product rose 2.6% in the final three months of 2018, above estimates of 2% to 2.3% leaving 2018 at 2.9%, the biggest increase since 2015. Consumer spending was at a solid 2.8% clip in the quarter, though below the previous two quarters. The BEA said the government shutdown in December did have an impact on the numbers. Within the data, the inflation numbers were flat to a bit lower than the third quarter. In addition, business inventories grew more than estimated. Overall, a solid report.

Mortgage rates remained unchanged in the latest survey and continue to hover near 12-month lows. Freddie Mac reports that the 30-year fixed-rate mortgage came in at 4.35% in this week’s survey with an average 0.50 in points and fees. Freddie Mac says that average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Freddie went on to say that the general decline in rates we have seen recently, combined with rebounding pending home sales, hint at a strong spring homebuying season.

Home prices continued to rise in the final three months of 2018 and on a monthly basis though at a slower pace. The Federal Housing Finance Agency reported this week that home prices rose 1.1% in the fourth quarter of 2018 and jumped 5.7% from the fourth quarter of 2017 to the fourth quarter of 2018. On a monthly basis, prices increased 0.3% from November to December. “House prices rose throughout 2018 but at a slower rate than in recent years,” said Dr. William Doerner, Supervisory Economist. “In the fourth quarter, house price appreciation hit one of the lowest levels in the past four years.”

Courtesy of Mortgage Market Guide

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Wednesday – February 27, 2019

Yesterday Fed Chair Powell’s testimony in front of the Senate Banking Committee reiterated the Fed will remain patient on interest rate hikes while watching the incoming data. He went on to say that the FOMC will “evaluate the appropriate timing and approach for the end of the balance sheet runoff.” There’s probably a good chance the Fed will halt or slow the quantitative tightening by year-end.

Signed contracts to purchase homes surprisingly jumped in January from December with gains seen across all four major regions of the U.S. The National Association of REALTORS© (NAR) reports that Pending Home Sales jumped 4.6% from December though year-over-year signings fell 2.3%, marking the thirteenth straight month of annual declines. Lawrence Yun, NAR chief economist said, “Homebuyers are now returning and taking advantage of lower interest rates, while a boost in inventory is also providing more choices for consumers.”

Mortgage rates were essentially unchanged in the latest week and remain near 12-month lows. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage was at 4.65% in the week ending February 22, 2019 with an average 0.42 in points. Total mortgage application volume rose by 5.3% while the refinance and purchase index increased 4.6% and 6.1%, respectively. The 30-year jumbo loan fell by 16 basis points to 4.40% with 0.29 in points. “Mortgage rates were little changed last week, but as we anticipated, homebuyers are responding favorably to this more stable rate environment,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist.

Courtesy of Mortgage Market Guide

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Tuesday – February 26, 2019

Delayed December Housing Starts fell 11.2% from November to an annual rate of 1.078 million units versus the 1.254 million expected. It was the slowest pace since September 2016. Building Permits were essentially unchanged at 1.326 million versus the 1.290 million expected. Year-over-year, Housing Starts fell nearly 11% with losses seen in both single-family starts (-6.7%) and multi-dwelling units (-22%). Fannie Mae Chief Economist Doug Duncan said last week, “Falling – or at least not rising – interest rates, strong employment, continued wage growth, and a deceleration in home price appreciation should support more favorable homebuying conditions heading into the spring, along with improved affordability.”

Home price gains continued to cool a bit in December as price appreciation comes back down to more normal levels. The S&P Case-Shiller 20-City Index rose 4.2% from December 2017 to December 2018, down from 4.6% in November. Month-over-month, prices were up 0.2%. The National Home Price Index saw a 4.7% annual gain from 5.1% in November. Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices David Blitzer said, “Home prices continue to outpace wage gains of 3.5% to 4% and inflation of about 2%.”

Consumer Confidence surged this month as Stocks rallied since the beginning of the year and after the government shutdown ended. The Conference Board reports that the Consumer Confidence Index rose to 131.4 in February, above the 125 expected and well above the 121.7 recorded in January. Currently, consumers continue to to view both business and labor market conditions favorably. Lynn Franco, Senior Director of Economic Indicators said, “Consumers expect the economy to continue expanding. However, according to The Conference Board’s economic forecasts, the pace of expansion is expected to moderate in 2019.”

Courtesy of Mortgage Market Guide

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Monday – February 25, 2019

This week is filled with risk-events that could bring in an uptick in volatility. This week features a slew of economic reports from housing, manufacturing, consumer attitudes, personal income and spending along with the inflation reading Core PCE. Fed Chair Powell will be in front of Congress on Tuesday and Wednesday testifying on the current state of the U.S. economy and monetary policy. Throw in trade headlines and you have a recipe for an uptick in volatility.

President Trump said that “substantial progress” has been made in the U.S.-China trade talks and will extend the March 1 deadline for increasing tariffs on Chinese goods imported into the U.S. The closely watched S&P 500 is now just 4.3% shy of its all-time closing high of 2,930 hit back on September 20, 2018. The index is up nearly 19% from the Christmas Eve low of 2,351 due in part to dovish rhetoric from Fed Chair Powell and trade optimism. The S&P is trading higher to begin the week.

Redfin reports sales of new single-family homes declined 8% from January 2018 to January 2019. It was the fifth consecutive month of year-over-year decreases in new-home sales. Breaking the numbers down year-over-year down by regions, the Midwest fell 8.7%, Northeast down 6.6%, South lost 4.7% while the West saw a 16.5% decline. “The shrinking size of sales declines, paired with falling interest rates, may be helping to improve builder confidence, which has been on the rise since December,” said Daryl Fairweather, chief economist at Redfin.

Courtesy of Mortgage Market Guide

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