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Daily Rate Update: January 13th-17th

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Friday – January 17, 2020

The Census Bureau reports that December Housing Starts surged 17% from November to an annual rate of 1.608M units,the highest since December 2006, versus 1.380M expected as the sector continues to build momentum. It was the biggest percentage gain since October 2016. From December 2018 to December 2019, starts soared 40%. Single-family starts jumped 11.2% to 1.055M units, the highest level since June 2007. Building Permits edged lower, which is typical for December.

China reported upbeat economic data. This week’s signing of the Phase One trade deal is likely to continue boosting optimism within the global economy. Corporate earnings have been on the positive side this week and have helped to boost stocks to record levels. Noted hedge fund guru David Tepper told CNBC this morning that he is ‘long the market (stocks) and continues that way.’ Mr.Tepper has been spot on calling the markets rise for the past 10 years. Tepper said, “I love riding a horse that’s running.” In addition, hedge fund titan Stanley Drunkenmiller is also bullish on U.S. stocks, at least in the immediate term. The above coupled with low inflation, low rates, solid consumer spending and an expanding economy bolsters the Goldilocks scenario. And yesterday, the Philadelphia Manufacturing Index tripled estimates, a good sign for the sector.

Courtesy of Mortgage Market Guide

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Thursday – January 16, 2020

A rash of better-than-expected economic data hit the wires this morning which is boosting the major U.S. stock indexes. December Retail Sales were strong signaling that the consumer continues to spend and drive the U.S. economic expansion. Weekly Initial Jobless Claims declined and remain at 50-year lows while the Philadelphia Fed Manufacturing Index surged this month.

Morgan Stanley reported robust quarterly earnings today capping off a stream of solid reports from major financial institutions this week, which is also driving today’s stock rally. In addition, the signing of the U.S.-China trade deal yesterday lifted uncertainty which is also positive for stocks and not-so-positive for bonds. The main driver in the equity markets will be the fundamentals … economic data and earnings.

Mortgage rates remain just above historic lows, reports Freddie Mac. The 30-year fixed-rate mortgage was essentially unchanged this week at 3.65% with 0.7 in points and fees. “By all accounts, mortgage rates remain low and, along with a strong job market, are fueling the consumer-driven economy by boosting purchasing power, which will certainly support housing market activity in the coming months,” said Sam Khater, Freddie Mac’s Chief Economist.

Courtesy of Mortgage Market Guide

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Wednesday – January 15, 2020

Mortgage Rates edged lower in the latest week and remain just above historic lows. Low rates have been a tailwind for the housing sector and should continue throughout 2020. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage fell four basis points to 3.87%, the lowest since late September with 0.32 in points for the week ended January 10, 2020. Low rates spurred on mortgage application activity. The Market Composite Index jumped 30%, the Refinance Index rose 43% while the Purchase Index increased by 16%.

Target reports that holiday sales were below estimates as sales rose 1.4% compared to a gain of 5.7% a year ago, with underperforming sales for toys and electronics. December Retail Sales will be released tomorrow to gauge consumer spending during the holiday shopping season. Wholesale inflation was tame in December while the New York State Manufacturing Index beat expectations. The data had little impact on the markets.

Courtesy of Mortgage Market Guide

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Tuesday – January 14, 2020

The December NFIB Small Business Optimism Index ended 2019 historically strong, with a reading of 102.7. The report went on to say that an increased number of small business owners reported better business conditions and expect higher nominal sales in the next three months. NFIB Chief Economist William Dunkelberg said, “2020 is starting out with a solid foundation for continued growth, two years into the Tax Cuts and Jobs Act that’s providing fuel to grow small businesses and their workforce.”

Inflation at the consumer level remained subdued in December with the indexes for gasoline, shelter, and medical care modestly higher while underlying inflation measures declined. The Labor Department reported that the Consumer Price Index (CPI) rose 0.2% last month, inline with estimates and down from the 0.3% increase in November. Core CPI, which strips out volatile food and energy, rose 0.1%, down from a gain of 0.2% in November. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Earnings season unofficially kicked off today with some of the largest banks in the U.S. reporting their quarterly numbers. JPMorgan Chase, the nation’s largest bank, reported a profit of $2.57 per share, above the $2.35 expected. Citigroup reported that fourth-quarter profits rose 15% or $2.15 per share versus the $1.81 estimated. Wells Fargo saw a steep decline in profits due in part to litigation costs and persistently low-interest rates.

Courtesy of Mortgage Market Guide

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Monday – January 13, 2020

The Mortgage Bankers Association (MBA) reports that its Mortgage Credit Availability Index (MCAI) decreased 3.5% in December to 182.2 and down 4% from June’s record high of 189.8 though up 4.1% vs a year ago. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. “Credit availability fell in December after three months of expansion, driven by drops in both conventional and government supply,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.

Quarterly earnings season for Q4 2019 kicks off this week with big bank names such as Citigroup, JPMorgan Chase, Wells Fargo, Bank of America and Goldman Sachs reporting their numbers. Earnings for S&P 500 companies are expected to fall by 0.6% from the fourth quarter of 2018. Investors will also receive economic data from housing, manufacturing, consumer spending and sentiment along with inflation numbers from the closely watched Consumer Price Index.

The major U.S. stock market averages are higher once again today and are at fresh record highs as the week kicks off. The closely watched S&P 500 is at an all-time high of 3,282 after a gain of nearly 30% in 2019. An expanding economy, low inflation and rates, ultra-low unemployment, solid consumer confidence ad spending are a few reasons for the stellar performance in the equity markets.

Courtesy of Mortgage Market Guide

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