Daily Rate Update: January 6th-10th

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Friday – January 10, 2020

And the survey says … 145,000 jobs were created in December, lower than the 160K expected and down from 256,000 in November. Adding to the slight miss were downward revisions to October and November removing an additional 14,000. The unemployment rate held steady at 3.5% and at 50-year lows. The closely watched U6 number, or total unemployed, fell to 6.7%, it’s lowest ever since records began in 1994. The Labor Force Participation Rate was unchanged at 63.2%.

For 2019, payrolls rose by an average of 176K per month or 2.1 million for the year, the slowest since 2011 and down from 2.7 million in 2018. Right now there still remains a 1,000,000 plus gap between job openings and available people to fill them. The 176,000 per month average remains a good number 10 plus years into an economic recovery and more than enough to soak up population growth and those re-entering the labor force. The available pool of qualified workers is and will remain a challenge for business owners in the year ahead.

Courtesy of Mortgage Market Guide

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Thursday – January 9, 2020

Mortgage rates edged lower early this week due in part to the Middle east tensions. Freddie Mac reports that the 30-year fixed-rate mortgage fell by eight basis points to 3.64% with 0.7 in points and fees. However, rates have inched higher in the past few days. Freddie Mac says that the drop in mortgage rates, combined with the strong labor market, should propel a continued rise in homebuyer demand. Last year this time the rate was 4.45%.

The Federal Reserve reports that the value of all U.S. owner-occupied homes increased to a record $29.2 trillion in Q3 2019 in its Flow of Funds Report. It was a 4.2% increase from a year earlier, the slowest annualized gain since 2012. Americans owned $18.7 trillion of their homes, giving them a 64% equity stake, the report said. In addition, the collective value of U.S. homes is now 21% higher than the bubble peak hit in 2006.

Americans filing for first-time unemployment benefits fell by 9,000 in the latest week to 214,000 and remain at 50-year lows. To put it in perspective, in 1970 the U.S. population was 200 million, today it stands at 327 million. This remains a solid reading and leading indicator for the labor market. The four-week moving average of claims, which irons out seasonal abnormalities, fell by 9,500 to 224,000 last week.

Courtesy of Mortgage Market Guide

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Wednesday – January 8, 2020

The housing market in 2020 has been upgraded in forecasts for single-family housing starts, new home sales and mortgage originations. Fannie reports that its Home Purchase Sentiment Index (HPSI) capped off a strong year in December with the index just below the survey high at 91.7. Three of the six HPSI components increased month over month, including the percentage of Americans who believe that home prices will go up over the next 12 months. Annually, the HPSI is up 8.2 points, driven primarily by consumers’ favorable mortgage rate expectations and a growing share reporting it’s a good time to buy a home.

Mortgage rates edged lower in the latest week and remain just above all-time lows. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage fell by four basis points to 3.91% with 0.33 in points. Mike Fratantoni, MBA Senior Vice President and Chief Economist said, “We expect that the strong job market will continue to support purchase activity this year, and the uptick in housing construction towards the end of last year should provide more inventory for prospective buyers.”

Private job growth surged in December as the labor market continues to be a big source of strength for the U.S. economy. ADP reports that private payrolls rose by 202,000 last month, well above the 155,000 expected. The November number of 67,000 jobs created was revised higher to 124,000. Ahu Yildirmaz, vice president and co-head of the ADP Research Institute said, “The service providers posted the largest gain since April, driven mainly by professional and business services. Job creation was strong across companies of all sizes, led predominantly by midsized companies.”

Courtesy of Mortgage Market Guide

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Tuesday – January 7, 2020

The service sector of the U.S. economy continues to be a bright spot. The sector provides a service, not a product, such as retail, banks, hotels, real estate and the like. The Institute for Supply Management’s Service Index registered 55 in December with the sector growing for the 119th consecutive month. A reading above 50 indicates the non-manufacturing sector economy is generally expanding; below 50 indicates the non-manufacturing sector is generally contracting.

The financial markets are quiet so far this morning with little movement in the bond markets. U.S. stocks fell at the outset yesterday on the Middle East tensions but the Dow, S&P and NASDAQ erased their losses and ended in positive territory. As Jim Cramer said on CNBC this morning, “This market is resilient.” Mortgage Bond and Treasury prices are near unchanged with the 10-year yield at 1.81%. The markets are gearing up for some potential headline risk by way of two key labor market reports – tomorrow’s ADP Private Payrolls and Friday’s official Jobs Report.

Courtesy of Mortgage Market Guide

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Monday – January 6, 2020

The U.S. financial markets kick off the week impacted by geopolitical headlines though both stock and bond prices trading near unchanged on the push-pull Middle East tensions coupled with positive U.S. – China trade headlines. U.S. stocks opened lower but have quickly shed losses as the session drags on. The markets will continue to take direction from the incoming geopolitical headlines.

Oil prices have gushed higher in the past week due to the Middle East tensions. The price for West Texas Intermediate oil has risen to near $65 from $50 seen back in November. The national average price for a regular gallon of gasoline is at $2.58, unchanged in the past month, but could spike higher on the Middle East tensions. The highest price ever recorded was $4.11 back on July 17, 2008.

Two key labor market reports will be released this week in a sector that has been a bright spot in a solid economy. ADP Private Payrolls will be released on Wednesday followed by Non-Farm Payrolls on Friday. Back in December, a report showed that U.S. employers added 266,000 new workers in the Non-Farm Payrolls report while the 3.5% unemployment rate was at a 50-year low. In addition, average hourly earnings have been on the rise which will continue to boost consumer spending.

Courtesy of Mortgage Market Guide

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