Daily Rate Update: July 15th-19th

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Friday – July 19, 2019

US stocks are modestly higher this morning being buoyed by strong earnings from Microsoft. This morning, Larry Fink from BlackRock, chairman and CEO of the world’s largest money-management firm, said that US stocks should push higher from the current record levels. “People are underinvested in equities … with the change of tone of central bank behavior and you’re starting to see corporate earnings coming in pretty well,” said Fink. “We are still constructive on the world.” We agree with Mr. Fink and think his statements will age well for we do not see a recession in the near-term horizon and those that are saying it are simply incorrect.

The Bureau of Economic Analysis will release its Gross Domestic Product (GDP) data for the second quarter of 2019 next week and the numbers are looking to decline from the strong 3.1% recorded in the first quarter. Most estimates are calling for a rise of around 2% as the US is now in its longest stretch of economic expansion in history. At this point in time, the US economy still has room to grow after strong June retail sales and manufacturing data reported in the past few weeks. The US labor market remains strong while Americans filing for first-time unemployment benefits are near 50-year lows. GDP is the value of the goods and services produced in the US.

Courtesy of Mortgage Market Guide

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Thursday – July 18, 2019

Median home prices hit fresh record highs in the second quarter of 2019 as demand ramped up due in part to low mortgage rates. ATTOM Data Solutions reports that the single-family homes or condos sold for a median price of $266,000 in Q2 2019, up nearly 11% from the previous quarter and up 6.4% from a year ago. Todd Teta, chief product officer at ATTOM Data Solutions said, “With mortgage rates dipping to new lows, it’s no surprise that people were wanting to buy a home, even if prices were at their peak. We expect to see milder home prices in the coming quarters.”

Mortgage rates edged higher in the latest week though they remain at multi-year lows. Freddie Mac reports that the 30-year fixed-rate mortgage rose six basis points in the latest week to 3.81% with an average 0.6 in points and fees. A year ago this time, the 30-year fixed-rate mortgage averaged 4.52%. Freddie Mac said that despite the uptick in rates, the improvement in housing demand should provide sufficient momentum for the housing market and economy during the rest of the year.

Manufacturing activity in the Philadelphia region surged in July, according to the Philadelphia Federal Reserve. The Philly Fed Index surged to 21.8 in July, well above the 0.3 recorded in June and above the 5.0 expected. All components within the reports rose while the employment gauge increased 15 points to 30.0, the highest reading since October 2017. In addition, the survey’s future indexes indicate that respondents continue to expect growth over the next six months.

Courtesy of Mortgage Market Guide

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Wednesday – July 17, 2019

For the second straight month, new home construction declined in the US due in part to builders unable to find inexpensive lots to build on, a lack of skilled workers and higher prices. The Commerce Department reports that housing starts fell 1% in June from May to an annual rate of 1.253 million units, below the 1.27 million expected. Starts rose 6.2% from June 2018 to June 2019.Big gains were seen in the Northeast and Midwest with losses in the South and West. Single-family units, which account for the bulk of the housing market, rose 3.5% in June from May with a modest loss year-over-year. Multi-dwelling units fell nearly 10% month-over-month. Building Permits, a sign of future construction, fell 6% from May to June.

After moving lower in the first half of 2019, mortgage rates have edged higher in the past few weeks as bond prices rose while US stocks hit all-time record highs. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage rose eight basis points in the latest week to 4.12% with an average 0.38 in points. The MBA also reports that its Market Composite Index, a measure of total mortgage application volume, fell 1.1% while the refinance index rose 1.5% and the purchase index fell by 3.8%. The survey covers over 75% of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.

Fannie Mae released its housing forecast this week revealing that mortgage rates will remain low for the foreseeable future. Fannie forecasts that the 30-year fixed-rate mortgage will average 4% in 2019 with a decline to 3.70% in 2020. Total mortgage originations are expected to reach $1.75 trillion this year while 2020 will see a lower number of $1.691 trillion. “Housing remains a net positive to the economy, as the industry anticipates growth fueled by strong household balance sheets, low mortgage rates, and a surge in refinance activity,” said Fannie Mae Senior Vice President and Chief Economist Doug Duncan.

Courtesy of Mortgage Market Guide

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Tuesday – July 16, 2019

A solid labor market coupled with rising home prices has pushed the overall mortgage delinquency rate to its lowest in more than 20 years, reports CoreLogic. The 30 days or more delinquency rate for April was 3.5%, down from 4.3% in April 2018. In addition, no state posted an annual gain in its overall or serious delinquency rate. “The U.S. has experienced 16 consecutive months of falling overall delinquency rates, but it has not been a steady decline across all areas of the country,” said Frank Martell, President and CEO of CoreLogic.

The consumer is alive and well in the US due in part to a solid labor market and a slight increase in wages. Retail sales rose 0.4% in June versus the 0.2% expected. When stripping out autos, sales were also up 0.4%, above the 0.2% expected. Within the report, the *control group sales, that feed directly into Gross Domestic Product, jumped 0.7% versus the 0.3% expected. *The “retail sales control group”, published by US Census Bureau, represents the total industry sales that are used to prepare the estimates of personal consumption expenditures for most goods – an inflationary number.

Over in the equity markets, stocks are near unchanged after Wells Fargo, Goldman Sachs and JPMorgan reported solid earnings but future Fed rates cuts could impact banks’ net interest margins. In addition, the solid retail sales data and the specter of an uptick in inflation could limit further rate cuts in 2019 which is capping any gains for stocks today. A twenty-five basis-point cut to the Fed Funds Rate at the end of the month’s FOMC meeting is still showing a 100% probability. Remember, the Fed has stated it will be data dependent on monetary policy going forward.

Courtesy of Mortgage Market Guide

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Monday – July 15, 2019

The Dow Jones Industrial Average (27,332), S&P 500 (3,013) and NASDAQ (8,244) stock indexes all closed at record highs on Friday and are near unchanged this morning after positive economic news out of China along with solid quarterly earnings from Citigroup. Goldman Sachs, JPMorgan and Wells Fargo will report tomorrow. Analysts are forecasting that earnings for the S&P 500 are expected to have declined by 3% in Q2 2019. With such a low bar set for earnings expectations, it could be setting the markets up for companies to beat estimates. Mortgage applications for new home purchases jumped in June from May while year-over-year applications also saw a solid increase. The Mortgage Bankers Association reports that its Builder Application Survey showed a near 18% increase in mortgage applications for new home purchase from June 2018 to June 2019. On a monthly basis, applications rose 14% from May to June. The MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country.

Courtesy of Mortgage Market Guide

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