Mortgage in America

Daily Rate Update: July 27th-31st

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Friday – July 31, 2020

The U.S. consumer continued to spend big for the second month in a row in June as pockets of the economy reopen and online spending soars. Personal Spending rose 5.6% in June after the 8.2% gain seen in May with consumers buying new cars and trucks and there was a big jump elective medical procedures and surgeries that were postponed due to the shutdown. Consumers also increased spending on clothing, recreation and gasoline.

Inflation remained tame in June as evidenced by a key gauge used by the Federal Reserve. The Core Personal Consumption Expenditures (PCE) rose by 0.9% in June 2020 from June 2019. The Fed has set its target range at 2% but inflation has been running well below that level for quite some time and will remain for the foreseeable future.

Unemployment remains elevated as evidenced by the 1.434 million first-time claims for unemployment benefits was reported yesterday. And with the possibility of the enhanced $600 unemployment benefit expiring tonight, it could get rough and uncertain for many Americans. Those who are unemployed will continue to receive their state benefits but that is a big decline from the extra $600. Congress is currently trying to come to an agreement quickly to aid those who are really in need of the extra money.

Courtesy of Mortgage Market Guide 

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Thursday – July 30, 2020

Mortgage rates continue to hover near record lows as the Federal Reserve holds rates low to spur on not only the housing sector but the overall economy also. Freddie Mac reports that the 30-year fixed-rate mortgage fell to 2.99% with 0.8 in points and fees. Last year this time the rate was 3.75%. Chief Economist Sam Khater from Freddie Mac said, “Real estate is one of the bright spots in the economy with current purchase demand up 20% from a year ago & modest decline in home prices. Home sales should remain strong into the fall.”

Americans filing for first-time unemployment benefits remain elevated and rose for the second straight week as the fallout from the pandemic induced shutdown continues to reverberate throughout the labor market. Weekly Initial Jobless Claims rose by 12,000 for the week ended July 25 to 1.4343 million versus the 1.4 million expected. It marks the 19th straight week of over 1,000,000 weekly claims. Congress is mulling over whether or not to extend the $600 enhanced unemployment benefit, reduce it or discontinue it.

Economy activity fell off a cliff in the second quarter of 2020 as the pandemic induced shutdown devastated the overall U.S. economy. The Bureau of Economic Analysis reports that Gross Domestic Product (GDP) fell a record 32.9% and was the worst number in 70 years of data. GDP is the value of the goods and services produced in the United States. Third-quarter GDP should see a big rebound given the reopening of the economy.

Courtesy of Mortgage Market Guide 

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Wednesday – July 29, 2020

Mortgage rates remained near all-time lows in the latest week as the Federal Reserve continues to hold borrowing costs low to spur on economic activity. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage was unchanged at 3.20% with 0.37 in points for the week ending July 24. The MBA also reports that the Market Composite Index, a measure of total mortgage loan application volume fell 0.8%, the Purchase Index declined by 1.5% while the Refinance Index was near unchanged.

Signed real estate contracts for existing single-family homes continued to increase in June after the big gains seen in May. The National Association of REALTORS© reports that Pending Home Sales rose by 16.6% in June from May and was up 6.3% annually. In addition, all four major regions of the country experienced gains. Lawrence Yun, NAR’s chief economist said, “Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy.”

Homeownership rates increased in the latest quarterly reading as the sector continues to shine post-shutdown. The U.S. Census Bureau reports that the homeownership rate rose to 67.9% in Q2 2020 from 65.3% in Q1 and up from 64.1% in Q2 2019. The rate of 67.9% is almost a 12-year high. The report did say that as a result of the coronavirus pandemic (COVID-19), data collection operations were affected during Q2 2020. In-person interviews were suspended during the quarter and replaced with telephone interview attempts when contact information was available.

Courtesy of Mortgage Market Guide 

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Tuesday – July 28, 2020

As more and more Americans return to work the number of forbearance filings have been declining week over week. The Mortgage Bankers Association reports that the total number of loans now in forbearance fell to 7.74% from 7.80% as of July 19, 2020. In addition, the MBA estimates 3.9 million homeowners are in forbearance plans. “The share of loans in forbearance declined by a smaller amount than in previous weeks, as the pace of borrowers exiting forbearance slowed,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist.

Home prices saw solid gains year over year in May as the economy reopened after the pandemic induced shutdown. The S&P Case-Shiller 20-City Home Price Index rose 3.7% from May 2019 to May 2020, down from 3.9% in April. Prices were up 0.4% from April 2020 to May 2020. In addition, the National Composite Index increased by 4.5%. “More data will obviously be required in order to know whether May’s report represents a reversal of the previous path of accelerating prices or merely a slight deviation from an otherwise intact trend,” said spokesperson Craig J. Lazzara.

Courtesy of Mortgage Market Guide 

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Monday – July 27, 2020

Economic data is plentiful this week with Durable Orders easily beating expectations in June as data continues to roll in on the positive side. In addition, housing, consumer confidence and sentiment, the inflation reading Core PCE and consumer spending will be released. All eyes will be glued to the first reading Q2 2020 Gross Domestic Product where it is expected to plunge by at least 30% due to the pandemic induced shutdown.

The Fed’s monetary policy report will be released on Wednesday at 2:00 p.m. ET. There is a zero percent chance of a change to the short-term Fed Funds Rate, but what the statement conveys and what Fed Chair Powell will say at his 2:30 p.m. ET press conference could impact the markets. The Federal Funds Rate is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight.

Just some quick facts regarding Treasury securities. Treasury notes are interest-bearing securities that have a fixed maturity of not less than 1 year and not more than 10 years from the date of issue. The Treasury currently issues notes in 2, 3, 5, 7, and 10-year maturities. Treasury notes pay interest on a semi-annual basis. When a note matures, the investor receives the face value. Treasury bills are short-term securities maturing in one year or less. Bills are sold at a discount or at par (face value). When a bill matures, the investor receives the face value. The difference between the purchase price and the face value equals the interest earned. Treasury bonds are interest-bearing securities with maturities over 10 years. Treasury bonds pay interest on a semi-annual basis. When a bond matures, the investor receives the face value.

Courtesy of Mortgage Market Guide 

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