Daily Rate Update: July 30th-August 3rd

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Friday – August 3, 2018

And the survey says … 157,000 jobs were created in July, below the 190,000 expected. The headline number was a miss, but a look under the hood shows many strong data points. The headline number of 157,000 missed expectations, but May and June were revised higher by 59,000. The Unemployment Rate fell to 18-year lows of 3.9%. One of the biggest highlights was the U6 number, or total unemployed, which dropped 0.3% to 7.5% for the month and down big from 8.5% a year ago.

Within the report it showed that the Labor Force Participation Rate remained at 62.9%. For the past three months, job growth averaged 224,000 compared to 194,000 in the same period in 2017. Average hourly earnings came in at 0.3% month over month, in line with estimates, while annually it remained at 2.7%. Weighing a bit on the report was hobby and retail toy employment, which fell by 32,000, largely due to the closing of Toys R Us. Outside the headline number which is always volatile and subject to revisions, this report was a strong one.

The service sector grew in July for the 102nd consecutive though the numbers were a bit lower than June. The Institute for Supply Management (ISM) Service Index registered 55.7 in July, below the 59.1 recorded in June and below the 58.5 expected. Within the report it revealed that the new orders index declined while the employment component gained strength. The survey went on to say that the majority of respondents remain positive about business and the economy.

Courtesy of Mortgage Market Guide

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Thursday – August 2, 2018

Mortgage rates rose this week to near seven-year highs. Freddie Mac reports that the 30-year fixed-rate mortgage rose six basis points to 4.60% with an average 0.40 in points and fees. Freddie Mac says average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Sam Khater, Freddie Mac’s chief economist says, “With the embers of a strong economy potentially stoking higher inflation, borrowing costs will likely modestly rise in coming months.”

The labor market continues to produce strong numbers as 2018 progresses and as the U.S. economy strengthens. Outplacement firm Challenger, Gray & Christmas reports that U.S.-based employers announced planned job cuts of 27,122 in July, 27.1% less than the 37,202 cuts in June. The July number is 4.2% below the 28,307 announced from the same time last year. Retailers are leading the cut in jobs as online shopping continues to grow. “The economy is at near-full employment. Nearly 90% of companies recently polled by Challenger are either actively hiring or in retention mode. Companies are not letting go of their workforces right now,” said John Challenger, chief executive officer of Challenger, Gray & Christmas, Inc.

Rental and housing numbers from the Census Bureau: The U.S. Census Bureau reports that over the 10 years from 6/30/07 to 6/30/17, the number of “renter” households in the U.S. increased by 8.4 million to 43.4 million, while the number of “owner” households increased by just 0.9 million to 76.1 million. However, over the latest 12 months from 6/30/17 to 6/30/18, the number of “renter” households in the United States declined by 0.1 million to 43.3 million, while the number of “owner” households increased by 1.8 million to 77.9 million.

Courtesy of Mortgage Market Guide

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Wednesday – August 1, 2018

The labor market continues to produce positive numbers for employment as the U.S. economy grows stronger. ADP Private Payrolls rose 219,000 in July, above the 175,000 expected while June was revised higher to 181,000 from 177,000. July’s 219,000 was the highest since February’s 241,000. The job market is booming, impacted by the deficit-financed tax cuts and increases in government spending,” says Mark Zandi, chief economist of Moody’s Analytics.

It’s Fed Day! The Federal Open Market Committee meeting ends this afternoon with the 2:00 p.m. ET release of its monetary policy statement. The market does not expect a hike to the short-term Fed Funds Rate. Rather, the statement will be dissected for clues that could solidify expectations for two more hikes in 2018. The current Fed Funds Rate is at a range of 1.75% to 2%. It is expected that there will be a rate hike at the September meeting.

Mortgage rates edged higher in the latest week after some positive economic reports were released last week. Second quarter 2018 Gross Domestic Product rose 4.1%, which pushed Bond prices lower, rates higher. The 30-year fixed-rate mortgage rose seven basis points to 4.84%, though rates still remain historically low. The survey covers over 75% of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.

Courtesy of Mortgage Market Guide

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Tuesday – July 31, 2018

Home prices rose steadily across the nation in May though affordability issues may come into play in the months ahead. The S&P CoreLogic Case-Shiller 20-City Home Price Index rose 6.5% from May 2017 to May 2018. This was in line with expectations and just below the 6.7% recorded in April (revised from 6.6 percent). On a monthly basis, home prices were up 0.7% from April to May.

David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices says, “Home prices continue to rack up gains two to three times greater than the inflation rate.” In addition, “affordability – a measure based on income, mortgage rates and home prices – has gotten consistently worse over the last 18 months. All these indicators suggest that the combination of rising home prices and rising mortgage rates are beginning to affect the housing market.”

Consumer Confidence rose in July to its second highest level in 2018 with consumers feeling that economic growth is still strong. The Consumer Confidence Index rose to 127.4 in July, above 127.1 in June. Within the report it showed that those stating business conditions are “good” increased, while those saying business conditions are “bad” declined. Consumers’ assessments of the labor market were also more favorable. Those claiming jobs are “plentiful” increased, while those claiming jobs are “hard to get” were virtually unchanged.

Courtesy of Mortgage Market Guide

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Monday – July 30, 2018

This week, the U.S. capital markets will receive a full dose of economic data and risk-filled headlines that will impact investors. Coming up is the the two-day Fed meeting that kicks off on Tuesday and ends Wednesday at 2:00 p.m. ET with the release of the monetary policy statement. The Fed is expected to hold the benchmark Fed Funds Rate steady at the 1.75% – 2% level, but the statement always carries headline risk.

On the economic data front, the inflation reading Core PCE, Personal Income and Spending, housing, manufacturing and service sector data will be released this week. Economic data culminates on Friday with the Jobs Report for July. In addition, a slew of earnings will be released this week. With the month coming to an end, the S&P is up 3.7%, the Dow has gained 4.9% while the tech-heavy NASDAQ is up 3% due in part to strong earnings, solid economic growth, a tight labor market, and high consumer confidence and small business optimism levels.

The National Association of REALTORS® reports that Pending Home Sales in June rose 0.9% rising in all four major regions across the country. The 0.9% was above the 0.2% expected. Despite the increase in June, Pending Home Sales are down 2.5% from June 2017. Lawrence Yun, NAR chief economist, says “Even with slightly more homeowners putting their home on the market, inventory is still subpar and not meeting demand. As a result, affordability constraints are pricing out some would-be buyers and keeping overall sales activity below last year’s pace.” Mr. Yun went on to say that the good news is it is possible that the worst supply crunch affecting most of the country has passed.

Courtesy of Mortgage Market Guide

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