Daily Rate Update: July 8th-12th

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Friday – July 12, 2019

In recent years, potential homebuyers looking for a mortgage or those looking to refinance felt it took too long to close the deal once approved … but times have changed. LendingTree reports that the average time to close a purchase mortgage loan transaction is now 40 days, down from 74 days in 2017, a refinance now takes 38 days, down from 55 days in 2017. There was a few caveats as to what type of mortgage and the borrower. A borrower with a high credit score tend to close faster while refi borrowers with loan-to-value ratios below 80% also sealed-the-deal quicker.

After a rough week for the bond markets and yields, Mortgage Backed Securities are flat weighed down by the ongoing rate cut euphoric stock frenzy. Both the Dow (27,088) and the S&P (2,999) closed at record highs yesterday after a rate cut is set at the end-of-month Fed meeting with a rise in a possibility of a 50bp cut. We feel a 25bp will take place. Stocks are higher in early trading this morning. The Goldilocks economy here in the US continuing for the foreseeable future with low inflation, solid economic growth and consumer spending along with high consumer confidence. Could there be a recession at some point? Possibly. But Fed Chair Powell has stated over and over that the Fed will do all that is necessary to sustain the current economic expansion.

Courtesy of Mortgage Market Guide

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Thursday – July 11, 2019

Underlying inflation at the consumer level warmed up a bit in June with the biggest increase occurring since January 2018. The Core Consumer Price Index (CPI), which strips out volatile food and energy, rose by 0.3% in June led by increases in prices for apparel, used cars and trucks along with household furnishings. On an annual basis, the Core CPI rose 2.1% from the 2% recorded year-over-year in May. The Federal Reserve will closely dissect this number along with incoming economic data in the coming weeks ahead of the two-day FOMC meeting on July 30-31.

Mortgage rates were unchanged this week and remain near three-year lows as the market stabilizes after pushing lower since the highs seen last November. Freddie Mac reports that the 30-year fixed-rate mortgage was unchanged this week at 3.75% with an average 0.5 in points and fees. Sam Khater, Freddie Mac’s chief economist, says, “While rates have moderated, we’re still at nearly three-year lows, which is good news for buyers looking to purchase a home before school starts.”

Americans filing for first-time unemployment benefits fell to a three-month low in the latest week and are at lows seen around 1970. The Labor Department reports that weekly initial jobless claims fell by 13,000 in the latest week to 209,000 signaling continued strength in the sector which could boost the somewhat slowing US economy. The four-week moving average of initial claims, which irons out seasonal abnormalities, fell 3,250 to 219,250 last week. There have been no signs of an uptick in layoffs related to the US/China trade wars thus far.

Courtesy of Mortgage Market Guide

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Wednesday – July 10, 2019

Mortgage rates inched lower in the latest week and remain near lows seen in September 2017. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage fell three basis points to 4.04% with an average 0.37 in points. The jumbo rate rose three basis points to 4.03% with 0.27 points while the FHA 30-year was unchanged at 3.97% with 0.30 in points.

The MBA also reported that the Market Composite Index, a measure of total mortgage loan application volume, fell 2.4% while the Refinance Index decreased 6.5% and the purchase index gained 2.3%. Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting said, “Borrowers have been less sensitive to low rates as many borrowers have either recently refinanced or are likely waiting for rates to fall even further.

“Inflation pressures remain muted, global growth continues to be a concern,” were the remarks from Fed Chair Powell this morning prior to his testimony on Capitol Hill. Those words from Fed Chair Powell’s opening statement this morning was virtually identical to what he was saying back in early January when he did a 180 degree turn to the dovish side. Mr Powell also added, “Since then (the June Fed meeting), based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook.” Mr. Powell’s remarks lifted both the stock and bond markets this morning and propelled the closely watched S&P 500 Stock Index to an all-time high of 3,000.

Courtesy of Mortgage Market Guide

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Tuesday – July 9, 2019

The NFIB Small Business Optimism Index edged lower in June from May though it remains near historically high levels. The index fell to 103.3 from 105.0 in May. The NFIB commented that if economic growth slows, that is not bad in a fully employed economy that can’t find enough workers to fill open job positions. “Job openings and plans to create jobs remain historically very strong, and while it’s not as “hot” as May, Main Street is still running strong,” said NFIB Chief Economist William Dunkelberg.

Job openings remained higher than there are workers to fill those positions across the country as the labor market continues running on all cylinders. The Bureau of Labor Statistics reports that job openings fell by 49,000 on the last day of May to 7.32 million from 7.37 million in April in its Job Openings and Labor Turnover Survey, or JOLTS report. The quits rate held at 2.3% for the 11th straight month in May, the highest since 2005 which means workers are confident regarding their chances to find a new job.

Courtesy of Mortgage Market Guide

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Monday – July 8, 2019

After last week’s holiday-shortened week, things will heat up in the next 5 days while volatility may also be on the rise for the US capital markets. The week will feature Fed Chair Powell as he delivers his semi-annual testimony on the state of the US economy in front of Congress on Wednesday and Thursday. Powell’s speech comes ahead of the July 30-31 Fed meeting and his words could be market moving. The Treasury will sell a total of $78 billion in Treasury Notes and Bonds this week beginning with tomorrow’s $24B 3-year offering. Inflation readings from the Producer and Consumer Price Index will also be released during the week.

Low mortgage rates could generate an uptick in homeowners refinancing their current mortgages in the months ahead. Black Knight, a leading provider of integrated software for housing industry, reports that 8.2 million homeowners with mortgages could now benefit from a refinance, including 35% of those who took out their loans last year. In addition, as of June 27, there were 1.5 million potential refinance candidates in the 2018 vintage alone, matching the total of potential refinance candidates in the 2013-2017 vintages combined, reports Black Knight.

Fannie Mae reports that housing confidence dipped slightly in June, though it remains near survey highs on improved mortgage rate expectations in its monthly Home Purchase Sentiment Index (HPSI). The index fell 0.5 points in June to 91.5 after hitting a near survey high in May. “Growing expectations that mortgage rates will remain steady suggest improved stability for housing affordability and helped keep the HPSI relatively flat this month, despite modest declines in other components,” said Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae.

Courtesy of Mortgage Market Guide

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