Daily Rate Update: June 11th-15th

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Friday – June 15, 2018

Renewed tariff woes with China are helping the U.S. Bond markets today while pushing the Dow Jones Industrial Average, S&P 500 and the NASDAQ lower as the week comes to an end. President Trump has approved tariffs on $50 billion worth of Chinese goods imported into the U.S. An official announcement is expected later today. The closely watched Dow Jones Industrial Average was down nearly 300 points in early trading.

The Federal Reserve raised its benchmark short-term Fed Funds Rate this week, but what does that actually equate to for the U.S. consumer? The consumer will see a hike on rates for credit cards, home equity lines of credit, auto loans and other adjustable-rate instruments. In addition, student loan rates will creep higher while savings rates for banks will edge higher, but not by much.

Fannie Mae reported this week that mortgage lenders reported a net-negative profit margin outlook for the seventh consecutive quarter due in part to rising home prices and a tight supply of home for sale on the market. Tight supplies continue to put a squeeze on mortgage demand. “Lenders remain bearish this quarter as they continue to face headwinds from rising mortgage rates, tight supply, and strong home price appreciation, which have drastically reduced refinance activity and restrained home purchase affordability,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.

Courtesy of Mortgage Market Guide

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Thursday – June 14, 2018

Recent tax cuts and a strong labor market sent consumers on a spending spree in May as Americans doled out their hard-earned cash at gas stations, clothing stores and home improvement centers. May Retail Sales surged 0.8 percent from April, well above the 0.4 percent expected. From May 2017 to May 2018, Retail Sales were up 5.9 percent.

When stripping out autos, Retail Sales jumped 0.9 percent versus the 0.5 percent expected. Overall, it was a strong report. If consumers continue to spend, the U.S. economy will continue to grow at a solid pace in the months ahead. The Retail Sales report is a measure of the total receipts of retail stores from samples representing all sizes and kinds of business in retail trade throughout the nation.

Mortgage rates edged higher in the latest week but looking at rates from a historic perspective, they are still relatively low. Freddie Mac reports that the 30-year fixed-rate mortgage rose eight basis points to 4.62% in the latest week with an average 0.40 in points and fees. Freddie Mac says the good news is that the impact of rising rates on consumer budgets will be smaller than past rate hike cycles. That is because a much smaller segment of mortgage loans in today’s market are pegged to short-term rate movements.

Courtesy of Mortgage Market Guide

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Wednesday – June 13, 2018

Higher oil prices led wholesale prices higher in May as inflation pressures begin to build. The Producer Price Index (PPI) surged 0.5% in May from April, above the 0.3% rise expected. On an annual basis PPI jumped 3.1% from 2.6% in April and was the largest increase since January 2012. The Core PPI, which strips out volatile food and energy, rose 0.2% month over month and 2.6% annually.

It’s Fed day! The Federal Reserve is expected to raise the short-term Fed Funds Rate by 0.25% to bring it to the 1.75%-2% level. The announcement will be made at 2:00 p.m. ET this afternoon. The hike is most likely baked into the cake and shouldn’t stir up the markets in a big way. However, what is revealed in the statement, economic projections and Fed Chair Powell’s news conference, could shake things up.

The Mortgage Bankers Association (MBA) reports that home loan rates edged higher in the latest week but remain historically low. The MBA reports that the 30-year fixed-rate conforming mortgage rose to 4.83% from 4.75% with points increasing to 0.53 from 0.46 for the week ending June 8, 2018. In addition, the MBA’s Market Composite Index, a measure of total mortgage loan application volume, fell 1.5% from the previous week. The purchase and refinance indexes both fell 1.5%.

Courtesy of Mortgage Market Guide

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Tuesday – June 12, 2018

Small business optimism continued to reach new heights in May due in part to tax cuts and less regulations. The NFIB Small Business Optimism Index rose to 107.8 in May, the second highest reading in the survey’s 45-year history. “Main Street optimism is on a stratospheric trajectory thanks to recent tax cuts and regulatory changes. For years, owners have continuously signaled that when taxes and regulations ease, earnings and employee compensation increase,” said NFIB President and CEO Juanita Duggan.

Consumer inflation was somewhat tame month over month while annual increases were a bit hotter than expected. The headline Consumer Price Index (CPI) rose 0.2% in May, just below the 0.3% expected as increases in gasoline slowed a bit during the month. However, year-over-year CPI increased 2.8%, the biggest increase since February 2012, up from 2.5% in April. The Core CPI, which strips out volatile food and energy, rose 0.2% from April and was up 2.2% annually. The Fed’s preferred inflation gauge, the annual Core Personal Consumption Expenditure, rose 1.8% in April, just below the Fed’s target range of 2%.

Mortgage delinquency rates edged lower in March due in part to an improving economy and labor market. CoreLogic reports that the 30 days or more delinquency rate for March 2018 was 4.3%. In March 2017, 4.4% of mortgages were delinquent by at least 30 days or more including those in foreclosure. This represents a 0.1%-point decline in the overall delinquency rate compared with March 2017.

Courtesy of Mortgage Market Guide

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Monday – June 11, 2018

The Federal Open Market Committee meeting kicks off on Tuesday and ends Wednesday at 2:00 p.m. ET with the release of the monetary policy statement and interest rate decision. The Fed is expected to raise the Fed Funds Rate by 0.25% to bring the benchmark rate to 2%. The hike is already baked into the cake but the accompanying statement, economic projections and Fed Chair Powell’s press conference immediately following the release could impact the markets. There will be no headlines until Wednesday.

The housing market continues to produce positive headlines for consumers. Property data collector CoreLogic reports that homeowner equity surged by $1 trillion in Q1 2018 from Q1 2017, an annual increase of 13.3%. In addition, homeowner equity has doubled in the past five years, rising by $4.4 trillion from Q1 2013 to Q1 2018. Over the past 12 months, 640,000 borrowers moved into positive equity.

Tonight at 9:00 p.m. ET President Trump will meet North Korean leader Kim Jong Un with the goal being “the complete, and verifiable, and irreversible denuclearization of the Korean Peninsula.” Ahead of the summit, U.S. Stocks are modestly higher. This week’s events will have an impact on Stock and Bond prices as well as home loan rates.

Courtesy of Mortgage Market Guide

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