Daily Rate Update: June 17th-21st

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Friday – June 21, 2019

The National Association of REALTORS® reports that existing home sales in May rose 2.5% from April to an annual rate of 5,340,000 units versus the 5,300,000 expected. Sales in April were revised higher. From a year ago, sales fell by 1.1%. Gains were seen across all major regions of the US. The median existing home sales price was $277,700, up 4.8% from May from a year ago. May’s price increase marks the 87th straight month of year-over-year gains. Lawrence Yun, NAR’s chief economist, said the 2.5% jump shows that consumers are eager to take advantage of the favorable conditions. “The purchasing power to buy a home has been bolstered by falling mortgage rates, and buyers are responding.”

US stocks are slightly lower as risk appetite dampens on the US/Iran tensions. The S&P closed at an all-time record high yesterday of 2,954.18 on the rate-cut euphoria along with hopes for a positive trade outcome between the US and China. This morning, Fed Vice Chair Clarida said the economy is solid, the labor market is strong while inflation remains near the Fed’s objective. With today being the first day of summer, trading volumes will begin to decrease by this afternoon as players look to escape early to kick off the weekend.

Courtesy of Mortgage Market Guide

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Thursday – June 20, 2019

“We will use our tools as appropriate to sustain the expansion. Participants (Fed members) expressed concerns a about a more sustained shortfall of inflation,” said Fed Chair Powell at his press conference yesterday. Mr. Powell went on to say that Fed members cited weaker business investment and cross currents as reasons for seeing cuts. In addition, the Fed chair said inflation is coming to target more slowly than expected while rising wages are not providing an upward push on inflation. The Fed left the benchmark Fed Funds Rate unchanged at this week’s Fed meeting.

The takeaway: a cut to the Fed Funds Rate is essentially guaranteed in July while there is a third of a chance of a .50% cut! The statement and Powell’s words sent mortgage bonds, treasuries and stocks soaring higher. The S&P 500 is at fresh all-time highs. The all-time closing high for the S&P is 2,945.83, hit back on April 30 before the May sell-off. The 10-year T Note yield dipped below 2% this morning to 1.97% before rising to the current level of 2.01%.

Mortgage rates inched higher this week though remain at the lows seen in September 2017. Freddie Mac reports that the 30-year fixed-rate mortgage rose just two basis points to 3.84% with an average 0.6 in points and fees. Sam Khater, Freddie Mac’s chief economist, says, “While the continued drop in mortgage rates has paused, homebuyer demand has not. Today’s low rates, strong job market, solid wage growth and consumer confidence are typically important drivers of home sales.”

Courtesy of Mortgage Market Guide

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Wednesday – June 19, 2019

Mortgage application volumes slowed in the latest week after the big gains seen in the previous week, reports the Mortgage Bankers Association (MBA). The Market Composite Index, a measure of total mortgage loan application volume, fell 3.4% in the week ended June 14, 2019. Both the Refinance and Purchase Indexes fell 3.5% though the share of refinance share of applications was still at the highest level since January 2018.

Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting said, “Purchase applications decreased more than 3 percent last week, but were still up almost 4 percent from last year. Strong demand from first-time buyers and low unemployment continue to push this year’s purchase activity above a year ago.” The 30-year fixed-rate mortgage rose two basis points to 4.14% with 0.38 in points, the jumbo rate was unchanged at 4.04% with 0.17 in points while the FHA rate increased three basis points ti 4.12% with 0.44 in points.

Good news for the high-priced housing market in the San Francisco Bay area. Tech and search engine giant Alphabet (Google) announced that the company will commit $1 billion to spur on housing construction as the tech sector looks to address the affordability crisis in the region. Google said the project will include the redirecting of $750 million of company owned land from commercial to residential use where 15,000 units will be built, across all income levels, reports the Wall Street Journal.

Courtesy of Mortgage Market Guide

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Tuesday – June 18, 2019

May housing starts fell 0.9% from April to an annual rate of 1,279,000 units versus the 1,240,000 expected while April was revised higher to 1,281,000 from 1,139,000. In addition, March was also revised higher as lower mortgage rates boosted the sector. Building permits, a sign of future construction, came in near unchanged at 1,294,000 with April revised higher to 1,290,000 from 1,259,000. Overall, a solid report.

Fannie Mae released its June Economic and Housing Outlook revealing that the housing market is expected to provide support to the larger US economy in 2019 via lower mortgage rates, and increasing sales pace. In addition, Fannie Mae said that supporting affordability, home price appreciation remains near its slowest pace in seven years. On the economic front, Fannie Mae sees full year Gross Domestic Product to rise by 2.1% with a 1.5% gain in 2020 due to weakening global economies and softness in business fixed investment.

US stocks are surging today after the European Central Bank Chief Mario Draghi said the central bank will go all in on accommodative monetary policy if the region’s economy continues to slow. In addition, the White House announced today that President Trump and China’s President Xi are to have an extended meeting next week at the G-20 Summit in Japan. The closely watched S&P 500 Stock Index is now just below all-time highs hit on April 30 due to a solid economy, 50-year low unemployment along with low inflation.

Courtesy of Mortgage Market Guide

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Monday – June 17, 2019

Fitch Ratings reports that home price growth slowed in Q1 2019 to 3% annually from the 4% seen in Q4 2018. However, Fitch says the slowdown in home price gains should plateau due to the decline in mortgage rates along with a limited supply of new homes. The report went on to reveal that Fitch said only a small number of housing markets look to be at risk for a price correction.

It’s Fed week! Fed members kick off their two-day FOMC meeting on Tuesday and ends Wednesday at 2:00 p.m. ET with the release of the Fed’s monetary policy statement along with economic forecasts. Immediately following the release, Fed Chair Powell will hold a press conference at 2:30 p.m. ET. There is just a small chance of a cut to the Fed Funds Rate at this meeting but chances spike to 85% at the July meeting.

US Stocks are modestly higher and remain just below all-time highs as the economy continues to expand. On Friday, the Atlanta Fed upped its forecast for Q2 2019 Gross Domestic Product (GDP) from 1.4% to 2.1%, a near 50% increase! The increase comes on the heels of strong retail sales in April and May with solid industrial production numbers. The Atlanta Fed is not known for their accurate forecasting of GDP – but Q2 GDP may show an upward surprise.

Courtesy of Mortgage Market Guide

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