Daily Rate Update: March 11th-15th

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Friday – March 15, 2019

The week comes to an end with little fanfare in the absence of any major headlines. In economic news, manufacturing activity in the New York State region came in below expectations though the employment component increased. Preliminary March Consumer Sentiment came in at 87.8, beating estimates. Redfin reports that home sales slowed in February, up 0.6% year-over-year, the smallest annual increase since March 2012.

Zillow Research reports that rental prices, which cooled a bit in 2018, are now slowly inching higher. Nationally, median rents rose 2.4% or $34 year-over-year in February to $1,472 a month. The priciest rental market was San Jose, California at $3,547 in February while Pittsburgh was the lowest at $1,100. Zillow went on to report that home values nationally rose 7.2% in February 2019 from February 2018.

With the spring and summer driving season upon us, gas prices at the pumps are beginning to push higher. The national average price for a regular gallon of gas is at $2.54, up from $2.29 a month ago. Gas prices tend to rise this time of the year due in part to added costs needed to refine the costlier summer blend gas along with an uptick in demand. A year ago the price was $2.53 while the highest price recorded was $4.11 back in July 2008.

Courtesy of Mortgage Market Guide

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Thursday – March 14, 2019

The Census Bureau reports that delayed January New Home sales fell nearly 7% from December to an annualized rate of 607,000 units versus the 623,000 expected. However, December was revised higher to 652,000 from 621,000. Sales also declined year-over-year by 4.1%. Sales fell in the Northeast, Midwest and in the South but rose in the West. The average sales price was $373,100 from last year’s $377,800. Inventories were 6.6 months, just above the 6% average.

Mortgage rates continued to decline in the latest survey due in part to low inflation coupled with slowing global growth. Freddie Mac reports that the 30-year fixed-rate mortgage fell ten basis points to 4.31% with an average 0.40 in points and fees. Rates are now at 13-month lows and sets up for a solid spring buying season given home prices are also lower this season compared to last year.

As the spring buying season kicks off the Mortgage Bankers Association (MBA) reports that mortgage applications for new home purchases rose 3% from February 2018 to February 2019, up month-over-month by 6% from January in its Builder Application Survey. The survey tracks application volume from mortgage subsidiaries of home builders across the nation. Joel Kan the MBA’s Associate Vice President of Economic and Industry Forecasting said, “Slowing home-price growth, combined with stronger wage gains and lower mortgage rates, is translating to improving affordability conditions for spring buyers.”

Courtesy of Mortgage Market Guide

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Wednesday – March 13, 2019

Inflation at the wholesale level edged slightly higher in February led by higher gas prices though inflation remains contained. The February Producer Price Index (PPI) and Core rate both rose month-over-month by 0.1% just below the 0.2% expected further strengthening the low inflation environment. The Core PPI strips out volatile food and energy costs. The year-over-year numbers edged lower. Delayed January Durable Orders rose 0.4% versus the -0.6% expected.

Mortgage rates edged lower in the latest week and remain just below year ago levels ahead of the critical spring buying season. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage dipped three basis points to 4.64%, FHA down five basis points to 4.61% while the jumbo rate rose four basis points to 4.45%. Those rates do carry at least an average 0.50 in points. The MBA reports that the refinance index was essentially unchanged while the purchase index increased 4.3%. In addition, the average purchase loan size rose to a survey high of $326,000 in the latest week.

Fannie Mae released its Home Purchase Sentiment Index (HPSI) showing a slight decrease after the gains seen in January. The index fell 0.4 points to 84.3 in February due in part to a decline in the net share of Americans who reported substantially higher household income compared to the same time last year which was offset by an increase in the job confidence component. “The HPSI held steady in February, as consumers’ continuing optimism about economic conditions seems to be balanced with softening attitudes toward the housing market,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.

Courtesy of Mortgage Market Guide

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Tuesday – March 12, 2019

Inflation at the consumer level remained tame in February due in part to modest gains in the costs of food, gasoline and rents. The February Consumer Price Index rose month-over-month for the first time since October up 0.2%, in line with estimates. On an annual basis, CPI rose 1.5%, the smallest annual increase in 2-1/2 years. Core CPI, which excludes food and energy, rose 0.1% versus 0.2% expected and up 2.1% annually from 2.2% in January. The tame inflation data backs up the call for no rate hikes anytime soon and most likely for all of 2019.

The NFIB Small Business Optimism Index edged higher in February though below the all-time highs seen this past summer. The NFIB also reported that small job creation broke a 45-year record in February as the labor market continues to strengthen. 

“Small business owners are thankful to have the government shutdown in the rear view mirror but need more certainty about the future,” said NFIB President and CEO Juanita D. Duggan. “The best thing Washington can do for the small business half of the economy is to continue the policies – tax cuts and deregulation – that leave them with more resources to invest and find qualified workers.”

Home owners on the brink of foreclosure edged lower in December as incomes and home-price growth continues. CoreLogic reports that the 30-days or more delinquency rate was 4.1% in December, down 1.2% from December 2017. In addition, the report showed that all states saw serious delinquency rates decrease except for North Dakota, which remained the same. The serious delinquency rate is defined as 90 days or more past due including loans in foreclosure.

Courtesy of Mortgage Market Guide

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Monday – March 11, 2019

The consumer bounced back in January after weak sales numbers at retail outlets were reported in December. Retail sales grew 0.2% in January after the negative 1.6% reported in December. The drop in December could have been due to the partial government shutdown towards the end of December and the decline in stock prices during the month of 2018. Year-over-year sales grew 2.3% from January 2018. When stripping out autos, sales jumped 0.9% from the -2.1% seen in December. One bad month does not constitute a trend.

Fed Chair Powell was on 60 minutes last night and reiterated his “patient” stance on interest rates. Mr. Powell also that he sees no reason why the U.S. economy shouldn’t continue to expand. The Fed chief went on to say that unemployment is low while inflation is muted. The Fed member will meet next week for the scheduled two-day Federal Open Market Committee Meeting. There is a near zero percent chance of a hike to the benchmark short-term Fed Funds Rate.

The rest of the week’s economic calendar features the inflation reading Consumer Price Index and Consumer Sentiment. The NFIB Small Business Optimism Index and the government’s jobs related JOLTS (Job Openings and Labor Turnover Survey) report will be released later in the week. There will be added bond supply as the Treasury will sell $38 billion 3-year Notes today, $24 billion 10’s tomorrow and $16 billion 30-year bonds on Wednesday. All results at 1:00 p.m. ET. The results could impact the Bond markets.

Courtesy of Mortgage Market Guide

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