Daily Rate Update: May 14th-18th

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Friday – May 18, 2018

Fannie Mae released its May 2018 Economic and Housing Outlook yesterday revealing that despite a lusterless first three months of 2018, it expects home sales to post decent gains both this year and next, as prices increase and affordability declines amid low inventory. On the economic front, Fannie Mae is forecasting that Gross Domestic Product will average 2.7% in 2018 due in part to strengthening consumer spending. One headwind to the economic outlook is the continued rise in oil prices as they may offset some of the increase in disposable income from the recent tax cuts while also putting upward pressure on headline inflation.

Memorial Day marks the unofficial start of summer, and Americans will kick off the season by traveling in near-record numbers. According to AAA, more than 41.5 million Americans will travel this Memorial Day weekend, nearly 5% more than last year and the most in more than a 12 years. About 36 million of those travelers will drive to their holiday weekend destination. “Gas prices are higher. People will be spending about $6 more for a full tank of gas, but that’s not going to stop people from traveling this Memorial Day,” Jenkins said. “This is the kick-off for the summer season, the economy is still good, and overall people are ready to roam.” The national price for a gallon of gas is $2.91, about $0.55 more than this time last year.

Courtesy of Mortgage Market Guide

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Thursday – May 17, 2018

Mortgage rates continued their trek higher this week due in part to the continued growth in the U.S. economy and a tight labor market. Positive economic data usually pushes Bond prices lower, which leads to higher rates. Freddie Mac reports that the 30-year fixed-rate mortgage rose five basis points to 4.66%, the highest level since May 19, 2011. That rate does carry an average 0.4 in points and fees. Freddie Mac says while this year’s higher mortgage rates have not caused much of a ripple in the strong demand for buying a home that is seen in most markets, inflationary pressures and the prospect of rates approaching 5% could begin to hit the psyche of some prospective buyers.

HousingWire reports that Ellie Mae’s April Origination Insight data shows that the share of closed purchase loans jumped to its highest level since the company began tracking originations, while the time to close a loan continues to shrink. Ellie Mae expects to see a strong purchase market during the peak summer buying months, despite low inventories of homes for sale on the market.

Redfin reports that the national median home price increased 7.6% in April 2018 from April 2017 to $302,200 across the 174 markets that it tracks. This was the first time in history that the national median home price rose above the $300,000 level. The online real estate brokerage firm also reported that home sales were up 5.2% from last year and were higher by 1.5% from January to April this year from the same period last year. “Despite rising prices and low inventory, sales in 2018 so far are slightly higher than last year, which was the best year on record since the 2006 housing boom,” said Redfin Chief Economist Nela Richardson.

Courtesy of Mortgage Market Guide

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Tuesday – May 15, 2018

Consumers spent broadly across most retail sectors in April after a sluggish start in the beginning of the year. The Commerce Department reported that Retail Sales rose 0.3% from March to April, which was concentrated on sales at furniture stores, clothing stores and gasoline stations. March’s reading was revised to a 0.8% increase from February, up from the 0.6% originally reported. On a year-over-year basis, Retail Sales jumped a solid 4.7%. 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.

Manufacturing activity in the New York State region increased in May led by the new orders index and the prices paid index. The Empire Manufacturing Index rose to 20.1 in May from the 15.8 recorded in April and above the 15 expected. Of those surveyed, 40% of respondents reported that conditions had improved over the month, while 20 percent reported that conditions had worsened.Employment was expected to increase in the months ahead while future business conditions rose from April.

Over in the housing market, home builder sentiment remained strong in May as builders are being boosted by growing consumer demand for single-family homes. However, the increasing costs for lumber poses a concern for builders. The NAB Housing Market Index rose two points in May to 70.

“Tight housing inventory, employment gains and demographic tailwinds should continue to boost demand for newly built single-family homes,” said NAHB Chief Economist Robert Dietz.

Courtesy of Mortgage Market Guide

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Monday – May 14, 2018

This morning, the Federal Reserve Bank’s Loretta Mester (voter, hawk) says the Fed could raise rates more rapidly if the U.S. economy grows faster than expected, though it could go slower if inflation weakens. Ms. Mester went on to say that she doesn’t see inflation picking up sharply this year. The Fed’s favorite inflation gauge, the annual Core PCE, is at 1.9%, not far off the Fed’s target of 2%. Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.

The National Bureau of Economic Research (NBER) recently reported that the current economic expansion in the U.S. is in a tie for the second longest in history dating back to June 2009. In addition, the number of consecutive months of labor market gains is the longest ever as of April. The NBER went on to say that the 3.9% Unemployment Rate recorded in April was the lowest since late 2000. The NBER also reported that the number of job openings hit 6.6 million in March, the highest since the Labor Department started tracking the number in December 2000.

Gas prices at the pumps continued to rise to start the week as the summer driving season gets set to kick off in a few weeks. In addition, the recent announcement from the White House to withdraw from Iranian nuclear deal had a hand in driving up oil prices. Motor Club AAA reports that the headlines from Washington along with the switch over to summer blend gasoline and growing global demand are also factors fueling the rise in gas prices. The national average price for a regular gallon of gasoline is at $2.87, up 6 cents in the latest week and up 53 cents from a year ago.

Courtesy of Mortgage Market Guide

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