Daily Rate Update: May 7th-11th

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Friday – May 11, 2018

The Mortgage Bankers Association reported on Thursday that its Builder Application Survey for April shows that mortgage applications to purchase new homes rose 7.5% compared to April 2017. However, compared to March, applications declined 5%. The MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 656,000 units in April 2018. Despite a strong economy and job market, the decrease in April was likely due to a combination of rising mortgage rates and slow new construction activity, as builders still face a shortage of skilled labor and increasing materials costs, among other challenges,” said Joel Kan, Associate Vice President of Economic and Industry Forecasting at the MBA.

The Federal Reserve’s Fed Funds Rate: You hear about it in the financial news on an almost weekly basis; but what is it and what does it impact? The Federal Funds Rate is the rate at which depository institutions (banks) lend reserve balances to other banks on an overnight basis. Reserves are excess balances held at the Federal Reserve to maintain reserve requirements. The Fed Funds Rate influences short term interest rates, albeit indirectly, for everything from home and auto loans to credit cards, as lenders often set their rates based on the prime lending rate. The prime lending rate is the lending rate at which banks charge their customers. The Prime Rate is calculated by taking Fed Funds Rate, currently at 1.75%, of 1.75% and adding three points to it equaling the current Prime Rate of 4.75%.

Courtesy of Mortgage Market Guide

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Thursday – May 10, 2018

Consumer prices cooled a bit in April after spiking early in the year, helping to ease rising inflation fears. The numbers revealed an uptick in energy and food prices which were offset by a decline in demand for used cars and trucks. The Bureau of Labor Statistics reports that the headline Consumer Price Index (CPI) rose 0.2% in April, just below the 0.3% expected and still down from the 2018 high of 0.5% recorded in January.

The so-called Core CPI, which strips out volatile food and energy, rose 0.1%, below the 0.2% expected. On a 12-month basis, CPI rose 2.5%, up from the 2.4% in March, while the Core rate increased 2.1%, unchanged from the March reading. The members of the Federal Reserve will be dissecting the data but it does regard the Core Personal Consumptions Expenditures (PCE) as its favorite inflation gauge. The annual Core PCE was last reported at 1.9%, right near the Fed’s 2% target.

Mortgage rates were steady in the latest week, and while they have risen in 2018, rates still remain historically attractive. Freddie Mac reports that the 30-year fixed-rate mortgage was unchanged this week at 4.55% with an average 0.5 point added on top. Freddie Mac says as we head into late spring, the demand for purchase credit remains rock solid, which should set us up for another robust summer home sales season. While this year’s higher rates, which are up 50 basis points from a year ago, have put pressure on the budgets of some home shoppers, weak inventory levels are what’s keeping the housing market from a stronger sales pace.

Courtesy of Mortgage Market Guide

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Wednesday – May 9, 2018

Wholesale inflation was rather tame in April with the smallest amount of gains seen since the end of 2017. The decline was led by lower prices for food and gas. The April Producer Price Index rose by 0.1%, below the 0.2% expected and down from the 0.3% recorded in March. On a year-over-year basis, the Producer Price Index slipped to 2.6% from the 3% seen in March on an annual basis. The more closely watched Consumer Price Index will be released on Thursday.

Mortgage rates remained steady in the latest week and though they have risen to multi-year highs in 2018, they still remain historically attractive. The Mortgage Bankers Association (MBA) reports that its Market Composite Index, a measure of total mortgage loan application volume, fell 0.4% in the latest week with little change in rates. The MBAs refinance index -0.6%, purchase index -0.2%. The MBA also reported that the 30-year fixed-rate mortgage fell to 4.78% from 4.80%, while the jumbo rate was little changed at 4.65%. The MBA mortgage rates carry at least an average 0.50 point added on top.

As the economy continues to grow and house prices rise, mortgage delinquency rates are on the decline. The serious mortgage delinquency rate, or those at least 60 days or more past due, decreased to 1.74% in the first quarter. This is down from 2.07% in the first quarter of 2017, marking the 19th straight annual drop since the third quarter of 2013. “Borrowers continue to perform well, making on-time payments that are more in line with traditional patterns observed prior to the mortgage crisis,” said Joe Mellman, TransUnion senior vice president and mortgage business leader.

Courtesy of Mortgage Market Guide

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Tuesday – May 8, 2018

The NFIB’s Small Business Optimism Index sustained record-high levels in April of 104.8, driven by reports of improved profits, which pushed the index to its highest level in the survey’s 45-year history. “There is no question that small business is booming,” said NFIB Chief Economist Bill Dunkelberg. “Consumer spending, the new tax law, and lower regulatory barriers are all supporting the surge in optimism across all small business industry sectors.”

Government sponsored entity Fannie Mae released its Home Purchase Sentiment Index (HPSI) for April revealing that housing confidence hit a new all-time high last month. The HPSI rose 3.4 points in April to 91.7, marking a new survey high. The increase can be attributed to increases in five of the six HPSI components. The data showed that now is a good time to sell a home, home prices will rise, mortgage rates will decrease while Americans expressed an increased sense of job security. One caveat: The net share of respondents who said now is a good time to buy a home was the only component that decreased.

The Bureau of Labor Statistics reports that there were more job openings in March than any other time since the surveys inception in December 2000. According to the JOLTS (Job Openings and Labor Turnover Survey) report, there was a record-high of 6.6 million job openings in March. Job openings increased in a number of industries, with the largest surges in professional and business services (+112,000); construction (+68,000); and transportation, warehousing and utilities (+37,000). The number of job openings increased in the Northeast and Midwest regions.

Courtesy of Mortgage Market Guide

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Monday – May 7, 2018

Strong corporate earnings have been reported this season as tax cuts and a growing economy are a few key factors in the increase. Nearly 80% of the 400 S&P 500 companies that have reported so far this season have topped profit estimates, according to Thomson/Reuters. The numbers are supporting U.S. Stocks, which continue to churn just below the all-time highs that were hit back in January. Each earnings season begins one or two weeks after the last month of each quarter (December, March, June and September).

Oil prices continue to rise to levels not seen in over four years. West Texas Intermediate oil has risen to $70.37/barrel, +$0.65, above $70 for the first time since November 2014. “Black Gold,” “Texas Tea” is being boosted by Venezuela’s deepening economic crisis and a looming decision on whether the U.S. will impose sanctions on Iran, reports Thomson/Reuters. The rise in oil prices has increased gas prices at the pumps. The average price for a regular gallon of gasoline is at $2.81, up from $2.66 a month ago.

Home prices continue to rise and a recent report from Black Knight Financial Services reveals that prices jumped more in the first two months of 2018 than any stat of a year since 2005. Median home prices rose 1.24% across the nation since the beginning of 2018 with 60% of all metro areas seeing an acceleration in the rate of price increases through February of this year.

Courtesy of Mortgage Market Guide

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