Daily Rate Update: November 12th-15th

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Friday – November 15, 2019

The consumer is alive and well and continues to drive the U.S. economy. October Retail Sales rose 0.3%, higher than the 0.2% gain expected boosted by auto sales and higher gasoline prices. Consumer spending making up nearly 70% of Gross Domestic Product. Retail Sales grew 2.9% year over year. Consumers have been supported by a strong labor market and rising wages.

The Mortgage Bankers Association reports that mortgage delinquencies fell in the third quarter of 2019 as a strong labor market helps Americans to pay their bills on time. The delinquency rate is at 3.97%, the lowest since the first quarter of 2019. “Mortgage delinquencies decreased in the third quarter across all loan types – conventional, VA, and in particular, FHA,” said Marina Walsh, MBA’s vice president of industry analysis. “The labor market remains healthy and economic growth has been stronger than anticipated. These two factors have contributed to the lowest level of overall delinquencies in almost 25 years.”

Courtesy of Mortgage Market Guide

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Thursday – November 14, 2019

Wholesale inflation as defined by the Core Producer Price Index (PPI) for October came in at 1.5% year-over-year from 1.7% in September. The headline PPI fell to 1.1% annually from 1.4% in September, the smallest increase since October 2016. From September to October, PPI rose 0.4%, the most in six months led by a rise in the cost of goods and services. PPI measures the average change over time in the selling prices received by domestic producers for their output.

Total household debt hit a fresh record high in the third quarter of 2019 led by a big gain in mortgage debt, reports the New York Federal Reserve. Total household debt hit $14 trillion, an increase of $92 billion. It was the 21st consecutive quarter with an increase. Mortgage balances, the largest component of household debt, rose by $31 billion in the third quarter to $9.44 trillion. Mortgage originations, which include mortgage refinances, stood at $528 billion this quarter compared to $445 billion in Q3 2018. Student loan debt rose by $20 billion to $1.5 trillion.

There were no surprises from Fed Chair Powell yesterday in his testimony on the US economic environment and monetary policy. Mr. Powell said, “Looking ahead, my colleagues and I see a sustained expansion of economic activity, a strong labor market, and inflation near our symmetric 2% objective as most likely.” Translation – no recession in sight! Mr. Powell will be in front of the Senate around 10:00 a.m. ET today.

Courtesy of Mortgage Market Guide

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Wednesday – November 13, 2019

Consumer inflation edged higher in October and was the largest gain since March, fueled by higher gas prices. The Consumer Price Index (CPI) rose 0.4% versus the 0.3% expected while the year-over-year number saw a 1.8% increase from 1.7% in September. Core CPI rose 0.2%, in line with estimates, while the year-over-year number was up 2.3% from a gain of 2.4% in September. Core PCE, the Fed’s favorite inflation gauge, is running at 1.7% annually, just below the Fed’s target of 2%. Inflation is low and as the Fed has been saying, it will remain subdued for quite some time.

Mortgage rates rose in the latest week and remain at historic lows. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage rose five basis points to 4.03% for the week ending November 13, 2019. That rate carries a 0.31 in points. Despite the increase in rates, the Purchase Index rose 5.1% while the Refinance Index increased 12.9%. The Market Composite Index, a measure of total mortgage application volume, rose 9.6%. The survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990.

The National Retail Federation reports that consumers are expected to spend 4% more this holiday shopping season than in 2018. The average consumer says they will spend an average of $1,047.83 this season, up from $1,007.24 last year. Shoppers between the ages of 35 and 44 plan to spend the most at $1,158.63. Total consumer spending in this holiday shopping season is expected to be between $727.9 billion and $730.7 billion. “Consumers are in good financial shape and willing to spend a little more on gifts for the special people in their lives this holiday season,” NRF President and CEO Matthew Shay said.

Courtesy of Mortgage Market Guide

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Tuesday – November 12, 2019

The Mortgage Bankers Association reports that mortgage credit availability increased for the second straight month in October driven mainly by an increase in conventional loan programs. The Mortgage Credit Availability Index (MCAI) rose 0.9% in October to 185.1. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012. The increase was also due to programs for borrowers with lower credit scores as well as for investors and second home loans.

The NFIB Small Business Optimism showed a strong historical reading of 102.4 in October, up from September. Within the report, eight of the 10 Index components increased, as talk of a recession waned in October. NFIB President and CEO Juanita D. Duggan said, “Small business owners are continuing to create jobs, raise wages, and grow their businesses, thanks to tax cuts and deregulation, and nothing is stopping them except for finding qualified workers.”

This week features a key economic report that measures the strength of the US consumer. Solid consumer spending has been one of the highlights of the US economy in 2019 and should continue given the strong labor market. Retail sales for October will be released on Friday as we head into the holiday shopping season. The National Retail Federation is expecting that holiday shoppers plan to spend 4% more this season than in 2018.

Courtesy of Mortgage Market Guide

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