Daily Rate Update: November 13th-16th

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Friday – November 16, 2018

U.S. Stocks are closing out the week the same way they came in… with extreme volatility. The Dow Jones Industrial Average traded as high as 26,000 with a low of 24,787. Stocks were influenced this week by trade issues, Brexit, the Fed and somewhat tame inflation data. Next week, the U.S. markets are closed on Thursday for Thanksgiving and have an abbreviated session on Friday.

The Mortgage Bankers Association (MBA) reports that its Builder Application Survey increased 11% in October following declines in August and September. In addition, the MBA said that the average loan size for new homes fell to $331,732, its lowest since July 2017. The Builder Application Survey provides timely and detailed monthly metrics on loan application activity received directly from home builders for new single-family properties.

Courtesy of Mortgage Market Guide

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Thursday – November 15, 2018

As the holiday shopping season unfolds, retailers were giddy in October due in part to strong sales for motor vehicles and building materials. Retail Sales jumped 0.8% versus the 0.5% expected and were up from 0.1% in September. It was the largest increase since May’s gain of 1.2%. The Core rate rose 0.7%, above the 0.5% expected. Consumer spending accounts for more than two thirds of U.S. economic activity.

Last night, Fed Chair Powell said that the U.S. economy is strong and “is in such a good place right now” but could face issues from a global slowdown in 2019 as the Fed weighs the pace of future interest hikes. Powell said the Fed’s goal is to “extend the recovery, expansion, and to keep unemployment low, to keep inflation low,” reports Bloomberg. The Fed is expected to raise the short-term Fed Funds Rate by 0.25% at next month’s FOMC meeting bringing that benchmark rate to 2.50%. That will directly push the Prime Rate to 5.50% which is derived by Fed Funds Rate (2.50%) + 3 = 5.50%.

Mortgage rates remained unchanged in the latest week despite the volatility in the U.S. financial markets. A moderation in inflation due in part to lower oil prices along with somewhat subdued wage growth held rates steady. Freddie Mac reports that the 30-year fixed-rate mortgage was unchanged at 4.94% in the week ended November 15, with an average 0.5 in points and fees. Freddie Mac says average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.

Courtesy of Mortgage Market Guide

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Wednesday – November 14, 2018

The October Consumer Price Index rose 0.3%, in line with estimates, though it was the largest increase since the 0.5% registered in January. The Core CPI was also in line at 0.2%. On a year-over-year basis, CPI rose to 2.5% from 2.3% in September and down from the 2018 high of 2.9% hit in June. The more important Core rate rose 2.1% from 2.2% year over year and down from 2.4% in July. Inflation data is a key metric for the Federal Reserve in its monetary policy outlook.

The Mortgage Bankers Association (MBA) reports that mortgage rates edged higher in the latest week due in part to a strengthening U.S. economy. The MBA reports that the 30-year fixed-rate mortgage rose two basis points to 5.17% with an average of 0.50 in points and fees. Within the report it showed that the Market Composite Index, a measure of total mortgage loan application volume, fell 3.2%. The refinance fell 4.3% while the purchase index declined 2.3%.

With Thanksgiving next week, here are some fun facts to share. Benjamin Franklin wanted the turkey to be the national bird, not the eagle. Americans eat 46 million turkeys each Thanksgiving. Californians consume the most turkey in the U.S. on Thanksgiving Day! The average turkey for Thanksgiving weighs 15 pounds. The Macy’s Thanksgiving Day Parade began in 1924 with 400 employees marching from Convent Ave to 145th street in New York City. Modern Thanksgiving was first officially called for in all states in 1863 by a presidential proclamation of Abraham Lincoln.

Courtesy of Mortgage Market Guide

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Tuesday – November 13, 2018

The NFIB Small Business Optimism Index continued its two-year streak of highs coming in at 107.4 in October. “For two years, small business owners have expressed record levels of optimism and are proving to be a driving force in this rapidly growing economy,” said NFIB President and CEO Juanita D. Duggan. “The October optimism index further validates that when small businesses get tax relief and are freed from regulatory shackles, they thrive and the whole economy prospers.” This is wonderful news and will lead to higher wages going forward.

A recent Harris Insights housing consumer study shows more Americans are using real estate agents to buy and sell their homes than ever before, even among the younger generations. The report showed that 90% of consumers are using real estate agents, up 5% from the last report in 2014 and up 9% from 2001. Millennials are also using real estate agents as 91% of those ages 18 to 34 prefer agents to technology based buying and selling of homes.

Gas prices at the pumps continue to push lower as demand eases and the end of the refinery maintenance season wraps up. The national average price for a regular gallon of gas fell to $2.68 today, down from $275 a week ago and $2.90 a month ago. AAA says prices can go even lower if we see a surge in gasoline production in the coming weeks. Also helping to usher in lower gas prices is the recent decline in oil. West Texas Intermediate oil hit $77/barrel on October 3 and is currently trading around $57.

Courtesy of Mortgage Market Guide

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