Daily Rate Update: November 26th-30th

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Friday – November 30, 2018

Freddie Mac released its Economic & Housing Forecast for November revealing that it expects modest housing market growth in 2019. Freddie Mac expects home sales to increase 1% to 6.08 million units in 2019 and rise 2% in 2020 to 6.20 million units. Home prices are expected to rise 4.3% in 2019 and 2.9% in 2020. Freddie Mac expects GDP growth to average 3% in 2018, 2.4% in 2019 and 1.8% in 2020. The 30-year fixed-rate mortgage is forecasted to average 5.1% in 2019 and 5.6% in 2020.

The G-20 meeting kicks off today in Buenos Aries, Argentina and runs through the weekend. The big meeting will be between U.S. President Donald Trump and China’s President Xi Jinping as the two leaders try to hammer out a trade deal after both sides recently slapped tariffs on imported goods. This morning, U.S. Trade Representative Lighthizer said he would be surprised if the dinner between President Trump and China’s Xi Jinping “wasn’t a success.”

Courtesy of Mortgage Market Guide

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Thursday – November 29, 2018

The National Association of REALTORS® reports that Pending Home Sales unexpectedly declined in October by 2.6% from September, well below the gain of 0.5% expected. On an annual basis, sales fell 6.7%, the seventh straight month of annual decreases. Sales declined in the South, Midwest and the West with gains seen in the Northeast. Lawrence Yun, NAR chief economist, said that ten straight months of decline certainly isn’t favorable news for the housing sector. “The recent rise in mortgage rates have reduced the pool of eligible homebuyers,” he said.

Mortgage rates were unchanged this week and have stabilized in the past couple of months as interest rate sensitive sectors such as new auto and home sales softened the outlook for the economy. Freddie Mac reports that the 30-year fixed-rate mortgage remained at 4.81% with an average 0.5 in points and fees. Freddie Mac went on to say, “Homebuyers pounced on the stability in rates as purchase mortgage applications increased, which indicates that despite higher mortgage rates this year there are buyers on the fence waiting for the right time to buy.”

Fed Chair Jerome Powell spoke at the New York Economic Club yesterday and he delivered a somewhat dovish stance on future interest hikes. Mr. Powell said that the benchmark Fed Funds Rate is just below its neutral policy and that future interest rate moves will be data dependent. Mr. Powell went on to say that he doesn’t see any dangerous excesses in the Stock markets while inflation remains contained. The Fed is expected to raise the benchmark interest next month but there may only be one hike in 2019, down from three that was previously expected.

Courtesy of Mortgage Market Guide

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Wednesday – November 28, 2018

The Commerce Department reported this morning that New Home Sales fell 8.9% in October from September to an annual rate of 544,000, below the 575,000 expected. However, sales in September were revised higher to 597,000 from 553,000. Sales were down 12% from October 2017. Across the country, sales fell in the Northeast, Midwest and the South with gains seen in the West. There was a 7.4 month supply of homes for sale on the market in October, above six months that is seen as normal. The median sales price fell 3.1% from a year ago, to $309,700.

The Mortgage Bankers Association reports that its Market Composite Index, a measure of total mortgage loan application volume, rose 5.5% for the week ended November 23. The refinance index increased 0.5% while the purchase index increased 8.9% from one week earlier. The 30-year fixed-rate conforming mortgage fell to 5.12% from 5.16%, with points decreasing to 0.46 from 0.48. The survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990.

Economic growth remained strong in the third quarter of 2018 fueled in part by last year’s tax cuts. The Bureau of Economic Analysis reports that the second read for the third quarter of 2018 was unchanged from the first read at 3.5%. That is down from 4.2% in the second quarter. Within the report, it showed that key inflation components declined from the previous reading. Consumer spending fell to 3.6% from 4%.

Courtesy of Mortgage Market Guide

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Tuesday – November 27, 2018

The September Case-Shiller 20-City Index rose 5.1% from September 2017, just below the 5.3% expected and down from 5.5% in August. Month-over-month was unchanged. The slower pace of gains is to be expected and with faster-rising wages, it represents a healthier market. “Home prices plus data on house sales and construction confirm the slowdown in housing with one factor contributing to the weaker housing market is the recent increase in mortgage rates,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.

Home price gains keep coming this morning as the FHFA reported solid numbers from the sector. U.S. house prices rose 1.3% in Q3 2018. House prices rose 6.3% from Q3 2017 to Q3 2018. Month over month prices rose 0.2% from August to September. “Home prices continued to rise in the third quarter but their upward pace is slowing somewhat,” said Dr. William Doerner, Supervisory Economist. “Rising mortgage rates have cooled down housing markets – several regions and over two-thirds of states are showing slower annual gains.”

The sales numbers are in for holiday sales over the five-day period from Thanksgiving Day until the end of Cyber Monday and they were impressive. On Cyber Monday, consumers spent a record $7.9 billion online, a jump of nearly 20% from last year. Black Friday produced e-commerce sales of $6.22 billion while online sales totaled $3.7 billion on Thanksgiving Day. Overall holiday sales are expected to increase between 4.3% and 4.8% this season from 2017 to a dollar amount between $717 billion and $720 billion, reports the National Retail Federation. Holiday sales totals could top $1 trillion for the first time ever, according to eMarketer, due in part to a strong U.S. economy and an extra day of shopping this season.

Courtesy of Mortgage Market Guide

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Monday – November 26, 2018

Ellie Mae released its Origination Insight Report revealing that closing rates in October rose to their highest percentage in 2018. Closing rates for all loans rose to 72.2% in October, the highest this year, up from 71.7% in September. Closing rates on refinanced loans remained at 76.4%. In addition, the percentage of borrowers using adjustable rate mortgages rose 8.2% in October, up from 7.2% in September. “As interest rates continue to rise, the percentage of adjustable rate mortgages is increasing as homebuyers are looking to take advantage of the best rates from their lenders,” said Jonathan Corr, president and CEO of Ellie Mae.

Mortgage debt has been steadily increasing over the past year and is set to rise above totals from 10 years ago, right before the housing crash. The Federal Reserve reports that total outstanding mortgage debt rose to $10.2 trillion in the second quarter of 2018, up 2.7% from the same period in 2017. Non-mortgage related debt has also been rising for loans such as borrowing money for new cars and to pay college tuition with student loans. Non-mortgage related debt rose 6.4% from the second quarter of 2017. Total combined household debt was at an all-time high of $15.7 trillion in the second quarter of 2018.

Fannie Mae released its November 2018 Economic and Housing outlook last week revealing that while economic growth has increased slightly, a strong labor market is not enough to boost housing. Fannie Mae forecasts 3.1% Gross Domestic Product for the full year 2018, up a tenth from the last forecast in October. Fannie Mae predicts that economic growth to slow to 2.3% in 2019. Fannie Mae reports, “The housing sector is also expected to continue to face challenges despite the strong economy and job market. Ongoing affordability constraints stemming from further home price appreciation and a lack of for-sale inventory will likely remain headwinds for housing through 2018 and into 2019.”

Courtesy of Mortgage Market Guide

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