Daily Rate Update: November 5th-9th

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Friday – November 9, 2018

Fannie Mae released its Home Purchase Sentiment Index (HPSI) for October this week showing a decline in sentiment despite a favorable U.S. economy. The HPSI fell 2 points in October to 85.7, continuing its recent downward trend. The report revealed that the net share of Americans who said it is a good time to buy a home fell 5 percentage points, and the net share who said it is a good time to sell a home fell 3 percentage points.

Wholesale inflation surged in October to the highest level in six years led by rising energy costs. The Producer Price Index rose 0.6% in October, well above the 0.2% expected. When stripping out volatile food and energy, the Core PPI also rose 0.6% versus the0.2% expected. On a 12-month basis, PPI jumped 2.9% from 2.6% in September while the Core rate rose 2.6% from 2.5%. And although the PPI is not as crucial to the Fed as the Consumer Price Index (CPI), it will still be taken into consideration for monetary policy. CPI will be released next week.

An increase in mortgage rates and a modest uptick in home prices kept housing affordability at a 10-year low in the third quarter of 2018. The National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) fell to 56.4% from 57.1% in the second quarter. That equals to 56.4% of new and existing homes sold between the beginning of July and the end of September were affordable to U.S. families earning the U.S. median income of $71,900.

Courtesy of Mortgage Market Guide

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Thursday – November 8, 2018

A strong U.S. economy, job market and business activity pushed mortgage rates higher in the latest week. Freddie Mac reports that the 30-year fixed-rate mortgage rose 11 basis points in the latest week to 4.94% with an average of 0.50 in points and fees. Freddie Mac said, “Higher mortgage rates have led to a slowdown in national home price growth, but the price deceleration has been primarily concentrated in affluent coastal markets such as California and the state of Washington.”

Americans filing for first-time unemployment benefits continue to hover near 50-year lows as the job market continues to roam in greener pastures. The Labor Department reports that Weekly Initial Jobless Claims came in at 214,000 for the week ended November 3. The four-week moving average of claims, which irons out seasonal abnormalities, fell to 213,750, near unchanged. The labor market is now at or near full employment.

With Thanksgiving right around the corner, motor club AAA forecasts that this year more Americans will travel for the holiday. AAA predicts that 54.3 million Americans will travel 50 or more miles from home, a 4.8% increase from 2017. There will be 2.5 million more people taking to the road to get to their destinations than last year. “Consumers have a lot to be thankful for this holiday season: higher wages, more disposable income and rising levels of household wealth,” said Bill Sutherland, AAA Travel senior vice president. “This is translating into more travelers kicking off the holiday season with a Thanksgiving getaway, building on a positive year for the travel industry.”

Courtesy of Mortgage Market Guide

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Wednesday – November 7, 2018

The midterm elections produced a split Congress, which investors are taking in stride as both Stock and Mortgage Bond prices are rising ahead of this afternoon’s release of the Fed statement. The Republicans remained in control of the Senate by a slim margin while the Democrats took control of the House, also by a slim margin. Historically, U.S. Stocks have fared well into the third year of the president’s term.

Mortgage rates edged higher in the latest week as borrowing costs continue their slow yet upward trajectory. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage rose four basis points in the latest survey to 5.15%. That rate does carry an average 0.50 in points. Within the report, it showed that the MBA’s Market Composite Index, a measure of total mortgage loan application volume, fell 4% in the latest week. The refinance index fell 2.5% while the purchase index declined 5%.

Gas prices at the pumps continued to edge lower this week and are the lowest level in six months. An uptick in oil supplies along with fewer drivers on the road at this time of the year has sent prices lower. The national average price for a regular gallon of gasoline is at $2.74, down from $2.91 a month ago though up from $2.53 a year ago. The highest recorded price was $4.11 hit back on July 17, 2008. Motor club AAA says that as demand continues to decline, gas prices could get even cheaper.

Courtesy of Mortgage Market Guide

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Tuesday – November 6, 2018

CoreLogic reports that home prices nationwide, including distressed sales, rose 5.6% year over year in September 2018 compared to September 2017. The 5.6% is down from June’s 7.1% year-over-year increase as home price gains moderate to more historical levels. Month–over month saw a 0.4% rise. From September 2018 to September 2019, CoreLogic forecasts a 4.7% gain … still a great story with rates at historically low levels.

Job openings remained elevated in September as employers look for qualified candidates to fill open positions. The Bureau of Labor Statistics (BLS) reports that on the last business day in September there were 7 million jobs available in its JOLTS (Job Openings and Labor Turnover Survey) report, just below the all-time high of 7.3 million hit in August. The 7 million exceeds the 6.08 million that are currently unemployed. In a separate report from the BLS showed unemployment rates were lower in September in 9 states, higher in 4 states, and stable in 37 states and the District of Columbia.

Mortgage credit availability increased in October after two months of tightening in August and September. The Mortgage Bankers Association reports that its Mortgage Credit Availability Index (MCAI) rose 2.5% to 186.7, its highest level since early 2008, up 3.1% from a year ago. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit.

Courtesy of Mortgage Market Guide

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Monday – November 5, 2018

The service sector of the U.S. economy, which makes up a large portion of the economy, continued to strengthen in October. The ISM Service Index edged lower to 60.3, below the 21-year high of 61.6 hit in September. The report showed that every major sector of the service industry expanded in October. In addition, the service sector has grown for the 105th consecutive month. A reading above 50% indicates the non-manufacturing sector economy is generally expanding; below 50% indicates the non-manufacturing sector is generally contracting.

Freddie Mac reports that cash-out refinance loans rose in the second quarter of 2018 to the highest level since 2008. However, the dollar number is well below the frothy levels seen in the years leading up to the financial crisis. Cash extractions rose 77% in the second quarter of 2018 to a total of $15.8 billion, far below the pre-recession levels of $75 – $85 billion. “While cash-outs make up the highest share of refinances they have since 2008, this is no reason for alarm,” says the Federal Deposit Insurance Corporation. “In an environment of home price appreciation, people commonly tap into their home equity.”

The U.S. markets will be gearing up for this week’s two-day Federal Open Market Committee meeting that begins on Tuesday and ends Wednesday at 2:00 p.m. ET with the release of the monetary policy statement. There is a near-zero-percent chance of a hike to the short-term Fed Funds Rate but what the statement reveals could be key. The statement could signal the path of interest rate hikes down the road. Currently, there is a 72% probability of a hike at the December meeting.

Courtesy of Mortgage Market Guide

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