Daily Rate Update: October 15th-18th

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Friday – October 18, 2019

A recent report from Zillow reads that housing inventories continue to decline as supply can’t keep up with demand. After a weak recovery in inventories earlier in the year, the situation has gotten worse as for-sale inventory tumbled in September. The numbers show that there were 112,112 fewer homes on the market across the nation in September than in September 2018, a 6.4% decline. The bottom line is there is a need for more new construction or existing homes for sale for the housing market to be healthy and stable.

A story has been circulating the past few days that the Federal Reserve may pause cutting interest rates after the October 31 Fed meeting where the Fed Funds Rate is expected to decrease by 0.25%. The chance of a cut this month is currently 87%. Fed Chair Powell has said interest policy will be determined by incoming data and that the Fed will do what it takes to keep the economic expansion going. The markets should be following what Mr. Powell has been saying and follow his guidance for monetary policy.

Gas prices at the pumps have remained steady in the past month and below last year’s levels. The national average price for a regular gallon of gas is $2.65, the same as a month ago and down from $2.86 a year ago. The numbers vary in a big way around the country. GasBuddy reported that a station in Essex, California was charging $6.24 for regular this week while in Houston, Texas, a station was selling it for $1.88! Go figure! Outside of those contrasting numbers from single stations, the average high price was seen in California at $4.16 a gallon, the lowest seen in Louisiana at $2.26.

Courtesy of Mortgage Market Guide

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Thursday – October 17, 2019

Mortgage rates edged higher in the latest survey though they remain at three-year lows. Freddie Mac reports that the 30-year fixed-rate mortgage rose 12bp to 3.69% with an average 0.6 in points and fees. A year ago the rate was 4.85%. “Despite this week’s uptick in mortgage rates, the housing market remains on the upswing with improvement in construction and home sales,” said Sam Khater, Freddie Mac’s Chief Economist.

September housing starts fell 9% from August’s 12-year high to an annual rate of 1,256,000 units versus the 1,306,000 units expected. Year-over-year total housing starts rose 1.6%. The slowdown was due in part to a big decline in multi-family dwellings. The silver lining within the data showed that single-family home construction, which makes up the bulk of the housing market, increased for the fourth straight month and the 918,000 annualized units in September was the best since January. Single-family starts were up 4.3% annually. Building permits, a sign of future construction, were 8% higher than last year. The New York Federal Reserve reported this week that the housing market has rebounded and remains a bright spot in the US economy. Overall this was a positive report.

Courtesy of Mortgage Market Guide

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Wednesday – October 16, 2019

Home builder sentiment increased in October to its highest level in 20 months due in part to low mortgage rates, solid job growth and a decline in new home inventory. The National Association of Home Builders Housing Market Index (HMI) jumped to 71 this month, up from 68 in September to the best levels since February 2018. Within the report it showed that the HMI Index gauging current sales conditions, sales expectations and the measure charting traffic of prospective buyers all increased during the month. NAHB Chief Economist Robert Dietz said, “However, builders continue to remain cautious due to ongoing supply side constraints and concerns about a slowing economy.”

Mortgage rates inched higher in the latest survey though they remain at three-year lows as the purchase environment in 2019 continues to be stronger than in 2018, reports the Mortgage Bankers Association. The 30-year fixed-rate mortgage rose two basis points to 3.92% in the week ending October 11, 2019 with 0.35 in points. The Market Composite Index, a measure of total mortgage loan application volume, rose 0.5%, the Refinance Index increased 3.6% while the Purchase Index fell 4.1%.

The Federal Reserve released its US Economy in a Snapshot this week revealing that single-family housing starts and permits have rebounded over the past three months. New and existing home sales rose in August. A still-strong labor market and low mortgage rates could continue to provide support to housing. In addition, consumer spending softened in August while inflation continued to remain below the Fed’s target rate of 2%.

Courtesy of Mortgage Market Guide

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Tuesday – October 15, 2019

The US manufacturing sector received some positive news today after several months of negative headlines due in part to the US-China trade issues. The Empire State Manufacturing Index rose 4.0 in October, above the negative 1.0 expected and up from a gain of 2.0 in September. Within the numbers it showed that employment levels and hours worked both increased modestly while the New Orders Index edged higher. Looking ahead, optimism about future conditions improved but remained somewhat subdued.

On the trade front, Bloomberg is reporting that China may be unable to purchase $50 billion worth of agricultural products from the US without removing import tariffs. On Friday, a “phase one” trade deal was announced between the two nations with the signing to come in the near future. Despite what could be perceived as uncertain news regarding China, stocks are higher so far today on solid quarterly earnings.

A recent study by LendingTree shows that mortgage denials are now at the lowest levels since the financial crisis. Mortgage borrowing is on an upswing given the low rate environment and as demand increases, LendingTree conducted the study to see how many borrowers qualify for a loan. Nearly 1 in 10 mortgages were denied during the application process, which on a national level, means that only 9.8% were denied in 2018. LendingTree analyzed more that 10 million mortgage applications for the survey.

Courtesy of Mortgage Market Guide

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