Daily Rate Update: October 29th-November 2nd

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Friday – November 2, 2018

The job market continued to strengthen in October and rebounded after an ease in job growth in September due in part to severe weather on the East Coast. The Bureau of Labor Statistics reported that U.S. employers added 250,000 new workers in October while year-over-year wage growth hit nine-year highs. The 250,000 was well above the 190,000 expected, while there were zero net revisions for August and September.

Year-over-year wage growth rose 3.1%, the highest level since September 2009, while month-over-month saw a gain of 0.2%, in line with estimates. The Unemployment Rate remained at a 49-year low of 3.7% while total unemployed, or the U6 number, fell to 7.4% from 8% seen in October 2017. More Americans are now looking for a job, which pushed the Labor Force Participation Rate up to 62.9% from 62.7%. Overall a solid report on all fronts.

Courtesy of Mortgage Market Guide

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Thursday – November 1, 2018

Mortgage rates edged lower in the latest survey after rising for most of 2018. Freddie Mac reports that the 30-year fixed-rate mortgage fell three basis points to 4.83% with an average of 0.50 in points and fees. Freddie Mac said that higher mortgage rates have led to a decline in home sales in 2018 though the weakness has been concentrated in the expensive segments rather than entry-level or first-time buyers.

Americans filing for first-time unemployment benefits remained near 50-year lows as the labor market continues to strengthen. Weekly Initial Jobless Claims fell by 2,000 in the latest week to 214,000. The four-week moving average of claims, which irons out seasonal abnormalities, rose 1,750 to 213,750. The details come ahead of Friday’s Non-Farm Payrolls report where it is expected that employers added 185,000 new workers in October.

The 2018 holiday shopping season has unofficially kicked off today with Halloween now in the rearview mirror. Target rolled out its Black Friday plans and deals today as retailers try to get a jump on the season. Target will open at 5:00 p.m. on Thanksgiving and will remain open until 1:00 a.m. on Friday. Target will also feature an app for customers in the store to purchase items through the app and avoid the checkout lines. The National Federation of Retailers forecasts that 2018 sales will rise 4.1% from 2017.

Courtesy of Mortgage Market Guide

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Wednesday – October 31, 2018

ADP reported 227,000 new private jobs were created in October, well above the 180,000 expected as the job market continues to strengthen. It was the highest number in eight months. Mark Zandi, chief economist of Moody’s Analytics said, “The only blemish is the struggles small businesses are having filling open job positions.” Just recently, the NFIB reported that the Small Business Optimism Index shattered the record previously set 35 years ago. Today’s report comes ahead of the government’s Jobs Report for October on Friday.

Mortgage rates were unchanged in the latest week after rising for most of 2018. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage remained at 5.11% with an average of 0.50 in points. Within the report, it showed that both the refinance and purchase indexes fell 4% and 2%, respectively. The survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990.

Courtesy of Mortgage Market Guide

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Tuesday – October 30, 2018

The S&P Case-Shiller 20-City Index rose 5.5% in August 2018 from August 2017, down from 5.9% in July and below the 5.9% expected. The housing sector has slowed with an ease in home price gains. However, seeing a moderation in home price gains should be viewed as healthy because the previous trend of hot price gains and low wage growth was unsustainable.

Consumer Confidence rose to an 18-year high in October due in part to a strong U.S. economy and solid labor market. The Conference Board reports that its Consumer Confidence Index rose to 137.9 in October, the highest since September 2000. Lynn Franco, Senior Director of Economic Indicators at The Conference Board said, “Consumers’ assessment of present-day conditions remains quite positive, primarily due to strong employment growth. The Expectations Index posted another gain in October, suggesting that consumers do not foresee the economy losing steam anytime soon. Rather, they expect the strong pace of growth to carry over into early 2019.”

Freddie Mac released its October forecast on Monday revealing that economic growth and home sales slow as mortgage rates rise. Freddie predicts that after a strong 4.2% Gross Domestic Product in the second quarter of 2018, growth will slow to a more normal level of 3% in the third quarter and an average of 3% for all of 2018. On the mortgage rate front, the 30-year fixed-rate is expected to average 4.5% in 2018, rising to 5.1% in 2019 and 5.6% in 2020. Total originations are expected to remain at $1.650 trillion in 2019, matching 2018. Freddie went on to forecast that total home sales will decline marginally to 6.07 million this year and increase 1.8% in 2019 to 6.18 million.

Courtesy of Mortgage Market Guide

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Monday – October 29, 2018

The Fed’s favorite inflation gauge, the annual Core PCE, was unchanged in September at 2% while month over month saw a rise of 0.2%, just above the 0.1% expected. Inflation pressures have remained contained and the Federal Reserve will have to look closely at future inflation data ahead of the December Federal Open Market Committee meeting. Remember, the Federal Reserve has forecasted Core PCE to run near current levels through 2021. If that forecast is accurate, long-term rates like mortgages, can’t move too high.

Consumer spending rose in September, a good sign that Americans have the confidence in the economy and the job market to continue to spend their hard-earned dollars. Personal Spending rose 0.4% in September, above expectations while August was revised higher. That is a positive sign heading into the holiday shopping season as retailers look to ring up brisk sales in a strong U.S. economy.

U.S. Stocks begin the final days of October higher though the month has seen the Dow, S&P and NASDAQ fall from the all-time highs hit in September. The Dow Jones Industrial Average has declined 6.5% in October, the S&P has fallen 9% while the tech heavy NASDAQ is down 11% due in part to tariff issues, geopolitical headlines, mixed earnings in the industrial and tech sector along with profit taking. However, the U.S. economy remains strong and Stock market corrections, when prices are at all-time highs, are normal and healthy.

Courtesy of Mortgage Market Guide

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