Daily Rate Update: October 7th-11th

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Friday – October 11, 2019

Given the low mortgage rate environment home buyer appetite has increased leading to a shortage of homes for sale on the market. Realtor.com reports that during September, the national inventory of homes for sale declined 2.5% from the previous year, and at a much quicker pace of decline compared to August’s 1.8% drop. In addition, lower mortgage rates prompted a 10% year-over-year decline in available homes under $200,000. “Buyers looking for their next home have faced the headwinds of tight inventory and a competitive market this year. While lower mortgage rates and the arrival of fall promised a reprieve, conditions continue to tighten as demand remains strong,” said George Ratiu, senior economist for Realtor.com.

Hopes for a “skinny” trade deal and tariff delays between the US and China are lifting US stocks this morning, at the expense of bonds. President Trump has said the talks are going very well and will meet with China’s Vice Premier He later today. In addition positive Brexit news is further fueling the “risk-on” trade here in the US. The optimism has pushed the 10-year yield to 1.75% from yesterday’s low of 1.54% while in the same time, mortgage bond prices have declined.

Courtesy of Mortgage Market Guide

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Thursday – October 10, 2019

Consumer inflation remained tame in September as increases in costs for food and rent were offset by declines in energy prices. The Labor Department reported that the Consumer Price Index (CPI) was unchanged in September and was the weakest read since January. The so-called Core CPI, which strips out volatile food and energy, rose 0.1% from the 0.3% increase seen in August. Inflation continues to run low and will remain subdued for a few more years, says the Federal Reserve.

Mortgage rates edged lower in the last survey and remain at three-year lows, which is giving the housing market a boost. Freddie Mac reports the 30-year fixed-rate mortgage averaged 3.57% with an average of 0.6 points for the week ending October 10, 2019, down from last week’s 3.65%. A year ago at this time, the 30-year rate averaged 4.90%. Sam Khater, Freddie Mac’s Chief Economist said, “The fifty-year low in the unemployment rate combined with low mortgage rates has led to increased homebuyer demand this year. Much of this strength is coming from entry-level buyers.”

Courtesy of Mortgage Market Guide

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Wednesday – October 9, 2019

Reports this morning suggest that Chinese officials are open to a partial trade deal along with China offering to increase purchases of soybeans from the US. Trade talks kick off tomorrow on Capitol Hill with Treasury Secretary Steven Mnuchin and USTR Robert Lighthizer meeting with Chinese Vice Premier Liu He. Both economies are feeling the pain of the trade dispute and would benefit mightily from an interim deal.

Mortgage rates edged lower in the latest survey pushing the refinance index to a two-month high for the week ended October 4. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage fell nine basis points to 3.90% with 0.37 in points. The Market Composite Index, a measure of total mortgage loan application volume, rose 5.2%, the Refinance Index increased 10% while the Purchase Index decreased 1%. Joel Kan, Associate Vice President of Economic and Industry Forecasting said, “Despite low rates, the cloudier economic outlook and ongoing market uncertainty may be keeping some potential homebuyers away from the market this fall.”

The Mortgage Bankers Association also reported this week that mortgage credit availability increased in September by 0.9% to 183.4 in its Mortgage Credit Availability Index (MCAI). A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012. The MCAI is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.).

Courtesy of Mortgage Market Guide

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Tuesday – October 8, 2019

Small business optimism remained strong in September though it did decline in September due in part to the global trade issues. The NFIB Small Business Optimism Index fell 1.3 points to 101.8. September’s figure falls within the top 20% of all readings in the index’s 46-year history. “As small business owners continue to invest, expand, and try to hire, they’re doing so with less gusto than they did earlier in the year, thanks to the mixed signals they’re receiving from policymakers and politicians,” said NFIB President and CEO Juanita D. Duggan.

Wholesale inflation from the Producer Price Index (PPI) for September remained tame falling 0.3% versus a gain of 0.1% expected. The decline was due in part to falling costs of goods and services. It was the biggest decline in eight months. On an annual basis, PPI rose 1.4%, the smallest increase since November 2016. Its cousin, the more closely watched Consumer Price Index, will be released on Thursday. Inflation is a non-issue and is reason why long-term rates like mortgages will remain low for a long time.

Low mortgage rates have pushed home affordability to a near-three-year high in September, reports Black Knight. The company reports that as of September 2019, with the average 30-year interest rate at 3.64%, it now requires 20.7% of the national median income to make monthly principal and interest (P&I) payments on the average-priced home. That marks the second lowest national payment-to-income ratio in 20 months, behind only August 2019. In addition, Black Knight said that while falling interest rates have improved affordability across the country, pockets of tight affordability remain, especially along the western coast of the US.

Courtesy of Mortgage Market Guide

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Monday – October 7, 2019

Fannie Mae’s Home Purchase Sentiment Index (HPSI) for September reveals that consumers’ economic and financial concerns kept housing confidence in check. The Home Purchase Sentiment Index fell 2.3 points in September to 91.5, retreating from a survey high in August. Three of the six HPSI components declined month-over-month, including an 8-percentage point drop in the net “Confidence About Not Losing Job” component and 7-percentage point drop in the net “Home Prices Will Go Up” component. These were partially offset by increases in the “Good Time to Buy” and “Good Time to Sell” components, at 3 and 4 percentage points on net, respectively.

US/China trade talks will kick off towards the end of the week. The markets have been gripped in the headlines and will react accordingly to the slant of the talks. Bloomberg reported over the weekend that Chinese officials have narrowed the range of subjects that will be discussed on Thursday and Friday and may be reluctant to a broad deal. Stocks, which suffered a third weekly loss on Friday due in part to fears of slowing growth, kick off this week modestly lower.

The Fed minutes from the September FOMC meeting will be released this week on Wednesday. Fed Chair Powell said on Friday that the Fed’s job is to “keep the economy expanding as long as possible,” and repeated that the US economy is “in a good place.” There shouldn’t be big any surprises coming from the minutes after the Chair’s words. Mr. Powell will be speaking today in Salt Lake City at 1:00 p.m. ET at a conference.

Courtesy of Mortgage Market Guide

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