Daily Rate Update: September 17th-21st

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Friday – September 21, 2018

Despite the strong job market here in the U.S., banking and lending giant Wells Fargo plans on cutting up to 26,500 jobs, or 10% of its workforce, over the next three years. The bank said that the move into digital banking and the firm’s efficiency programs would result in the layoffs along with normal attrition. The plans come as the U.S. economy is on the upswing, the labor market tight and as rival JPMorgan Chase announced plans to open more branches.

Next week, the U.S. financial markets have several hurdles to jump over, which comes as the Dow, S&P and NASDAQ Stock indices are at all-time highs. The two-day Fed meeting kicks offs on Tuesday with the monetary policy statement being released on Wednesday at 2:00 p.m. ET. There will be a hike to the Fed Funds Rate, which is most likely already priced in but the statement has the potential to move the markets. The week will also feature the Fed’s favorite inflation gauge, the Core PCE, which could also shake up the markets. The final read on second quarter Gross Domestic Product will be released.

Fannie Mae released its September Economic and Housing Outlook showing that Gross Domestic Product in the third quarter of this year is estimated to be 3.2%. Fannie Mae said there will be an expected slowdown in consumer spending and business fixed investment growth. On the housing front, Doug Duncan from Fannie Mae said, “We expect housing to be a drag once again this quarter. But in a welcome development, some construction material prices have softened, which should help builders to continue to build smaller or less expensive homes most in demand from potential first-time homebuyers. Additionally, the crunch on for-sale inventories of existing homes has eased slightly, hopefully setting up an improvement in the housing market next year.”

Courtesy of Mortgage Market Guide

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Thursday – September 20, 2018

The National Association of REALTORS® reports that after four straight months of declines, Existing Home Sales were unchanged in August from July at an annual rate of 5.34 million units. That was below the 5.37 million expected. Flat sales were due to a balance of gains in the Northeast and Midwest and losses in the South and West. From August of last year, sales were down 1.5%. The median existing home price in August was $264,800, up 4.6% from $253,100 of August 2017. Unsold inventory of existing homes in August was at a 4.3-month supply, below the 6-month supply considered normal.

Mortgage rates continued to edge higher in the latest week as Bond prices fell due in part to a strong U.S. economy, an uptick in wage growth along with a strong labor market. Freddie Mac reports that the 30-year fixed-rate mortgage rose to 4.65% this week with an average 0.50 in points and fees. Freddie Mac said, “Purchase applications have risen on an annual basis for five consecutive weeks. However, given the widespread damage caused by Hurricane Florence in the Carolinas, the next few months of housing activity will likely be somewhat volatile.”

Americans filing for first-time unemployment benefits continue to hover near lows seen in the late 1960s, when the labor market was smaller. The Labor Department reports that Weekly Initial Jobless Claims fell to 201,000 in the latest week, down 3,000. It was the lowest number since November 1969. The jobs market is at or near full employment due to a strong U.S. economy.

Courtesy of Mortgage Market Guide

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Wednesday – September 19, 2018

Housing Starts surpassed estimates in August, rising 9.2 percent from July to a seasonally adjusted annual rate of 1.282 million units. This was above the 1.229 million expected. Single-family starts, which make up the largest share of the residential housing market, rose 1.9 percent.

However, the real boost in starts came from multi-family construction, which climbed 27.3 percent. Housing Starts were flat in the Northeast, but the Midwest, South and West all saw positive gains. New home construction is also 9.4 percent higher than August of last year.

Building Permits, a sign of future construction, didn’t fare as well. From July to August, Building Permits decreased 5.7 percent. They are also 5.5 percent lower than August 2017.

Courtesy of Mortgage Market Guide

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Tuesday – September 18, 2018

Home builder sentiment held steady at 67 in September, per the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Readings over 50 are considered positive. The price of lumber has declined since the highs seen in the spring, which is a welcome sign. NAHB Chairman Randy Noel noted, “Despite rising affordability concerns, builders continue to report firm demand for housing, especially as millennials and other newcomers enter the market.”

The Fed’s two-day Federal Open Market Committee meeting begins next Tuesday, and it is expected that the Fed will raise its benchmark Fed Funds Rate. This is the rate at which banks lend money to each other overnight and it does not directly impact long-term rates like those for purchase and refinance home loans. There are growing expectations that the Fed may also hike the Fed Funds Rate at its December meeting, though this could be impacted if the threat of a prolonged trade war continues.

Mortgage Bonds continue to struggle in early trading.

Courtesy of Mortgage Market Guide

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Monday – September 17, 2019

Housing data dominates the headlines this week with news on August Housing Starts and Building Permits releasing on Wednesday and Existing Home Sales on Thursday. Housing Starts rebounded slightly in July after hitting a nine-month low in June, while sales of existing homes saw a fourth straight month of declines in July, their slowest pace in more than two years. Low inventory has been an issue for many homebuyers across the country this year, and it will be especially important to see what the data for August shows in that regard.

In the manufacturing sector, the Empire State Index fell to 19 points in September. This was down nearly 7 points from August’s reading of 25.6, which was a 10-month high.

Mortgage Bonds fell below a key support level and have neared 2018 lows.

Courtesy of Mortgage Market Guide

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