Daily Rate Update: September 23rd-27th

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Friday – September 27, 2019

Inflation, as measured by the Core PCE, rose to 1.8% annually in August from 1.7% in July, which was revised from 1.6%. The Core PCE is the Fed’s favorite inflation gauge and has set a target range of 2.0%. It has been running below that level for some time. Month-over-month, Core PCE rose 0.1% versus the gain of 0.1% expected. Inflation remains subdued and as the Fed has said, it will remain low for the foreseeable future. Inflation is a major driver for home loan rates, not the Fed.

Consumer spending slowed in August after the big surge by the consumer in the second quarter of this year. The Commerce Department reports that personal spending rose 0.1% last month after the big gains seen in the previous months. The US economy is reliant on consumer spending to fuel the economy and so far in 2019, consumers have opened their wallets and spent on goods and services in 2019. August could have been a one-time occurrence with low consumer spending and the markets will look to see if spending will pick up as we head into the crucial holiday season.

Courtesy of Mortgage Market Guide

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Thursday – September 26, 2019

Consumer spending surged in the second quarter of 2019 due in part to a strong labor market here in the US. The government released the final read on second quarter Gross Domestic Product today showing a 4.6% increase in consumer spending, the fastest pace since the fourth quarter of 2014. For the first half of 2019, Gross Domestic Product grew at a solid 2.6% rate. The report revealed that business investment slowed which could be attributed to the trade issues between the US and China.

Mortgage rates edged lower this week and remain near multi-year lows, reports Freddie Mac. The 30-year fixed-rate mortgage fell nine basis points to 3.64% with an average 0.6 in points and fees. A year ago the rate was 4.72%. Sam Khater, Freddie Mac’s Chief Economist, says, “With both the unemployment rate and mortgage rate below four percent and near historic lows, it is no surprise that the housing market regained momentum with home sales and construction at or near decade highs. The fall housing market is poised to continue with steady gains in prices and solid sales activity.”

Americans filing for first-time unemployment benefits continued to run at 50-year lows in the latest week as the labor market continues to be a bright light for the US economy. Weekly initial jobless claims came in at 213,000 in the week ended September 21, up marginally. The four-week moving average of claims, which irons out seasonal abnormalities, fell modestly to 212,000.

Courtesy of Mortgage Market Guide

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Wednesday – September 25, 2019

Low mortgage rates fueled sales of new single-family homes in August signaling a positive sign for the sector after strong Housing Starts and Existing Homes Sales in the past three weeks. August new home sales surged 7% from July to an annual rate of 713,000 versus the 659,000 expected. It was the second time sales rose above the 700,000 level since 2007.

New home sales in July were revised higher to 666,000 from 635,000. Sales were up 18% from August 2018. Strong gains in the West and South offset losses in the Northeast and Midwest. The median price of new homes sold in August was $328,400, up 2.2% from a year ago. Inventories to a 5.5-month supply. Overall, a solid report.

Mortgage application activity plunged in the latest week after the steep rise in rates in the previous week. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage inched higher to 4.02% with 0.38 in points. The Market Composite Index, a measure of total mortgage application volume, fell 10%, the Refinance Index fell 15% and the Purchase Index declined by 3%. The MBA also reports that low mortgage rates will spur on total originations in 2019 to $1.9T, the highest since the $2T recorded in 2016.

Courtesy of Mortgage Market Guide

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Tuesday – September 24, 2019

Home price gains continued to slow in July and are way below the annual gains seen a year ago. The July S&P Case-Shiller 20-City Home Price Index rose 2% year-over-year, down from 2.2% in June. It was the slowest pace since 2012. The national index rose 3.2%, matching June’s number. On a monthly basis, prices were unchanged. Home price gains have been on the decline since March 2018 but in this low rate environment, signs are pointing to a re-heat.

The heightened tariff and trade issues in late August and early September pushed consumer attitudes lower this month. The Conference Board released its Consumer Confidence Index showing a decline to 125.1 from the 134.2 recorded in August. The Present Situation and Expectations Index components also decline. In addition, those saying jobs are “plentiful” declined while those claiming jobs are “hard to get” declined slightly. The US economy is dependent on confident consumers to spend their hard-earned dollars, which fuels economic expansion.

The global markets continue to be gripped in the trade headlines and it will continue until some type of complete deal is struck.
China granted waivers to several Chinese companies to purchase soybeans from the US, tariff free, while Treasury Secretary Mnuchin announced that talks will resume the week of October 7. That news coupled with the fact that the US economy remains resilient is pushing stocks higher today though the gains are marginal, at best.

Courtesy of Mortgage Market Guide

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Monday – September 23, 2019

Foreclosure starts fell to their lowest level in 18 years while low interest rates have increased prepayments by 5% from July to August, a three-year high. There were 36,200 foreclosure starts in August, down 23% from August 2018. August’s prepayment rate was up 62% from the same time last year and 2.5 times the 18-year low hit in January. Black Knight said the month’s prepayment activity reflects June/July interest rates; as rates fell further in August and September, the peak in refinance-driven prepayments is likely still to come.

The decline in homes for sale on the market continued in August with inventories falling 5.5% from a year ago and down 1.5% from July, in 53 metro areas. Months Supply of Inventory decreased to 2.8 compared to 2.9 in July 2019 and eclipsed the previous August low in the report’s 11-year history. In addition, inventory has remained below four months in 39 of the last 42 months, dating back to March 2016. Six months is considered a market balanced between sellers and buyers. “The modest inventory growth that started last fall has been swallowed up by demand as buyers have returned to the market, likely spurred on by attractive interest rates,” said RE/MAX CEO Adam Contos.

There were no economic reports due for release today. The rest of the week’s calendar features housing, consumer attitudes and spending, Gross Domestic Product, and the inflation reading Core PCE. The Treasury will be selling a total of $113 billion in Treasury notes this week beginning tomorrow, the results could impact bond prices and rates. Mortgage Bond prices begin the week near unchanged while US stocks are modestly higher. This week is typically the weakest week of the year for the S&P 500 stock index but it is getting off to a positive start.

Courtesy of Mortgage Market Guide

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