Daily Rate Update: September 24th-28th

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Friday – September 28, 2018

Inflation remained contained in August and comes after Fed Chair Powell said this week that he doesn’t see any upside surprises to inflation. The Bureau of Economic Analysis reported this morning that Core Personal Consumption Expenditures, the Fed’s favorite inflation gauge, was unchanged year-over-year at 2%, right at the Fed’s target range. Inflation data is one of the metrics that dictates the path of mortgage rates. A low inflation environment tends to keep interest rates in check.

Consumer Sentiment continued to hover near at frothy levels in September due in part to a strong economy and tight labor market. The Consumer Sentiment Index rose to 100.1 in September, well above the 96.2 recorded in August and topped the triple digit mark for only the third time since January 2004. Richard Curtin, chief economist at the index said, “All households held very optimistic expectations for improved personal finances in the year ahead, the most favorable financial prospects since 2004.”

Courtesy of Mortgage Market Guide

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Thursday – September 27, 2018

Soaring consumer confidence, a strengthening economy and a tight labor market sent Bond prices lower, yields higher and mortgage rates higher this week. Freddie Mac reports that the 30-year fixed-rate mortgage rose seven basis points in the latest week to 4.72% with an average 0.5 tacked on in points and fees. Freddie Mac said that housing constraints and home price gains are beginning to ease, which should keep housing demand up in the near future.

Final economic growth in the second quarter of 2018 grew at a robust pace due in part to increased consumer and business spending along with investment increases. The Bureau of Economic Analysis reported that Gross Domestic Product (GDP) rose 4.2% in the second quarter, the best reading since the third quarter of 2014. The Atlanta Federal Reserve is forecasting that GDP in the third quarter of 2018 will rise 4.4%.

In other economic news, very strong data from August Durable Orders shows they are up 4.5% from -1.2% in July, which helped to lift the U.S. Stock markets. Durable Orders are those products that tend to be on the expensive side and last for at least three years. Weekly Initial Jobless Claims continue to hover near lows seen in the late 1960s coming in at 214,000 in the latest week.

Courtesy of Mortgage Market Guide

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Wednesday – September 26, 2018

Mortgage rates hit their highest level in seven years in the latest week as the 30-year fixed-rate mortgage rose to 4.97%, the highest since April 2011, reports the Mortgage Bankers Association (MBA). In a strengthening economy and tight labor market, rates have no where else to go but higher, though because of the ridiculously low rates abroad, there is a limit to how high rates can go in the near term. The MBA went on to report that that purchase and refinance indexes both rose last week.

It’s Fed Day! U.S. financial markets are cautious ahead of the Fed statement and expected hike to the short-term Fed Funds Rate, due out at 2:00 p.m. ET. The rate hike is already baked into the markets but what the monetary policy statement reveals could potentially move the markets. The Fed could reveal the path of future rate hikes and some signals on the inflation picture. The statement will most likely confirm a strong economy and tight labor market.

Sales of new single-family houses rebounded in August after the two-month decline, signaling the housing market is still alive and well. New Home Sales rose 3.5% from July to an annual rate of 629,000, in line with expectations. However, July was revised lower to 608,000 from the 627,000 originally reported. Sales were up 12.7% from August 2017. Sales soared in the Northeast, rose in the Midwest and West, and fell in the South. The median sales price of new houses sold in August 2018 was $320,200. There was a 6.1-month supply of homes for sale on the market, which is considered normal.

Courtesy of Mortgage Market Guide

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Tuesday – September 25, 2018

Home price gains eased a bit in July and have begun to slow after the big gains seen in the past few years. The S&P/Case-Shiller 20-City Home Price Index rose 5.9% from July 2017 to July 2018, down from the 6.4% year-over-year gain seen in June. On a monthly basis, prices were up just 0.1% from June. “Rising homes prices are beginning to catch up with housing,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “Year-over-year gains and monthly seasonally adjusted increases both slowed in July for the S&P CoreLogic Case-Shiller National Index and the 10- and 20-City Composite indices.”

Americans across the nation expressed high praises for the strengthening U.S.economy in September while saying there are plenty of available jobs. The Conference Board reported that the Consumer Confidence Index hit 138.4 this month, the highest since September 2000 and just below the all-time high of 144.7 hit in May of the same year. Lynn Franco, Director of Economic Indicators at The Conference Board says, “These historically high confidence levels should continue to support healthy consumer spending and should be welcome news for retailers as they begin gearing up for the holiday season.”

Freddie Mac released its Economic & Housing Research report for September showing that economic growth quickened in the second quarter. Second quarter Gross Domestic Product rose 4.2%, the fastest pace in almost four years due in part to an uptick in consumer spending. On the housing front, Freddie expects total home sales to decline 0.9% to 6.07 million in 2018, before increasing 1.8% to 6.18 million in 2019. Housing starts are now forecast to rise 7.5% this year and 4.7% in 2019. Mortgage rates are forecasted to average 4.50% this year and 5.1% in 2019.

Courtesy of Mortgage Market Guide

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Monday – September 24, 2018

The last week of the month and end of the third quarter is underway with several hurdles for the U.S. markets to jump this week. The two-day FOMC meeting begins tomorrow with the monetary policy statement being delivered at 2:00 p.m. ET on Wednesday. The Treasury will sell a total of $106B in securities this week. The August Core PCE will be released on Friday, after the Fed meeting, and always carries headline risk. The Core PCE is the Fed’s favorite inflation gauge. New Home Sales and several home price indexes will also be released this week.

The Federal Reserve is expected to raise the short-term interest, the Federal Funds Rate, this week. The Fed Funds Rate is the rate in which banks and credit unions lend reserve balances held at the Federal Reserve to other depository institutions overnight, on an uncollateralized basis. A move in the Fed Funds Rate will impact credit card rates, and student, auto, and personal loans. Rates on home equity lines of credit will also rise.

Courtesy of Mortgage Market Guide

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