Daily Rate Update: September 30th-October 4th

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Friday – October 4, 2019

And the survey says: 136K jobs were created in September which was just below expectations of 145,000. Inside the report it was mostly upside surprises. First, there were solid upward revisions for the previous two months, adding 45,000 jobs to what was originally reported. The unemployment rate fell to 3.5%, the lowest since 1969. The Labor Force Participation Rate was unchanged at 63.2%. The Labor Force Participation Rate is the percentage of the civilian population 16 years and older that is working or actively looking for work.

The U6 rate dropped to 6.9%. The U6 measures total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force. This number was 17% back in 2010 and declining to 6.9% is remarkable. The U6 is down from 7.5% in September 2018. The one bad print was hourly earnings which came in unchanged and dropped the year-over-year increase to 2.9%. Overall, it was a solid report and keeps the recession fears on the sidelines for the foreseeable future.

Courtesy of Mortgage Market Guide

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Thursday – October 3, 2019

Mortgage rates inched higher in the latest week and remain at three-year lows which has been a boon for the housing market. Freddie Mac reports that the 30-year fixed-rate mortgage rose to 3.65% this week from 3.64% in the previous week and down from 3.73% in the week ended September 19. Freddie Mac says that while mortgage rates generally held steady this week, overall mortgage demand remained very strong, rising over 50% from a year ago thanks to increases in both refinance and purchase mortgage applications.

The closely watched S&P 500 is down nearly 5% since the high seen on September 19, with most of the damage done this week. The ISM Manufacturing Index on Monday and today’s ISM Service Index, both below expectations kicked off the fresh recession talk. However, yesterday, New York Fed President Williams said the baseline economic forecast remains “a positive one.” “Right now, the outlook is actually very favorable,” Williams said yesterday and added that GDP growth is around 2% rate, with a “very strong” labor market and inflation near a 2% rate. It’s hard to imagine the holiday season being a bust with a consumer so willing and able to spend, which bodes well for the 4th quarter Gross Domestic Product.

Courtesy of Mortgage Market Guide

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Wednesday – October 2, 2019

Private employment hiring rose less than expected in September and was down from the August reading though it was still a solid number. ADP private payrolls rose by 135,000 last month versus the 150,000 expected. August was revised lower to 157,000 from 195,000. ADP reports that the average monthly job growth for the past three months is 145,000, down from 214,000 for the same time period last year. Slowing global growth coupled with the US/China trade issues could be holding back hiring here in the US.

Mortgage rates were essentially unchanged in the latest week while mortgage application volume increased. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage was at 3.99% for the week ended September 26, up from 3.82% on September 6. The rate carries 0.38 in points. The MBAs Market Composite Index, a measure of total mortgage loan application volume, rose 8.1%, the Refinance Index was up 14% while the Purchase Index increased by 1%. The MBAs survey covers over 75% of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.

US stocks are plunging today after yesterday’s sell-off on fears of slowing domestic growth. Yesterday’s weak ISM Manufacturing Index reinforced the slowdown in the sector and it could spread to the broader economy. The Dow Jones Industrial Average lost 350 points on Tuesday and was down near 500 points this morning. With the possibility of a domestic slowdown, the US Federal Reserve will most likely cut short-term rates this month to continue the economic expansion.

Courtesy of Mortgage Market Guide

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Tuesday – October 1, 2019

CoreLogic reports that home prices, including distressed sales, rose 3.6% in August 2019 compared to August 2018 and increased 0.4% month-over-month from July to August. Looking ahead, CoreLogic is forecasting that prices will rise 5.8% on a year-over-year basis from August 2019 to August 2020. The 3.6% annual increase is a big slowdown from a year earlier when the report showed an annual increase of 5.5%. Dr. Frank Nothaft, Chief Economist for CoreLogic said, “This moderation in home-price growth should be welcome news to entry-level buyers.”

Manufacturing across the nation weakened last month due in part to trade issues between the US and China. The September ISM National Manufacturing Index fell to 47.8 last month from 49.1 in August. All components within the report declined including the Employment Index. “Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019. Overall, sentiment this month remains cautious regarding near-term growth,” said Timothy R. Fiore from the ISM. A reading above 50 indicates that the manufacturing economy is generally expanding; below 50 indicates that it is generally contracting.

Freddie Mac released its September Forecast on Monday revealing that housing is to remain strong heading into the fall. The forecast is for Gross Domestic Product to average 2.2% in 2019, with trade tensions likely having an impact on the second half of the year. The 30-year fixed-rate mortgage is expected to remain below 4.0% for the remainder of the year. The house price forecast remains unchanged and is expected to appreciate 3.4% in 2019, in line with long term growth. With continued low mortgage rates and strong refinance activity, expect slightly higher annual mortgage origination levels of $2.1 trillion and $1.8 trillion in 2019 and 2020, respectively. Sam Khater, Freddie Mac’s Chief Economist, says, “Despite fears of an economic slowdown, the housing market continues to be a bright spot in the economy.”

Courtesy of Mortgage Market Guide

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Monday – September 30, 2019

It’s jobs week with ADP Private Payrolls on Wednesday and the government’s Jobs Report on Friday. In addition, the ISM National Manufacturing Index will be released and may give some clues on the current slowdown in the sector. If a trade agreement is reached between the US and China, some of the weakness in the manufacturing will most likely be alleviated. If a trade deal is reached between the US and China, there could be upward pressure on mortgage rates.

The Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency have adopted a final rule that increases the threshold for residential real estate transactions requiring an appraisal from $250,000 to $400,000. Given price appreciation in residential real estate transactions since 1994 when the last threshold was last updated, the change will provide burden relief without posing a threat to the safety and soundness of financial institutions.

Manufacturing activity in the Chicago are fell into contraction this month for the third time in four months as the sector continues to be impacted by the trade issues between the US and China. The Chicago PMI fell to 47.1 in September from 50.4 in August. Any reading below 50 shows contraction, above 50, expansion. The GM strike did have a hand in the declining numbers. The more closely watched ISM National Manufacturing Index will be released this week to fully gauge the sector.

Courtesy of Mortgage Market Guide

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