Mixed data causes little change in mortgage rates

Economic Observer
Mixed Data

Overview: Wednesday’s dovish Fed minutes caused a minor improvement in mortgage rates, while the major economic data released over the past week contained mixed results and was roughly offsetting. In addition, reduced concern about North Korea was slightly negative for mortgage rates. The net effect was that mortgage rates ended the week with little change. 

The minutes from the July 26 Fed meeting were viewed as slightly more dovish than expected, which was good for mortgage rates. There appears to be growing uncertainty among Fed officials about when inflation will begin to increase. In recent months, the major inflation indicators have remained well below the Fed’s target of 2.0%. According to the minutes, some Fed officials felt that the Fed “could afford to be patient under current circumstances” in terms of tightening monetary policy.

Recently released economic data contained mixed news. On Friday, the core Consumer Price Index (CPI) revealed that inflation in July was just 1.7% higher than a year ago, which was the same annual rate as in June. This was down from an annual rate of 2.3% in February. The surprisingly low inflation data was good for mortgage rates. However, Tuesday’s Retail Sales report showed unexpectedly strong gains. In July, retail sales, excluding the volatile auto component, jumped 0.5% from June, and the June results were revised significantly higher as well. Stronger economic activity raises the outlook for future inflation, and mortgage rates rose due to the retail sales data.

Last week, rising tensions with North Korea benefited mortgage rates as investors shifted to safer assets such as bonds. As is often the case, a reversal in mortgage rates took place this week when investor sentiment changed. This week, it appeared that the situation with North Korea was less likely to escalate, and investors sold bonds to return to riskier assets.

Week Ahead

Looking ahead, investors will continue to keep an eye on the situation with North Korea. In addition, Industrial Production, an important indicator of economic activity, will be released on Thursday. The minutes from the July 20 European Central Bank meeting will also come out on Thursday and could influence U.S. markets. The New Home Sales report will be released on August 23, followed by Existing Home Sales on August 24.


Chart

Contact me to discuss how I can help your clients with their mortgage needs.

Share this article:

Facebook  Twitter  LinkedIn  Google+  Pinterest
Jason R. Richardson Photo Jason R. Richardson
NMLS# 256859
Mid America Mortgage, Inc.
27413 Tourney Road Suite #150
Valencia, CA 91355
(866) 575-9993
EMAIL ME
Visit my website

FacebookTwitterLinkedIn Google+YouTube channel

Mid America Mortgage, Inc. Logo
Economic Observer
Commentary provided by MBSQuoteline. For live MBS pricing visit www.mbsquoteline.com.

This letter is for information purposes only and is not an advertisement to extend customer credit as defined by Section 12 CFR 1026.2 Regulation Z. Program rates, terms and conditions are subject to change at any time.

What’s Ahead For Mortgage Rates This Week – August 14, 2017

Job Openings, New Jobless Claims Rise

Job openings rose in June to 6.20 million as compared to May’s reading of 5.70 million job openings. Analysts said that increasing job vacancies show that employers are unable to find qualified workers. Business services, construction, health care and professional job sectors had the most job openings. Slow wage growth could be contributing to widespread job openings. Average wage growth has been running at approximately 2.50 percent, which is lower than the average of 3.50 to 4.00 percent typically seen during economic expansion.

First-time jobless claims rose to 244,000 as compared to expectations of 242,000 new claims and the prior week’s reading of 242,000 new jobless claims.

Mortgage Rates Lower

Freddie Mac reported lower mortgage rates last week. The average rate for a 30-year fixed rate mortgage was three basis points lower at 3.90 percent. The average rate for a 15-year fixed rate mortgage was unchanged at 3.18 percent. The average rate for a 5/1 adjustable rate mortgage was one basis point lower at 3.14 percent.

Inflation rose in July by 0.10 percent against an expected increase of 0.20 percent; June’s reading was unchanged. Core inflation, which excludes volatile food and energy sectors, rose by 0.10 percent against expectations of 0.20 percent and 0.10 percent growth in June.

What’s Ahead

This week’s scheduled economic reports include the NAHB Housing Market Index, Commerce Department readings on housing starts and building permits issued and the University of Michigan’s Consumer Sentiment Index, Weekly reports on mortgage rates and new jobless claims will also be released.

Powered by WPeMatico

What’s Ahead For Mortgage Rates This Week – August 7, 2017

Last week’s economic news included readings on pending home sales, construction spending. Several reports related to employment were also posted along with weekly readings on mortgage rates and new jobless claims.

Pending Home Sales Rise as Construction Spending Lags

Pending home sales rose by 1.50 percent to an index reading of 110.2 in June according to the National Association of Realtors®. Sales of homes under contract that have not yet closed regained positive territory after May’s negative reading of -0.70 percent. Pending sales were in negative territory for the past three months.

Regional results for pending sales were mixed. The Northeast posted a gain of 0.70 percent, which was 3.40 percent higher than in June 2016. The Midwest region lost ground with a reading of -0.50 percent in June, but pending sales were 3.40 percent higher year-over-year. Pending home sales increased by 2.10 percent in the Southern region, which was 2.60 percent higher year-over-year. Although the Western region posted a month-to-month pending home sales gain of 2.90 percent for June, pending home sales were 1.10 percent lower year-over-year.

The west has enjoyed a run on rapid home price growth due to slim supplies of homes for sale and high demand for homes in popular metro areas. June’s lower year-over-year reading could signal that home prices have maxed out and low inventory of homes isn’t providing potential buyers with enough choices given higher home prices.

Construction Spending Slows, Mortgage Rates Hold Steady

Real estate pros again cited the shortage of available homes as driving high home prices and creating high competition for homes on the market. These conditions can make homeownership difficult for first-time and moderate- income buyers. Despite pressure on home builders to increase construction, the Commerce Department reported lower construction spending in June. Spending was lower by -1.10 percent against expectations of 0.40 percent growth based on May’s flat reading.

Mortgage rates were little changed last week; the average rate for a 30-year fixed rate mortgage rose one basis point to 3.93 percent. 15-year fixed mortgage rates were two basis points lower at 3.18 percent. Rates for a 5/1 adjustable rate mortgages were three basis points lower at 3.15 percent. Discount points averaged 0.50 percent for all three mortgage types.

Weekly Jobless Claims, Unemployment Rate Fall

New jobless claims fell to 20,000 new claims as compared to expectations of 244,000 new claims and the prior week’s reading of 245,000 initial jobless claims filed. Readings for Non-Farm Payrolls were lower at 209,000 private and public-sector jobs created.in July. Analysts expected 175,0000 new jobs based on June’s reading of 231,000 jobs. ADP Payrolls reported 178,000 private sector jobs created in July as compared to June’s reading of 191,000 new jobs created.

The national unemployment rate dropped to 4.30 percent as expected and was lower than June’s reading of 4.40 percent. Lower unemployment readings suggest that fewer people are seeking full-time work.

Whats Ahead

This week’s scheduled economic reports include readings on job openings, inflation and core inflation. Weekly readings on mortgage rates and new jobless claims will also be released.

Powered by WPeMatico

What’s Ahead For Mortgage Rates This Week – July 31, 2017

Last week’s economic news included readings on new and existing home sales, Case-Shiller Home Price Index reports and an announcement by the Federal Open Market Committee of the Federal Reserve. Weekly readings on mortgage rates and new jobless claims were also released.

New and Existing Home Sales Mixed in June

Sales of new homes rose in June rose to a seasonally- adjusted annual rate of 610,000 homes. Analysts expected 614,000 new home sales based on May’s reading of 605,000 new home sales. The National Association of Realtors® reported 5.52 million previously owned homes sold in June on a seasonally-adjusted annual basis. A reading of 5.57 million sales was expected, based on May’s reading of 5.62 million sales. Sales of pre-owned homes are lagging due to a severe shortage of homes available. Low inventory and high demand are limiting options for buyers, who are frequently forced to compete with multiple offers for homes they want and not enough listings of appropriate or affordable homes.

New home sales rose in June according to the Commerce Department. June sales of new homes increased by 5000 sales to a seasonally-adjusted annual rate of 610,000 new home sales. June’s reading fell short of the 614,000 sales anticipated by analysts.  While housing and real estate industries say that building more homes is the only solution to reducing the shortage of homes for sale, builders cite labor and lot shortages and increases in materials cost as headwinds to building more homes at a fast pace. June’s reading was 9.10 percent higher than a year ago.

CaseShiller: Home Prices Hold Steady in May

National home price appreciation held steady at a seasonally adjusted annual rate of 5.60 percent in May. The 20-City Index, which reported a year-over-year gain of 5.70 percent. indicated that home values remain highest in the West. Seattle, Washington had the highest year-over-year home price gain of 13.30 percent. Portland Oregon followed with a year-over-year gain of 8.90 percent. Denver, Colorado reported a year-over-year gain of 7.90 percent for home prices.

The Federal Reserve announced that its target federal funds interest rate would not change; it is currently at 1.00 to 1.25 percent. The Fed also noted that it would start reducing its balance sheet soon.

Mortgage Rates Fall as New Jobless Claims Rise

Freddie Mac reported lower average mortgage rates with the rate for a 30-year fixed rate mortgage four basis points lower at 3.92 percent. The average rate for a 15-year fixed rate mortgage dropped three basis points to 3.20 percent. The average rate for a 5/1 adjustable rate mortgages was three basis points lower at 3.18 percent. Discount points averaged 0.50 percent for all three mortgage types.

New jobless claims rose to 244,000 as compared to 245,000 new claims expected and 234,000 new claims filed the prior week.

Whats Ahead

Next week’s scheduled economic releases include readings on pending home sales, inflation, construction spending and ADP payrolls. Non-farm payrolls and the national unemployment rate will also be released, along with weekly reports on mortgage rates and new jobless claims.

Powered by WPeMatico

Summer Housing Market Remains Strong [INFOGRAPHIC]

Market Perspective
Looking for ways to grow your business in today’s housing market? Let’s discuss how we can work together!
Share this article:

Facebook  Twitter  LinkedIn  Google+  Pinterest

Jason R. Richardson Photo Jason R. Richardson
NMLS# 256859
Mid America Mortgage, Inc.
27413 Tourney Road Suite #150
Valencia, CA 91355
(866) 575-9993
EMAIL ME
Visit my website

FacebookTwitterLinkedIn Google+YouTube channel

Mid America Mortgage, Inc. Logo
Economic Observer
This letter is for information purposes only and is not an advertisement to extend customer credit as defined by Section 12 CFR 1026.2 Regulation Z. Program rates, terms and conditions are subject to change at any time.

Fed, ECB Highlight the Week

Economic Observer
Fed, ECB Highlight the Week

Overview: Two major central bank meetings caused some volatility in mortgage rates over the past week. Neither ended up having much net effect, however, and mortgage rates ended the week with little change. 

As expected, the U.S. Federal Reserve made no change to the federal funds rate at its meeting on Wednesday. Of note, the Fed statement said that officials expect to begin to reduce its holdings of Treasury securities and mortgage-backed securities (MBS) “relatively soon.” Investors think that this policy change may be announced as early as the next meeting on September 20. The statement also slightly changed its description for inflation as “running below 2%” instead of “running somewhat below 2%.” Concerns that the Fed might be more hawkish had caused mortgage rates to rise on Tuesday, but the increase was reversed on Wednesday when the statement contained no surprises.

While the Fed is currently holding its balance sheet steady and plans to soon begin to shrink it, the European Central Bank (ECB) is still adding to its portfolio. At the ECB meeting on July 20, investors were hoping to learn more about the ECB’s plans for its massive bond purchase program next year. Investors were disappointed by a lack of new information, though, as ECB President Draghi only provided the vague guidance that the discussion about when to begin scaling back the program should take place “in the fall.”

The housing data released this week revealed that home sales have been holding fairly steady in recent months, despite a lack of inventory in many markets. In June, sales of previously owned homes decreased a little from May, but they still were higher than a year ago. Total inventory of homes for sale fell slightly to a 4.3-month supply, and it was 7% lower than a year ago. In addition, the median existing-home price was 7% higher than a year ago.

Week Ahead

Looking ahead, the Durable Goods Report will be released on Thursday. The first reading for second quarter Gross Domestic Product (GDP), the broadest measure of economic growth, will come out on Friday. The core Personal Consumption Expenditures (PCE) Price Index, the inflation indicator favored by the Fed, will be released on August 1. The Institute for Supply Management (ISM) Manufacturing Index also will come out on August 1, and the next Employment Report will be released on August 4.


Chart

Contact me to discuss how I can help your clients with their mortgage needs.

Share this article:

Facebook  Twitter  LinkedIn  Google+  Pinterest
Jason R. Richardson Photo Jason R. Richardson
NMLS# 256859
Mid America Mortgage, Inc.
27413 Tourney Road Suite #150
Valencia, CA 91355
(866) 575-9993
EMAIL ME
Visit my website

FacebookTwitterLinkedIn Google+YouTube channel

Mid America Mortgage, Inc. Logo
Economic Observer
Commentary provided by MBSQuoteline. For live MBS pricing visit www.mbsquoteline.com.

This letter is for information purposes only and is not an advertisement to extend customer credit as defined by Section 12 CFR 1026.2 Regulation Z. Program rates, terms and conditions are subject to change at any time.

Rates Again Move Higher

Economic Observer
Rates Again Move Higher

Overview: The upward momentum in global bond yields, which followed hawkish comments from the European Central Bank (ECB), continued over the past week. The U.S. manufacturing data was also negative for mortgage rates, and rates ended the week higher. 

Last week, comments from the ECB caused investors to expect the ECB to scale back its bond purchase program sooner than anticipated. The possibility of a reduction in demand from the ECB was viewed as bad news for global bonds, including U.S. mortgage-backed securities (MBS). This started an upward trend in mortgage rates that has continued this week.

On Monday, the Institute for Supply Management (ISM) reported that its Manufacturing Index unexpectedly jumped to 57.8 from 54.9, which was the highest reading since August 2014. Readings above 50 indicate an expansion in the sector. Fifteen out of 18 industries reported growth in June, and the employment component of the report rose to the highest level since 2011. Since stronger economic growth raises the outlook for future inflation, this data was negative for mortgage rates.

The detailed minutes from the June 14 Fed meeting, which were released on Wednesday, contained no major surprises and had little impact. As Fed officials have made clear in their recent comments, they debated at the meeting about whether the unexpected decline in inflation over the last few months is just a short-term event or a longer-term one. Fed officials also had different opinions about announcing a start to the Fed’s balance sheet reduction “within a couple of months” or waiting until later in 2017. Given the minutes and recent comments from officials, investors think that the most likely outcome is that the Fed will announce the beginning of the balance sheet reduction in September and will not consider hiking the federal funds rate again until December.

Week Ahead

Looking ahead, the ISM Services Index will come out on Thursday. The important monthly Employment Report will be released on Friday. As usual, this data on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Fed Chair Yellen will be testifying before Congress on July 12. In addition, there will be Treasury auctions on July 11, 12, and 13.


Chart

Contact me to discuss how I can help your clients with their mortgage needs.

Share this article:

Facebook  Twitter  LinkedIn  Google+  Pinterest
Jason R. Richardson Photo Jason R. Richardson
NMLS# 256859
Mid America Mortgage, Inc.
27413 Tourney Road Suite #150
Valencia, CA 91355
(866) 575-9993
EMAIL ME
Visit my website

FacebookTwitterLinkedIn Google+YouTube channel

Mid America Mortgage, Inc. Logo
Economic Observer
Commentary provided by MBSQuoteline. For live MBS pricing visit www.mbsquoteline.com.

This letter is for information purposes only and is not an advertisement to extend customer credit as defined by Section 12 CFR 1026.2 Regulation Z. Program rates, terms and conditions are subject to change at any time.

Disappointing Data and Fed Rate Hike

Economic Observer
Disappointing Data and Fed Rate Hike

Downside misses in major reports on inflation and retail sales were favorable for mortgage rates this week. The Fed meeting was viewed as slightly negative. The net effect was a small decline in mortgage rates, which ended at the best levels of the year.

As widely expected, the Federal Reserve raised the federal funds rate on Wednesday afternoon by 25 basis points, bumping it to a range of 1.0% to 1.25%. Investors mostly reacted to new information in the Fed’s statement about the plan to reduce the $4.5 trillion of mortgage-backed securities (MBS) and Treasuries on its balance sheet. If the economy performs in line with the Fed’s forecast, the plan calls for a gradual reduction in the holdings by no longer reinvesting all of the principal payments received. The reductions are expected to begin this year. The amount that will not be reinvested will begin at $10 billion per month (split between Treasuries and MBS roughly in proportion to the Fed’s holdings) and will increase every three months until the total monthly amount not reinvested reaches $50 billion. These figures may have been larger than anticipated by investors, and mortgage rates moved a little higher after the statement was released.

Two major economic reports released on Wednesday morning fell short of expectations, causing mortgage rates to improve. In May, the core Consumer Price Index (CPI), which excludes the volatile food and energy components, was 1.7% higher than a year ago, down from the 1.9% year-over-year rate of increase in April. After holding steady during the second half of 2016, core CPI inflation peaked in January at 2.3% and has declined every month since then. According to the statement, most Fed officials expect that inflation will remain below their 2.0% target in the near term but will stabilize near their target in the medium term.

Excluding the volatile auto component, retail sales in May fell 0.3% from April, which was well below the consensus for an increase of 0.2%. Retail sales are volatile month to month, however, and they still were 4.0% stronger during the first five months of 2017 than they were over the same time period last year.

Week Ahead

Looking ahead, the housing starts data will be released on Friday. The Existing Home Sales report will come out on June 21, followed by New Home Sales on June 23. In addition, Industrial Production, an important indicator of economic growth, will be released on Thursday.


Chart

Contact me to discuss how I can help your clients with their mortgage needs.

Share this article:

Facebook  Twitter  LinkedIn  Google+  Pinterest
Jason R. Richardson Photo Jason R. Richardson
NMLS# 256859
Mid America Mortgage, Inc.
27413 Tourney Road Suite #150
Valencia, CA 91355
(866) 575-9993
EMAIL ME
Visit my website

FacebookTwitterLinkedIn Google+YouTube channel

Mid America Mortgage, Inc. Logo
Economic Observer
Commentary provided by MBSQuoteline. For live MBS pricing visit www.mbsquoteline.com.

This letter is for information purposes only and is not an advertisement to extend customer credit as defined by Section 12 CFR 1026.2 Regulation Z. Program rates, terms and conditions are subject to change at any time.

What’s Ahead For Mortgage Rates This Week – May 22, 2017

Last week’s economic reports included readings from the National Association of Home Builders, Commerce Department readings on housing starts and building permits and weekly reports on mortgage rates and new jobless claims.

NAHB Housing Market Index Rises, Exceeds Expectations

Builder Sentiment rose two points in May, which exceeded expectations of no change to April’s reading of 68. Builders and analysts said that short inventories of available homes continue to drive demand for new homes. While index readings jumped immediately after the Presidential election in November, builder enthusiasm settled when tariffs on lumber were increased.

Two of three components used in calculating the NAHB Housing Market Index reading. Builder confidence in current housing market conditions gained two points to a reading of 76; Confidence in market conditions over the next six months gained four points to 79. The reading for buyer traffic in new home developments fell one point to 51. Any reading over 50 is considered positive in NAHB HMI reports.

Housing Starts, Building Permits Lower in April

Despite rising home builder confidence in current and future housing markets, housing starts and building permits issued were lower in April than for March. According to the Commerce Department, 1.172 million homes were started in April as compared to 1.203 million housing starts reported in March; April’s housing starts were 0.070 percent higher year over year. Analysts had expected a reading of 1,259 million starts, which are calculated on a seasonally-adjusted annual basis.

Builders started single-family homes at a seasonally- adjusted annual pace of 835,000 homes in April, which indicated that builders may be gaining confidence in building homes for sale as compared to rental units. Building permits were issued at a pace of 1,229 million on a seasonally-adjusted annual basis; this was lower than the March reading of 1.260 million permits issued.

 The apparent lag between strong builder sentiment and housing starts and permits could be due to ongoing concerns over increasing materials prices and shortages of buildable lots and labor needed to ramp up home construction.

Mortgage Rates, Weekly Jobless Claims Fall

Mortgage rates fell last week. Freddie Mac reported that the average rate for a 30-year fixed rate mortgage averaged three basis points lower at 4.02 percent. Rates for a 15-year fixed rate mortgage averaged 3.27 percent, a drop of two basis points over the prior week. Mortgage rates for a 5/1 adjustable rate mortgage averaged 3.13 percent, which was one basis point lower than the prior week. Discount points were unchanged at an average of 0.50 percent for all three mortgage types reported.

New jobless claims were lower than expected last week, with 232,000 new claims filed as compared to 240,000 new claims expected and 236,000 claims reported the prior week. Low readings for new unemployment claims suggest strong jobs markets, but can be volatile and subject to adjustment.

Whats Ahead

This week’s scheduled economic reports include readings on new and existing home sales and consumer sentiment. Mortgage rates and new jobless claims will also be released.

Powered by WPeMatico

NAHB: Home Builder Confidence Rises in May

The National Association of Homebuilders reported a two-point increase in builder confidence in May. The NAHB Housing Market Index reading increased from 68 in April to 70, which was the second-highest reading since the economic recovery started. May’s reading exceeded analyst expectations of a flat reading for May. Builder confidence rose as demand for homes continued to rise; this factor overrode builder obstacles including higher prices for lots and ongoing labor shortages. A new tariff on lumber was also expected to dampen builder confidence.

Component Readings Suggest Strong Builder Confidence in Current and Future Housing Markets

The monthly Housing Market Index is comprised of three components. Builder confidence in current housing market conditions rose two points to 76; the reading for builder confidence in market conditions for the next six months rose four points to 79. Builder confidence in buyer traffic in new homes dropped one point to 51, but overall, builder confidence in market conditions is strong as any NAHB Housing Market Index reading over 50 is considered positive.

Fewer Mortgage Applications: Home Buyers Dont Share Builder Optimism

According to the Mortgage Bankers Association, mortgage applications dropped 4.30 percent year-over-year in April, and were 20 percent lower than in March. While the Mortgage Bankers Association doesn’t report seasonal adjustments, fewer applications for purchase mortgages on new homes illustrated ongoing affordability challenges faced by first-time and moderate income home buyers.

High demand for available homes puts mortgage-dependent home buyers at a disadvantage when cash offers are in play. Rapid escalation of home prices creates difficulty for first-time and moderate income buyers as down payment and mortgage qualification requirements sideline buyers.

Increasing home builder sentiment has not corresponded to the number of new homes being built, which industry analysts consider the main solution to high demand for homes driven by short inventories of homes. First-time buyers are important to housing markets as they enable “move-up” buyers to sell their homes and buy new or larger homes.

Powered by WPeMatico

Inspiring the American Dream With Intelligent Design

Subscribe For The Latest Updates

Signup for the Mortgage Geek newsletter and get access to new marketing products for free!