Tucson Mortgages Home Loan News 10-22-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of October 15, 2018
  • Economic Calendar – week of October 22, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market put in a “mixed” performance for the week despite companies representing about 14% of the S&P 500’s market cap reporting mostly favorable third quarter corporate earnings.  However, continuing angst over the U.S. – China trade conflict coupled with a report showing slower economic growth in China dampened investor sentiment.  China reported 6.5% year-over-year GDP growth and this was less than the previous quarter’s growth rate of 6.7% and less than the consensus forecast of 6.6% growth.

Bond yields edged higher following “hawkish” comments contained within the Federal Reserve’s minutes from their late-September monetary policy meeting.  The minutes, released last Wednesday, indicated a willingness among Fed policymakers to continue their steady pace of rate hikes.  The minutes also revealed discussion of raising rates past the “neutral” zone and into the “restrictive” zone in an effort to slow the economy and lower the risk of rising inflation.  As a result, the probability of a December rate hike remains high with the probability rising to 83.7% from 79.8% last week.

In housing, the Census Bureau released their latest Housing Starts and Building Permits data last Wednesday, showing Starts fell 5.3% in September to a seasonally adjusted annual rate of 1.201 million units.  This was a little below the consensus forecast of 1.221 million units with single-family starts declining 0.9% to 871,000.  Regionally, total starts were 29.0% higher in the Northeast with single-unit starts 6.7% lower.  The Midwest saw total starts 14.0% lower with single-unit starts 10.2% higher.  Total starts were 13.7% lower in the South with single-unit starts down 6.8%.  The West had a 6.6% increase in total starts with single-unit starts rising 7.0%.

Meanwhile, Building Permits declined 0.6% to a seasonally adjusted annual rate of 1.241 million permits coming in below the consensus forecast of 1.273 million.  The primary reason for this miss was a 9.3% drop in permits for buildings with five units or more.

Single-family permits climbed 2.9% to 851,000, matching last March’s total for the third-lowest annual rate this year.

Regionally, total permits were 9.8% lower in the Northeast with single-unit permits rising 13.7%.  Total permits in the Midwest were down 18.9% with single-unit permits 1.7% lower.  The South saw a gain of 0.6% in total permits with single-unit permits 1.6% higher.  Total permits out West increased 11.1% with single-unit permits gaining 5.8%.  The data from this latest report suggests the supply of new homes is failing to keep pace with the demand for new homes at more favorable and affordable price points.   Therefore, it is likely overall home sales activity will continue to be negatively impacted by affordability factors.

Friday, the National Association of Realtors (NAR) reported Existing Home Sales fell 3.4% month-over-month in September to a seasonally adjusted annual rate of 5.15 million.  This was below the consensus forecast of 5.30 million and was the lowest sales level since November 2015.  Also, total sales were 4.1% lower on a year-over-year basis.

Single-family home sales were 3.4% lower month-over-month at a seasonally adjusted annual rate of 4.58 million and were 4.0% below the year-ago sales level.  Existing home inventory for sale at the end of September fell from 1.91 million to 1.88 million but was up 1.1% from a year ago.  Unsold inventory currently stands at a 4.4-month supply versus 4.3 months in August and remains below the 6.0-month supply typically associated with a balanced market.  The median existing home price for all housing types rose 4.2% to $258,100 – the 79th straight month of year-over-year gains.  The median existing single-family home price was up 4.6% from a year ago to $260,500.  First-time buyers accounted for 32% of sales in September, up from 31% in August and 29% a year ago.  Coupled with the Housing Starts and Building Permits data, it appears a combination of high home prices, low inventory of affordable homes, rising mortgage rates, and the new tax law limiting incentives for homeownership are having an adverse impact on the housing sector this year.

Elsewhere, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed the number of mortgage applications decreased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 7.1% for the week ended October 12, 2018.  The seasonally adjusted Purchase Index decreased 6.0% from the week prior while the Refinance Index decreased 9.0%.

Overall, the refinance portion of mortgage activity fell to 38.1% from 39.0% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 7.1% from 7.3% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 5.10% from 5.05% with points increasing to 0.55 from 0.51 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond fell 23.4 basis points to close at $99.891 while the 10-year Treasury yield increased 2.7 basis points to end at 3.194%.  The Dow Jones Industrial Average gained 104.35 points to close at 25,444.34.  The NASDAQ Composite Index fell 47.86 points to close at 7,449.03.  The S&P 500 Index added 0.65 of one point to close at 2,767.78.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 2.93%, the NASDAQ Composite Index has advanced 7.90%, and the S&P 500 Index has added 3.52%.

This past week, the national average 30-year mortgage rate rose to 4.99% from 4.94%; the 15-year mortgage rate increased to 4.47% from 4.42%; the 5/1 ARM mortgage rate climbed to 4.51% from 4.43% while the FHA 30-year rate remained unchanged at 4.50%.  Jumbo 30-year rates rose to 4.42% from 4.40%.

Economic Calendar – for the Week of October 22, 2018

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

The FNMA 30-year 4.0% coupon bond ($99.891, -23.4 bp) traded within a narrower 45.3 basis point range between a weekly intraday high of 100.266 on Wednesday and a weekly intraday low of $99.813 on Friday before closing the week at $99.891 on Friday.  After trading slightly higher from Monday through Tuesday, mortgage bonds traded lower toward support levels.

Mortgage bonds remain “oversold” while operating from a sell signal last Tuesday.  While we could see bonds continue down to support levels and then make a bounce higher, the overall trend remains negative.  If the third quarter earnings season just getting under way shows strong results, we could see the stock market begin to recover from recent weakness and move higher into the end of the year – a historically strong period for stocks.  If this scenario plays out, it would put added pressure on bond prices pushing yields and mortgage rates a little higher.

 

Tucson Mortgages Home Loan News 10-15-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of October 8, 2018
  • Economic Calendar – week of October 15, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

Indications of global economic weakness, rising Treasury bond yields, and seemingly no progress in trade negotiations between the U.S. and China combined to heavily weigh on investor sentiment during the week resulting in the sharpest stock market correction since last February.  The stock market swoon prompted President Trump to criticize the Federal Reserve, saying the Fed is “out of control” and has “gone crazy” with its rate hikes.  The Fed has raised rates three times this year and appears ready to raise rates once again at its December meeting.  The probability for a December rate hike currently stands at 79.7%.

Last Tuesday, the International Monetary Fund cut its 2018 and 2019 global economic growth forecast to 3.7% from 3.9%, stating tariffs between the U.S. and China, an imminent Brexit deal between Great Britain and the European Union, and the new trilateral trade agreement between the U.S., Canada, and Mexico could lead to slower growth.

Furthermore, investors received a mixed picture of inflation as producer (wholesale) prices for September rebounded to 0.2% from August’s reading of -0.1%.  However, consumer inflation as measured by the total Consumer Price Index (CPI) and core CPI, which excludes food and energy, only increased by 0.1% when both had been forecast to rise by 0.2%.  These monthly increases resulted in total CPI rising 2.3% year-over-year, versus 2.7% in August with the core CPI up 2.2%, unchanged from August.

Elsewhere, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed the number of mortgage applications decreased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 1.7% for the week ended October 5, 2018.  The seasonally adjusted Purchase Index decreased 1.0% from the week prior while the Refinance Index decreased 3.0%.

Overall, the refinance portion of mortgage activity fell to 39.0% from 39.4% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 7.3% from 7.1% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 5.05% from 4.96% with points increasing to 0.51 from 0.49 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond gained 15.6 basis points to close at $100.125 while the 10-year Treasury yield decreased 6.6 basis points to end at 3.167%.  The Dow Jones Industrial Average plunged 1,107.06 points to close at 25,339.99.  The NASDAQ Composite Index fell 291.56 points to close at 7,496.89.  The S&P 500 Index lost 118.44 points to close at 2,767.13.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 2.51%, the NASDAQ Composite Index has advanced 8.60%, and the S&P 500 Index has added 3.50%.

This past week, the national average 30-year mortgage rate fell to 4.94% from 5.02%; the 15-year mortgage rate decreased to 4.42% from 4.50%; the 5/1 ARM mortgage rate climbed to 4.43% from 4.35% while the FHA 30-year rate decreased to 4.50% from 4.62%.  Jumbo 30-year rates fell to 4.40% from 4.50%.

Economic Calendar – for the Week of October 15, 2018

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

The FNMA 30-year 4.0% coupon bond ($100.125, +15.6 bp) traded within a narrower 62.5 basis point range between a weekly intraday high of 100.344 on Thursday and a weekly intraday low of $99.719 on Monday before closing the week at $100.125 on Friday.  Monday, the bond traded lower to touch exactly upon the 100% Fibonacci retracement support level before pulling slightly higher above this key level.  The bond then traded higher Tuesday through Thursday as the stock market was undergoing a correction.  Friday, the bond market softened as the stock market rallied with the major indexes moving back toward their 200-day moving averages after falling below them on Wednesday and Thursday.

Mortgage bond prices are now about mid-way between support and resistance levels while still “oversold” and operating on a buy signal from last Wednesday.  If the major stock indexes fail to rebound from their 200-day moving averages, it could lead to further stock market weakness while serving as a boost to bond prices resulting in slightly lower mortgage rates.

 

Tucson Mortgages Home Loan News 10-8-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of October 1, 2018
  • Economic Calendar – week of October 8, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

Domestic economic news caused a dramatic jump in bond yields that reached multi-year highs.  The yield on the benchmark 10-year Treasury note shot from 3.06% at the end of trading the previous week to 3.25% in intraday trading this past Friday.  This is the highest level for the 10-year Treasury note since the summer of 2011, and it had a negative impact on mortgage rates.

The largest move occurred Wednesday following an interview with Federal Reserve Chairman Jerome Powell when he described the economy as “firing on all cylinders.”  Wednesday’s economic data confirmed Powell’s comments as the Institute for Supply Management’s Non-manufacturing (Services) Index sharply increased in September to a record high of 61.1%, its highest level since the Institute began collecting data a decade ago.  Further, the ADP monthly employment report on private sector payroll growth also came in significantly higher than expected.

Bond yields continued to rise on Thursday, and especially on Friday, after the release of the Employment Situation (Jobs) report for September.  Also, fresh concerns over Italian and Greek debt triggered a rise in global bond yields with yields on 10-year German, Spanish, and Portuguese government debt rising to multi-month highs, and in the case of Great Britain, multi-year highs.

Tuesday, CoreLogic® released its CoreLogic Home Price Index (HPI™) and HPI Forecast™ for August 2018 showing home prices increased in both month-over-month and year-over-year time frames.

On a month-over-month basis, prices increased by 0.1% in August 2018.  Year-over-year from August 2017, home prices increased nationally by 5.5%.

Looking ahead, home prices are expected to decrease by 0.4% from August to September 2018 on a month-over-month basis.  On a year-over-year basis, the CoreLogic HPI Forecast predicts the national home-price index to continue to increase by 4.7% from August 2018 to August 2019.  Dr. Frank Nothaft, chief economist for CoreLogic, remarked “The rise in mortgage rates this summer to their highest level in seven years has made it more difficult for potential buyers to afford a home.  The slackening in demand is reflected in the slowing of national appreciation, as illustrated in the CoreLogic Home Price Index.  National appreciation in August was the slowest in nearly two years, and we expect appreciation to slow further in the coming year.”

Friday, the Employment Situation Summary (jobs report) for September came up short of the consensus forecast of 184,000 at just 134,000.  However, the August reading was revised higher by 69,000 to 270,000.

The Unemployment Rate dropped to 3.7%, its lowest level since 1969, even though the labor force participation rate remained unchanged at 62.7%.  Average Hourly Earnings growth was reported at 0.3% in September, but the August growth rate was revised down to 0.3% from 0.4%.

Overall, this latest jobs report shows the labor market remains strong.  Employers are having a difficult time finding qualified workers, and this will pressure wages higher and fuel wage-based inflation going forward.  Inflation leading to additional Fed rate hikes, higher bond yields, and higher mortgage rates.

Elsewhere, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed the number of mortgage applications remained unchanged from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) was unchanged for the week ended September 28, 2018.  The seasonally adjusted Purchase Index increased 0.1% from the week prior while the Refinance Index decreased 0.1%.

Overall, the refinance portion of mortgage activity was unchanged at 39.4% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 7.1% from 6.5% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.96% from 4.97% with points increasing to 0.49 from 0.47 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond plunged 93.7 basis points to close at $99.969 while the 10-year Treasury yield increased 16.8 basis points to end at 3.233%.  The Dow Jones Industrial Average fell 11.26 points to close at 26,447.05.  The NASDAQ Composite Index fell 257.90 points to close at 7,788.45.  The S&P 500 Index lost 28.41 points to close at 2,885.57.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 6.99%, the NASDAQ Composite Index has advanced 12.82%, and the S&P 500 Index has added 7.93%.

This past week, the national average 30-year mortgage rate rose to 5.02% from 4.78%; the 15-year mortgage rate increased to 4.50% from 4.26%; the 5/1 ARM mortgage rate jumped to 4.35% from 3.95% while the FHA 30-year rate increased to 4.62% from 4.37%.  Jumbo 30-year rates climbed to 4.50% from 4.32%.

Economic Calendar – for the Week of October 8, 2018

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

The FNMA 30-year 4.0% coupon bond ($99.969, -93.7 bp) traded within a far wider 132.8 basis point range between a weekly intraday high of 101.047 on Tuesday and a weekly intraday low of $99.719 on Friday before closing the week at $99.969 on Friday.  After a slight rebound higher on Tuesday, mortgage bond prices plunged the remainder of the week on renewed inflation fears.  The bond fell through support levels to reach the 100% Fibonacci Retracement level at $99.719.  The bond is once again extremely “oversold,” but if the $99.719 support level fails to hold the next support level at $99.50 will come into play.   A continuation lower to the next support level should result in slightly higher mortgage rates.

 

Tucson Mortgages Home Loan News 10-1-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of September 24, 2018
  • Economic Calendar – week of October 1, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market turned in a mixed performance for the second consecutive week as investors pulled back from record highs reached during the prior week amid trade and political turmoil.  The Dow and S&P 500 both posted small losses while the NASDAQ Composite Index recorded a moderate gain.  Treasury and mortgage bond yields ended the week slightly lower after retreating on Wednesday following the Federal Reserve’s monetary policy meeting.  The drop in bond yields were partly due to dovish comments on inflation made by Fed Chairman Jerome Powell following the policy meeting.

As widely expected, the Federal Reserve increased short-term interest rates, bumping up the fed funds target range by 25 basis points to 2.00-2.25%.  In the accompanying policy statement, the Fed removed the word “accommodative”, leading some analysts to believe Fed officials could be leaning toward slowing the pace and number of rate hikes.  However, Fed Chairman Powell commented during his press conference that the language change wasn’t a signal for a change in the Fed’s assessment of rate hikes.  The Fed still appears to be planning to raise rates another 25 basis points in December with the latest Fed Funds Futures contract showing a probability of 76.5%.  Looking ahead to next year, the Fed’s latest dot plot shows expectations for three rate hikes in 2019 and one in 2020.

In housing news, the Federal Housing Finance Agency (FHFA) released their FHFA House Price Index (HPI) on Tuesday showing a 0.2% increase in U.S. house prices in July from the prior June reading.  From July 2017 to July 2018, house prices were 6.4% higher.  For the nine census divisions, seasonally adjusted monthly price changes from June 2018 to July 2018 ranged from a -0.5% in the East South Central division to +1.1% in the South Atlantic division.  The 12-month changes were all positive, ranging from +4.7% in the New England division to +8.7% in the Mountain division.

The previously reported 0.2% increase in June was revised upward to 0.3%.

Also last Tuesday, the S&P Dow Jones Indices released their latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices.  Data released for July 2018 showed home prices continued to rise across the country over the last 12 months with a 6.0% annual gain in July, down from 6.2% in the previous month.

The 10-City Composite annual increase came in at 5.5%, down from 6.0% in the previous month.  The 20-City Composite recorded a 5.9% year-over-year gain, down from 6.4% in the previous month.

Las Vegas, Seattle and San Francisco continued to report the highest year-over-year gains among the 20 cities.  In July, Las Vegas led the way with a 13.7% year-over-year price increase, followed by Seattle with a 12.1% increase and San Francisco with a 10.8% increase.  Five of the 20 cities reported greater price increases in the year ending July 2018 versus the year ending June 2018.

David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, had this to say “Rising homes prices are beginning to catch up with housing.  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.

The slowing is widespread: 15 of 20 cities saw smaller monthly increases in July 2018 than in July 2017.  Sales of existing single family homes have dropped each month for the last six months and are now at the level of July 2016.  Housing starts rose in August due to strong gains in multifamily construction.  The index of housing affordability has worsened substantially since the start of the year.”

Wednesday, the Census Bureau released their New Home Sales report for August showing an increase in sales of 3.5% to a seasonally adjusted annual rate of 629,000.  This just missed the consensus estimate of 630,000, plus July’s sales number was downwardly revised to 608,000 from 627,000.  Regionally, new home sales in the Northeast jumped 47.8% to 34,000; rose 2.7% in the Midwest to 77,000; and increased 9.1% in the West to 168,000.  Sales in the Southern region, the largest market for new home sales, fell 1.7% month-over-month to 350,000.

Homes priced at $399,999 or less accounted for 67% of new homes sold versus 70% in July, possibly indicating supply constraints at the lower end of the new home market.

The average sales price climbed 5.2% year-over-year to $388,400 while the median sales price was up 1.9% year-over-year to $320,200.  The supply of new homes for sale is at a 6.1-months’ supply at the August sales rate versus 6.0 months a year ago.  This data reflects the affordability constraints that are increasing right along with rising home prices and mortgage rates.

Thursday, the National Association of Realtors (NAR) released a summary of Pending Home Sales showing August’s sales rate was 1.8% lower than in July and was 2.3% lower from a year ago.

Pending Sales represent homes that have a signed contract to purchase on them but have yet to close.  They tend to lead existing-home sales data by one to two months.

Three of the nation’s four regions showed declines from a year ago. The South had the only increase in pending sales of 1.3% while the West showed a significant drop in sales of 11.3%.  The Northeast fell 1.6% followed by the Midwest with a decline of 1.1%.  The U.S. pending home sales index level for the month was 104.2.  July’s data was revised higher to 106.1.  Despite August’s decline, this is the pending index’s 52nd consecutive month over the 100 level.  The 100 level is based on a 2001 benchmark and is consistent with a healthy market and existing-home sales above the five million mark.

Elsewhere, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed an increase in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 2.9% during the week ended September 21, 2018.  The seasonally adjusted Purchase Index increased 3.0% from the week prior as did the Refinance Index.

Overall, the refinance portion of mortgage activity increased to 39.4% from 39.0% of total applications from the prior week.  The adjustable-rate mortgage share of activity remained unchanged at 6.5% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.97% from 4.88%, its highest level since April 2011, with points increasing to 0.47 from 0.44 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond gained 6.2 basis points to close at $100.906 while the 10-year Treasury yield decreased 0.30 of one basis point to end at 3.065%.  The Dow Jones Industrial Average fell 285.19 points to close at 26,458.31.  The NASDAQ Composite Index gained 59.39 points to close at 8,046.35.  The S&P 500 Index lost 15.69 points to close at 2,913.98.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 7.04%, the NASDAQ Composite Index has advanced 16.56%, and the S&P 500 Index has added 8.99%.

This past week, the national average 30-year mortgage rate fell to 4.78% from 4.85%; the 15-year mortgage rate decreased to 4.26% from 4.30%; the 5/1 ARM mortgage rate dropped to 3.95% from 4.05% while the FHA 30-year rate decreased to 4.37% from 4.48%.  Jumbo 30-year rates decreased to 4.32% from 4.40%.

Economic Calendar – for the Week of October 1, 2018

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

The FNMA 30-year 4.0% coupon bond ($100.906, +6.20 bp) traded within a narrower 45.4 basis point range between a weekly intraday high of 101.063 on Friday and a weekly intraday low of $100.609 on Tuesday before closing the week at $100.906 on Friday.  Mortgage bond prices took a dip lower on Monday and Tuesday before bouncing higher off of technical support levels the remainder of the week.  The bond remains “oversold” while still operating on a buy signal from last Wednesday so we could see an extension higher in price toward resistance at $101.33.  A continuation higher toward technical resistance should result in stable to very slightly lower mortgage rates.

 

Tucson Mortgages Home Loan News 9-24-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of September 17, 2018
  • Economic Calendar – week of September 24, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market turned in a mixed performance for the week with the Dow Jones Industrial Average and the S&P 500 Index both recording new all-time highs while the technology-laden Nasdaq Composite Index and some of the smaller-cap indexes recorded modest losses.  The bond market slid lower with yields rising.  The solid performance in larger-cap stocks took place as investors shrugged off a further escalation in the trade conflict between the U.S. and China.

Last Monday evening President Trump announced the U.S. will be enacting tariffs on $200 billion worth of Chinese goods beginning September 24 at an initial rate of 10% that will increase to 25% on January 1, 2019.  The president also declared he will impose additional tariffs on $267 billion worth of Chinese goods if China retaliates, which it stated it would do with 5-10% tariffs on $60 billion worth of U.S. goods.

Stocks traded unexpectedly higher on Tuesday following Monday’s tariff announcement as a number of analysts suggested the initial 10% tariff rate by the U.S. was not as severe as expected and appeared to be a negotiating strategy.  Regardless, investor activities likely reflected the market’s conviction that the trade disagreements between the U.S. and China will eventually be resolved.

Wednesday, the Commerce Department reported Housing Starts rose 9.2% in August to a seasonally adjusted annual rate of 1.282 million, exceeding the consensus forecast of a 1.229 million annual rate.  However, monthly housing starts numbers are notoriously volatile and August’s housing starts number was driven by an outsized spike in apartment building that camouflaged weakening across single- and multifamily construction.

Single-family housing starts in August increased by 1.9% to a seasonally adjusted annual rate of 876,000 units while multifamily starts skyrocketed 27.3% to an adjusted annual rate of 392,000 units.  The 27% spike in multifamily starts inflates top-line numbers and covers a developing down trend in permits issued.

Total Building Permits declined 5.7% from July to August to a seasonally adjusted annual rate of 1.229 million and were below the consensus estimate of 1.310 million.  Single-family permits fell 6.1% and multifamily permits declined down 4.9% for the month.  Quoting from Wells Fargo Economics Group’s analysis of the August housing numbers, “Permits are now running below Starts, suggesting homebuilding is losing momentum.”

Thursday, the National Association of Realtors (NAR) reported Existing Home Sales held steady in August at a seasonally adjusted annual 5.34 million pace, a rate that was unchanged compared to July.  Total sales were 1.5% lower than a year ago, and although sales seem to have grind to a halt in 2018, in the year-to-date reading they’re only 1.2% lower than the same period a year ago.  The flat reading missed the consensus forecast of a 5.37 million rate.

The median existing home price for all housing types increased 4.6% to $264,800, marking the 78th straight month of year-over-year gains.  The median existing single-family home price was $267,300, up 4.9% from a year ago.  The inventory of homes for sale at the end of August was unchanged at 1.92 million remaining 2.7% higher from a year ago.  Unsold inventory remained at a 4.3-month supply for the third consecutive month.  This is below the 6.0-month supply typically associated with a more balanced market.  NAR Chief Economist Lawrence Yun remarked “the housing market seems to be wobbling toward some equilibrium.  Prices are still rising, rising, rising, but at a slightly slower pace.”

However, the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), a measure of home-builder confidence, may portray current housing-market conditions the best. Survey results are transformed into an index where any score over 50 indicates more builders view conditions as good than poor.  Tuesday, the September HMI was reported at a solidly positive 67 matching August’s number.  The HMI index measuring current sales conditions rose one point to 74 and the component gauging expectations in the next six months increased two points to 74. Further, the metric charting buyer traffic held steady at 49.  Moving forward, there are expectations for some housing market disruption effects due to the impact of Hurricane Florence.  Single-family construction in North Carolina, South Carolina and Virginia makes up 12% of national production.

Elsewhere, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed an increase in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 1.6% during the week ended September 14, 2018.  The seasonally adjusted Purchase Index increased 0.3% from the week prior while the Refinance Index increased 4.0% from a week earlier.

Overall, the refinance portion of mortgage activity increased to 39.0% from 37.8% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 6.5% from 6.4% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.88% from 4.84%, its highest level since April 2011, with points decreasing to 0.44 from 0.46 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond lost 26.5 basis points to close at $100.844 while the 10-year Treasury yield increased 6.60 basis points to end at 3.066%.  The Dow Jones Industrial Average gained 588.83 points to close at 26,743.50.  The NASDAQ Composite Index lost 23.08 points to close at 7,986.96.  The S&P 500 Index added 24.69 points to close at 2,929.67.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 8.19%, the NASDAQ Composite Index has advanced 15.70%, and the S&P 500 Index has added 9.58%.

This past week, the national average 30-year mortgage rate rose to 4.85% from 4.74%; the 15-year mortgage rate increased to 4.30% from 4.22%; the 5/1 ARM mortgage rate rose to 4.05% from 4.02% while the FHA 30-year rate increased to 4.48% from 4.42%.  Jumbo 30-year rates increased to 4.40% from 4.37%.

Economic Calendar – for the Week of September 24, 2018

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

The FNMA 30-year 4.0% coupon bond ($100.844, -26.50 bp) traded within a wider 54.7 basis point range between a weekly intraday high of 101.156 on Monday and a weekly intraday low of $100.609 on Wednesday before closing the week at $100.844 on Friday.  Mortgage bond prices trended lower until reaching technical support found at the 100% Fibonacci retracement level located at $100.609.  The bond then made a small bounce off of this support level on Thursday and Friday resulting in a weak buy signal.  The bond remains extremely “oversold” and thus could continue to make a run higher toward resistance at $101.15.  Such a rebound toward nearest technical resistance would have a positive influence on the mortgage bond market resulting in slightly lower rates.

 

Tucson Mortgages Home Loan News 9-17-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of September 10, 2018
  • Economic Calendar – week of September 17, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market rebounded from the prior week’s losses following news Wednesday and Thursday that there would be a new series of trade negotiations with China plus an invitation from the U.S. to the Chinese government to discuss trade policy.  Investors are hoping the discussions will thwart the implantation of extensive tariffs from both sides and prevent an escalating trade war.  The strength in stocks helped to push bond prices lower with Treasury yields increasing despite soft inflation data during the week.

On the economic front, there were a couple of significant reports concerning inflation.  The core Producer Price Index (PPI) and the core Consumer Price Index (CPI) for August were both below consensus expectations.  The core PPI fell 0.1% when economists were expecting an increase of 0.2%, and the core CPI came in at a less-than-expected increase of 0.1%.  These tame inflation numbers worked to lessen concerns the Federal Reserve might have to raise rates more frequently than expected in order to cool off an overheating economy.  Despite this, the Fed is expected to raise rates by another 25 basis points at its upcoming September 25-26 policy meeting, with the probability of a rate hike at 100%.  Further, the probability of a 25 basis point rate hike at the December policy meeting currently stands at 80%.

In housing related news, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed a decrease in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) declined 1.8% during the week ended September 7, 2018.  The seasonally adjusted Purchase Index increased 1.0% from the week prior while the Refinance Index decreased 6.0% from a week earlier, its lowest level since December 2000.

Overall, the refinance portion of mortgage activity decreased to 37.8% from 38.9% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 6.4% from 6.1% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.84% from 4.80% with points increasing to 0.46 from 0.43 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond lost 34.4 basis points to close at $101.109 while the 10-year Treasury yield increased 6.10 basis points to end at 3.00%.  The Dow Jones Industrial Average gained 238.13 points to close at 26,154.67.  The NASDAQ Composite Index advanced 107.50 points to close at 8,010.04.  The S&P 500 Index added 33.30 points to close at 2,904.98.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 5.81%, the NASDAQ Composite Index has advanced 16.03%, and the S&P 500 Index has added 8.65%.

This past week, the national average 30-year mortgage rate rose to 4.74% from 4.71%; the 15-year mortgage rate increased to 4.22% from 4.19%; the 5/1 ARM mortgage rate remained unchanged at 4.02% while the FHA 30-year rate rose to 4.42% from 4.39%.  Jumbo 30-year rates increased to 4.37% from 4.36%.

Economic Calendar – for the Week of September 17, 2018

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

The FNMA 30-year 4.0% coupon bond ($101.109, -34.40 bp) traded within a wider 42.2 basis point range between a weekly intraday high of 101.50 on Monday and a weekly intraday low of $101.078 on Friday before closing the week at $101.109 on Friday.  Mortgage bond prices declined below nearest support levels and are now taking aim toward the next major support level at the 100% Fibonacci retracement level located at $100.797.  Although the bond is deeply “oversold,” it could stay this way and could continue to gradually trend lower toward the 100.797 level.  Should this scenario play out, mortgage rates could slowly rise higher.

 

Tucson Mortgages Home Loan News 9-10-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of September 3, 2018
  • Economic Calendar – week of September 10, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock and bond markets both traded lower during the Labor Day holiday shortened week.  Continuing uncertainty regarding U.S. trade policy weighed on investor sentiment with trade negotiations between the U.S. and Canada making little progress.  Furthermore, tariffs on $200 billion in Chinese goods after the public comment period on the proposed tariffs closed on Thursday were set to be implemented.

However, White House Economic Adviser Larry Kudlow told Bloomberg Television the administration would first evaluate the public comments before taking any action.  President Trump then remarked to reporters that another $267 billion in Chinese tariffs might follow the $200 billion round of tariffs to essentially cover all U.S. imports from China.  This remark would ostensibly apply pressure on China to negotiate in good faith for a fair trade deal.

While there is little evidence about whether the trade “war” with China is having a negative effect on the Chinese economy, signs are scarce that it has had a negative impact on U.S. economic growth.  Friday, the Labor Department reported job growth picked up in August , while average hourly earnings increased by 2.9% on a year-over-year basis, the fastest growth rate during the present economic expansion beginning in 2009.

The data seemed to have the greatest impact on bond prices with investors worrying wage inflation might be enough to trigger a faster pace of short-term rate increases by the Federal Reserve.  The Fed is widely expected to hike short-term rates by another 25 basis points when policymakers meet at the end of September.  Plus, the probability of a December rate hike has risen to 79.8% from 72.8% on Thursday.

Friday, the positive jobs data contributed to a jump in longer-term interest rates with the yield on the benchmark 10-year Treasury note briefly touching 2.95%, its highest level in nearly a month.

Elsewhere, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed a slight decline in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 0.1% during the week ended August 31, 2018.  The seasonally adjusted Purchase Index increased 1.0% from the week prior while the Refinance Index fell 1.0% from a week earlier.

Overall, the refinance portion of mortgage activity increased to 38.9% from 38.7% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 6.1% from 6.3% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.80% from 4.78% with points decreasing to 0.43 from 0.46 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond lost 36.0 basis points to close at $101.453 while the 10-year Treasury yield increased 7.90 basis points to end at 2.939%.  The Dow Jones Industrial Average fell 48.28 points to close at 25,916.54.  The NASDAQ Composite Index plunged 207.00 points to close at 7,902.54.  The S&P 500 Index lost 29.84 points to close at 2,871.68.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 4.84%, the NASDAQ Composite Index has advanced 14.47%, and the S&P 500 Index has added 7.41%.

This past week, the national average 30-year mortgage rate rose to 4.71% from 4.65%; the 15-year mortgage rate increased to 4.19% from 4.15%; the 5/1 ARM mortgage rate increased to 4.02% from 3.98% while the FHA 30-year rate rose to 4.39% from 4.37%.  Jumbo 30-year rates increased to 4.36% from 4.33%.

Economic Calendar – for the Week of September 10, 2018

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

The FNMA 30-year 4.0% coupon bond ($101.453, -36.0 bp) traded within a wider 39.1 basis point range between a weekly intraday high of 101.797 on Thursday and a weekly intraday low of $101.406 on Friday before closing the week at $101.453 on Friday.  Mortgage bond prices took a dip lower on Tuesday and Wednesday below support levels before bouncing back to support on Thursday.  Bond prices then made a solid step lower on Friday following the release of the Employment Situation Summary (Jobs Report) for August showing a higher-than-expected increase of +0.4% in Average Hourly Earnings, triggering fears inflation might be ratcheting up.  Economists had expected only a +0.2% increase.  The bond is now approaching “oversold” status so we could see a continuation lower toward the next support level before we see a rebound.  Therefore, mortgage rates may deteriorate slightly this week before improving.

 

Tucson Mortgages Home Loan News 9-3-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of August 27, 2018
  • Economic Calendar – week of September 3, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

Trade-related news dominated investor sentiment during the week.  Last Monday, news of a bilateral trade agreement between the U.S. and Mexico propelled several stock indexes to new all-time highs including the Nasdaq Composite and S&P 500 indices.  With stocks making new highs, bond prices failed to gain much traction with the yield on the benchmark 10-year Treasury note rising slightly during the week.  Following news of the trade deal between Mexico and the U.S., Canada entered trade discussions with the U.S. but was unable to conclude a new trade deal by a Friday deadline.   Negotiations are scheduled to resume this coming week.

In other trade news Thursday, President Trump announced he would move ahead with tariffs on $200 billion worth of Chinese goods as early as this coming week and also said in a Bloomberg interview that the European Union’s (EU) offer to eliminate auto tariffs was “not good enough” and compared the EU’s trade policies to those of China.

This tough talk on trade by the president is a negotiating tactic and it will be interesting to see the ultimate outcomes when trade deals are finalized between the U.S. and the EU and China.

There were several housing-related news releases during the week.  Tuesday, the latest Case-Shiller Home Price Index from S&P Dow Jones Indices and CoreLogic showed home prices nationwide increased 6.2% for the year through June 2018.  However, this is lower than May’s reading of a 6.4% price gain for the year.  Average home prices for the top 10 metropolitan areas increased 6% and the 20-city composite saw a 6.3% year-over-year gain.

David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, remarked “Home prices continue to rise across the U.S.  However, even as home prices keep climbing, we are seeing signs that growth is easing in the housing market.  Sales of both new and existing homes are roughly flat over the last six months amidst news stories of an increase in the number of homes for sale in some markets.”

Seattle, Las Vegas and San Francisco continue to have the highest year-over-year gains among all cities in the 20-city index.  Las Vegas took the lead from Seattle with a year-over-year price increase of 13% to Seattle’s 12.8% price increase while San Francisco saw an increase of 10.7%.

Wednesday, the National Association of Realtors (NAR) reported Pending Home Sales fell on an annual basis for the seventh consecutive month in July.  The NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, dropped 0.7% in July to 106.2, down from 107 in June.  With June’s decline, the index is down 2.3%.   NAR Chief Economist Lawrence Yun stated “Contract signings inched backward once again last month, as declines in the South and West weighed down on overall activity.  It’s evident in recent months that many of the most overheated real estate markets – especially those out West – are starting to see a slight decline in home sales and slower price growth.  The reason sales are falling off last year’s pace is that multiple years of inadequate supply in markets with strong job growth have finally driven up home prices to a point where an increasing number of prospective buyers are unable to afford it.”

Elsewhere, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed a decline in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 1.7% during the week ended August 24, 2018.  The seasonally adjusted Purchase Index decreased 1.0% from the week prior while the Refinance Index fell 3.0% from a week earlier.

Overall, the refinance portion of mortgage activity remained unchanged at 38.7% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 6.3% from 6.5% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.78% from 4.81% (the lowest rate since the week ended July 20, 2018) with points increasing to 0.46 from 0.42 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond lost 17.1 basis points to close at $101.813 while the 10-year Treasury yield increased 4.70 basis points to end at 2.860%.  The Dow Jones Industrial Average gained 174.47 points to close at 25,964.82.  The NASDAQ Composite Index advanced 163.56 points to close at 8,109.54.  The S&P 500 Index added 26.83 points to close at 2,901.52.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 5.04%, the NASDAQ Composite Index has advanced 17.47%, and the S&P 500 Index has added 8.52%.

This past week, the national average 30-year mortgage rate rose to 4.65% from 4.63%; the 15-year mortgage rate increased to 4.15% from 4.14%; the 5/1 ARM mortgage rate increased to 3.98% from 3.95% while the FHA 30-year rate remained unchanged at 4.37%.  Jumbo 30-year rates eased to 4.33% from 4.34%.

Economic Calendar – for the Week of September 3, 2018

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

The FNMA 30-year 4.0% coupon bond ($101.813, -17.1 bp) traded within a slightly wider 29.7 basis point range between a weekly intraday high of 101.953 on Monday and a weekly intraday low of $101.656 on Wednesday before closing the week at $101.813 on Friday.  Mortgage bond prices took a dip lower to test a solid, triple layer of support Monday through Wednesday from the prior week’s extremely “overbought” position.  Prices then bounced just above the triple support layer formed from the convergence of the 25-day (101.727), 100-day (101.745) and 50-day (101.784) moving averages on Thursday and Friday.  Mortgage bonds are no longer “overbought” and prices appear ready to continue higher from support.  However, a stubborn resistance level found at the 76.4% Fibonacci retracement level at $101.988 has put a manhole cover over any meaningful advances since last May.  This has resulted in bond prices getting squeezed between support and resistance forcing a mostly sideways direction in the market.  This action should continue this week with minimal effect on mortgage rates.

 

Tucson Mortgages Home Loan News 8-27-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of August 20, 2018
  • Economic Calendar – week of August 27, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market recorded moderate gains with the S&P 500 notching another all-time record high on Friday, the first time since January 26th of this year.  Bonds also fared well with U.S. Treasury yields decreasing modestly during the week.  President Trump’s publicly pronounced unhappiness with Federal Reserve Chair Jerome Powell for raising interest rates in addition to voicing his desire for Fed policymakers to keep interest rates low may have helped boost buying demand for Treasuries, sending yields lower.  Because U.S. Treasury yields are substantially higher than many other industrialized nations, U.S. Treasuries remain attractive investments for foreign buyers.

President Trump also publicly blamed both the European Union and China of manipulating their currencies to weaken them relative to the U.S. dollar in an effort to boost their exports to the U.S. Although low-level trade talks between the U.S. and China took place in Washington, D.C. during the week, no real progress was made on tariffs and trade.  In fact, last Thursday the U.S. began to enforce an additional 25% in tariffs on Chinese imports ranging from machinery to motorcycles while China retaliated with corresponding tariffs on U.S. products from coal to trucks.  Trade resolutions may not be realized until later in the year when higher-level negotiations are scheduled to take place.

Meanwhile, the minutes from the Fed’s July 31–August 1 monetary policy meeting indicated the Fed expects to next raise rates at its September meeting.  Fed officials stated in the minutes that it would likely “soon” be appropriate to raise rates.  There currently is a 96.0% probability rates will be bumped up another 25 basis points on September 26.  Friday, in a speech at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming, Fed Chair Powell defended the gradual pace of the Fed’s rate hikes saying that the “slow increases are appropriate given current levels of inflation and unemployment.”

It was a big week for housing news.  Wednesday, the National Association of Realtors reported Existing Home Sales tumbled for the fourth straight month falling to a seasonally-adjusted annual rate of 5.34 million in July, down 0.7% from June.

Affordability issues are taking a toll on home buyers, especially for first timers facing ever-increasing prices on lower inventory and seeing home prices increasing faster than their incomes.

Total home sales in July were 1.5% lower than the same period a year ago.  The median existing home prices for all housing types increased 4.5% in July to $269,600 – the 77th straight month of year-over-year gains.

For sales of existing single-family homes, the median price has climbed 4.6% from a year ago to $272,300.  Unsold inventory remained at a 4.3-month supply, unchanged from June and last July and remaining below the 6.0-month supply typically associated with a more balanced market.

Thursday, the Commerce Department reported sales of New Homes fell 1.7% month-over-month in July to a seasonally adjusted annual rate of 627,000.  This was below the consensus forecast of 645,000 and also below an upwardly revised 638,000 (from 631,000) in June.

The median sales price increased 1.8% year-over-year to $328,700 while the average sales price increased 5.9% to $394,300.

Based on the current rate of sales, the inventory of new homes for sale increased to a 5.9-months’ supply, versus 5.2 months in June and 5.8 months in the year-ago period.

Homes priced below $400,000 accounted for 71% of new homes sold in July versus 70% in June.

Jefferies, LLC economist Ward McCarthy had this to say about the latest housing data.  “Housing activity in general has retreated from levels that were temporarily boosted by 2017 natural disasters –hurricanes and wild fires— that forced displaced households to seek alternative housing.  The housing sector is also undergoing an adjustment to affordability that is less attractive than it was for most of the cycle, as well as changes in the treatment of SALT deductions in the federal tax code.  That is the bad news.  The good news is that there is no evidence of the type of imbalances that could cause a sharp downturn, such as heavy inventories and/or rising mortgage default and delinquency rates.  We also note this is not the first temporary slowdown in housing activity this cycle.”

Also on Thursday, the Federal Housing Finance Agency (FHFA) released their latest House Price Index (HPI) showing home prices increased just 0.2% in June from May.  Economist William Doerner said although home prices rose in the second quarter, it was at a much slower pace than previously recorded in the past four years.  “Mortgage rates have increased by more than half a percentage point over the first six months of the year.  Rates are still inexpensive from a historical standpoint, but their bump-up appears to have gently pressed the brakes on house price increases.”

Nationally, home prices in all 50 states and the District of Columbia increased since the second quarter last year.

States with the largest gains are Nevada (+17%), Idaho (+13%), District of Columbia (+11.8%), Utah (+11.3%) and Washington (+11%).

States showing the least amount of annual appreciation are North Dakota (+2.1%), Louisiana (+2.3%), West Virginia (+2.3%), Connecticut (+2.4%) and Alaska (+2.6%).

Elsewhere, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed an increase in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 4.2% during the week ended August 17, 2018.  The seasonally adjusted Purchase Index increased 3.0% from the week prior while the Refinance Index jumped 6.0% higher from a week earlier.

Overall, the refinance portion of mortgage activity increased to 38.7% from 37.6% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 6.5% from 6.2% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance was unchanged at 4.81% with points decreasing to 0.42 from 0.43 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond gained 15.6 basis points to close at $101.984 while the 10-year Treasury yield decreased 5.10 basis points to end at 2.813%.  The Dow Jones Industrial Average gained 121.03 points to close at 25,790.35.  The NASDAQ Composite Index advanced 129.65 points to close at 7,945.98.  The S&P 500 Index added 24.56 points to close at 2,874.69.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 4.33%, the NASDAQ Composite Index has advanced 15.10%, and the S&P 500 Index has added 7.52%.

This past week, the national average 30-year mortgage rate fell to 4.63% from 4.64%; the 15-year mortgage rate remained unchanged at 4.14%; the 5/1 ARM mortgage rate decreased to 3.95% from 3.97% while the FHA 30-year rate remained unchanged at 4.37%.  Jumbo 30-year rates eased to 4.34% from 4.37%.

Economic Calendar – for the Week of August 27, 2018

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

The FNMA 30-year 4.0% coupon bond ($101.984, +15.6 bp) traded within a narrower 17.2 basis point range between a weekly intraday low of 101.828 on Monday and Friday and a weekly intraday high of $102.00 on Monday before closing the week at $101.984 on Friday.  Mortgage bond prices traded mostly in a sideways direction between technical support provided by the 100-day moving average and overhead resistance from the 76.4% Fibonacci retracement level located at $101.988.  The bond remains on a buy signal from August 10th but is now extremely “overbought” and susceptible to a pullback toward technical support.  However, support is close at hand, so we could see a continuation of a sideways trading pattern without much effect on mortgage rates.  Rates should continue to show stability in the coming week.

 

Tucson Mortgages Home Loan News 8-20-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of August 13, 2018
  • Economic Calendar – week of August 20, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market turned in a “mixed” performance while mortgage bonds and treasuries traded essentially flat on the week.  Both the Dow Jones Industrial Average and S&P 500 were able to advance while the technology-heavy NASDAQ Composite Index posted a modest loss.  Equity markets were influenced by continuing volatility in emerging market currencies, the Turkish Lira in particular.  Other factors included news of renewed trade negotiations between the U.S. and China and economic news of solid retail sales.

Thursday and Friday, reports surfaced that the U.S. and China will resume trade negotiations by the end of August.  U.S. and Chinese trade negotiators reportedly now have a goal of ending their trade disagreements ahead of multilateral meetings between President Trump and President Xi of China scheduled for November.

In economic news, the Commerce Department reported Retail Sales increased a robust 0.5% in July to easily surpass the consensus forecast of +0.1% and a downwardly revised 0.2% gain in June.  Core Retail Sales, sales excluding autos, gas stations, and building materials stores, rose by an even greater 0.6% and were driven by healthy spending at clothing stores, restaurants and bars, and online purchases.

Last Wednesday in housing, the National Association of Home Builders (NAHB) reported their Housing Market Index (HMI), a gauge of builder opinion on the relative level of current and future single-family home sales, fell slightly lower for August to 67 from last month’s reading of 68.  Readings above 50 indicate a favorable outlook on home sales while those below 50 indicate a negative outlook.

NAHB chairman Randy Noel had this to say “The good news is that builders continue to report strong demand for new housing, fueled by steady job and income growth along with rising household formations.  However, they are increasingly focused on growing affordability concerns, stemming from rising construction costs, shortages of skilled labor and a dearth of buildable lots.”

On Thursday, the Commerce Department reported Housing Starts increased 0.9% in July to a seasonally adjusted annual rate of 1.168 million.  This was below the consensus forecast of 1.256 million and followed a downwardly revised 1.158 million from an initially reported 1.173 million for June.  However, Building Permits increased 1.5% to 1.311 million.  Although the Permits number was slightly below the consensus forecast of 1.316 million, June’s number was revised higher to 1.292 million from an originally reported 1.273 million.

Permits for single-family units increased 1.9% to 869,000 while Permits for multi-unit dwellings increased 0.7% to 442,000.  Regionally, single-family starts were 5.7% lower in the Northeast, 22.3% higher in the Midwest, 2.0% higher in the South, and 10.0% lower in the West.  The number of units under construction at the end of July totaled 1.122 million units.  This is slightly below the second quarter average of 1.123 million, suggesting a slightly negative influence on third quarter GDP forecasts.

Overall, the fact that single-family starts increased by only 0.9% to 862,000 likely reflect some of the difficulties home builders are facing with higher costs for land, materials, and skilled construction labor.

Elsewhere, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed another decrease in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 2.0% during the week ended August 10, 2018.  The seasonally adjusted Purchase Index dropped 3.0% from the week prior while the Refinance Index remained unchanged from a week earlier.

Overall, the refinance portion of mortgage activity increased to 37.6% from 36.6% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 6.2% from 6.3% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance dropped to 4.81% from 4.84% with points decreasing to 0.43 from 0.45 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond gained 1.5 basis points to close at $101.828 while the 10-year Treasury yield decreased 0.90 of one basis point to end at 2.864%.  The Dow Jones Industrial Average gained 356.18 points to close at 25,669.32.  The NASDAQ Composite Index fell 22.78 points to close at 7,816.33.  The S&P 500 Index added 16.85 points to close at 2,850.13.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 3.84%, the NASDAQ Composite Index has advanced 13.22%, and the S&P 500 Index has added 6.60%.

This past week, the national average 30-year mortgage rate remained unchanged at 4.64; the 15-year mortgage rate rose to 4.14% from 4.13%; the 5/1 ARM mortgage rate increased to 3.97% from 3.95% while the FHA 30-year rate remained unchanged at 4.37%.  Jumbo 30-year rates eased to 4.37% from 4.40%.

Economic Calendar – for the Week of August 20, 2018

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

The FNMA 30-year 4.0% coupon bond ($101.828, +1.50 bp) traded within a narrow 25.0 basis point range between a weekly intraday low of 101.641 on Tuesday and a weekly intraday high of $101.891 on Wednesday and Friday before closing the week at $101.828 on Friday.  Mortgage bond prices retreated slightly on Monday and Tuesday before recovering essentially to where they began the week during Wednesday through Friday.  Prices are trending along a convergence of the 25-day, 50-day, and 100-day moving averages that act both as technical support and resistance.  The bond is neither “overbought” nor “oversold” while remaining on a ‘buy” signal so we could likely see more of the same recent pattern where prices trend in a sideways direction with the abovementioned major moving averages.  Continue to look for stable to slightly improved mortgage rates this coming week.