Tucson Mortgages Home Loan News 8-15-2016

By Todd Abelson NMLS #180858 on .

Weekly Review: week of August 8, 2016
Mortgage Rate Forecast with Chart
Economic Calendar – week of August 15, 2016
Federal Reserve FOMC Meeting Schedule & Current Rate Hike Probability

Weekly Review

Bond prices improved and yields declined with 10-year Treasury note yields falling to their lowest level since the beginning of August after the release of economic news on Friday morning showing flat retail sales in July and the largest drop in producer prices in almost a year.

Also, the major stock market indexes – the Dow Jones Industrial Average, the S&P 500 Index, and the NASDAQ Composite Index, all set record highs on Thursday, a conjunction that hasn’t happened since December 31, 1999.  Before we cheer this occurrence, within three months after the last time it happened in 1999, the stock market began a free-fall through September 2002.  By then, the NASDAQ ended up losing nearly 80% of its value, the S&P 500 ended up losing 43% of its value and the Dow Jones Industrial Average ended with a 27% decline.

On Tuesday, what little economic news there was wasn’t particularly encouraging.  The Labor Department reported 2nd quarter Preliminary Productivity, measured as the output of goods and services produced by American workers per hour worked, fell at a 0.5% seasonally adjusted annual rate as hours worked increased faster than output.  This is the third consecutive quarter of declining Productivity, the longest such string of declines since 1979.  Productivity was also down 0.4% from the year ago period, the first annual decline in three years and just the sixth year-over-year decline recorded since 1982.  The dismal Productivity report suggests worker income could stagnate along with economic growth in coming years.

Wednesday, equity markets were generally lower on a drop in crude oil prices while weaker economic news in Europe helped to send bond prices higher and yields moving lower as investors continued to try and acquire the best yielding sovereign bonds globally.

In housing, the Mortgage Bankers Association (MBA) released their latest Mortgage Application Data for the week ending August 5th showing the overall seasonally adjusted Market Composite Index increased 7.1%.  The seasonally adjusted Purchase Index rose 3.0% from the prior week, while the Refinance Index increased 10.0%.  Overall, the refinance portion of mortgage activity increased to 62.4% of total applications from 60.7%.  The adjustable-rate mortgage share of activity was unchanged at 4.7% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased from 3.67% to 3.65% with points decreasing to 0.34 from 0.30.

Thursday, bond prices tumbled following a sharp 4% bounce higher in oil prices, solid economic data, and a lackluster Treasury auction of 30-year bonds.  The Treasury also conducted a $15 billion 30-year bond auction having a high yield of 2.274% with a bid-to-cover ratio of 2.24 that was less than the 12-auction average of 2.36 indicating tepid demand.  Indirect bidders (foreign central banks) bought 61.5% of the supply while direct bidders took 10.9% of the issue.  Bond prices fell following the auction.

Friday brought disappointing economic news out of China, and here domestically, to put a damper on the stock market despite higher crude oil prices, allowing a rebound to take place in the bond market with the yield on 10-year Treasuries falling during the morning to their lowest level since August 1.  Bond prices then subsequently pulled back from their best levels during afternoon trading.  Weaker than forecast industrial production, retail sales, and fixed-asset investment in China helped to curb investor enthusiasm while softer-than-expected readings on U.S. Producer Prices and Retail Sales suggested U.S. inflation may not be gaining enough steam to meet the Federal Reserve’s stated target of 2%.

Producer prices as measure by the Producer Price Index (PPI) recorded their largest decline in nearly a year in July on declining costs for services and energy products.  The PPI easily missed the consensus forecast of a flat 0.0% with a reading of -0.4%.  Also, when excluding costs for food and energy, the so-called Core PPI fell 0.3% versus a forecast of +0.2%.

Meanwhile, the Commerce Department reported Retail Sales were at a flat 0.0% for July, missing the consensus forecast calling for a 0.4% increase, as consumers cut back on purchases of clothing and other goods.  Retail Sales excluding auto and truck sales declined 0.3% compared to expectations for a +0.2% increase.  Overall, Retail Sales have risen 2.3% on a year-over-year basis.

Bond investors savored the sour PPI and Retail Sales news because economists who had been predicting a surge in third-quarter growth might have to trim their forecasts.  Bond investors also know this data feeds into the equation where lower inflation plus lower economic growth equals lower interest rates.  This latest batch of economic data could also give the Federal Reserve pause to raise interest rates.  The latest readings from the CME Group’s FedWatch tool shows investors have reduced their expectations the Fed would raise rates before the end of the year.  Traders now see a 40% chance the Fed will hike interest rates by its December 14 meeting, versus a 44.9% chance on Thursday.

For the week, the FNMA 3.0% coupon bond gained 14.0 basis points to end at $103.78 while the 10-year Treasury yield decreased 7.2 basis points to end at 1.5101%.  Stocks ended the week higher with the Dow Jones Industrial Average adding 32.94 points to end at 18,576.47.  The NASDAQ Composite Index advanced 11.78 points to close at 5,232.90, and the S&P 500 Index gained 1.18 points to close at 2,184.05.  Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 6.20%, the NASDAQ Composite Index has added 4.31%, and the S&P 500 Index has advanced 6.42%.

This past week, the national average 30-year mortgage rate decreased to 3.37% from 3.41% while the 15-year mortgage rate decreased to 2.73% from 2.75%.  The 5/1 ARM mortgage rate fell to 2.80% from 2.85%.  FHA 30-year rates dropped to 3.15% from 3.25% while Jumbo 30-year rates decreased to 3.47% from 3.55%.

 

Mortgage Rate Forecast with Chart

For the week, the FNMA 30-year 3.0% coupon bond ($103.78, +14 basis points) traded within a narrower 40 basis point range between a weekly intraday high of $103.95 and a weekly intraday low of $103.55 before closing at $103.78 on Friday.

Chart:  FNMA 30-Year 3.0% Coupon Bond

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Choppy, see-saw trading was evident Wednesday through Friday when most of the week’s economic news was released.  Thursday’s substantial downward move was partially erased when the bond shot 23 basis points above the 25-day moving average located at $103.72 on Friday only to pull back 15 basis points by the close of trading.  This pullback on Friday from the intraday high price resulted in a weak “shooting star” type of candlestick with a long upper shadow or wick calling into question the ability of the 25-day moving average to hold as support when trading resumes on Monday.

If the bond can bounce higher from the 25-day moving average and continue toward resistance located at the 23.6% Fibonacci retracement level this coming week, mortgage rates should improve.  If the 25-day moving average fails to hold as support and the bond continues to decline from that point, mortgage rates would slightly increase.

 

Economic Calendar – for the Week of August 15, 2016

The economic calendar features a couple of reports on regional manufacturing and housing that will be of interest to traders including the New York Empire State Manufacturing Index on Monday; the Philadelphia Fed Manufacturing Survey on Thursday; and Housing Starts and Building Permits on Tuesday.  Inflation at the consumer level as measured by the Consumer Price Index will also be of interest on Tuesday as will the latest set of minutes from the Federal Reserve’s July 27 FOMC meeting on Wednesday.  Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

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** Probability generated from the CME Group FedWatch tool based on the 30-day Fed Funds futures prices.

* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.
 

 

Tucson Mortgages Home Loan News 8-8-2016

By Todd Abelson NMLS #180858 on .

Weekly Review: week of August 1, 2016
Mortgage Rate Forecast with Chart
Economic Calendar – week of August 8, 2016
Federal Reserve FOMC Meeting Schedule & Current Rate Hike Probability

 

Weekly Review

The week began on a down note for both stocks and bonds as weaker Chinese manufacturing data and uneven results of European bank stress tests weighed on the financial markets both here and abroad.  Crude oil prices also played a role early in the week when West Texas Intermediate (WTI) crude fell below $40 per barrel and close to a 5-month low on Tuesday to weigh on energy stocks and overall market sentiment.  However, a rebound in oil prices on Wednesday facilitated a rebound in stock prices while mixed economic news led to a slight improvement in bond prices.

Thursday, the stock and bond markets reacted favorably to a decision by the Bank of England to cut interest rates for the first time since 2009 with a 25 basis point cut to 0.25%.  In what some market pundits termed as a “sledgehammer stimulus” program to provide greater support for Great Britain’s post-Brexit economy, the Bank of England also announced it would buy 60 billion pounds ($79 billion) of government debt over the next six months and would also buy 10 billion pounds ($13 billion) of high-grade corporate debt.  Great Britain’s central bank policymakers stated they expect their economy to stagnate for the remainder of 2016 and suffer weak economic growth throughout 2017.  They also said they expect to cut interest rates even closer to zero by the end of this year.

Friday, a far hotter than forecast Employment Situation Summary (jobs report) for July triggered a rally in the stock market prompting traders to sell bonds to send prices significantly lower as the threat of a September rate hike by the Federal Reserve is very much “back on the table.”

The July jobs report from the Department of Labor showed Nonfarm Payrolls jumped by 255,000 to easily exceed the consensus forecast of 185,000.  Furthermore, June’s reading was upwardly revised to 292,000 from 287,000.  Nonfarm Private Payrolls increased by 217,000 and were also well above the consensus forecast of 171,000.  However, June’s reading was revised lower to 259,000 from 265,000.

Average Hourly Earnings increased 0.3% month-over-month to exceed the consensus forecast of 0.2%.  Over the past 12 months, Average Hourly Earnings have risen 2.6% to approach the highest level seen over the last seven years.

The Unemployment Rate unexpectedly held steady at June’s rate of 4.9% even though more people entered the workforce.  Economists had forecast an unemployment rate of 4.8%.

The Average Workweek ticked higher to 34.5 hours from June’s level of 34.4 hours and was higher than the consensus forecast of 34.4 hours.

Both the labor force participation rate, at 62.8%, and the employment-population ratio, at 59.7% were little changed in July.  The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed at 5.9 million in July.  These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.

Overall, this was a very strong jobs report following a robust report in June.  The data from June and July showing faster job and wage growth provides a stronger rationale for the Fed to raise the fed funds rate at least once before the end of the year.

In housing related news, the Commerce Department reported Construction Spending declined for a third consecutive month in June with spending on nonresidential construction falling by the largest amount in six months.  Construction Spending dropped 0.6% in June following declines of 0.1% in May and 2.9% in April.  Nonresidential construction declined 1.3%, the largest decline since December, while residential activity was unchanged in June.  Spending on government projects fell 0.6%, the fourth consecutive decline, with federal, state, and local construction activity declining.

Furthermore, the Mortgage Bankers Association (MBA) released their latest Mortgage Application Data for the week ending July 29th showing the overall seasonally adjusted Market Composite Index decreased 3.5%.  The seasonally adjusted Purchase Index fell 2.0% from the prior week, while the Refinance Index dropped 4.0%.  Overall, the refinance portion of mortgage activity decreased to 60.7% of total applications from 61.1%.  The adjustable-rate mortgage share of activity was unchanged at 4.7% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased from 3.69% to 3.67% with points decreasing to 0.30 from 0.36.

For the week, the FNMA 3.0% coupon bond dropped 46.8 basis points to end at $103.64 while the 10-year Treasury yield increased 14.1 basis points to end at 1.5902%.  Stocks ended the week higher with the Dow Jones Industrial Average adding 111.29 points to end at 18,543.53.  The NASDAQ Composite Index advanced 58.99 points to close at 5,221.12, and the S&P 500 Index gained 9.27 points to close at 2,182.87.  Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 6.03%, the NASDAQ Composite Index has added 4.09%, and the S&P 500 Index has advanced 6.36%.

This past week, the national average 30-year mortgage rate increased to 3.41% from 3.37% while the 15-year mortgage rate increased to 2.75% from 2.72%.  The 5/1 ARM mortgage rate rose to 2.85% from 2.84%.  FHA 30-year rates held steady at 3.25% while Jumbo 30-year rates increased to 3.55% from 3.50%.

 

Mortgage Rate Forecast with Chart

For the week, the FNMA 30-year 3.0% coupon bond ($103.64, -47 basis points) traded within a narrower 44 basis point range between a weekly intraday high of $104.05 and a weekly intraday low of $103.61 before closing at $103.64 on Friday.

After retreating on Monday and Tuesday, the bond reversed direction and moved higher on Wednesday and Thursday only to reverse course once again on Friday following a much stronger than forecast jobs report.  The move sent the bond’s price tumbling below the 25-day moving average support level located at $103.78 while completing a two-day bearish engulfing lines candlestick pattern, a moderately powerful sell signal.  The slow stochastic oscillator moved lower from Thursday’s positive stochastic crossover to negate that signal with a substantial loss of momentum.  Technical resistance is now found at the former 25-day moving average support level while primary support shifts to the 50-day moving average at $103.31.

There isn’t much in the way of market moving economic news early in the week so we may see mortgage bonds trade in a sideways pattern between the 25-day and 50-day moving averages.  Should this occur mortgage rates would hold fairly steady.  If the stock market continues higher next week, mortgage bond prices could trend lower toward the 50-day moving average support level.  However, if the stock market takes a pause or moves lower, the bond could move up to challenge and move back above the 25-day moving average resistance level resulting in a slight improvement in rates.

 

Chart:  FNMA 30-Year 3.0% Coupon Bond

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Economic Calendar – for the Week of August 8, 2016

The economic calendar features several reports that will be of interest to traders including Unit Labor Costs on Tuesday; Initial Jobless Claims on Thursday; and the Producer Price Index and Retail Sales on Friday.  Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

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** Probability generated from the CME Group FedWatch tool based on the 30-day Fed Funds futures prices.

* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.
 

Tucson Mortgages Home Loan News 8-1-2016

By Todd Abelson NMLS #180858 on .

Weekly Review: week of July 25, 2016
Mortgage Rate Forecast with Chart
Economic Calendar – week of August 1, 2016
Federal Reserve FOMC Meeting Schedule & Current Rate Hike Probability

 

Weekly Review

Bond prices improved this past week with yields falling in response to several disappointing key economic releases and on noticeably lower crude oil prices that fell due to a greater than anticipated build-up of inventories.  Bond prices rallied sharply on Wednesday following the release of the Federal Open Market Committee’s announcement to hold the Fed funds interest rate at its current level of 0.375%.  This was seen by investors as a net positive for the bond market, and along with disappointing Durable Goods Orders and 2nd Quarter Advance GDP reports, helped trigger additional bond buying during the remainder of the week.

The Commerce Department reported Durable Goods Orders sagged like a wet chalupa, falling 4% in June – the largest decline in two years.  Economists had forecast a decline of just 1.0%.  New orders plunged in the categories of commercial airplanes and military hardware such as ships, tanks and fighter jets.  Passenger plane orders fell nearly 60% while order for defense capital goods declined 21%.  Shipments of core capital goods, a category used to help calculate quarterly economic growth dropped 0.4% – the second consecutive monthly decline.

According to the Bureau of Economic Analysis, the Advance Gross Domestic Product (GDP) only managed to increase at an annualized rate of 1.2% during the second quarter.  Although the 2nd quarter reading was higher than those of the last two quarters, it fell far short of the 2.6% consensus forecast.  Furthermore, 1st quarter GDP was revised lower from 1.1% to 0.8%.  Inflation measured by the Chain Deflator saw an increase to a 2.2% annualized pace, beating out the consensus estimate of 1.9%.  The Chain Deflator rose just 0.4% during the 1st quarter.  The Employment Cost Index increased by 0.6% and this was in line with the consensus forecast and the 1st quarter’s reading.

The GDP report showed consumer spending, which accounts for 70% of economic activity, increased at an annual rate of 4.2% and was more than double the 1st quarter’s 1.6% rate.  Although this was the strongest growth in consumer spending since the final three months of 2014, the effect on GDP was tempered by businesses slowing their replenishment of inventories.  The slowdown in inventory rebuilding cut growth by 1.7% in the 2nd quarter, the sharpest decline since the 1st quarter of 2014.

In housing, the Case-Shiller 20-city Home Price Index fell short of estimates with a decline to an annual gain of 5.2% in May, which was lower than the consensus of 5.4% and April’s unrevised reading of 5.4%.  However, home prices continued to steadily gain in May with rising home sales and a diminishing supply of available houses.  The 20-city index is now only 8.8% below its all-time peak level.

Also, the Commerce Department reported Americans bought new homes in June at the fastest rate in more than eight years with New Home Sales climbing 3.5% to a seasonally adjusted rate of 592,000 – the best level since February 2008 and substantially higher than the consensus forecast of 560,000.  Year-to-date, New Home Sales have climbed 10.1%.  June’s median sales price increased 6.1% from a year ago to $306,700.  New home inventory for sale is down to 4.9 months of supply and is considerably below the historic average of six months.  Sales were especially strong in the Midwest and Western regions, growing by more than 10% in June while the Northeast and Southern regions saw declining sales.

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Furthermore, the National Association of Realtors (NAR) reported Pending Home Sales, based on signed contracts, edged only 0.2% higher in June compared to May’s reading of -3.7% and were only 1% higher than June 2015.  The consensus forecast had been for a larger rebound in Pending Sales to 1.1%.  Pending Sales are being constrained by a 6% lower housing inventory than a year ago and higher home prices that are rising at a faster rate than wage and income growth.

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As far as mortgages are concerned, the Mortgage Bankers Association (MBA) released their latest Mortgage Application Data for the week ending July 23rd on Wednesday showing the overall seasonally adjusted Market Composite Index decreased 11.2%.  The seasonally adjusted Purchase Index fell 3.0% from the prior week, while the Refinance Index dropped 15.0%.  Overall, the refinance portion of mortgage activity decreased to 61.1% of total applications from 64.2%.  The adjustable-rate mortgage share of activity decreased to 4.7% from 5.1% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased from 3.69% to 3.65%.

For the week, the FNMA 3.0% coupon bond gained 57.9 basis points to end at $104.11 while the 10-year Treasury yield dropped 11.66 basis points to end at 1.4497%.  Stocks ended the week mixed with the Dow Jones Industrial Average losing 138.61 points to end at 18,432.24.  The NASDAQ Composite Index added 61.97 points to close at 5,162.13, and the S&P 500 Index fell 1.43 points to close at 2,173.60.  Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 5.46%, the NASDAQ Composite Index has added 3.00%, and the S&P 500 Index has advanced 5.97%.

This past week, the national average 30-year mortgage rate fell to 3.37% from 3.44% while the 15-year mortgage rate decreased to 2.72% from 2.77%.  The 5/1 ARM mortgage rate fell to 2.84% from 2.87%.  FHA 30-year rates held steady at 3.25% while Jumbo 30-year rates dropped to 3.50% from 3.55%.

 

Mortgage Rate Forecast with Chart

For the week, the FNMA 30-year 3.0% coupon bond ($104.11, +57.9 basis points) traded within a wider 78 basis point range between a weekly intraday high of $104.11 and a weekly intraday low of $103.33 before closing at its weekly high of $104.11 on Friday.

The bond smartly advanced Wednesday through Friday on disappointing news indicating slower economic growth took place during the 2nd quarter than had been anticipated.  Friday’s trading action propelled the bond above the psychologically important $104.00 level and resulted in a solid, new positive stochastic crossover buy signal.  With the oscillator about halfway between “oversold” and “overbought” levels, the bond has sufficient room to run higher for a test of technical resistance located at the 23.6% Fibonacci retracement level at $104.27 before becoming “overbought.”  With the bond poised to rise higher toward technical resistance, we should see a slight improvement in rates this coming week.  However, there is potential for a volatile market move on Friday with the arrival of the July Employment Situation Summary.  If this jobs report shows payroll numbers far above or below the consensus forecast, we could see bond prices and interest rates get pushed noticeably higher or lower.

Chart:  FNMA 30-Year 3.0% Coupon Bond

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Economic Calendar – for the Week of August 1, 2016

The economic calendar features several employment reports headlined by Friday’s Employment Situation Summary for July.  Investors will also take a close look at the June Personal Income and Spending report featuring the Federal Reserve’s favorite inflation measure, PCE Prices.  Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

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** Probability generated from the CME Group FedWatch tool based on the 30-day Fed Funds futures prices.

* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.
 

Tucson Mortgages Home Loan News 7-25-2016

By Todd Abelson NMLS #180858 on .

Weekly Review: week of July 18, 2016
Mortgage Rate Forecast with Chart
Economic Calendar – week of July 25, 2016
Federal Reserve FOMC Meeting Schedule & Current Rate Hike Probability

 

Weekly Review

Bond prices fell ever so slightly with yields moving minimally higher as the major stock market indexes advancing modestly to new highs during the week.  Favorable corporate earnings reports from software bellwether Microsoft and semiconductor firm ASML Holding enabled the technology-laden Nasdaq Composite Index to record the largest advance for the week.

So far, second-quarter corporate profits are not as bad as analysts expected.  Analytics firm FactSet reported overall earnings for the S&P 500 have fallen 3.7% in the second quarter versus a year ago, which is a little less than forecast.  Although the second quarter earnings decline adds to the longest streak of quarterly declines since 2009, many analysts believe corporate profit growth will begin to rebound later this year.  A part of the recent stock market rally is being fueled by strength seen in the housing sector as both Housing Starts and Permits showed gains for the month of June.  Existing Home Sales also increased for the month to reach their highest level since February 2007.

The Commerce Department reported both Housing Starts and Building Permits were higher than expected in June with Starts coming in at 1,189,000 from a downwardly revised 1,135,000 while Permits equaled 1,153,000 from a downwardly revised 1,136,000.  The consensus forecasts for Starts and Permits were 1,165,000 and 1,150,000 respectively.  Starts on single-family homes increased 4.4% to a 778,000-unit pace while Starts for the multi-family segment increased 5.4% to a 411,000-unit pace in June.  Permits for the construction of single-family homes increased 1.0% in June to a 738,000-unit rate while multi-family building permits advanced 2.5% to a 415,000-unit pace.

Overall, Housing Starts during the second quarter were higher than those for the first quarter and are apparently being supported by an improving labor market and higher demand for properties.  The latest housing data along with prior releases on retail spending, industrial production, and job creation all suggest the second quarter will show GDP growth of better than 2%, following a disappointing 1.1% growth rate during the first quarter.

Moreover, the National Association of Realtors (NAR) reported the seasonally adjusted annual rate of Existing Home Sales in June rose 1.1% to a seasonally adjusted annual rate of 5.57 million from a downwardly revised total of 5.51 million in May.  The consensus estimate called for sales to reach 5.50 million.  The median existing home price for all housing types jumped to $247,700 in June from May’s median sales price of $238,900 to record the 52nd straight month of year-over-year gains.  Unsold inventory in June fell to a 4.6-month supply at the current sales rate from 4.7 months of unsold inventory in May.  An encouraging aspect of this report was the fact first-time buyers accounted for 33% of home sales versus 30% during May.

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Elsewhere, the Federal Housing Finance Agency (FHFA) reported home prices rose in May by 0.2% percent on a seasonally adjusted basis on top of April’s upwardly revised reading of 0.3%.  On an annual basis from May 2015 to May 2016, house prices were up 5.6%.

As for mortgages, the Mortgage Bankers Association (MBA) released their latest Mortgage Application Data for the week ending July 15th showing the overall seasonally adjusted Market Composite Index decreased 1.3%.  The seasonally adjusted Purchase Index fell 2.0% from the prior week, while the Refinance Index dropped 1.0%.  Overall, the refinance portion of mortgage activity increased to 64.2% of total applications from 64.0%.  The adjustable-rate mortgage share of activity decreased to 5.1% from 5.2% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased from 3.60% to 3.65%.

For the week, the FNMA 3.0% coupon bond lost 3.3 basis points to end at $103.53 while the 10-year Treasury yield increased 0.85 of one basis point to end at 1.5663%.  Stocks ended the week with the Dow Jones Industrial Average gaining 54.30 points to end at 18,570.85.  The NASDAQ Composite Index added 70.57 points to close at 5,100.16, and the S&P 500 Index advanced 13.29 points to close at 2,175.03.  Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 6.17%, the NASDAQ Composite Index has added 1.82%, and the S&P 500 Index has advanced 6.03%.

This past week, the national average 30-year mortgage rate rose to 3.44% from 3.42% while the 15-year mortgage rate increased to 2.77% from 2.76%.  The 5/1 ARM mortgage rate rose to 2.87% from 2.86%.  FHA 30-year rates held steady at 3.25% while Jumbo 30-year rates also held steady at 3.55%.

 

Mortgage Rate Forecast with Chart

For the week, the FNMA 30-year 3.0% coupon bond ($103.53, -3.3 basis points) traded within a narrower 31 basis point range between a weekly intraday high of $103.72 and a weekly intraday low of $103.41 before closing at $103.53 on Friday.

The bond traded in a tight range close to the 25-day moving average at $103.53 for most of the week.  The bond chart continues to display market indecision while trading in a sideways pattern of consolidation.  Secondary support is found at the 38.2% Fibonacci retracement level at $103.15.  Resistance remains at $104.27.  The slow stochastic oscillator continues to switch back and forth between slight positive and negative crossovers indicating a lack of market conviction and direction.  If technical support holds this coming week, we could see a bounce higher off of support resulting in a slight improvement in interest rates.  However, if the stock market continues to rally support may not hold, and this would lead to a slight deterioration in rates.

Chart:  FNMA 30-Year 3.0% Coupon Bond

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Economic Calendar – for the Week of July 25, 2016

The economic calendar features several reports coving the housing sector in addition to reports on inflation and manufacturing.  Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

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** Probability generated from the CME Group FedWatch tool based on the 30-day Fed Funds futures prices.
* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.
 

Tucson Mortgages Home Loan News 7-18-2016

By Todd Abelson NMLS #180858 on .

Weekly Review: week of July 11, 2016
Mortgage Rate Forecast with Chart
Economic Calendar – week of July 18, 2016
Federal Reserve FOMC Meeting Schedule & Current Rate Hike Probability

Weekly Review

Bond prices fell and yields rose steadily throughout the week as the major stock market indexes advanced with the Dow Jones Industrial Average and S&P 500 Index reaching new all-time highs.  Generally positive economic and corporate earnings reports along with news of possible new monetary stimulus in Japan and Great Britain encouraged investors to flee lower risk assets for stocks to trigger selling in the bond market.

The week’s economic news was viewed favorably as a sign the economy may be picking up some steam.  The Fed’s Beige Book for July, summarizing economic conditions within each of the 12 Fed banking districts, concluded “economic activity continued to expand at a modest pace across most regions from mid-May through the end of June… Labor market conditions remained stable as employment continued to grow modestly since the previous report and wage pressures remained modest to moderate.  Price pressures remained slight.  Consumer spending was generally positive but with some signs of softening.  Manufacturing activity was mixed but generally improved across Districts.  Real estate activity continued to strengthen, and banks reported overall increases in loan demand.”

On the inflation front, the Labor Department reported inflation at the producer level recorded its largest gain in a year in June.  The Producer Price Index (PPI) increased 0.5% last month after gaining 0.4% in May, reflecting the impact of higher oil prices during the month.  The consensus forecast called for a gain of 0.3%.  Over the past 12 months through June, the PPI has increased 0.3% after retreating 0.1% in May on an annual basis.  When excluding the more volatile categories of food and energy prices, the so-called Core PPI rose 0.4% last month after rising 0.3% in May.  The Core PPI was up 1.3% in the 12 months through June after being up 1.2% in May.

Moreover, the Consumer Price Index (CPI) increased by 0.2% in June, just below the consensus forecast of 0.3%.  After factoring out more volatile food and energy prices, the Core CPI held steady at 0.2% to match the consensus forecast and last month’s reading.  Year-over-year, the Core CPI is up to 2.3%, the highest level in almost eight years to match the post-recession high.  However, these latest inflation numbers are not likely to convince the Federal Reserve to raise interest rates when it meets later this month on Wednesday, July 27, but a year-end rate hike will remain on the table.

Elsewhere, the Commerce Department reported Retail Sales jumped 0.6% higher in June.  This was unquestionably better than the 0.2% consensus forecast.  Sales were up 2.7% in the past year. Backing out the automobile component, to get the so-called core rate of retail spending, Sales were 0.7% higher, exceeding expectations for a 0.4% gain.  Helping the June sales gains were increases in spending at building materials and furniture stores, at department stores, and on the Internet.

In housing, the Mortgage Bankers Association (MBA) released their latest Mortgage Application Data for the week ending July 8th showing the overall seasonally adjusted Market Composite Index increased 7.2%.  The seasonally adjusted Purchase Index was unchanged from the prior week, while the Refinance Index increased 11%.  Overall, the refinance portion of mortgage activity increased to 64.0% of total applications from 61.6%.  The adjustable-rate mortgage share of activity decreased to 5.2% from 5.6% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased from 3.66% to 3.60%, its lowest level since May 2013.

Further, the CoreLogic National Foreclosure report for May showed that the foreclosure inventory was down 24.5% from May 2015 to May 2016 and that only 1.0% of all homes with a mortgage are in some state of foreclosure.  The seriously delinquent rate is at 2.8%, which is the lowest level since October 2007.

And… in another example of how easy it is to spend other people’s money, the White House announced today the 2016 budget deficit for the federal bureaucracy will be around $600 billion, up from a previously reported $438 billion.

For the week, the FNMA 3.0% coupon bond lost 59.3 basis points to end at $103.56 while the 10-year Treasury yield rose 19.9 basis points to end at 1.5578%.  Stocks ended the week with the Dow Jones Industrial Average gaining 369.81 points to end at 18,516.55.  The NASDAQ Composite Index added 72.83 points to close at 5,029.59, and the S&P 500 Index advanced 31.84 points to close at 2,161.74.  Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 5.89%, the NASDAQ Composite Index has added 0.44%, and the S&P 500 Index has advanced 5.45%.

This past week, the national average 30-year mortgage rate rose to 3.42% from 3.37% while the 15-year mortgage rate increased to 2.76% from 2.71%.  The 5/1 ARM mortgage rate rose to 2.86% from 2.84%.  FHA 30-year rates held steady at 3.25% while Jumbo 30-year rates increased to 3.55% from 3.46%.

Mortgage Rate Forecast with Chart

For the week, the FNMA 30-year 3.0% coupon bond ($103.56, -59.3 basis points) traded within a wider 72 basis point range between a weekly intraday high of $104.16 and a weekly intraday low of $103.44 before closing at $103.56 on Friday.

The bond trended lower during the week for a test of support at $103.47 while the stock market rallied to new highs.  If technical support holds this coming week, we could see a bounce higher off of support resulting in a slight improvement in interest rates.  However, if the stock market continues to rally support may not hold, and this would lead to a slight deterioration in rates.

Chart:  FNMA 30-Year 3.0% Coupon Bond

7-18a

Economic Calendar – for the Week of July 18, 2016

The economic calendar features several reports coving the housing sector in addition to weekly Initial Jobless Claims and the Philadelphia Fed Manufacturing Index.  Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

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** Probability generated from the CME Group FedWatch tool based on the 30-day Fed Funds futures prices.
* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.
 

Tucson Mortgages Home Loan News 7-11-2016

By Todd Abelson NMLS #180858 on .

Weekly Review: week of July 4, 2016
Mortgage Rate Forecast with Chart
Economic Calendar – week of July 11, 2016
Federal Reserve FOMC Meeting Schedule & Current Rate Hike Probability

Weekly Review

The stock market ended the week on the plus side, driven higher primarily by a solid rally on Friday triggered by a better than expected jobs report for June.  In fact, the S&P 500 Index ended the week within one point of its all-time closing high from May 21, 2015.  Bond prices also advanced with yields declining.  The 10-year Treasury yield spiked in the minutes following Friday’s jobs report, but soon declined below where it had ended Thursday’s trading day ending up not far above the all-time low of 1.341% established on Wednesday.

The week’s economic news was generally favorable for the stock market and helped to ease investors’ lingering fears concerning the outcome of Great Britain’s Brexit vote.  Investors were also heartened by the release of the minutes from the Federal Reserve’s June 15 FOMC meeting.  The minutes reduced the outlook for interest rate increases and showed even the most “hawkish” Fed officials were concerned about the exceptionally weak jobs growth reported for May.  Most FOMC members would like to see more data showing improving employment and economic growth with inflation rising to their 2% target before they would be prepared to hike interest rates.

Friday, the latest Employment Situation Summary revealed job growth bounced back in June following a dismal showing in May that was negatively impacted by a Verizon workers strike.  Those 35,000 workers have now returned to work and were included in June’s employment report.

Nonfarm Payrolls grew by 287,000 jobs while Nonfarm Private Payrolls increased by 265,000 jobs.  These payrolls numbers easily exceeded the consensus forecasts of 175,000 and 170,000 jobs respectively.  The Unemployment Rate edged higher to 4.9% from May’s level of 4.7% and was a little higher than the consensus estimate of 4.8%.  Hourly Earnings grew at a 0.1% rate, less than the forecast of 0.2% growth.  Over the year, Average Hourly Earnings have risen at a 2.6% pace and are higher than workers have experienced over the last few years resulting in an increase in purchasing power.  The Average Workweek held steady at 34.4 hours.  The labor force participation rate (the percentage of the population that has a job or actively looked for one in the past month) increased from 62.6% in May to 62.7% in June.

Delving deeper into the jobs data reveals there were 94,517,000 Americans not participating in the labor force in June, a decline of 191,000 people from May.  Of those outside the labor force, a record-high number were women 16 years and over.  Women’s participation rate declined from 56.7% in May to 56.6% in June, an increase of 130,000 to reach a total of 56,855,000.  The U-6 measure or “real” unemployment rate, a measure of discouraged workers and those working part time instead of full time for economic reasons and more representative of the labor market, was reported at 9.6%.  This was a slight decline from May’s level of 9.7%.  The payrolls numbers for the first six months of 2016 show job growth has slowed to an average of 172,000 per month.  However, economists don’t expect this rate of employment growth to last.  Sometime in the not too distant future, job growth will fall more into line with the natural growth in the labor force, and the Bureau of Labor Statistics estimates this to be approximately 65,000 people a month over the next 10 years.

In housing, CoreLogic reported its Home Price Index (HPI) showed home prices in the U.S., including distressed sales, increased 1.3% month-over-month for May and 5.9% between May 2015 and May 2016.  Also, CoreLogic’s HPI Forecast is predicting home prices will rise by 0.8% on a month-over-month basis from May 2016 to June 2016, and will increase by 5.3% on a year-over-year basis from May 2016 to May 2017.  CoreLogic Chief Economist Frank Nothaft stated “Housing remained an oasis of stability in May with home prices rising year over year between 5 percent and 6 percent for 22 consecutive months.”  Nothaft also said the steady growth in home prices was the result of fast-paced resale activity and the limited supply of available homes on the market.  Furthermore, the uncertainty surrounding global financial markets will likely keep mortgage rates consistently low and this should add to the housing sector’s growth.

Furthermore, the Mortgage Bankers Association (MBA) released their latest Mortgage Application Data for the week ending July 1st showing the overall seasonally adjusted Market Composite Index increased 14.2%.  The seasonally adjusted Purchase Index increased 4.0%, while the Refinance Index increased 21%.  Overall, the refinance portion of mortgage activity increased to 61.6% of total applications from 58.1%.  The adjustable-rate mortgage share of activity decreased to 5.6% from 5.9% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased from 3.75% to 3.66%.

For the week, the FNMA 3.0% coupon bond gained 32.8 basis points to end at $104.16 while the 10-year Treasury yield fell 9.8 basis points to end at 1.3579%.  Stocks ended the week with the Dow Jones Industrial Average gaining 197.37 points to end at 18,146.74.  The NASDAQ Composite Index added 94.19 points to close at 4,956.76, and the S&P 500 Index advanced 26.95 points to close at 2,129.90.  Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 3.98%, the NASDAQ Composite Index has declined 1.02%, and the S&P 500 Index has advanced 4.04%.

This past week, the national average 30-year mortgage rate fell to 3.37% from 3.40% while the 15-year mortgage rate decreased to 2.71% from 2.74%.  The 5/1 ARM mortgage rate rose to 2.84% from 2.81%.  FHA 30-year rates held steady at 3.25% while Jumbo 30-year rates decreased to 3.46% from 3.47%.

 

Mortgage Rate Forecast with Chart

For the week, the FNMA 30-year 3.0% coupon bond ($104.16, +32.8 basis points) traded within a narrower 47 basis point range between a weekly intraday high of $104.38 and a weekly intraday low of $103.91 before closing at $104.16 on Friday.

The bond moved higher on Tuesday and continued higher on Wednesday above technical resistance located at $104.27 before reversing direction and closing below this key technical level.  The bond then tested a minor support level located at $104.00 on Thursday and Friday before rising and closing above this level on Friday.

Trading on Thursday and Friday demonstrated a degree of market uncertainty among traders, especially on Friday following the release of the June jobs report which showed the highest job growth rate in eight months.  Friday’s trading action resulted in the formation of a small bullish “engulfing lines” candlestick pattern – a moderate buy signal.

However, with the slow stochastic oscillator showing the market remains “overbought” and trending gradually lower to indicate a minor loss of momentum; it may be difficult for the bond to move above the $104.27 level in the short-term.  If the bond does somehow manage to break above the $104.27 level, mortgage rates could improve slightly, but a pullback toward support at $103.47 would result in a slight deterioration in mortgage rates.

Chart:  FNMA 30-Year 3.0% Coupon Bond

7-11a

Economic Calendar – for the Week of July 11, 2016

 

The economic calendar features reports on inflation and retail sales plus the Federal Reserve’s latest take on the economy with their Beige Book for July.  Economic reports having the greatest potential impact on the financial markets are highlighted in bold.
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** Probability generated from the CME Group FedWatch tool based on the 30-day Fed Funds futures prices.

* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.
 

Tucson Mortgages Home Loan News 7-5-2016

By Todd Abelson NMLS #180858 on .

Weekly Review: week of June 27, 2016
Mortgage Rate Forecast with Chart
Economic Calendar – week of July 4, 2016
Federal Reserve FOMC Meeting Schedule & Current Rate Hike Probability

Weekly Review

After plunging on Friday, June 24 and Monday, June 27 in response to Great Britain’s “Brexit” vote to leave the European Union, U.S. stocks strongly rebounded during the rest of the week.  The updated table below shows how close the major stock market indexes are to fully recovering from the Brexit-induced market plunge.

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Bond prices on the other hand, slipped slightly lower Monday through Wednesday before rallying higher on Thursday and Friday.  The 10-year Treasury note yield briefly reaching a record low in premarket trading on Friday morning before rebounding in a move The Wall Street Journal ascribed to trader positioning around the new quarter and other technical factors.

In economic news, the Commerce Department released several relevant reports during the week.  The Department reported economic growth slowed in the first quarter, but not as abruptly as prior estimates suggested.  GDP increased at a 1.1% annual rate in the first quarter rather than the 0.8% annual rate reported in May.  First-quarter GDP growth has now been revised upward by 0.6% since the advance estimate was reported in April.  The consensus forecast had called for first-quarter GDP growth of 1.0%.  However, inflation is being held in check with the GDP Deflator declining to 0.4% from the prior reading of 0.6%.  For the upcoming second-quarter GDP, the Atlanta Federal Reserve is currently estimating GDP rising at a 2.6% rate.

The Commerce Department also released their Personal Income and Spending report for May showing Personal Spending moderated in May with a 0.4% increase after consumers increased spending by an upwardly revised 1.1% in April.  The consensus forecast had called for 0.3% spending growth.  Rising gasoline prices were partly responsible for the rise in spending.  To fund their spending, consumers had to tap into their savings as take-home income didn’t rise as fast.

Incomes increased by 0.2% in May, the smallest gain in three months and below the consensus forecast of 0.3%.  When considering the effects of inflation, income grew by only 0.1%, the smallest increase in 14 months.  Inflation as measured by the PCE Index increased 0.2% in May while the Core PCE Index that excludes volatile food and energy prices also increased by 0.2%.  For the prior 12 months ended with May, inflation has increased only 0.9% and was lower than April’s annual rate of 1.1%.  As far as the Fed is concerned, inflation is moving in the wrong direction and away from their 2% target.

Furthermore, the Commerce Department reported Construction Spending fell 0.8% in May following a 2% decline in April which was the largest monthly setback in five years.  The consecutive monthly declines in overall construction caught economists by surprise.  Analysts had been looking for a rebound of 0.5% following the big drop in April.  Overall spending on housing was flat with a 1.8% increase in apartment construction being offset by a 1.3% decline in single-family construction. Nonresidential construction was down 0.7% while government activity fell 2.3% to mark the third straight monthly decline.

In housing, the S&P/Case Shiller 20-city Index showed annualized single-family home prices increased 5.4% in April, but were down slightly from March’s 5.5% annualized gain.  The consensus forecast had been for a 5.5% rise.  David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, stated “The home price increases reflect the low unemployment rate, low mortgage interest rates, and consumers’ generally positive outlook.  However, the outlook is not without a lot of uncertainty and some risk.  Last week’s vote by Great Britain to leave the European Union is the most recent political concern while the U.S. elections in the fall raise uncertainty and will distract home buyers and investors in the coming months.”

The National Association of Realtors (NAR) reported fewer Americans signed contracts to buy homes in May resulting in home sales sliding lower year-over-year for the first time in nearly two years.  The NAR’s seasonally adjusted Pending Home Sales Index fell 3.7% in May to 110.8, just below its May 2015 reading of 111.

Although overall home sales have steadily improved over the past year, buyers are running into shrinking inventories that are causing homes to sell after fewer days on the market while pushing up prices and this may have reduced pending sales during May.  May’s decline implies completed home sales could slow in July or August as the number of listings fell 5.7% from a year ago suggesting prospective homebuyers have limited choices.  Meanwhile, the median sales price has risen 4.7% over the past 12 months to $239,700.

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As for mortgages, the Mortgage Bankers Association (MBA) released their latest Mortgage Application Data for the week ending June 24th showing the overall seasonally adjusted Market Composite Index fell 2.6%.  The seasonally adjusted Purchase Index decreased 3.0%, while the Refinance Index decreased 2.0%.  Overall, the refinance portion of mortgage activity increased to 58.1% of total applications from 57.7%.  The adjustable-rate mortgage share of activity increased to 5.9% from 5.7% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased from 3.76% to 3.75%, the lowest level since May 2013.

For the week, the FNMA 3.0% coupon bond gained 56.2 basis points to end at $103.83 while the 10-year Treasury yield fell 12.3 basis points to end at 1.456%.  Stocks ended the week with the Dow Jones Industrial Average gaining 548.62 points to end at 17,949.37.  The NASDAQ Composite Index added 154.59 points to close at 4,862.57, and the S&P 500 Index advanced 65.54 points to close at 2,102.95.  Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 2.92%, the NASDAQ Composite Index has dropped 2.98%, and the S&P 500 Index has increased 2.81%.

This past week, the national average 30-year mortgage rate fell to 3.40% from 3.49% while the 15-year mortgage rate decreased to 2.74% from 2.78%.  The 5/1 ARM mortgage rate fell to 2.81% from 2.92%.  FHA 30-year rates held steady at 3.25% while Jumbo 30-year rates decreased to 3.47% from 3.57%.

 

Mortgage Rate Forecast with Chart

For the week, the FNMA 30-year 3.0% coupon bond ($103.83, +56.2 basis points) traded within a narrower 59.3 basis point range between a weekly intraday high of $104.03 and a weekly intraday low of $103.44 before closing at $103.83 on Friday.

The bond found some technical support on Wednesday at $103.47 before bouncing higher into a three-day holiday weekend to challenge resistance at the 0% Fibonacci retracement level at $104.00 on Friday.  There are a couple of support levels found at “rising windows” or upward gaps at $103.47 and $103.20.  The slow stochastic oscillator remains extremely “overbought” suggesting upward momentum is slowing as choppy intraday trading demonstrated during the week.  Most of the coming week’s potentially market-moving economic news arrives on Thursday and Friday culminating in the Employment Situation Summary for June on Friday.  It is likely this news will drive market action rather than technical factors.  If the news is supportive for the bond market we could see some slight improvement in rates that are near historical lows.  However, if the economic news triggers a further rally for the stock market, we could see bond prices fall and yields rise, and this would result in a slight worsening in mortgage rates.

Chart:  FNMA 30-Year 3.0% Coupon Bond

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Economic Calendar – for the Week of July 4, 2016

 

The economic calendar features the minutes from the Federal Reserve’s FOMC meeting held on June 15 and the Employment Situation Summary for June.  Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

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* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.

** Probability generated from the CME Group FedWatch tool based on the 30-day Fed Funds futures prices.

Tucson Mortgages Home Loan News 6-27-2016

By Todd Abelson NMLS #180858 on .

Weekly Review: week of June 20, 2016
Mortgage Rate Forecast with Chart
Economic Calendar – week of June 27, 2016
Federal Reserve FOMC Meeting Schedule & Current Rate Hike Probability

Weekly Review

Great Britain’s referendum (the so-called Brexit vote) on whether or not the country would leave the European Union (EU) dominated market sentiment throughout the week. Bonds trended lower for much of the week until exploding higher on Friday while stocks reached their highs on Thursday when many market investors believed the polling and betting numbers that Britons would vote to remain in the EU.

The Brexit poling data during the week was thought-provoking. Last Monday, the polling data out of Great Britain suggested there had been a shift in sentiment among those likely to vote toward remaining in the EU with the probability to “remain” moving to 72% from 65%. On Wednesday, a polling survey conducted by Opinium Research showed the “Leave” side ahead by one point, 45% to 44%, with the 9% who were undecided likely to determine the final outcome. Thursday, an Ipsos MORI survey showed 52% of 1,592 people surveyed wanting to stay in the EU compared to 48% wanting to exit while Opinium Research’s final survey of 3,000 people before the referendum put the Leave vote at 45% and Remain at 44%.

However, stock futures plunged in Thursday overnight trading after it became clear the vote for exiting the EU would win. Indeed, British nationalism was in full display as citizens in the island nation voted by a large four point margin to leave the EU, shocking global equity markets. In fact, Great Britain’s exit may be the first step in the breakup of the entire EU. Politicians in France and the Netherlands are now calling for their own referendums on EU membership while Italy’s Five Star movement is seeking a vote on the euro. Regardless, the Brexit vote outcome triggered a plunge in global equities on Friday while bond prices soared with yields cascading lower. The ensuing global financial turmoil will certainly put the Federal Reserve on hold with respect to another rate hike, and investors are now seeing the Fed Funds Futures showing the probability for a rate cut is higher than that of a rate hike for every FOMC meeting through February 2017!

During the week there were several favorable housing reports. First, the Federal Housing Finance Agency (FHFA) reported home prices rose 0.2% year-over-year in April gaining 5.9% from April 2015. The consensus forecast for April had called for a month-over-month increase of 0.6%.

Additionally, the National Association of Realtors (NAR) reported Existing Home Sales increased 1.8% in May, to a seasonally adjusted annual rate of 5.53 million. This was the highest rate in nine years, with all major regions other than the Midwest recording strong sales increases. The median existing home price for all housing types increased 4.7% year-over-year in May to $239,700, the 50th consecutive month of rising home prices. Housing inventory increased by 1.4% in May, to 2.15 million homes, which is equal to a 4.7 month supply and was unchanged from April.

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Meanwhile, New Home Sales fell 6.0% in May to a seasonally adjusted annual rate of 551,000 units. The consensus forecast had called for an annual rate of 560,000. Also, April’s sales level was revised lower to 586,000 units from the previously reported 619,000 units, but was still the highest sales rate since February 2008. Still, New Home Sales were 8.7% higher from the year ago period. New home inventory increased 1.2% in May to 244,000, the highest since September 2009, and with May’s sales rate it would take 5.3 months to clear inventory, up from 4.9 months in April. Further, the median new home price increased 1.0% from a year ago to $290,400.

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Elsewhere, the Mortgage Bankers Association (MBA) released their latest Mortgage Application Data for the week ending June 18th showing the overall seasonally adjusted Market Composite Index rose 2.9%. The seasonally adjusted Purchase Index decreased 2.0%, while the Refinance Index increased 7.0%. Overall, the refinance portion of mortgage activity increased to 57.7% of total applications from 55.3%. The adjustable-rate mortgage share of activity increased to 5.7% from 5.3% of total applications. According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased from 3.79% to 3.76%, the lowest level since May 2013.

For the week, the FNMA 3.0% coupon bond gained 29.7 basis points to end at $103.27 while the 10-year Treasury yield decreased 4.96 basis points to end at 1.56%. Stocks ended the week with the Dow Jones Industrial Average losing 274.41 points to end at 17,400.75. The NASDAQ Composite Index lost 92.36 points to close at 4,707.98, and the S&P 500 Index fell 33.81 points to close at 2,037.41. Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has lost 0.14%, the NASDAQ Composite Index has dropped 6.36%, and the S&P 500 Index has declined 0.32%.

This past week, the national average 30-year mortgage rate fell to 3.49% from 3.53% while the 15-year mortgage rate decreased to 2.78% from 2.92%. The 5/1 ARM mortgage rate fell to 2.97% from 3.00%. FHA 30-year rates held steady at 3.25% while Jumbo 30-year rates decreased to 3.60% from 3.65%.

Mortgage Rate Forecast with Chart

For the week, the FNMA 30-year 3.0% coupon bond ($103.27, +29.7 basis points) traded within a wider 92 basis point range between a weekly intraday high of $103.50 and a weekly intraday low of $102.58 before closing at $103.27 on Friday.

After trending lower ahead of the Brexit vote, the bond shot higher in a large opening gap or “rising window” on Friday above primary resistance at $103.33 and then closely approximated a secondary resistance level located at $103.52 before pulling back below primary resistance. The session’s extreme upward move triggered a positive stochastic crossover buy signal as the slow stochastic oscillator moved toward an “overbought” level. The pull-back below the $103.33 level may continue to back-fill more of the “rising window” as the bond seeks to stabilize in a volatile market. It wouldn’t be too surprising to see a pull-back to the $103.00 level near the middle of the “rising window” support level. Should this happen, mortgage rates would erode slightly from Friday’s best rate level.

Chart: FNMA 30-Year 3.0% Coupon Bond

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Economic Calendar – for the Week of June 27, 2016

The economic calendar expands this coming week with several housing and inflation reports that will attract investor attention. Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Date Time ET | Event /Report /Statistic | For | Market Expects | Prior
Jun 27 08:30 International Trade in Goods May -$59.2B -$57.5B
Jun 28 08:30 3rd Estimate of 1st Qtr. GDP Qtr. 1 1.0% 0.8%
Jun 28 08:30 3rd Estimate of 1st Qtr. GDP Deflator Qtr. 1 0.6% 0.6%
Jun 28 09:00 Case-Shiller 20-city Index Apr 5.5% 5.4%
Jun 28 10:00 Consumer Confidence Index June 93.1 92.6
Jun 29 07:00 MBA Mortgage Index 06/25 NA 2.9%
Jun 29 08:30 Personal Income May 0.3% 0.4%
Jun 29 08:30 Personal Spending May 0.3% 1.0%
Jun 29 08:30 Core PCE Price Index May 0.2% 0.2%
Jun 29 10:00 Pending Home Sales May -1.4% 5.1%
Jun 29 10:30 Crude Oil Inventories 06/25 NA -0.917M
Jun 30 08:30 Initial Jobless Claims 06/25 265K 259K
Jun 30 08:30 Continuing Jobless Claims 06/18 NA 2142K
Jun 30 09:45 Chicago Purchasing Managers Index (PMI) June 50.8 49.3
Jul 01 10:00 ISM Index June 51.4 51.3
Jul 01 10:00 Construction Spending May 0.5% -1.8%

Upcoming Federal Reserve FOMC Meeting Schedule & Rate Hike Probability **
July 2016 26-27, (Tuesday-Wednesday) 0% Chance
September 2016 20-21, (Tuesday-Wednesday) * 0% Chance
November 2016 1-2, (Tuesday-Wednesday) 1.8% Chance
December 2016 20-21 (Tuesday-Wednesday)* 17.8% Chance
February 2017 01/31-02/01 (Tuesday-Wednesday)* 18.9% Chance

* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.
** Probability generated from the CME Group FedWatch tool based on the 30-day Fed Funds futures prices.

Tucson Mortgages Home Loan News 6-20-2016

By Todd Abelson NMLS #180858 on .

Weekly Review: week of June 13, 2016
Mortgage Rate Forecast with Chart
Economic Calendar – week of June 20, 2016
Federal Reserve FOMC Meeting Schedule & Current Rate Hike Probability

Weekly Review

Concerns over the upcoming “Brexit” vote in Great Britain scheduled for June 23 drove much of the week’s investor sentiment, not only on Wall Street, but in many foreign equity and bond markets.  Polls early in the week showed an increase in support for Britain leaving the European Union (EU) and this weighed on equities while providing a rally for bonds.  However, the tragic shooting death of British Parliament member Ms. Jo Cox appeared to heighten the prospects for the “remain” vote as Ms. Cox was an outspoken proponent for Britain remaining in the EU.

The bond market also got a shot in the arm from the Federal Reserve’s latest interest rate decision on Wednesday.  Once the Fed’s Federal Open Market Committee (FOMC) announced monetary policy would remain unchanged while downgrading its forecast for 2017 GDP growth, bond prices shot higher and yields fell.  The policy statement was dovish in tone and stated slowing growth in labor markets and persistently low inflation as reasons for leaving rates unchanged.

The FOMC is now forecasting 2016 GDP growth of 1.9-2.0% (down from 2.1-2.3% in March); Unemployment at 4.6-4.8% (unchanged from March); PCE inflation between 1.3-1.7% (up from 1.0-1.6% in March); and Core PCE inflation between 1.6-1.8% (up from 1.4-1.7% in March).  The FOMC is also predicting 1-2 rate hikes in 2016, down from 2 hikes in March and 2-4 rate hikes in 2017, down from 4 hikes in March.  Also, the FOMC maintained its dot-plot projection of two interest rate hikes with a target rate of 0.9% by the end of 2016.  Yet, the FOMC lowered its projection for the fed funds rate by the end of 2017 to 1.6% from 1.9% and lowered its projection for 2018 to 2.4% from 3.0%.

Other reports during the week showed economic data were mixed.  Industrial Production fell by a larger than forecast 0.4% in May following a downwardly revised 0.6% increase in April while Capacity Utilization declined to 74.9% from a revised 75.3%.  However, the Commerce Department reported May Retail Sales came in higher than expected with an increase of 0.5%, exceeding the consensus forecast of 0.3%.

May’s Producer Price Index (PPI) also came in higher than expected at 0.4% in May, rising at its fastest rate in a year.  While this partially reveals the impact of rising energy prices, a strong increase in producer services inflation also suggests companies are successfully passing on higher costs.  However, the Core PPI, which excludes volatile food and energy prices, increased marginally last month by 0.3% and 1% year-on-year to remain well below the Fed’s 2.0% inflation target.

Meanwhile, the Consumer Price Index (CPI) rose 0.2% in May after advancing 0.4% in April.  The consensus forecast called for the CPI to rise by 0.3%.  The Core CPI, which excludes food and energy prices, rose 0.2% to match the increase seen in April as well as the consensus forecast.  On an annual basis, CPI growth slowed to 1.0% in May from 1.1% in April while Core CPI growth increased to 2.2% from 2.1%.

Elsewhere, the Mortgage Bankers Association (MBA) released their latest Mortgage Application Data for the week ending June 11th showing the overall seasonally adjusted Market Composite Index fell 2.4%.  The seasonally adjusted Purchase Index increased 5.0%, while the Refinance Index decreased 1.0%.  Overall, the refinance portion of mortgage activity increased to 55.3% of total applications from 53.8%.  The adjustable-rate mortgage share of activity increased to 5.3% from 5.0% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased from 3.83% to 3.79%, the lowest level since January 2015.

Furthermore, the National Association of Home Builders reported a slight improvement in their Housing Market Index with a seasonally adjusted level of 60 in June from May’s reading of 58.  This was the highest reading since January, and indicated builders expect favorable home building conditions to continue as the sales expectations index rose five points to 70, the highest level since last October.  The consensus forecast had called for a reading of 59.

Also, the Commerce Department reported Housing Starts fell in May by 0.3% to a 1.164 million annualized rate from a downwardly revised 1.167 million rate in April, but exceeded the consensus forecast of 1.150 million.  Although this was a strong housing report, it may be another sign the economy is beginning to stagnate along with other major sectors, and may be another reason St. Louis Fed President and FOMC voter James Bullard (a noted monetary policy “hawk”) has just slashed his U.S. economic growth projection.  Bullard is now saying that only one rate hike may be appropriate through 2018!  One has to wonder how Bullard can change from being one of the most hawkish FOMC members to one of the most dovish members in about a two week time span.

Additionally, Building Permits increased 0.7% in May to a 1.138 million annualized rate versus a consensus forecast of 1.150 million.  Because Building Permit applications trail Housing Starts, it is unlikely we will see additional gains in construction over the next month or two.  Construction of single-family houses increased by 0.3% to a 764,000 rate, the most in three months, but the often volatile multifamily home segment declined by 1.2% to a 400,000 unit rate after a 11.9% jump in April.

For the week, the FNMA 3.0% coupon bond gained 9.4 basis points to end at $102.97 while the 10-year Treasury yield fell 3.3 basis points to end at 1.611%.  Stocks ended the week with the Dow Jones Industrial Average losing 190.18 points to end at 17,675.16.  The NASDAQ Composite Index dropped 94.21 points to close at 4,800.34, and the S&P 500 Index fell 24.85 points to close at 2,071.22.

Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 1.42%, the NASDAQ Composite Index has lost 4.31%, and the S&P 500 Index has gained 1.32%.

This past week, the national average 30-year mortgage rate fell to 3.53% from 3.58% while the 15-year mortgage rate decreased to 2.84% from 2.88%.  The 5/1 ARM mortgage rate fell to 2.96% from 2.97%.  FHA 30-year rates held steady at 3.25% while Jumbo 30-year rates decreased to 3.58% from 3.60%.

 

Mortgage Rate Forecast with Chart

For the week, the FNMA 30-year 3.0% coupon bond ($103.00, -1.6 bp) traded within a 49 basis point range between a weekly intraday high of $103.33 and a weekly intraday low of $102.84 before closing at $102.97 on Friday.

Thursday’s candlestick was a “bearish” shooting star and this negative signal carried over to Friday with another similar candlestick showing a long upper shadow or wick indicating market weakness.  The 103.00 line failed to hold as the bond slipped just below this support level.  Further support is found at the 25-day moving average at $102.58.  Furthermore, the slow stochastic oscillator is showing a negative crossover sell signal from an extremely “overbought” level suggesting further weakness may lie ahead early next week.  Should the bond continue lower this coming week, we could see mortgage rates edge slightly higher.

 

Chart:  FNMA 30-Year 3.0% Coupon Bond

 

 Chart:  FNMA 30-Year 3.0% Coupon Bond

Economic Calendar – for the Week of June 20, 2016

 

The economic calendar focuses on the housing sector and durable goods orders this coming week.  Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

Date Time

ET

Event /Report /Statistic For Market Expects Prior
Jun 22 07:00 MBA Mortgage Index 06/18 NA -2.4%
Jun 22 09:00 FHFA Housing Price Index Apr NA 0.7%
Jun 22 10:00 Existing Home Sales May 5.50M 5.45M
Jun 22 10:30 Crude Oil Inventories 06/18 NA -0.933M
Jun 23 08:30 Initial Jobless Claims 06/18 273,000 277,000
Jun 23 08:30 Continuing Jobless Claims 06/11 NA 2,157K
Jun 23 10:00 New Home Sales May 560,000 619,000
Jun 24 08:30 Durable Goods Orders May -0.6% 3.4%
Jun 24 08:30 Durable Goods Orders excluding transportation May 0.1% 0.4%
Jun 24 10:00 Final Univ. of Michigan Consumer Sentiment June 94.0 94.3

 

 

 

Upcoming Federal Reserve FOMC Meeting Schedule & Rate Hike Probability **

July 2016 26-27, (Tuesday-Wednesday) 7% Chance
September 2016 20-21, (Tuesday-Wednesday) * 24% Chance
November 2016 1-2, (Tuesday-Wednesday) 24% Chance
December 2016 20-21 (Tuesday-Wednesday)* 23% Chance
February 2017 01/31-02/01 (Tuesday-Wednesday)* 27% Chance

 

* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.

** Probability generated from the CME Group FedWatch tool based on the 30-day Fed Funds futures prices.

Tucson Mortgages Home Loan News 6-13-2016

By Todd Abelson NMLS #180858 on .

Weekly Review: week of June 6, 2016
Mortgage Rate Forecast with Chart
Economic Calendar – week of June 13, 2016
Federal Reserve FOMC Meeting Schedule & Current Rate Hike Probability

Weekly Review

The major stock market indexes ended “mixed” for the week as global economic worries reappeared toward the end of the week to send the indexes lower from their best levels.

Global equity markets fell on Thursday following investor concerns about economic growth in the eurozone.

These concerns were triggered by comments made by European Central Bank President Mario Draghi who warned about “lasting economic consequences” after years of weak business output and productivity.  Draghi claimed if structural reforms were not imposed by governments “without undue delay”, the Eurozone economy was at risk of “suffering lasting economic damage.”

Investors also showed concern later in the week following a significant drop in European markets that was triggered by growing fears Great Britain would vote on June 23 to leave the European Union.  A decline in oil prices below $50 per barrel on Friday also seemed to weigh on sentiment after oil hit over $51 per barrel on Wednesday and Thursday.

However, bond prices improved modestly to send yields lower more in response to falling global yields rather than to the week’s scarce economic data.

As for mortgages, the Mortgage Bankers Association (MBA) released their latest Mortgage Application Data for the week ending June 4th showing the overall seasonally adjusted Market Composite Index rose 9.3%.  The seasonally adjusted Purchase Index increased 12.0%, while the Refinance Index increased 7.0%.

Overall, the refinance portion of mortgage activity decreased to 53.8% of total applications from 54.3%.  The adjustable-rate mortgage share of activity was unchanged at 5.0% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balance decreased from 3.85% to 3.83%.

For the week, the FNMA 3.0% coupon bond lost 1.6 basis points to end at $102.88 while the 10-year Treasury yield decreased 5.8 basis points to end at 1.6438%.  Stocks ended the week with the Dow Jones Industrial Average gaining 58.28 points to end at 17,865.34.  The NASDAQ Composite Index lost 47.97 points to close at 4,894.55, and the S&P 500 Index fell 3.06 points to close at 2,096.07.

Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 2.46%, the NASDAQ Composite Index has lost 2.31%, and the S&P 500 Index has gained 2.49%.

This past week, the national average 30-year mortgage rate fell to 3.58% from 3.62% while the 15-year mortgage rate decreased to 2.88% from 2.92%.  The 5/1 ARM mortgage rate fell to 2.97% from 3.00%.  FHA 30-year rates held steady at 3.25% while Jumbo 30-year rates decreased to 3.60% from 3.65%.

 

Mortgage Rate Forecast with Chart

For the week, the FNMA 30-year 3.0% coupon bond ($102.88, -1.6 bp) traded within a narrower 44 basis point range between a weekly intraday high of $103.14 and a weekly intraday low of $102.70 before closing at $102.88 on Friday.

Thursday’s large red candlestick reflects a monthly FNMA 30-year 3.0% coupon bond rollover of minus 27 basis points that distorts the technical chart and must be disregarded.  Monthly rollovers usually occur on the 9th or 10th of each month.

The bond rebounded Friday on stock market weakness and approached the $103.00 resistance level before pulling back.  The doji candlestick formed Friday shows some market indecision among traders.  Support is found at the 25-day moving average at $102.53.  The slow stochastic oscillator continues to show the bond is “overbought” and will be susceptible to a pullback unless the stock market undergoes a correction.

This week coming week the economic calendar heats up with several economic releases that could have a meaningful impact on the bond market including the Federal Reserve’s latest interest rate decision and commentary on monetary policy on Wednesday June 15.  Disappointing economic news may propel bond prices higher to challenge overhead resistance at $103.00 and should this happen rates would remain low or improve slightly.

 

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Chart:  FNMA 30-Year 3.0% Coupon Bond

Economic Calendar – for the Week of June 13, 2016

The economic calendar broadens this coming week with a number of reports likely to attract investor attention.  Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

Date Time

ET

Event /Report /Statistic For Market Expects Prior
Jun 14 08:30 Export Prices excluding agriculture May NA 0.5%
Jun 14 08:30 Import Prices excluding oil May NA 0.1%
Jun 14 08:30 Retail Sales May 0.3% 1.3%
Jun 14 08:30 Retail Sales excluding automobiles May 0.4% 0.8%
Jun 14 10:00 Business Inventories Apr 0.2% 0.4%
Jun 15 07:00 MBA Mortgage Index 06/11 NA 9.3%
Jun 15 08:30 Producer Price Index (PPI) May 0.3% 0.2%
Jun 15 08:30 Core PPI May 0.1% 0.1%
Jun 15 08:30 NY Empire State Manufacturing Index Jun -4.7 -9.0
Jun 15 09:15 Capacity Utilization May -0.2% 0.7%
Jun 15 09:15 Industrial Production May 75.2% 75.4%
Jun 15 10:30 Crude Oil Inventories 06/11 NA -3.226M
Jun 15 14:00 FOMC Rate Decision Jun 0.37% 0.37%
Jun 15 16:00 Net Long-Term TIC Flows Apr NA $78.1B
Jun 16 08:30 Consumer Price Index (CPI) May 0.3% 0.4%
Jun 16 08:30 Core CPI May 0.2% 0.2%
Jun 16 08:30 Initial Jobless Claims 06/11 270,000 264,000
Jun 16 08:30 Continuing Jobless Claims 06/04 NA 2,095K
Jun 16 08:30 Philadelphia Fed Manufacturing Index Jun 1.2 -1.8
Jun 16 08:30 Current Account Balance Q1 -$125.0B -$125.3B
Jun 16 10:00 NAHB Housing Market Index Jun 59 58
Jun 17 08:30 Building Permits May 1,155K 1,172K

 

 

Upcoming Federal Reserve FOMC Meeting Schedule & Rate Hike Probability **

June 2016 14-15, (Tuesday-Wednesday)* 2% Chance
July 2016 26-27, (Tuesday-Wednesday) 21% Chance
September 2016 20-21, (Tuesday-Wednesday) * 35% Chance
November 2016 1-2, (Tuesday-Wednesday) 36% Chance
December 2016 20-21 (Tuesday-Wednesday)* 54% Chance
February 2017 01/31-02/01 (Tuesday-Wednesday)* 57% Chance

 

* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.

** Probability generated from the CME Group FedWatch tool based on the 30-day Fed Funds futures prices.