Tucson Mortgages Home Loan News 10-7-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of September 30, 2019
  • Economic Calendar – week of October 7, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes ended mostly lower but “mixed” for the week with the technology-laden NASDAQ Composite Index bucking the trend to record a modest gain.  Meanwhile, longer-date bonds and Treasuries saw their yields decline as the latest economic data pointed toward a slowdown in global economic activity.

Domestic economic data included the ISM Manufacturing Index, the ISM Non-Manufacturing Index, and the Employment Situation Report for September.  The ISM Manufacturing Index suffered its worst reading since June 2009 with a decline to 47.8% from 49.1% in August.  Economists had been expecting a reading of 50.2%.  Readings below 50% indicate economic contraction.  The ISM Non-Manufacturing Index (Service Sector) for September dropped to 52.6% from 56.4% in August with consensus expectations of 55.4%.  The September Employment Situation Report revealed  nonfarm payrolls increased by 136,000 versus a consensus estimate of 150,000.  However, there were healthy upward revisions in the August and July payrolls numbers.  The unemployment rate fell to 3.5%, which is the lowest since December 1969, but average hourly earnings came up flat when expectations called for a +0.3% increase.

This coming week a resumption of U.S. trade talks with China is scheduled to take place on October 10 and 11 with China’s chief trade negotiator, Vice Premier Liu He, leading the Chinese delegation.  These talks are taking place just ahead of U.S. preparations to hike tariffs on $250 billion in Chinese goods to 30% on October 15.  Speaking of tariffs, the World Trade Organization (WTO) ruled the U.S. can place tariffs on $7.5 billion of European Union (EU) imports in retaliation for government aid from certain EU countries to Boeing rival Airbus.  It was announced the U.S. will be placing 25% tariffs on a range of products imported from the EU, including cheese, olives, wine, single-malt whiskeys, and civil aircraft.  This is the largest award in WTO history, and U.S. officials have said the tariffs should be in place by October 18.  You might want to stock up on these EU products if in the market for them before the tariffs hit.

In housing news CoreLogic released its Home Price Index (HPI) and HPI Forecast for August 2019, showing home prices increased both year-over-year and month-over-month.  Home prices increased nationally by 3.6% from August 2018.  On a month-over-month basis, prices increased by 0.4% in August 2019.


Home prices continue to increase on an annual basis with the CoreLogic HPI Forecast projecting annual price growth will increase 5.8% by August 2020.  On a month-over-month basis, the forecast calls for home prices to increase by 0.3% from August 2019 to September 2019.

Dr. Frank Nothaft, chief economist at CoreLogic, remarked “The 3.6% increase in annual home price growth this August marked a big slowdown from a year earlier when the U.S. index was up 5.5%.  While the slowdown in appreciation occurred across the country at all price points, it was most pronounced at the lower end of the market.  Prices for the lowest-priced homes increased by 5.5%, compared with August 2018, when prices increased by 8.4%. This moderation in home-price growth should be welcome news to entry-level buyers.”

Frank Martell, CoreLogic president and CEO, added “The millennial cohort has now entered the housing market in force and is already driving major changes in buying and selling patterns.  Almost half of the millennials over 30 years old have bought a house in the last three years.  These folks are increasingly looking to move out of urban centers in favor of the suburbs, which offer more privacy and a greener environment.  Perhaps most significantly, almost 80% of all millennials are confident they will become homeowners in the future.”

Elsewhere, the latest mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications decreased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) increased 8.1% for the week ended September 27, 2019.  The seasonally adjusted Purchase Index increased 1% from a week prior while the Refinance Index increased 14%.  Overall, the refinance portion of mortgage activity increased to 58.0% from 54.9% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 5.5% 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 decreased to 3.99% from 4.02% with points unchanged at 0.38 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the UMBS 3.0% coupon bond finished 53.10 basis points higher to close at $101.922 while the 10-year Treasury yield decreased 15.80 basis points to end at 1.529%.  The Dow Jones Industrial Average declined 246.53 points to close at 26,573.72.  The NASDAQ Composite Index gained 42.84 points to close at 7,982.47.  The S&P 500 Index fell 9.78 points to close at 2,952.01.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 13.92%, the NASDAQ Composite Index has gained 20.30%, and the S&P 500 Index has advanced 17.76%.

This past week, the national average 30-year mortgage decreased to 3.62% from 3.75%; the 15-year mortgage rate decreased to 3.25% from 3.39%; the 5/1 ARM mortgage rate decreased to 3.36% from 3.40%; and the FHA 30-year rate decreased to 3.25% from 3.44%.  Jumbo 30-year rates decreased to 3.64% from 3.75%.

Economic Calendar – for the Week of October 7, 2019

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

Mortgage Rate Forecast with Chart – UMBS 30-Year 3.0% Coupon Bond

The UMBS 30-year 3.0% coupon bond ($101.922; +53.10bp) traded within a wider71.9 basis point range between a weekly intraday low of $101.281 on Tuesday and a weekly intraday high of 102.00 on Friday before closing the week at $101.922 on Friday.

Mortgage bonds stair-stepped their way higher throughout the week to move above nearest technical resistance levels.  The move higher coincided with investors taking profits in stocks and moving into less risky bond investments.  As a result, the bond is about to enter “overbought” territory while butting up against technical resistance located at the 23.6% Fibonacci retracement level ($101.904).  If the bond can manage to continue higher toward secondary resistance located at the September 4 intraday high price ($102.25), we should see a slight improvement in mortgage rates.  However, a failure at resistance would likely result in a move back toward support at the 25-day moving average ($101.445) along with a slight worsening in rates.