Tucson Mortgages Home Loan News 11-4-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of November 4, 2019
  • Economic Calendar – week of November 4, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes ended higher, setting new all-time highs.  Mortgage Bonds were alsol higher for the week, suriving an action packed news week and strongr than anticipated Jobs Report.

The Bureau of Labor Statistics (BLS) reported that there were 128,000 jobs created in the month of October, which higher than the 90,000 expected.  Additionally, there were, 95,000 in positive revisions to the previous two months – August was revised higher by 51,000 and September was revised higher by 44,000.

The Unemployment Rate ticked up from 3.5% to 3.6%.  Let’s take a look at why – There are two different surveys within the Jobs Report – The Business Survey, where the headline jobs figure is derived from, and the Household Survey, where the Unemployment Rate comes from.  The Household Survey also has a job creation component, which said that there were 241,000 job creations.  But there is another component that goes into the Unemployment rate – The labor force increased by 325,000, and since the job creation component was smaller than the gains in the labor force, the unemployment rate increased.

Average hourly earnings increased from 2.9% year over year to 3.0%.  Average Weekly earnings, which is even more important, remained stable at 2.7% year over year.

In housing news, the Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed that home prices were up 3.2% year over year in August.  Even though appreciation has moderated, 3.2% is still a meaningful level for wealth creation.  Remember – On a $300,000 home, a 3.2% gain in appreciation translates to $9,600 over the course of the year.

Pending Home Sales, which measures signed contracts on existing homes and is a good leading indicator for Existing Home Sales, were up 1.5% in September.  This reading was stronger than expectations of a 0.7% gain and the second-best number in the last 12 months.  The gains were broad based, with sales up in every region.  Pending Home Sales are now up 3.9% annually, up from 2.5%.  Housing data has been and remains very strong.

The advanced or first look at Q3 GDP showed that it dropped slightly from 2% to 1.9% but was stronger than expectations of 1.7%.  Consumer Spending was up 2.9%, which was slightly stronger than the 2.6% expected.

The Mortgage Bankers Association reported their Mortgage Application data, showing that overall Mortgage Application volume was up 0.6%.  Applications to purchase a home were up 2% for the week and are still up 10.0% from this time last year.  Refinances were down 1.0%, but they are up 134% year over year.  The Refinance share of mortgage activity decreased from 58.5% to 58.0%.  ARM’s made up 5.2% of all applications.  12% of loans were FHA.

The average 30-year mortgage increased from 4.02% to 4.05% week over week, bringing rates about 105 bp or about 1.0% lower than this time last year.  Remember that the rate the MBA cites typically has some fraction of points included.

The Fed cut rate by 0.25% for the third time this year. They removed the language that ‘The Fed will act as appropriate to sustain the expansion’ and replaced it with ‘Will assess the appropriate path of the Fed Funds Rate’. This means instead of certain future cuts, the Fed will be data dependent. The reasons for the cut were global developments and muted inflation. Powell also said that the 3 cuts this year were insurance cuts and he is not thinking about taking them back, which the markets really seemed to like.

Personal Income and Spending was released for the month of September, showing that incomes were up 0.3%, which was in-line with estimates.  Spending was up 0.2%, which was also in-line with expectations.

The highly anticipated Personal Consumption Expenditures (PCE) Report, which is the Fed’s favored measure of inflation, showed that headline inflation dropped from 1.4% to 1.3%, which was lower than estimates of 1.4%.

The Core rate, which strips out food and energy prices and is the most important reading that we focus on, was reported at 1.7%, which was lower than August’s reading of 1.8%.

Economic Calendar – for the Week of October 28, 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

Mortgage Bonds ended the week higher, breaking above the 100, 25, and 50-day Moving Averages.  On Friday they moved lower after the strong Jobs Report, but were able to remain just above the dual floor of support, formed by the 50 and 25-day Moving Averages.  Bonds will try to remain above these levels, but may have some difficulty with optimism that an initial trade deal with China may be signed in the next few weeks.  As a result, Stocks will likely rally.  Keep a close eye to make sure support holds for Bonds, otherwise rates could move a bit higher.