Tucson Mortgages Home Loan News 3-12-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of March 5, 2018
  • Economic Calendar – week of March 12, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes completely erased last week’s losses with the S&P 500 and the Dow Jones Industrial Average climbing 3.5% and 3.3% respectively while the Nasdaq Composite Index advanced by 4.2% to close Friday with a new all-time high.  As a result, bond market prices continued to slip lower leading to slightly higher yields and interest rates.

Thursday, market participants were worried about President Trump signing proclamations imposing tariffs on steel (25%) and aluminum (10%) imports.  However, investors’ initial concerns over the possibility of a trade war breaking out were somewhat abated after the president later tweeted that Canada and Mexico would be exempt “if a new & fair NAFTA trade agreement is signed.”  The president also suggested other favored trading partners might also be excluded.  Tariffs are viewed as inflationary as they raise input costs resulting in higher prices of finished goods.  However, it appears the president will be using these tariffs as bargaining chips to renegotiate more favorable trade deals for the United States in the coming months.

In other significant economic news, the Labor Department released its closely watched Employment Situation Summary (jobs report) Friday morning.  The report revealed robust job growth with nonfarm payrolls increasing by 313,000 versus a consensus forecast of 210,000 new jobs.  The unemployment rate held steady at 4.1%, but more importantly, wage inflation slowed with average hourly earnings showing a deceleration in the year-over-year change to 2.6% at the end of February from 2.8% for the 12 months ending in January, and this helped spark a rally on Wall Street.

In housing, the number of mortgage applications showed a decrease according to the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) increased by 0.3% during the week ended March 2, 2018.  The seasonally adjusted Purchase Index decreased by 1.0% from the week prior while the Refinance Index increased 2.0%.

Overall, the refinance portion of mortgage activity was unchanged at 41.8% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 7.3% of total applications from 6.7%.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.65% from 4.64% with points decreasing to 0.58 from 0.63.

For the week, the FNMA 4.0% coupon bond lost 17.2 basis points to close at $102.203 while the 10-year Treasury yield increased 2.77 basis points to end at 2.8956%.  The major stock indexes moved sharply higher on the week.

The Dow Jones Industrial Average moved 797.68 points higher to close at 25,335.74.  The NASDAQ Composite Index added 302.94 points to close at 7,560.81, a new all-time high.  The S&P 500 Index gained 95.32 points to close at 2,786.57.  Year to date on a total return basis, the Dow Jones Industrial Average has risen 2.49%, the NASDAQ Composite Index has gained 9.52%, and the S&P 500 Index has advanced 4.22%.

This past week, the national average 30-year mortgage rate increased to 4.58% from 4.55%; the 15-year mortgage rate increased to 3.94% from 3.91%; the 5/1 ARM mortgage rate increased to 3.63% from 3.60% and the FHA 30-year rate increased to 4.38% from 4.34%.  Jumbo 30-year rates increased to 4.60% from 4.57%.

Economic Calendar – for the Week of March 12, 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 ($102.203, -17.2 bp) traded within a narrower 45.3 basis point range between a weekly intraday high of $102.547 on Monday and a weekly intraday low of $102.094 on Wednesday before closing the week at $102.203 on Friday.

The bond continued to trade in a sideways direction for the second consecutive week between nearest support and resistance levels as noted on the chart below.  The chart shows a weak buy signal from a positive stochastic crossover on Thursday just above the “oversold” level.  However, unless the stock market shows signs of faltering, we could very well see the current sideways trading pattern continue in the coming week with the bond trading between its 25-day moving average and support at $102 resulting in fairly stable mortgage rates at current levels.