Tucson Mortgages Home Loan News 7-22-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of July 15, 2019
  • Economic Calendar – week of July 22, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes began the week by setting new all-time closing highs on Monday, but then slid lower during the remainder of the week as second quarter earnings season got under way.  Meanwhile, bond and U.S. Treasury prices pushed higher, sending yields slightly lower.

The week’s economic data were mostly encouraging.  Retail Sales recorded a second month of solid gains in June rising 0.4% versus a consensus forecast of 0.2%.  Regional manufacturing indexes were positive with the New York Empire State Manufacturing Index bouncing back to a reading of 4.3 from last month’s -8.6.  The Philadelphia Fed Manufacturing Index was reported far higher than expected at 21.8 compared to expectations of just 5.0.

Rumors circulated during the week about the possibility of a 50 basis point rate cut by the Federal Reserve at its July 30–31 monetary policy meeting.  Last week, Fed officials sent “mixed signals” over how aggressive they would be in cutting short-term interest rates.  Fed Chairman Jerome Powell stated policymakers would “act as appropriate amid increased uncertainties,” while Dallas Fed President Robert Kaplan reported he only favored a “modest tactical adjustment” to rates which investors interpreted as meaning only one quarter-point cut this year.  New York Fed President John Williams chimed in during a speech to say “it pays to act quickly to lower rates at the first sign of economic distress.”  Fed Vice Chairman Richard Clarida then announced on Fox Business Network that “you don’t have to wait until things get so bad to have a dramatic series of rate cuts.”  According to a report from The Wall Street Journal last Friday, the Fed is indicating it will go ahead with a quarter-point cut.  By Friday’s close, the Fed Funds Futures markets were pricing in a 100% chance of a 25-basis point cut and a 22.5% chance of a 50-basis-point cut at the end of July.

In housing last Tuesday, the National Association of Home Builders (NAHB) released their latest Housing Market Index showing the Index increased to 65 this July from 64 in June.  The July reading exceeded consensus market expectations of 64.

The sub-index for current single-family homes edged up to 72 from 71 in June while the measure for home sales over the next six months increased to 71 from 70.  The sub-index for prospective buyers increased to 48 from 47.

The NAHB Housing Market Index in the United States averaged 50.40 from 1985 until 2019, reaching an all- time high of 78 in December of 1998 and a record low of 8 in January of 2009.

Wednesday, the Commerce Department reported Housing Starts fell 0.9% month-over-month in June to a seasonally adjusted annual rate of 1.253 million units.  This was below the consensus forecast of 1.270 million.  Furthermore, Building Permits dropped 6.1% month-over-month to a seasonally adjusted annual rate of 1.220 million, and this was below the consensus forecast of 1.300 million.


In both Starts and Permits, the weakness was attributed to declines in multi-unit dwellings.  Single-family starts improved by 3.5% month-over-month to 847,000 while single-family permits increased 0.4% month-over-month.

However, Permits for multi-unit dwellings dropped 16.8% month-over-month in June, led by a 20.7% decline in dwellings with five or more units.

Starts for multi-unit dwellings declined 9.4% month-over-month in June.  Regionally, single-family housing starts in June were 6.1% higher in the Northeast; 8.0% higher in the Midwest; 1.1% higher in the South, and 9.8% higher in the West.

Elsewhere, mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications decreased 1.1% from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 1.1% for the week ended July 12, 2019.  The seasonally adjusted Purchase Index declined 4% from a week prior while the Refinance Index increased 2%.  Overall, the refinance portion of mortgage activity increased to 50.0% from 48.7% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 4.9% of total applications from 5.3%.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.12% from 4.04% with points increasing to 0.38 from 0.37 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 3.5% coupon bond gained 23.5 basis points to close at $102.313 while the 10-year Treasury yield decreased 5.60 basis points to end at 2.05%.  The Dow Jones Industrial Average fell 177.83 points to close at 27,154.20.  The NASDAQ Composite Index dropped 97.65 points to close at 8,146.49.  The S&P 500 Index lost 37.16 points to close at 2,976.61.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 16.40%, the NASDAQ Composite Index has gained 22.78%, and the S&P 500 Index has advanced 18.74%.

This past week, the national average 30-year mortgage rate fell to 3.88% from 3.95%; the 15-year mortgage rate decreased to 3.59% from 3.63%; the 5/1 ARM mortgage rate fell to 3.65% from 3.70%; and the FHA 30-year rate dropped to 3.55% from 3.63%.  Jumbo 30-year rates decreased to 3.90% from 3.97%.

Economic Calendar – for the Week of July 22, 2019

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 3.5% coupon bond ($102.313; +23.5 bp) traded within a 43.8 basis point range between a weekly intraday low of $101.984 on Tuesday and a weekly intraday high of 102.422 on Thursday before closing the week at $102.313 on Friday.

Mortgage bonds made a move higher during the latter half of the week to break above the 25-day moving average and resistance provided by the 23.6% Fibonacci retracement level.  As the bond is still trading on a buy signal generated last Tuesday and not yet “overbought,” we can anticipate further price appreciation toward $102.50 and perhaps secondary resistance located at $102.73.  Should this scenario play out, mortgage rates would improve moving slightly lower.