Tucson Mortgages Home Loan News 7-29-2019
- Weekly Review: week of July 22, 2019
- Economic Calendar – week of July 29, 2019
- Mortgage Rate Forecast with Chart
The major stock market indexes rebounded from losses recorded during the prior week with the S&P 500 and NASDAQ Composite indexes reaching new record highs in conjunction with improved investor sentiment toward corporate earnings news. The second-quarter earnings reporting season is now in full swing with 145 of the S&P 500 companies having delivered their earnings results this past week. Although overall earnings have been somewhat flat, a greater number of companies than usual have been beating their earnings estimates. The companies that have managed to beat earnings expectations have been rewarded with stock price gains while those missing have been punished with stock sell-offs. Bonds traded relatively flat to slightly lower with U.S. Treasury prices edging lower to send yields a few basis points higher.
The week’s economic data was a mixed bag, as usual, with existing home sales falling more than expected in June as did manufacturing activity in the mid-Atlantic region. Last Wednesday, IHS Markit’s survey of overall manufacturing activity was reported falling to 50, the level dividing expansion and contraction. On the plus side, durable goods orders for June (excluding transportation) increased far more than expected while weekly jobless claims dropped sharply to touch a three-month low. Furthermore, the Commerce Department reported second quarter gross domestic product had grown at an annualized rate of 2.1%, exceeding the consensus forecast of 1.85%.
In housing last Tuesday, the Federal Housing Finance Agency released their House Price Index (HPI) report for May 2019. The FHFA House Price Index recorded a 0.1 percent increase in U.S. home prices in May 2019 from the previous month. From May 2018 to May 2019, house prices were up 5.0 percent.
For the nine census divisions, seasonally adjusted monthly price changes from April 2019 to May 2019 ranged from -1.0 percent in the East South Central division to +0.5 percent in the South Atlantic division.
The 12-month changes were all positive, ranging from +3.6 percent in the West South Central division to +6.7 percent in the Mountain division.
Also last Tuesday, the National Association of Realtors (NAR) reported Existing Home Sales for June declined despite cheaper mortgages.
Existing Home Sales declined 1.7% month-over-month in June to a seasonally-adjusted annual rate of 5.27 million. This was below the consensus forecast of 5.30 million and below an upwardly revised 5.36 million reported for May. Total sales were 2.2% lower than the same period a year ago.
The median existing home price for all housing types increased 4.3% year-over-year to a record $285,700, representing the 88th consecutive month of year-over-year gains.
The median existing single-family home price was $288,900, up 4.5% year-over-year.
Regionally, existing home sales were +3.0% in the Northeast; +2.3% in the Midwest; -6.1% in the South; and -5.3% in the West.
Median home prices were +4.8% to $321,200 in the Northeast; +6.7% to $230,400 in the Midwest; +4.9% to $248,600 in the South; and +2.3% to $410,400 in the West. Single-family home sales fell 1.5% month-over-month to a seasonally adjusted annual rate of 4.69 million and were 1.7% lower year-over-year. The inventory of homes for sale at the end of June increased to 1.93 million from 1.91 million in May, and unsold inventory stood at 4.4-month supply at the current sales rate compared to 4.3 months in May. Inventory remains below the 6.0-months’ supply typically associated with a more balanced market. Overall, the recent decline in mortgage rates has failed to stimulate a meaningful increase in existing home sales that have been limited by a shortage of available housing inventory at lower price points. NAR’s chief economist Lawrence Yun remarked “Home sales are running at a pace similar to 2015 levels — even with exceptionally low mortgage rates, a record number of jobs and a record high net worth in the country.”
Wednesday, the Commerce Department reported New Home Sales rebounded 7.0% in June to a seasonally adjusted annual rate of 646,000 units. Although this was below the consensus estimate of 660,000, it was above a downwardly revised 604,000 recorded for May. Sales for April and March were also revised lower. New Home Sales increased 4.5% from a year ago.
Regionally, New Home Sales for June were -4.2% in the Northeast; -26.3% in the Midwest; +0.3% in the South; and +50.4% in the West. The median new home price was essentially unchanged year-over-year at $310,400 while the average sales price was 0.4% lower at $368,600.
The inventory of new homes for sale dropped to a 6.3 months’ supply at the June sales rate from 6.7 months in May. Homes priced at $399,999 or less accounted for 73% of new homes sold, versus 71% in May and 70% a year ago. Overall, sales activity remains weak despite the solid fundamental support from low mortgage rates, low unemployment, and a tight supply of existing homes for sale.
Elsewhere, mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications decreased 1.9% from the prior week. The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 1.9% for the week ended July 19, 2019. The seasonally adjusted Purchase Index declined 2% from a week prior while the Refinance Index decreased 2%. Overall, the refinance portion of mortgage activity decreased to 49.8% from 50.0% of total applications from the prior week. The adjustable-rate mortgage share of activity decreased to 4.7% of total applications from 4.9%. According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.08% from 4.12% with points decreasing to 0.33 from 0.38 for 80 percent loan-to-value ratio (LTV) loans.
For the week, the FNMA 3.5% coupon bond finished unchanged to close at $102.313 while the 10-year Treasury yield increased 3.08 basis points to end at 2.0808%. The Dow Jones Industrial Average rose 38.25 points to close at 27,192.45. The NASDAQ Composite Index gained 183.72 points to close at 8,330.21. The S&P 500 Index added 49.25 points to close at 3,025.86. Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 16.57%, the NASDAQ Composite Index has gained 25.54%, and the S&P 500 Index has advanced 20.70%.
This past week, the national average 30-year mortgage rate rose to 3.91% from 3.88%; the 15-year mortgage rate decreased to 3.56% from 3.59%; the 5/1 ARM mortgage rate rose to 3.70% from 3.65%; and the FHA 30-year rate dropped to 3.50% from 3.55%. Jumbo 30-year rates increased to 3.91% from 3.90%.
Economic Calendar – for the Week of July 29, 2019
Economic reports having the greatest potential impact on the financial markets are highlighted in bold.
Mortgage Rate Forecast with Chart – UMBS 30-Year 4.0% Coupon Bond
The UMBS 30-year 3.5% coupon bond ($102.313; Unchanged) traded within a slightly narrower 37.5 basis point range between a weekly intraday low of $102.203 on Friday and a weekly intraday high of 102.578 on Thursday before closing the week at $102.313 on Friday.
Mortgage bonds have mostly traded “sideways” since the end of May as highlighted in the yellow rectangle in the chart below, and continued to trade sideways this past week. They have managed to stay above the 25-day moving average and the 23.6% Fibonacci retracement level this past week, and these levels provide a degree of technical support. The bond is trading on a buy signal generated last Wednesday and not yet “overbought” so we could see further price appreciation toward the top of the current sideways trading range as highlighted below. Should this scenario play out, mortgage rates could improve by moving slightly lower.