Tucson Mortgages Home Loan News 8-26-2019
- Weekly Review: week of August 19, 2019
- Economic Calendar – week of August 26, 2019
- Mortgage Rate Forecast with Chart
The major stock market indexes recorded their fourth consecutive week of losses as the U.S.-China trade war continued to weigh on investor sentiment. The stock market showed some early strength last week when the Trump administration announced on Monday it was temporarily halting a ban on U.S. firms doing business with Chinese telecommunications giant Huawei for 90 days. Then on Wednesday, stocks continued higher after the Federal Reserve released the minutes from its July 30–31 monetary policy meeting showing policymakers wanted to remain flexible in responding to economic data.
However, the markets plunged on Friday after China announced they would impose new tariffs on $75 billion worth of U.S. imports, including a 25% levy on U.S. autos, 5% on auto parts, and 5% to 10% on 5,078 products, including soybeans, coffee, whiskey, seafood and crude oil. The U.S. countered by announcing $250 billion of goods and products from China currently being taxed at 25% would be taxed at 30% and a remaining $300 billion of goods and products that were to be taxed at 10% will now be taxed at 15%. President Trump also announced “We don’t need China and, frankly, would be far better off without them,” and “ordered” American companies “to immediately start looking for an alternative to China.”
The US Chamber of Commerce weighed in on the trade war by calling on the United States and China to “get back to the table” to discuss issues important to both sides, including intellectual property and market access. The Chamber’s statement read in part “Today’s Chinese retaliation is unfortunate, but not unexpected. The fact of the matter is that nobody wins a trade war, and the continued tit-for-tat escalation between the U.S. and China is putting significant strain on the U.S. economy, raising costs, undermining investment, and roiling markets.”
In housing last Wednesday, the National Association of Realtors reported Existing Home Sales increased 2.5% to a seasonally adjusted annual rate of 5.42 million units for July. June’s sales rate was revised slightly higher to 5.29 million units from a previously reported 5.27 million units. Total sales were 0.6% higher than the same period a year ago.
The median existing home price for all housing types rose 4.3% year-over-year to $280,800 to reach the 89th consecutive month of year-over-year price gains. The median existing single-family home price increased 4.5% year-over-year to $284,000.
Regionally, Existing Home Sales were 2.9% lower in the Northeast; 1.6% higher in the Midwest; 1.8% higher in the South; and 8.3% higher in the West.
Median home prices were 1.0% lower in the Northeast slipping to $305,800; 8.1% higher in the Midwest rising to $226,300; 5.2% higher in the South climbing to $245,100); and 3.7% higher in the West increasing to $408,000. Single-family home sales increased 2.8% month-over-month to a seasonally adjusted annual rate of 4.84 million, and were 1.0% higher year-over-year.
The inventory of homes for sale at the end of July declined to 1.89 million from 1.92 million in June while inventory was 1.6% lower than a year ago. Unsold inventory fell to a 4.2-months’ supply at the current sales rate versus 4.4 months’ for June.
Friday, the Census Bureau released their latest New Home Sales report showing sales declined 12.8% month-over-month to a seasonally adjusted annual rate of 635,000 in July. This was below the consensus forecast of 645,000. However, June’s New Home Sales report of 645,000 was revised significantly higher to 728,000. Year-over-year, New Home Sales were 4.3% higher.
Regionally, New Home Sales were 50.0% higher in the Northeast; 11.1% lower in the Midwest; 16.1% lower in the South; and 14.2% lower in the West.
The median new home price fell 4.5% year-over-year to $312,800 while the average sales price declined 1.1% to $388,000. The inventory of new homes for sale increased to 6.4 months at the July sales rate from 5.5 months in June. Although there was a significant upward revision for June Sales, there was no follow-through sales momentum during July even with low mortgage rates and lower median home sales prices. Sales were notably lower in three of the four national regions and the total number of new homes sold was below the 646,000 annual sales rate originally reported for June.
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) fell 0.9% for the week ended August 16, 2019. The seasonally adjusted Purchase Index decreased 4% from a week prior while the Refinance Index increased 0.4%. Overall, the refinance portion of mortgage activity increased to 62.7% from 61.4% of total applications from the prior week. The adjustable-rate mortgage share of activity increased to 6.4% from 6.0% 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 3.90% from 3.93% with points remaining unchanged at 0.35 for 80 percent loan-to-value ratio (LTV) loans.
For the week, the UMBS 3.0% coupon bond finished 12.5 basis points lower to close at $101.656 while the 10-year Treasury yield decreased 3.54 basis points to end at 1.5266%. The Dow Jones Industrial Average fell 257.11 points to close at 25,628.90. The NASDAQ Composite Index dropped 144.22 points to close at 7,751.77. The S&P 500 Index lost 41.57 points to close at 2,847.11. Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 9.87%, the NASDAQ Composite Index has gained 16.83%, and the S&P 500 Index has advanced 13.57%.
This past week, the national average 30-year mortgage climbed to 3.63% from 3.58%; the 15-year mortgage rate increased to 3.33% from 3.25%; the 5/1 ARM mortgage rate rose to 3.42% from 3.40%; and the FHA 30-year rate increased to 3.30% from 3.25%. Jumbo 30-year rates increased to 3.75% from 3.69%.
Economic Calendar – for the Week of August 26, 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 ($101.656; -12.5 bp) traded within a narrower 37.5 basis point range between a weekly intraday low of $101.422 on Thursday and a weekly intraday high of 101.797 on Friday before closing the week at $101.656 on Friday.
Mortgage bonds continued to trade in a “sideways,” range-bound direction this past week, trading down to touch technical support on Thursday before bouncing a little higher on Friday. The bond is currently trading on a sell signal from a negative slow stochastic crossover occurring last Tuesday. However, the bond is no longer “overbought” and is slightly less susceptible to a pullback. The stock market has become more volatile of late and selling pressure may continue this week after last Friday’s sharp sell-off unless bargain-hunters step in to buy stocks. Should the stock market continue to correct, we could see investors move money into perceived safer-haven assets like Treasuries, mortgage bonds, and precious metals. This would improve bond prices and slightly reduce yields resulting in slightly lower interest rates. Mortgage rates should remain stable.