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Housing Momentum Continues

Thursday, December 31st, 2020

Investors reacted this week to major economic data, Covid headlines, and negotiations in Congress for an additional aid package. Despite the wide range of news, however, it was a relatively quiet week for mortgage markets, and rates remained near record low levels.

While the solid rebound from unprecedented job losses caused by the partial shutdown of the economy has continued, the latest data released on Friday fell short of expectations. In November, the economy gained 245,000 jobs, below the consensus forecast of 450,000. Strength was seen in transportation, professional services, and health care. The economy has now recovered more than half of the 22 million jobs lost in March and April.

The other major areas of the report contained more optimistic news. From a level of 6.9% last month, the unemployment rate fell to 6.7%, matching expectations. Average hourly earnings, an indicator of wage growth, rose 0.3% from October, above the consensus for an increase of 0.1%, and were an impressive 4.4% higher than a year ago.

Another significant economic report released this week, the national manufacturing index from the Institute of Supply Management (ISM), was in line with expectations. In November, ISM came in at 57.5, the sixth straight month of readings above 50, meaning that the sector is expanding. Since many consumers are spending less money on travel and leisure activities due to the pandemic, they are buying more goods, which has boosted manufacturing activity.

Looking ahead, investors will continue watching Covid case counts, progress on vaccines, and negotiations for additional government stimulus. Beyond that, the Consumer Price Index (CPI) will come out on Thursday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. The next European Central Bank meeting also will take place on Thursday.

Weekly Change
10yr Treasuryrose0.01
Dowrose300
NASDAQrose100
Calendar
Tue1/5ISM Manufacturing
Thu1/7ISM Services
Fri1/8Employment

All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline)

Job Gains Fall Short

Monday, December 7th, 2020

Investors reacted this week to major economic data, Covid headlines, and negotiations in Congress for an additional aid package. Despite the wide range of news, however, it was a relatively quiet week for mortgage markets, and rates remained near record low levels.

While the solid rebound from unprecedented job losses caused by the partial shutdown of the economy has continued, the latest data released on Friday fell short of expectations. In November, the economy gained 245,000 jobs, below the consensus forecast of 450,000. Strength was seen in transportation, professional services, and health care. The economy has now recovered more than half of the 22 million jobs lost in March and April.

The other major areas of the report contained more optimistic news. From a level of 6.9% last month, the unemployment rate fell to 6.7%, matching expectations. Average hourly earnings, an indicator of wage growth, rose 0.3% from October, above the consensus for an increase of 0.1%, and were an impressive 4.4% higher than a year ago.

Another significant economic report released this week, the national manufacturing index from the Institute of Supply Management (ISM), was in line with expectations. In November, ISM came in at 57.5, the sixth straight month of readings above 50, meaning that the sector is expanding. Since many consumers are spending less money on travel and leisure activities due to the pandemic, they are buying more goods, which has boosted manufacturing activity.

Looking ahead, investors will continue watching Covid case counts, progress on vaccines, and negotiations for additional government stimulus. Beyond that, the Consumer Price Index (CPI) will come out on Thursday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. The next European Central Bank meeting also will take place on Thursday.

Weekly Change
10yr Treasuryrose0.10
Dowrose300
NASDAQrose200
Calendar
Mon12/1JOLTS
Thu12/1CPI
Fri12/4ECB Meeting

Strong New Home Sales

Monday, November 30th, 2020

The short holiday week was a relatively quiet period for mortgage rates. A large batch of economic reports on Wednesday had little impact, and rates remained near record low levels.

Sales of new homes continued at a blistering pace in October. The following weakness during the spring due to the partial shutdown of the economy, new home sales have maintained an annualized rate of around one million units for four straight months, the best levels since 2006. Builders say that they are putting up new homes as quickly as possible, but that a lack of land, labor, and materials is limiting the pace of construction.

The reduced economic activity resulting from the pandemic has caused a decline in inflation, which has helped keep mortgage rates low. In October, the core PCE price index was just 1.4% higher than a year ago, down from an annual rate of increase of 1.5% last month. Core PCE is the inflation indicator favored by Fed officials, and their stated target is 2.0%.

On Tuesday, the Federal Housing Finance Agency (FHFA) announced that the baseline conforming loan limit for Fannie Mae and Freddie Mac mortgages in 2021 will increase by 7.5% from $510,400 to $548,250. The new limit for most high-cost areas will be $822,375 or 150% of $548,250. With the continued strength in the housing market and rising home values, this will be the fifth consecutive year of increases.

Looking ahead, investors will continue watching Covid case counts, progress on vaccines, and government stimulus measures. Beyond that, the monthly Employment report will be released on December 4, and these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Mortgage markets will be closed on Thursday and will close early at 2:00 et on Friday for Thanksgiving.

Weekly Change
10yr Treasuryrose0.02
Dowrose600
NASDAQrose200
Calendar
Mon12/1ISM Manufacturing
Thu12/1Construction
Fri12/4Employment

Divided Government

Monday, November 9th, 2020

During a week of election uncertainty, mortgage markets held relatively steady, as investors expect that control of the government will remain divided between the Democrats and the Republicans. In addition, the key labor market data came in roughly on target, and the Fed made no policy changes at Thursday’s meeting. Mortgage rates remained near record low levels.

While the final outcome of the election still remains uncertain at this time, investors expect that the Republicans will retain control of the Senate and Democrats of the House. For mortgage markets, divided government typically is viewed as positive, because it becomes more difficult to pass large new programs such as an additional stimulus package. Since funding government spending increases the supply of bonds, a lower level is more favorable for mortgage rates.

Friday’s highly anticipated monthly labor market report revealed that the solid rebound from unprecedented job losses caused by the partial shutdown of the economy has continued. In October, the economy gained a substantial 638,000 jobs, which was close to expectations. Particular strength was seen in hospitality and professional services. The economy has now recovered more than half of the 22 million jobs lost in March and April.

The big surprise was the shocking drop in the unemployment rate. From a level of 7.9% last month, it plunged to 6.9%, which was far below the consensus forecast of 7.7%. The data on job gains comes from actual figures provided by large companies, while the unemployment rate is based on a household survey conducted by the Labor Department. Although these two measures show similar results in the long run, it is common for them to display different levels of strength from month to month.

Thursday’s Fed meeting produced no surprises and had no impact on mortgage rates. As widely expected, Fed officials refrained from making any changes during the election uncertainty with financial markets performing smoothly. In fact, the statement released after the meeting was nearly identical to the prior one.

Looking ahead, investors will continue watching election results, covid case counts, and progress on vaccines. It will be a light week for economic data. The JOLTS report, which measures job openings and labor turnover rates, will be released on Tuesday. The Consumer Price Index (CPI) will come out on Thursday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. Mortgage markets will be closed on Wednesday in observance of Veterans Day.

Weekly Change
10yr Treasuryfell0.05
Dowrose1,800
NASDAQfell900
Calendar
Mon11/10JOLTS
Thu11/12CPI
Fri11/12Jobless Claims

Housing Sector Shines

Wednesday, October 28th, 2020

Increased expectations for additional government stimulus were modestly negative for mortgage markets this week, while strong housing data had little impact. Rates ended a little higher but remained near record low levels.

The spectacular rebound in the housing sector from weakness during the spring due to the partial shutdown of the economy has continued. In September, Existing Home Sales increased 9% from August and were 21% higher than a year ago, at the best level since May 2006. The median existing-home price was 15% higher than a year ago.

Inventory levels were down 19% from a year ago and remained the primary obstacle to even stronger sales activity. The number of homes for sale was at just a 2.7-month supply nationally, well below the 6.0-month supply which is considered a healthy balance between buyers and sellers. However, Tuesday’s report on housing starts contained encouraging news in this area. In September, single-family housing starts rose 9% from August and were 22% higher than a year ago. Similarly, single-family building permits, a leading indicator of future construction, were 24% higher than a year ago.

Lawmakers continue to negotiate an additional government aid package, and most investors expect a deal either before or shortly after the election. Increased fiscal stimulus would be unfavorable for mortgage rates for two primary reasons. First, government spending boosts economic activity, which raises the outlook for future inflation. In addition, the supply of bonds increases to fund the spending, so yields must rise to entice investors to purchase more bonds.

Investors will remain focused on medical advances to fight the coronavirus and negotiations for additional government stimulus measures. Beyond that, New Home Sales will be released on Monday. Third quarter gross domestic product (GDP), the broadest measure of economic activity, will come out on Thursday. The core PCE price index, the inflation indicator favored by the Fed, will be released on Friday.

Weekly Change
10yr Treasuryrose0.10
Dowfell300
NASDAQfell200
Calendar
Mon10/26New Home Sales
Thu10/29GDP
Fri10/30Core PCE

All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline)

New Home Sales Surge

Monday, August 31st, 2020

It was a volatile week for mortgage rates with stronger than expected housing data, big news from the Fed, and a postponement of the new fee on refinances. The net effect was roughly offsetting, however, and rates ended the week little changed.
The swift rebound in housing market activity from the weakness due to the shutdown of much of the economy to slow the spread of the coronavirus has continued. Like last week’s surprisingly strong existing home sales report, Tuesday’s new home sales data far surpassed expectations. In July, new home sales rose 14% from June to the best level since 2006 and were 36% higher than a year ago.
In a highly anticipated speech on Thursday, Fed Chair Powell outlined a change in policy in which the Fed will be more willing to tolerate higher inflation to help support the labor market. The new policy is described as “average inflation targeting,” which means that inflation will be allowed to run above the Fed’s 2.0% goal “for some time” following periods when it has run below that target. As a result of the change, it is expected that the Fed will raise the federal funds rate at a slower pace than in the past when labor market conditions improve. Although this was a major announcement, it had been telegraphed to investors for weeks, so its impact on mortgage rates was minimal.
One reason for the shift in Fed policy is that the reduced economic activity resulting from the pandemic has caused a decline in inflation, which has helped keep mortgage rates low. In July, the core PCE price index was just 1.3% higher than a year ago, up from an annual rate of increase of 1.1% last month. Core PCE is the inflation indicator favored by the Fed.
On August 12, the Federal Housing Finance Agency (FHFA) unexpectedly announced that a new refinance fee of 0.5% will be assessed for cash-out andno-cash-out refinances sold to Fannie Mae and Freddie Mac beginning September 1. After severe opposition swiftly emerged from many members ofthe mortgage industry, the FHFA announced on Wednesday that the implementation date for the new 0.5% fee will be postponed from September 1 to December 1 and that refinance loans with loan balances below $125,000will be exempted. This was welcome news for consumers in the market for refinancing.
Looking ahead, investors will continue watching for news about medical advances, government stimulus programs, Fed monetary policy changes, andplans for reopening the economy. Beyond that, the monthly Employment report will come out on Friday, and these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. In addition, the ISM national manufacturing index will be released on Tuesday and the ISM national services index on Thursday.

Weekly Change
10yr Treasuryrose0.10
Dowrose600
NASDAQrose400
Calendar
Tue9/1ISM Manufacturing
Thu9/3ISM Services
Fri9/4Employment

All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline)

Massive Job Gains Continue

Tuesday, August 11th, 2020

This week’s important economic reports modestly surpassed
investor expectations, and the economic recovery has continued to be
faster than anticipated. Despite the strong data, though, mortgage
rates dropped slightly to fresh record low levels.Friday’s highly anticipated monthly labor market report revealed that the stronger than expected rebound from the unprecedented job losses caused by the partial shutdown of the economy has continued. In July, the economy added a massive 1.8 million jobs, which was above the consensus forecast for an increase of 1.5 million. For perspective, typical monthly readings were for job gains of around 200,000 in 2019.The data from other areas of the report was similarly
encouraging. The unemployment rate dropped sharply from 11.1% to 10.2%,
which was better than the consensus forecast of 10.5%. Average hourly
earnings, an indicator of wage growth, unexpectedly rose in July and
were 4.8% higher than a year ago. According to the Labor Department,
the greatest strength was seen in hospitality, government, retail,
business services, and health care.Two other major economic reports released this week also
exceeded expectations. The ISM national services index rose to 58.1,
which was well above the consensus forecast of 55.0, and was the
highest level since February 2019. Similarly, the ISM national
manufacturing index increased to 54.2, the highest level since March
2019. Readings above 50 indicate an expansion in the sector.Looking ahead, investors will continue watching for news
about medical advances, government stimulus programs, Fed monetary
policy changes, and plans for reopening the economy. Beyond that, the
Consumer Price Index (CPI) will come out on Wednesday. CPI is a widely
followed monthly inflation report that looks at the price change for
goods and services. Retail Sales will be released on Friday. Since
consumer spending accounts for about 70% of all economic activity in
the US, the retail sales data is a key indicator of growth.All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline)

Weekly Change
10yr Treasuryfell0.01
Dowrose800
NASDAQrose300
Calendar
Wed8/12CPI
Thu8/13Import Prices
Fri8/14Retail Sales

All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline)

Consumer Spending Surges Again-July 2020

Sunday, July 19th, 2020

While the most significant economic data was stronger than expected this week, investors remained more focused on the concerning spread of the coronavirus in many areas. Mortgage rates dropped slightly to fresh record low levels.

Due to the shutdown of much of the economy to combat the pandemic, consumer spending dropped sharply in March and April. A swift rebound has been taking place, however, as the latest results again far exceeded expectations. In June, retail sales jumped 7.5% from May, and strength was seen in a wide range of areas. Since consumer spending accounts for about 70% of all economic activity in the US, the retail sales data is a key indicator of current financial conditions.

The housing market also has been recovering more quickly than expected. In June, housing starts surged 17% from May, while building permits, a leading indicator of future construction, rose modestly from May. The NAHB housing index showed that home builder confidence shot up from 58 to 72, which was far above the consensus forecast. Several large home building companies have commented that they are hiring back workers and restoring disrupted supply chains for materials as quickly as possible to help meet the unexpectedly large demand for homes. Since a lack of inventory has been holding back home sales in many regions, this news was very encouraging.

Thursday’s European Central Bank (ECB) meeting revealed no policy changes or significant surprises. ECB officials expect rates to remain at their “present or lower” levels until they see the outlook for inflation rise to their target level of 2.0%, and they project that European economic growth will decline by 8% to 10% this year.

Looking ahead, investors will continue watching for news about medical advances, Fed actions, government fiscal stimulus programs, and plans for reopening the economy. Beyond that, the housing data will be the focus during a light week for economic data. Existing Home Sales will be released on Wednesday and New Home Sales on Friday.

Weekly Change
10yr Treasury fell 0.02
Dow rose 600
NASDAQ fell 200
Calendar
Wed 7/22 Existing Home Sales
Thu 7/23 Jobless Claims
Fri 7/24 New Home Sales

All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline)

Improving Housing Market – June 2020 Edition

Monday, June 29th, 2020

The housing and inflation data released this week contained no major surprises, and investors were mostly focused on the concerning increase in the spread of the coronarvirus in several states. It was a quiet week for mortgage markets, and rates ended slightly lower.

While the housing market data released this week was mixed, it clearly supported the case that a faster than expected recovery in the sector is taking place. First, the bad news was that existing home sales in May were weaker than expected with a decline of 10% from April and were 12% lower than a year ago.

The existing home sales report confirmed that housing market activity dropped sharply in March and April due to the shutdown of much of the economy. Existing home sales measure closings, and this was the period when buyers would be signing contracts for homes which would close in May.

The encouraging news was that the data which reflects more recent activity was much better. In May, new home sales, which are based on contracts signed during the month, unexpectedly surged 17% from April and were significantly higher than a year ago.

In addition, both Freddie Mac and the Mortgage Bankers Association reported that average rates for 30-year fixed-rate mortgages remained near record low levels this week. In addition, the MBA revealed that applications to purchase a home were a solid 18% higher than a year ago at this time, and refinance applications were a stunning 76% higher.

The reduced economic activity resulting from the pandemic has caused a decline in inflation, which has helped keep mortgage rates low. In May, the core PCE price index was just 1.0% higher than a year ago, which was the same annual rate of increase as last month. Core PCE is the indicator favored by the Fed, and officials have stated that their target level for annual inflation is 2.0%.

Looking ahead, investors will continue to watch for news about medical advances, government stimulus programs, Fed monetary actions, and plans for reopening the economy. In addition, the monthly Employment report will be released on Thursday, and these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, the ISM national manufacturing index will be released on Wednesday. Mortgage markets will be closed on Friday in observance of July 4.

Weekly Change
10yr Treasury fell 0.03
Dow fell 600
NASDAQ fell 150
Calendar
Tue 6/30 Consumer Confidence
Wed 7/1 ISM Manufacturing
Thu 7/2 Employment

All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline)

Fed Helps Bonds – June 2020 Edition

Tuesday, June 16th, 2020

While it was a volatile week for stocks, the mortgage market remained relatively calm. Wednesday’s Fed meeting contained favorable news for bonds, and mortgage rates ended the week lower.

Since the middle of March, the Fed has bought over $2 trillion in Treasuries and mortgage-backed securities (MBS) to help support the economy and to maintain market stability, but it has been slowly reducing the quantity of its purchases each week. Wednesday, the Fed announced that going forward it will buy bonds “at least at the current pace,” signaling an end to the gradual reductions. This unexpected increase in future demand for MBS from the Fed helped push mortgage rates lower.

In addition, the Fed held the federal funds rate close to zero and projected that there will be no rate increases through at least 2022. Fed officials forecasted that the economy will shrink 6.5% in 2020 but will then grow by 5.0% in 2021 as it bounces back from the effects of efforts to fight the pandemic. Fed Chair Powell repeated the message that the Fed will use all of its tools for as long as needed to support the economic recovery.

One reason that Fed officials are comfortable with maintaining loose monetary policy is that the reduced economic activity resulting from the pandemic has caused a sharp decline in inflation. In May, the core CPI price index, which excludes the volatile food and energy components, was just 1.2% higher than a year ago, down from an annual rate of increase of 2.4% in February. Tame inflation has helped keep mortgage rates low.

Looking ahead, investors will continue to watch for news about medical advances, government stimulus programs, Fed monetary actions, and plans for reopening the economy. Beyond that, Retail Sales will be released on Tuesday. Since consumer spending accounts for about 70% of all economic activity in the US, the retail sales data is a key indicator of financial conditions. Housing Starts will come out on Wednesday.

Weekly Change
10yr Treasury fell 0.20
Dow fell 1,500
NASDAQ fell 200
Calendar
Tue 6/16 Retail Sales
Wed 6/17 Housing Starts
Thu 6/18 Jobless Claims

All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline)