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Blog

December 2019

December 2nd, 2019

Instructions on how to read this blog: Below is the news for the month when it happened and the market’s reaction.  For a full view of the month start at the bottom and work your way up. If want to know what just happened start at the top. All Times are Eastern Standard Time.  When the price of Mortgage Backed Securities (MBS) goes down rates go up, and when the price goes up rates come down. Remember in the bond market Bad News is Usually Good News and Good News is Usually Bad news. 

Views You Can Use updated monthly: http://www.mmgweekly.com/m/index.html?SID=78421a2e0e1168e5cd1b7a8d23773ce6

Newsletter updated weekly: http://www.mmgweekly.com/w/index.html?SID=

Freddie Mac US Weekly Average Mortgage Rates 12/26/19.  Many times our rates are better than below.  Rates are found on the following website:  http://www.freddiemac.com/pmms/

30-FRM 3.74% 0.7 fees Points

15-YR FRM 3.19%  O.7 Fees/Points 

5/1 ARM  3.45% 0.4 Fees/Points

Freddie Mac fixed rates moved from 4.55% in January 2019  to 3.74%  in December 2019.  See below and on the following link:https://www.thefinancials.com/Default.aspx?s=fxd_y30natlavg&SubSectionID=mortreleases

2019 Freddie Rates

Tuesday - December 31

Market Wrap - 2020 comes to a close with little fanfare in today's trading with Mortgage Bond and Treasury prices as well as the S&P closing slightly lower. The 10-yr yield ends the year at 1.92% for the early close at 2:00 p.m. ET. The U.S. stock markets close at the normal time of 4:00 p.m. ET. The S&P is ending up nearly 30% this year. Normal trading hours will resume on the 2nd.  We wish you and yours a Happy New Year!

Monday - December 30  

Late Morning Review - The National Association of Realtors® reports that Pending Home sales rose by 1.2% in November, up from the decline of 1.3% recorded in October. The NAR says that a sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. The index was up 7.4% year-over-year from November 2018. Lawrence Yun, NAR’s chief economist said, “The favorable conditions are expected throughout 2020 as well, but supply is not yet meeting the healthy demand.”

American workers are seeing the fruits of a tight labor market and an expanding economy in their paychecks each week. The New York Federal Reserve reports that the average annual salary of full-time workers increased to $69,181 in November 2019, up from $66,935 in July 2019. This is the highest value of the series since its inception in March 2014. The report went on to reveal that satisfaction with wage compensation and with promotion opportunities at respondents’ current jobs remained essentially constant.

 

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Friday - December 27  

Market Wrap - Mortgage Bonds were able to close with modest gains today as the torrid run for stocks took a breather. The 10-yr yield slipped to 1.87%. Markets were generally quiet with low volume trading. The Dow squeaked out a record close while the S&P closed flat.

Late Morning Review -  Freddie Mac reports that the 30-year fixed-rate mortgage in 2019 was the fourth lowest at an average of 3.90% since record-keeping began in 1971. The GSE is forecasting that in 2020 as well as 2021, mortgage rates will remain historically low, but warned that even with low mortgage rates reducing the amount of interest homebuyers owe, the lack of affordable homes could dampen home sales.

A noted trade group is predicting that the U.S. economy will dodge a recession in 2020 with positive economic growth (Gross Domestic Product) as the calendar turns to the new year. The Securities Industry and Financial Markets Association (SIFMA) is forecasting that there will be 1.8% growth in 2020, up from the June survey of 1.3%. SIFMA says the chance of a recession in 2020 is 25%, unchanged from the June outlook. U.S. workers will see a 3.2% rise in wages in 2020, up from 3.1% in 2019. The Fed's favorite inflation gauge, the Core PCE, could increase to 2.2% next year, up from the current 1.6%.
Workers will see a 3.2% increase in average hourly earnings in 2020, on the heels of a 3.1% gain in 2019,

Thursday - December 26  

Market Wrap - Mortgage Bonds hugged the flat line today in quiet trading with the markets in "holiday mode." The 10-yr Note closed near unchanged at 1.90%. The major U.S. stock indexes closed at fresh record highs as the market continues to melt-up. WTI oil settled at $61.70/barrel, +$0.59. 

Late Morning Review - Mortgage rates were unchanged in the latest week and remain just above historic lows in this low inflation environment. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage was at 3.99% in the week ending December 20, 2019 with 0.33 in points. The Market Composite, Purchase and Refinance Index all declined during the holiday rush. Mike Fratantoni, MBA Senior Vice President and Chief Economist said, Added Fratantoni, "We are in the slowest time of the year for the purchase market. Purchase application activity declined after the seasonal adjustment, but still remains about 5 percent ahead of last year's pace."

American filing for first-time unemployment benefits continues to hover near 50-year lows as the labor market continues to be a bright spot in the U.S. economy. Weekly Initial Jobless Claims fell 13,000 to 222,000 for the week ending December 21. The four-week moving average, which irons out week-to-week volatility, inched higher by 2,250 to 228,000. The underlying trend in claims remains consistent with a strong labor market.

Tuesday  December 24

Market Wrap - U.S. markets were quiet today in an abbreviated session ahead of the Christmas holiday. Mortgage Bonds closed near unchanged, Treasury prices a bit higher with the 10-yr yield settling at 1.90%. Stocks closed mixed. WTI oil is trading at $61.14/barrel, +$0.62.  Happy Holidays!

Monday - December 23  

Market Wrap - Mortgage Bond prices opened and closed near unchanged today as did Treasury prices in quiet trading. The 10-yr yield closed at 1.93%. Stocks closed with modest gains amid trade optimism. WTI oil settled at $60.53/barrel, up marginally. No economic reports due out tomorrow. Continue to lock files that are closing in 30 days or less while floating longer-term files. The bond markets will close early at 2:00 p.m. ET tomorrow, December 24, Christmas Eve. Stocks close at 1:00 p.m. All markets are closed on Wednesday, December 25, Christmas Day. Normal hours will be seen for all markets on December 26 and 27.

 

Late Morning Review - Sales of new single-family houses in November rose 1.3% from October to an annual rate of 719,000 units, reports the U.S. Census Bureau. October was revised lower to 710,000 from 733,000. Sales were up nearly 17% from November 2018. Sales surged in the Northeast by 52% while they were unchanged in the Midwest, down in the South with modest gains seen in the West. The November increase capped the best three months of sales (average 720,000) since 2007 as the sector continues to gain momentum. The median price was $338,800, up 7.2% year over year. Housing supply was is at 5.4 months.

U.S. stocks are modestly higher on positive trade news as the Dow, S&P and NASDAQ hover at all-time highs. The closely watched S&P 500 is up nearly 30% this year thanks to an expanding economy, strong employment and consumer confidence, low rates, tame inflation and positive movement on the U.S and China trade talks. The week should be on the quiet side with low trading volumes given the Christmas holiday. The bond markets close early at 2:00 p.m. ET tomorrow, Christmas Eve and all markets are closed on Wednesday for Christmas. Regular trading hours will be seen on Thursday and Friday.

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This Week: The upcoming week will be holiday-shortened with little economic data hitting the wires.

The Bond markets will close early at 2:00 p.m. ET on Tuesday, December 24 for Christmas Eve, and Stocks will close at 1:00 p.m. ET. All markets are closed on Wednesday, December 25 for Christmas Day. Normal hours will be seen for all markets on December 23, 26 and 27.

The only economic data point of value next week will be New Home Sales.

The week is typically one of the slowest trading volume weeks of the year with many investors and traders on vacation for the holidays. The markets will keep an eye on any headlines from the U.S./China trade front, but given it's Christmas week, there shouldn't be any glaring headlines.

Reports to watch:
 

  • New Home Sales will be released on Monday, Durable Orders on Tuesday, with Weekly Initial Jobless Claims on Thursday.

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Week in Review:  2019 was an incredible year for Stocks, which finished the final trading week of the year at all-time highs. Generally speaking, when Stocks go higher, so do rates. And that was the case this past week as home loan rates ticked up to the highest levels in months.

So, what was the reason for higher Stocks and higher rates?

Global financial improvement! 2019 was a "tug of war" year between central banks around the globe cutting rates and adding monetary stimulus, and economies attempting to avoid recession.

We are finishing the year with economies winning and showing improved growth and confidence heading into 2020.

What does this mean for rates in the near-term?

If countries around the globe continue to improve, their rates will continue to creep higher. If rates around the globe creep higher, so will ours.

The good news is that because inflation remains extremely low, we should not expect home loan rates to move too high anytime soon.

Bottom line: the U.S. has been and continues to be the global economic leader and moves into 2020 with a Goldilocks backdrop which includes a strong labor market, rising wages, low inflation, and low rates.

If you or someone you know has questions about home loans, give me a call. I'd be happy to help.

Friday - December 20  

 

Late Morning Review - The U.S. economy continued to generate growth in the final reading on Gross Domestic Product (GDP) for 2019. Final Q3 GDP remained unchanged at a solid 2.1%. Within the numbers, it showed that consumer spending, which accounts for two-thirds of U.S. economic activity, was revised higher to 3.2% from 2.9%. The consumer continues to be a key factor driving the economic expansion here in the U.S.GDP measures the market value of all the final goods and services produced in a specific time period, often annually.

Consumer Sentiment remained at very favorable levels in the second of two reading in December at 99.3. Inflation expectations declined in the December survey, with both the year-ahead and five-year expected inflation rates falling and backs up the federal reserves assertion that it will remain low for the foreseeable future. In addition, the impeachment hearing had a barely noticeable impact on economic expectations, as it was mentioned by just 2% of all consumers in the December survey.

U.S. stocks are at fresh record highs on this last full week of trading in 2019. The closely watched S&P 500 is up nearly 30% this year due to an expanding economy, low unemployment, strong consumer spending and confidence along with tame inflation and low-interest rates. The Goldilocks economy continues with chances of a recession extremely low or zero for the foreseeable future.

Thursday - December 19  

Freddie Mac US Weekly Average Mortgage Rates.  Many times our rates are better than below.  Rates are found on the following website:  http://www.freddiemac.com/pmms/

30-FRM 3.73% 0.7 fees Points

15-YR FRM 3.19%  O.7 Fees/Points 

5/1 ARM  3.37% 0.4 Fees/Points

Market Wrap - U.S. stocks closed at fresh record highs once again today as the Goldilocks economy lives with with talk of a recession completely now a forgotten distant memory. Mortgage Bonds produced meager gains while the 10-yr yield settled at 1.91%. WTI oil closed at $61.30/barrel, +$0.37. The Core PCE will be released tomorrow but we don't see any inflation pressures. The third read on Q3 GDP will be released along with Personal Income and Spending.

 

Late Morning Review - The National Association of REALTORS® reports that Existing Home Sales fell by 1.7% in November to October to an annual rate of 5,350,000 versus the 5,450,000 expected. On an annual basis, sales rose 2.7%. Gains were seen in the Northeast and Midwest, with declines in the South and West. Inventories are extremely low with just a 3.7 month supply where 6 months is seen as normal.

The median existing-home price housing types in November was $271,300, up 5.4% from November 2018, as prices rose in all regions. November’s price increase marks 93 straight months of year-over-year gains. Lawrence Yun, NAR’s chief economist, said the decline in sales for November is not a cause for worry. “Sales will be choppy when inventory levels are low, but the economy is otherwise performing very well with more than 2 million job gains in the past year,” said Yun.

Wednesday - December 18  

Mortgage Bond and Treasury prices tumbled today as recent positive economic data weighed on the debt markets. The yield on the 10-year Note closed at 1.92% from the early low of 1.86%. The German 10-yr Bund yield closed at -0.25%. Stocks closed mixed while the NASDAQ squeezed out a new record high. November Existing Home Sales and Weekly Claims will be released tomorrow morning. 

Late Morning Review - Fannie Mae released its December 2019 Housing and Economic Housing Outlook today revealing that the outlook for housing has been significantly upgraded as the economic forecast strengthens. Economic growth in 2020 is expected to increase by 2.1%. Fannie Mae expects no moves in interest rates by the Federal Reserve next year. In addition, Fannie Mae went on to say that Housing construction is once again poised to become an engine of overall economic growth. Homebuilders are expected to expand production in reaction to continued labor market strength and consumer spending, as well as supportive interest rates and waning risks of a significant near-term economic slowdown.

Mortgage rates were unchanged in the latest week while mortgage application volume declined as the holiday season pushed potential buyers and those looking to refinance to the sidelines. The 30-year fixed-rate mortgage was unchanged at 3.98% with points remaining unchanged at 0.33. The Market Composite Index, a measure of total mortgage loan application volume, fell by 5%, the Purchase Index decreased 2% while the Refinance Index lost 7%. Mike Fratantoni, MBA Senior Vice President and Chief Economist said, "As we move into the slowest time of the year for home sales, purchase application volume is declining but continues to outperform year-ago levels when rates were much higher. Purchase activity was 10 percent higher than a year ago."

If you thought that Black Friday was the busiest shopping day of the year ... think again. "Super Saturday" will take place this weekend ahead of the Christmas holiday next week as shoppers finish up their purchases. Analysts forecast that consumers will spend $34 billion this year on Super Saturday, which will eclipse the $31.5 billion generated on Black Friday. The U.S. consumer continues to show strength and is benefiting from low unemployment, solid wage growth and ultra-low unemployment.

 

Tuesday - December 17

 Market Wrap - Not much action in the U.S. financial markets today as the holiday mode creeps into the trading volumes. However, U.S. stocks squeaked out gains pushing the Dow, S&P and NASDAQ into fresh record high territory. Mortgage Bonds and Treasury prices closed near unchanged with the 10-yr yield also unchanged at 1.88%. WTI oil settled at $60.90/barrel, up $0.69. There are no economic reports due for release tomorrow.

Late Morning Review - The U.S. Census Bureau reports that privately-owned Housing Starts rose by 3.2% in November from October to an annual rate of 1.365 million units, above the 1.34 million expected. On an annual basis, total starts rose almost 14%. The all-important single‐family sector saw starts rise by 2.4% monthly and jumped nearly 17% year over year. Multi-family units were up 2.3% monthly and rose 4.4% annually. Building Permits, a sign of future construction, rose 1.4% monthly to an annual rate of 1.482 million units, the highest level since May 2007. Overall, a solid report for the sector.

The New York Fed reported this week that its Credit Access Survey shows increases in housing loan applications and approval rates. The latest Survey shows that households’ credit experiences and expectations remained fairly stable in 2019 compared to 2018. Among the most notable changes in 2019 was a slight increase in application rates combined with a decrease in rejection rates. This pattern was driven in part by households’ experiences with mortgage loans. Looking ahead, households also generally expect to be more likely to apply for and receive credit over the coming year.

U.S. stocks continue to reach new heights seemingly every other day due in part to solid economic growth, ultra-low unemployment, strong consumer spending and in a low-interest rate environment. The Dow Jones Industrial Average (28,235), S&P (3,191) and NASDAQ (8,814) all closed at record highs on Monday. The closely watched S&P 500 is up nearly 27% this year and it is its best run through December 16 since 1997! Many market analysts see the run extending into 2020.

 

Monday - December 16 

Market Wrap - U.S. stocks closed at record highs today due in part to the Phase One trade deal with China though they closed off the highs. The Dow (28,235), S&P (3,191) and the NASDAQ (8,814) closed at record highs. Mortgage Bond prices ended modestly lower while Treasury prices saw larger losses. The 10-yr yield rose to 1.88%. Tomorrow's data includes Housing Starts and Building Permits.  Longer-term we are comforted with the fact that rates should remain relatively low for quite some time thanks to persistently low inflation. Core PCE is running at 1.6% year over year and the Fed said they expect it to remain near that level throughout 2020.

Late Morning Review - The housing sector received good news today due in part to low mortgage rates coupled with strong employment in the U.S. The NAHB Housing Market rose to 76 this month, a 20-year high, up five points from November. Last year, the index stood at 56. Any number over 50 indicates that more builders view conditions as good than poor. “Builders are continuing to see the housing rebound that began in the spring, supported by a low supply of existing homes, low mortgage rates and a strong labor market,” said NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Connecticut.

Manufacturing activity in the New York State region edged higher in December, a good sign for the troubled sector. The Empire Manufacturing Index rose to 3.5 this month, up from 2.9 in November. Within the data, it showed that employment continued to expand while optimism about the six-month outlook picked up, and capital spending plans were notably stronger. Manufacturing has slowed in the past six months due to the trade issues between the U.S. and China but with the Phase One trade deal being confirmed, the sector may begin to pick up some strength.

House flipping in the third-quarter of 2019 pushed lower by 12.9% from the second-quarter and is down nearly 7% from a year ago, reports ATTOM Data Solutions. The U.S. Home Flipping Report showed that 56,566 U.S. single-family homes and condos were flipped in the third quarter of 2019 after an unusually lively flipping market in the spring of this year. “After a springtime selling binge earlier this year, the home-flipping business settled way down over the summer amid a continuing scenario of languishing profits,” said Todd Teta, chief product officer at ATTOM Data Solutions.

 

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This coming week will be the last full trading week for 2019.

This means we may see trading volumes decline which could cause some market volatility should a surprise new item hit the wires.

The week will bring the Fed's favorite inflation gauge, the core PCE, which has been running below the Fed's target of 2.0%, currently running at 1.6%. The Fed stated last week that the core PCE will continue near current levels into 2020. That's good news for home loan rates going forward.

The markets will also receive data from the housing sector, manufacturing, consumer sentiment and the final reading on Q3 GDP.

The main topic, U.S.-China trade issues will linger in the backdrop and potentially have a market effect as holiday trading volumes thin.

Reports to watch:
Manufacturing data will come from Monday's Empire State Index and Thursday's release of the Philadelphia Fed Index.

  • The NAHB Housing Market Index will be released on Monday, with housing starts and building permits on Tuesday followed by existing home sales on Thursday.
  • The core PCE, personal income and spending, GDP, and consumer sentiment will be released on Friday.

 

Friday - December 13  

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Week in Review (Let the Good times roll" ... The Cars)

As we enter the final weeks of 2019, the housing and home lending sectors have enjoyed a good year thanks to a "Goldilocks" scenario of a tight labor market, rising wages, consumer confidence, and three-year low interest rates.

Many are asking "What should we expect for housing, and thus lending, as we enter 2020?" The answer: 2020 may even be better for both.

Tailwinds for Housing in 2020 include:

  1. Housing starts of single-family homes are expected to hit the 1M mark for the first time in 12 years. This should help add to much-needed inventory in many parts of the country.
  2. In the final Jobs Report for 2019, which was November, the unemployment rate ticked down to 3.5%, a 50+-year low, while we created a massive 266,000 new jobs. Jobs buy homes, not rates. This kind of labor market strength heading into 2020 should further boost the housing sector.
  3. The Fed is not likely going to cut or hike rates in 2020, unless new economic threats emerge – meaning short-term interest rates are not likely to move much, if at all.
  4. Inflation remains low. Inflation is the main driver of long-term rates like mortgage rates. In the absence of any unforeseen pickup in inflation, home loan rates should remain relatively close to current levels for the foreseeable future.

Bottom line: 2019 was a good year and the data suggests the good times should continue well into the spring of 2020 making it a historic opportunity to have both a strong economy and low rates.

If you or someone you know has questions about home loans, give me a call. I'd be happy to help.

Late Morning Review - Home equity increased which is providing a source of wealth for homeowners in the U.S., CoreLogic reports. Borrower equity increased by $457 billion in the third quarter of 2019 compared with the third quarter of 2018, a 5.1% increase. CoreLogic went on to report that borrowers have gained $6 trillion in equity since the end of 2011 when equity stopped declining. During this same time period, homeowners have been staying in their homes longer, preferring to make remodeling updates as their home ages.

The long-awaited Phase One trade deal has been reached between the U.S. and China this morning as confirmed by both countries. The deal will scale back exiting tariffs on Chinese imports and cancel the new tariffs that were scheduled to go into effect on Sunday. President Trump said that the two sides will immediately begin on a Phase Two deal and that will begin before the 2020 U.S. elections.

The Mortgage Bankers Association (MBA) reports that new home purchases mortgage applications surged 27% in November from November 2018. On a monthly basis, applications decreased by 17% from October to November. The MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 688,000 units in November 2019. Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting said, "The healthy job market, increased new home construction, and rising household formation support growth heading into 2020, but affordability challenges in many markets and economic uncertainty pose as headwinds."

Thursday - December 12  

Market Wrap - A reported trade deal between the U.S. and China boosted stock prices today as the S&P 500 and NASDAQ closed at record highs. Mortgage Bonds and Treasury prices declined with the 10-yr yield rising to 1.90% from 1.77% seen overnight. WTI oil closed at $59.18/barrel, +$0.42. Retail Sales will be released tomorrow.

Late Morning Review - Mortgage rates inched higher this week and have steadily increased since September. Freddie Mac reports that the 30-year fixed-rate mortgage rose five basis points this week to 3.73% with 0.7 in points and fees. In early September the rate was 3.49%. Freddie Mac says, "The risk of an economic downturn has receded and, combined with the very strong job market, it should lead to a slightly higher rate environment. Often, while higher mortgage rates are deleterious, improved economic sentiment is the reason that these higher rates have not impacted mortgage demand so far."

The National Association of REALTORS® (NAR) hosted its first-ever Real Estate Forecast Summit recently at the NAR headquarters in Washington, D.C. Economists who attended expect the U.S. economy to 'continue expanding next year while projecting real estate prices will rise and reiterates that a recession remains unlikely. Forecasters see 2% Gross Domestic Product in 2020 with an annual unemployment rate of 3.7%. In addition, the average annual 30-year fixed-rate mortgage will average 3.8% and in 2020 and 4.0% in 2021. Annual median home prices are forecasted to increase by 3.6% in 2020 and by 3.5% in 2021.

 

Wednesday - December 11  

Market Wrap - The Fed held rates steady today and offered no surprises in its statement while Fed Chair Powell's press conference contained the same positive rhetoric that he has been conveying for the past 5 months. Mortgage Bonds and Treasury prices ended with gains with the 10-yr yield falling to 1.79%. Stocks closed with modest gains. PPI and Weekly Initial Jobless Claims will be released tomorrow.

Late Morning Review - Mortgage rates were essentially unchanged in the latest week and remain just above historic lows, reports the Mortgage Bankers Association (MBA). The 30-year fixed-rate mortgage rose one basis point to 3.98% with 0.33 points in the week ending December 6, 2019. The Market Composite Index, a measure of total mortgage loan application volume, rose 3.8%, the Purchase Index declined 0.4% while the Refinance Index gained 8.7%. The MBA said that the November jobs data showed increased payroll gains and low unemployment, which means conditions remain favorable for steady purchase growth in the coming months.

Inflation at the consumer level was a bit warmer than expected in November though overall inflation remains subdued in the current environment. The Consumer Price Index (CPI) rose 0.3% in November on higher costs for gasoline. On an annual basis, CPI rose 2.1% from the 1.8% reading in October. When stripping out volatile food and energy, the Core CPI was inline with the 0.2% estimate while year-over-year it saw a 2.3% gain, which was unchanged from October. The modest uptick in inflation coupled with a solid economy will hold the Federal Reserve from a change in interest rates in the near future.

It's Fed Day! The Federal Reserve is expected to hold the short-term Fed Funds Rate steady when the monetary policy statement is released at 2:00 p.m. ET this afternoon. The statement will be accompanied by a set of economic projections while Fed Chair Powell will hold a press conference at 2:30. Mr. Powell will most likely say that the economy is on a stable course and that the Fed will do all in its power to keep the expansion going.

Tuesday - December 10  

Late Morning Review - The good news continues to stream in from the small business sector of the economy. The NFIB Small Business Optimism Index saw its largest month-over-month gain since May 2018, up 2.3 points to 104.7 in November. The NFIB said that overall, the Main Street economic machine continued to push the economy forward. "Owners are aggressively moving forward with their business plans, proving that when they're given relief from the government, they put their money where their mouth is, and they invest, hire, and increase wages," said NFIB Chief Economist William Dunkelberg.

Mortgage credit availability increased across all loan types in November, reports the Mortgage Bankers Association. The mortgage credit availability index rose by 2.1% to 188.9 last month. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012. Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting said, "Expanding credit availability will continue to support active levels in mortgage lending, even as refinance activity starts to level off."

The December 15 tariff deadline on Chinese exports into the U.S. could be delayed as the two sides continue to negotiate. The White House continues to stress that Beijing commit to large purchases of U.S. farm products in order for the tariffs to be delayed. The headlines are supporting the U.S. stock markets though the gains are modest at best as the market looks ahead to the Federal reserve's release of its monetary policy statement on Wednesday afternoon.

 

Monday - December 9 

 Market Wrap - Mortgage Bonds are closing at the bottom of its recent sideways range. More pricing disconnect as Treasuries finished the day modestly higher. Support at the 50- and 100-day Moving Averages continue to hold for now for the Fannie Mae 30-yr 3.5% coupon. The 10-yr yield settled at 1.83%. Stocks closed lower as the tariff deadline approaches. WTI oil finished at $58.97/barrel, -$0.22. Productivity will be released tomorrow along with the NFIB Small Business Optimism Index. The Treasury will sell $24B 10-yr Notes and comes after solid demand for today's three-year offering. Continue to float into the Fed meeting but be on guard. 

Late Morning Review - The housing sector continues to receive positive news and is being supported by strong employment along with low mortgage rates. Fannie Mae released its November Home Sentiment Index showing that it rose 2.7 points to 91.5, revising the decline from October and re-approached the survey high set in August. The percentage of Americans who say it is a good time to buy increased in November, while the percentage who say it is a bad time to buy declined. Doug Duncan, Senior Vice President and Chief Economist said, "Looking ahead, we continue to expect a steady but modest pace of growth in home purchase activity.”

The Federal Housing Administration reported last week that loan limits will increase in 2020 and comes after the FHFA increased limits for 2020 in the past few weeks. The FHA 2020 loan limit for most of the country will increase by almost $17,000 to $331,760 from 2019's loan limit of $314,827. The new limits will be effective for FHA loans assigned on or after January 1, 2020.

Fed members will gather on Capitol Hill beginning tomorrow and ending Wednesday with the release of the monetary policy statement and a set of economic projections. At 2:30, Fed Chair Powell will hold a press conference. There is no chance of a change to the short-term Fed Funds Rate and we are not expecting any dramatic headlines. He will most likely say that the economy is on a stable course and that the Fed will do all in its power to keep the expansion going.

 

 

Friday - December 6

 

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Forecast for the WeekThe upcoming week will be centered around the two-day Fed meeting which kicks off on Tuesday, and ends with the release of the Monetary Policy Statement on Wednesday at 2:00 p.m. ET. The Fed will also release a set of economic projections with the statement while Fed Chair Powell will hold a press conference at 2:30 p.m. ET.

There is a zero percent chance of a change in the short-term Fed Funds Rate at this meeting. What Mr. Powell has to say could impact Bond prices and rates, but the market feels that the Fed Chair will choose his words carefully as to not overly disrupt the markets.
 

The week will also feature inflation data from both the Consumer Price Index (CPI) and Producer Price Index (PPI). As mentioned, the Fed has recently reported that in 2020 it may raise its target range for inflation from 2% to possibly 2.5%, which means consumer inflation readings will be more important to track. Note, the Fed's preferred measure of consumer inflation is the Core PCE and not the CPI measure.

Consumer spending will also be in the spotlight in the form of Retail Sales for November. The consumer has been carrying the U.S. economy. We shall see if it continues, leading up to this record holiday shopping season.
 

Forecast for the WeekThe upcoming week will be centered around the two-day Fed meeting which kicks off on Tuesday, and ends with the release of the Monetary Policy Statement on Wednesday at 2:00 p.m. ET. The Fed will also release a set of economic projections with the statement while Fed Chair Powell will hold a press conference at 2:30 p.m. ET.

 

There is a zero percent chance of a change in the short-term Fed Funds Rate at this meeting. What Mr. Powell has to say could impact Bond prices and rates, but the market feels that the Fed Chair will choose his words carefully as to not overly disrupt the markets.
 

The week will also feature inflation data from both the Consumer Price Index (CPI) and Producer Price Index (PPI). As mentioned, the Fed has recently reported that in 2020 it may raise its target range for inflation from 2% to possibly 2.5%, which means consumer inflation readings will be more important to track. Note, the Fed's preferred measure of consumer inflation is the Core PCE and not the CPI measure.

Consumer spending will also be in the spotlight in the form of Retail Sales for November. The consumer has been carrying the U.S. economy. We shall see if it continues, leading up to this record holiday shopping season.

Finally, the markets will continue to be gripped by the back-and-forth headlines from the U.S./China trade issues.

Reports to watch:

  • Productivity for the third quarter will be released on Tuesday.

On Wednesday, the inflation reading Consumer Price Index will be reported, followed by the Producer Price Index Thursday.

A key consumer spending report in Retail Sales will be delivered on Friday.

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Market Wrap - A robust Jobs Report for November coupled with an upbeat trade tone along with the second highest reading on Consumer Sentiment this year sent U.S. stocks soaring today. The Dow rose by 340 points and closed just below its all-time closing high. Mortgage Bonds closed near unchanged while Treasury prices fell. The 10-yr yield settled at 1.84%. WTI oil closed at $59.20, +$0.77. Next week all eyes will be on the Tuesday/Wednesday Fed meeting.

Late Morning Review - And the survey says ... 266,000 new jobs created in November, crushing expectations of 182,000 as the strong labor market marches on. September and October payroll growth were revised higher by a total of 41,000 lifting the three-month job creation average to a solid 205,000. A 266,000 print along with unemployment and weekly claims at 50-year lows is somewhat astounding and completely lays to rest any talk of a recession for the foreseeable future.

The unemployment rate declined to 3.5%, despite 325,000 people re-entering the labor force and adding to the labor pool. This thanks to a record 164,400,000 Americans working in November. In addition, total unemployed, or the U6 number has fallen to 6.9% from 7.6% in November 2018. The Labor Force Participation Rate was little changed at 63.2% in November. Year-over-year wage growth edged higher to 3.14%, which further fuels consumer spending.

8:35 AM ET - November Non-Farm Payrolls rise by 266K, above the 182K expected. September/October revised higher by a total of 41K. Three month average a robust 205K, especially with such low unemployment. Unemployment Rate edges lower to 3.5%. Strong report. Mortgage Bond prices decline. 10-yr yield surges to 1.86%. Stock futures add to gains.

Thursday - December 5

8:30 am ET - Weekly Initial Jobless Claims decline by 10K to historic lows of 203K and comes ahead of tomorrow's Jobs Report for November. The numbers have little impact on the markets.

Wednesday - December 4 

Market Wrap - Rebounding stock prices weighed on Mortgage Bonds today closing slightly lower while Treasury prices plunged as the disconnect continues. The 10-yr yield rose to 1.77% at the close of trading. Positive trade headlines sparked the rally in the stock markets. WTI oil settled at $58.43/barrel, +$2.33. Economic data tomorrow is limited to Weekly Claims as the market looks ahead to Friday morning's release of the government's Jobs Report for November.

Late Morning Review - Private employment growth slowed in November, reports payroll processor ADP with 67,000 jobs created during the month. The modest gain was well below the 156,000 expected. Small businesses added 11,000 new workers, medium size added 29,000 while large businesses added 27,000. The report comes ahead of Friday's government jobs report where the past three-month average at a robust 175,000 workers added.

Mortgage rates were unchanged in the latest week and remain at historic lows. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage was unchanged at 3.97% in the week ended November 29 with 0.32 in points. Mortgage application activity declined with the Market Composite Index, a measure of total mortgage application volume, fell 9.2%, the Purchase Index was essentially unchanged while the Refinance Index plunged by 16%. Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting said, "The purchase market overall looks healthy as we enter the home stretch of 2019. The combination of wage gains, slower home-price appreciation, and slightly easing inventory conditions continue to support increased activity."

 

 

Tuesday - December 3  

Late Morning Review -The housing market continues to be supported by a strong labor market with prices up solidly year over year in October. CoreLogic reports that home prices nationwide, including distressed sales, rose 3.5% year over year in October from October 2018 and up 0.5% month over month from September to October. CoreLogic is forecasting a 5.4% gain from October 2019 to October 2020. A strong labor market will continue to support the housing market here in the U.S. into the spring.

Consumer spending remained strong on Cyber Monday with a record $9.2 billion in online sales, up a whopping 17% from last year. It was the biggest U.S. online shopping day in history. During the peak online shopping hours, there was an astonishing $11 million spent per minute! The data showed that there was $3 billion in sales completed through a smartphone. The consumer continues to buoy the US economy. Top sellers on Cyber Monday included "Frozen 2" toys, L.O.L. Surprise dolls, Nerf products, "Madden 20," the Nintendo Switch, "Star Wars Jedi: Fallen Order," Samsung TVs, the Fire TV, Airpods, and air fryers, according to Adobe Analytics data.

U.S. stocks are plunging today after President Trump said last night that a trade deal with China could wait until after the 2020 election. The Dow Jones Industrial Average is down 450 points in Tuesday's trading session after a 269 point loss on Monday. Adding to the uncertainty in the equity markets is the U.S. imposing new tariffs on French goods in retaliation to a new digital services tax on firms like Google, Amazon and Facebook from France.

 

Monday - December 2  

Market Wrap - Renewed fears of a economic slowdown coupled with good old fashioned profit taking sent US stocks lower today as the final month of 2019 kicks off. Bond prices also moved lower on positive economic data from abroad coupled with the Fed possibly raising its inflation target next year. The 10-yr yield closed at 1.82%. WTI oil settled at $55.99/barrel, +$0.82. There are no economic reports due out tomorrow.

Late Morning Review - Freddie Mac recently reported its forecast on the housing market revealing that a strong labor should continue to buoy the sector into 2020. Freddie Mac is forecasting that mortgage rates will remain low while originations will be robust. The 30-year fixed-rate mortgage is expected at 3.8% in Q4 2019 with 2020 averaging 3.8%. Total originations are expected at $2.101 trillion this year and $2.132 trillion in 2020. The GSE went on to say that with low-interest rates, modest inflation, and a solid labor market, the U.S. housing market continues to show strength. Freddie Mac's forecast is for the U.S. housing market to maintain momentum over the next two years. Manufacturing activity across the U.S. contracted for the fourth straight month in November due in part to the trade issues between the US and China. The ISM Manufacturing Index fell to 48.1 last month from 48.3 in October. The new orders index slipped, while the employment component also declined. A reading above 50 indicates that the manufacturing economy is generally expanding; below 50 indicates that it is generally contracting. The major stock indexes here in the US have had a banner year due in part to a strong labor market along with solid consumer spending. The Dow Jones Industrial Average is up 20% year-to-date, the S&P is up 25% while the tech-heavy NASDAQ is higher by 30%. With such lofty gains this year, could stock prices move even higher still in December? That depends upon if whether or not a "Phase One" trade deal between the US and China is hammered out by the December 15 deadline. Will there be a Santa Claus rally at year's end ... it remains to be seen. A Santa Claus rally is a calendar effect that involves a rise in stock prices during the last 5 trading days in December and the first 2 trading days in the following January.