April 2019 ( What is going on with interest rates?

April 2019 ( What is going on with interest rates?

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:

Newsletter updated weekly:

Tuesday - April 30  

MARKET WRAP - Mortgage Bonds were on hold today and closed near unchanged ahead of tomorrow's ADP report and the Fed's monetary policy statement due out at 2:00 p.m. ET. Stocks closed mixed mixed weighed down by shares of Alphabet (Google) after a revenue miss though the S&P closed at yet another all-time high with small gains. 10-yr yield 2.50% after hitting 2.55% early in the session. WTI oil closed at $63.80/barrel, +$0.30. 

Late Morning Reivew - Home price gains continue to cool as they drift down to more normal levels due in part to an uptick in housing inventories. The S&P Case-Shiller 20-City Home Price Index rose 3% from February 2018 to February 2019, up 0.2% monthly from January to February. The national index increased 4% annually. Home price gains topped out in late 2013 with double digit gains. A spokesperson for the index said that the pace of home prices continues to slow.

Consumer confidence remained strong in April though below the best levels ever seen last fall. The Conference Board reports that its Consumer Confidence Index improved in April to 129.2 from 124.2 in March. Consumer assessments for current conditions as well as the outlook for the labor markets was more favorable in April than in March. Lynn Franco, Senior Director of Economic Indicators at The Conference Board said, "Overall, consumers expect the economy to continue growing at a solid pace into the summer months. These strong confidence levels should continue to support consumer spending in the near-term.”

Signed real estate contracts to purchase existing single-family homes jumped in March from February as the spring home buying season kicked off. The National Association of REALTORS® reports that Pending Homes Sales jumped 3.8% month-over-month though down 1.2% from March 2018. It was the 15th straight month of annual declines. Lawrence Yun, NAR chief economist said, "We are seeing a positive sentiment from consumers about home buying, as mortgage applications have been steadily increasing and mortgage rates are extremely favorable."


Monday - April 29  

Late Morning Review - For the first time in seven years, home prices fell annually though the data showed that only nine of the 85 largest metro areas saw a year-over-year decline in their median price. Redfin reports that the median home price was $295,000 annual in March, down 0.1% from March 2018. The numbers showed that West Coast markets such as Los Angeles, Orange County and Seattle posted double-digit annual declines, while large markets on the East Coast saw robust annual gains due in part to affordability.

This is a big risk-event-filled week, and it kicked off this morning with Core PCE, the Fed's favorite inflation gauge falling to 1.6% year-over-year, the lowest since January 2018. What has been taking place is disinflation, which is simply a decrease in the growth rate of inflation. The two-day Fed meeting kicks off on Tuesday and ends Wednesday with the release of the Fed's monetary policy statement. There is a zero-percent chance of a hike to the short-term Fed Funds Rate.



Friday - April 26  


Next Week - The financial markets are gearing up for some volatility. This is a big news week with key readings on inflation and jobs -- but most of all, it's Fed week. 

The two-day Fed meeting will kick off on Tuesday and ends Wednesday with the 2:00 p.m. ET release of the monetary policy statement. There is a near zero-percent chance of a hike to the benchmark Fed Funds Rate, currently at 2.50%. 

The Fed has been quite dovish and market-friendly since the year started -- will it continue? We shall find out the Fed's take on the present state of the US economy and the future of interest rate hikes when the statement is delivered, and when Fed Chair Powell conducts a press conference at 2:30 p.m. ET following the monetary policy release. There are times when Fed Chairs say off-script remarks that can create high market volatility in Stocks and rates so stay tuned. 

The April Jobs Report will be released along with ADP Private Payrolls. In addition, the Fed's Favorite inflation gauge, the Core PCE, will also be reported. The Core PCE fell to 1.8% year-over-year in the last report, below the 2% target range set by the Fed. Inflation, should it remain low, will continue to keep mortgage rates at relatively low levels. 

Bottom line: If there was a week where we can shift from complacency to volatility -- this is it. 

Reports to watch:

  • The heavy economic calendar begins on Monday with the Core PCE, Personal Income and Spending.
  • The S&P Case-Shiller 20-City Index, Pending Home Sales, Consumer Confidence and the Employment Cost Index will be delivered on Tuesday.
  • Manufacturing will be seen from the Chicago PMI on Tuesday with the national ISM Manufacturing Index on Wednesday and ISM Services on Friday.

Week in Review - Good news is typically bad news for Bonds and home loan rates. That has not been the trend of late, and certainly not this past week. 

Durable Goods Orders is a report which shows buying demand for products with a life cycle beyond 4 years -- think cars, washing machines and planes. And that buying demand of long-lasting goods is up at the highest levels since last summer, highlighting that the US economy continues to grow, and consumers and businesses feel confident in investing. 

Adding to the good-news week were continued strong corporate earnings reports, and future guidance from the likes of Amazon, Microsoft and Facebook. 

Finally, the first look at 1st quarter GDP showed the US economy grew at a blistering 3.2% pace -- way above economists' expectations of 1.9%. The US economy is reaccelerating. 

In the face of all the good news, home loan rates held steady and remain near one-year lows. 

Bottom line: when you consider the strong labor market, rising wages, growing economy, low inflation, high consumer confidence, and low rates -- it truly is a Goldilocks situation in the economy and for anyone looking to buy a home. 

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

MARKET WRAP - Strong Q1 2019 GDP coupled with low inflation components within the report lifted both Stocks and Bonds today leaving the S&P and NASDAQ at record high closing levels. WTI oil settled at $63.23/barrel, -$1.98. 10-yr yield 2.50%. Next week's risk events - ADP, Core PCE, the Jobs Report and the Fed meeting. Floating is recommended heading into the weekend. Have a great weekend!

Late Morning Review - The Goldilocks economy lives on in the US after the Gross Domestic Product (GDP) report showed strong growth along with lower inflation. Fears of a slowdown in economic growth here in the US were laid to rest this morning after Gross Domestic Product jumped 3.2% in Q1 2019 in the first of three readings. This was way above the expected range of 2% - 2.8%.

It was the strongest Q1 GDP since the 3.3% seen in Q1 2015. Within the report it showed that the inflation components declined, local and state government spending surged, while consumer spending edged lower. Solid economic data in the past few months along with strong retail sales were a few of the catalysts that lifted growth.

The US homeownership rate in the first quarter of 2019 edged lower from the fourth quarter of 2018. The Census Bureau reports that the homeownership rate of 64.2% in the first quarter of 2019 was virtually unchanged from the first quarter of 2018, but 0.6 percentage points lower from the fourth quarter 2018 rate of 64.8%. “Anemic homeownership rate growth among younger buyers signals the difficulties many of those buyers continue to face in securing a down payment, finding a home in their budget or qualifying for a loan,” said Skylar Olsen, Zillow’s director of economic research.

Thursday - April 25

MARKET WRAP - Mortgage Bonds continue to be trapped in a sideways pattern just above support with no clear catalyst to move prices higher. Stocks closed mixed with the Dow modestly lower weighed down by declining 3M shares. 10-yr yield 2.53%. WTI oil settled at $65.17/barrel, -$0.81. The first read on Q1 2019 GDP will be released tomorrow morning. As long as support can hold, continue to float brand-new files or those with a longer time frame outside of 30 days. Any files closing soon, you might still want to lock as rates remain very favorable while showing no signs of immediate improvement.

Late Morning Review - Mortgage rates continue to edge higher in the latest survey though still remain at 12-month lows in this low inflationary environment. Freddie Mac reports that the 30-year fixed-rate mortgage rose three basis points to 4.20% with an average 0.50 in points and fees.

Sam Khater, Freddie Mac’s chief economist, says, “Despite the recent rise in mortgage rates, both existing and new home sales continue to show strength – indicating the lagged effect of lower rates on housing demand. This, along with improved affordability, should push housing activity higher in the coming months.”

Next week is shaping up to be a big week for economic data that could impact the markets as well as mortgage rates. Inflation data, manufacturing, job growth numbers, housing and Consumer Confidence will all be released. In addition, Federal Reserve members will meet for the regularly scheduled two-day Federal Open Market Committee meeting which will kick off on Tuesday and ends Wednesday with the release of the monetary policy statement.

Wednesday - April 24

MARKET WRAP - Subdued global inflation along with weak European economic data lifted Mortgage Bond prices today. The Fannie Mae 4% 30-yr coupon opened and closed above support - a promising sign. Stocks ended modestly lower on mixed earnings reports. WTI oil settled at $65.83/barrel, -$0.47. 10-yr yield declined to 2.52%. As long as support can hold, continue to float brand-new files or those with a longer time frame outside of 30 days. Any files closing soon, you might still want to lock as rates remain at 12-month lows.

Late Morning Review - Mortgage rates continued to inch upward in the latest week and are now 10 basis points higher in the last three weeks and at the highest levels in a month. A strengthening economy coupled with a jump in retail sales have fueled the push higher in rates. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage rose two basis points in the latest week to 4.46% with an average 0.44 in points.

The MBA also reports that both Refinance and Purchase indexes declined in the latest week. "Borrowers remain extremely sensitive to rate changes, which is why there has been a 28% drop in refinance applications over this three-week period. Purchase activity also declined, but remains almost 3% higher than a year ago," said Mike Fratantoni, MBA Senior Vice President and Chief Economist.

Low inflation numbers out of Australia coupled with weak economic data from Germany are lifting mortgage bond prices today, though they are off their best levels. Inflation around the globe is low and economic growth is soft which should keep interest rates here in the US relatively low for the foreseeable future. The US Federal Reserve Bank has said they are watching the economic slowdown around the globe when considering monetary policy. The two-day Fed meeting will take place next week and with growth around the globe weak and disinflation creeping in - there is virtually zero percent chance of a hike and likely none for quite some time.

Tuesday - April 23  

MARKET WRAP - The sideways pattern at support continued today for Mortgage Bonds closing with modest gains capped by inflationary high oil prices and rising Stocks. The closely watched S&P 500 closed at an all-time high of 2,933.68 fueled by strong earnings reports. WTI oil settled at $66.33/barrel, +$0.78, highest since October 31, 2018. 10-yr closed at 2.56%.

Late Morning Review - After recent disappointing numbers from March housing starts and existing home sales, sales of new single-family homes surged in March due in part to lower mortgage rates and home prices. The Commerce Department reports that new home sales rose 4.5% in March from February to an annual rate of 692,000 units, well above the 646,000 expected and the highest level since November 2017. From March 2018 to March 2019, sales rose 3%. Gains on a monthly basis were seen in the Midwest, South and West, with losses in the Northeast.

Home price gains cooled in March from February as prices come back down to more normal levels. The Federal Housing Finance Agency (FHFA) reports that its Home Price Index rose 0.3% from January to February, down from the 0.6% increase in January. Home prices have now risen for 86 consecutive months, but February marked the slowest annual growth in US home prices since January 2015.


Monday - April 22  

MARKET NEWS - Mortgage Bonds edged lower in today's session as higher oil prices ushered in inflation fears. The Fannie Mae 30-yr 4% coupon closed right on support at the 50-day Moving Average. Stocks closed mixed ahead of a slew of earnings reports this week. WTI oil settled at $65.65/barrel, +$1.61. 10-yr yield 2.58%. Technically, support continues to hold for the Bond at the 50-day Moving Average (102.35).

Late Morning Review - Housing data in March disappointed as the spring home buying season kicks off. The weak data comes despite low rates along with rising wages. Housing Starts fell 0.3% in March from February to an annual rate of 1.139 million units versus the 1.247 million expected. The year-over-year numbers were weak declining 14.2% from march 2018. Building permits, a sign of future construction, fell 1.7% to an annual rate of 1.27 million. Single-family starts fell 0.4% month-over-month, down 11% year over year.

The National Association of REALTORS reports that existing home sales fell 4.9% in March from February's big surge in sales while declining 5.4% year over year. Existing Home Sales include single-family homes, town homes, condominiums and co-ops. The median home prices rose 3.8% from March 2018 to $259,400. Unsold inventory is at a 3.9-month supply, from 3.6 months a year ago. Lawrence Yun, NAR’s chief economist, anticipated waning in the numbers for March. “It is not surprising to see a retreat after a powerful surge in sales in the prior month. Still, current sales activity is underperforming in relation to the strength in the jobs markets. The impact of lower mortgage rates has not yet been fully realized.”


Friday April 17th


Forecast for next week - Corporate earnings will continue to dominate the headlines, and what companies say about the future could have an effect on the financial markets. Housing data along with Gross Domestic Product will be released in the upcoming week, and the markets will find out if the economy continues to strengthen.  In addition, global economic headlines will help define whether or not the reacceleration of US and global economic data will continue. 

Should it continue, Stocks and home loan rates are likely to edge higher still. 

Reports to watch:

  • Housing data from Existing Home Sales will be released on Monday followed by New Home Sales on Tuesday.
  • On Thursday, Weekly Initial Jobless Claims along with Durable Orders will be delivered.
  • The first reading on Q1 Gross Domestic Product and Consumer Sentiment will be reported on Friday.

Week in Review - The economic data coming out of the US this week showed that not only is a recession highly unlikely anytime soon, but the economy is actually reaccelerating from the slowdown seen last Fall. 

Back in October and November, the Fed was very hawkish and suggested that three rate hikes would come in 2019. This caused angst and fear that economic conditions would slow to a recession. It also led to a sharp decline in Stocks and consumer confidence. 

Fast forward just a couple months to January 2019, and the Fed completely reversed their position, and signaled there is no rate hike coming in 2019 or anytime soon. This new "wait and see" position from the Fed has set off a rally in Stocks and a surge in consumer confidence. 

It has also sparked confidence and certainty in the business climate, thereby giving corporations reason to hire and retain employees. 

And that was clearly evident this week as we saw yet another decline in Initial Jobless (Unemployment) Claims and the rate at which people are being fired from their jobs. 

Bottom line: the economic resurgence has put upward pressure on rates this past week, but they remain near 12-month lows. 

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

MARKET WRAP - Not much action in today's holiday shortened session as Mortgage Bonds closed above support at the 50-day Moving Average. The Bond markets closed at 2:00 p.m. ET. The S&P and Dow are higher and will undergo normal trading hours. The 10-yr T Note was last seen at 2.56%. WTI oil at $63.87/barrel, near unchanged. Heading into the long weekend, continue to advise locking for folks closing within 30 days. With the bounce off support and some stabilization being seen, you can float others, but be mindful that if this trend of global growth reacceleration continues, rates will likely be pressured higher.

Late Morning Review - Consumer spending remained solid last month due in part to a strong labor market. March retail sales jumped 1.6% from February versus the 0.9% expected and was the largest gain in 18 months led by gains in auto sales and gasoline receipts. Retail Sales x-autos also surged by 1.2%, well above the 0.7% expected. The stronger numbers could give a boost to first quarter GDP when the data is released next week.

Labor market news continues to come in on the strong side with Weekly Initial Jobless Claims falling 7,000 to 192,000, lows seen in September 1969. The four-week moving average of claims, which irons out seasonal abnormalities, fell 6,000 to 201,250, the lowest reading since November 1969. There are no more job openings than there are available workers. To put the low numbers into perspective ... at the height of the Great Recession Weekly Initial Jobless Claims hit 956,000 the week of January 10, 2009.

Mortgage rates continued to edge higher for the third consecutive week as bond prices fell and yields rose. Freddie Mac reports that the 30-year fixed-rate mortgage rose five basis points to 4.17% with an average 0.5 in points and fees. Rates remain at lows seen in the week ended January 25, 2018. Low rates and easing home price gains should fuel the spring housing market.

Wednesday April 17th

MARKET WRAP - Not much action in the Mortgage Bond markets today as prices tried to stabilize after the recent decline supported by the 50-day Moving Average. Prices were held in check by strong economic data out of China. Stocks closed near unchanged, pausing after their recent big gains. 10-yr yield unchanged at 2.59%. WTI oil closed at $63.78/barrel, -$0.27. Folks closing within 30 day should be advised to lock. 

Late Morning Review -The spring homebuying season got off to a decent start though sales have somewhat eased this season. RE/MAX reports that home sales in March were up 29% from February though down 8.6% from a year earlier. RE/MAX reports that March 2019 was the 8th consecutive month of year-over-year declines and the slowest start to the spring buying season in 5 years. RE/MAX CEO Adam Contos said, “Although the seasonal bounce that typically ends the first quarter wasn’t as strong as in the past few years, conditions are in place for a healthy spring selling season.

Single-family rental prices churned higher year-over-year in February fueled in most part to low-end rentals. Analytics firm CoreLogic reports that prices rose 2.9% year-over-year in February 2019, up slightly from the 2.7% annual gain seen in February 2018. Low-end rental rose 3.7% year-over-year while high-end rentals rose 2.4%. “As with the for-sale market, supply of single-family rentals saw very low levels in February, putting upward pressure on the cost of both for-sale and for-rent homes,” said Molly Boesel, Principal Economist at CoreLogic.

Home and refinance borrowing costs edged higher in the latest week though they remain at 12-month lows. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage rose four basis points in the latest survey to 4.44% with an average 0.47 in points. The Market Composite Index, a measure of total mortgage loan application volume, fell 3.5% last week. The Purchase Index rose marginally and is now at the highest level since April 2010 while the Refinance Index fell by 8.2%.

Tuesday April 16th

MARKET WRAP - After falling below support late last week, Mortgage Bonds have slowly edged lower under the weight of rallying Stock prices, which are on a slow ascent. The yield on the 10-yr T Note rose to 2.59%. WTI oil settled at $64.04/barrel, +$0.64. Folks closing within 30 days should be advised to lock. You can attempt floating others in this short trading week - but be mindful that corporate earnings could spark volatility. The Bond markets close early on Thursday at 2:00 p.m. ET with all US markets closed for Good Friday.

Late Morning Review - Home builders remained confident in the market for newly-built single-family homes in April though they continue to deal with affordability concerns due to a shortage of construction workers and buildable lots. The NAHB Housing Market Index rose one point this month to 63 where any number over 50 indicates that more builders view conditions as good than poor. Sentiment levels have hovered in the low 60s for the past three months.

Better-than-expected earnings from UnitedHealth Group, J&J and Bank of America are pushing US stocks modestly higher this morning as the Dow, S&P and NASDAQ seem poised to move another leg higher. The S&P 500 closed at 2,905 yesterday, just below its all-time closing high of 2,930 hit on September 20, 2018. In addition, The Conference Board reports that its Global Consumer Confidence Index remains near all-time highs.

Monday - April 15  

MARKET WRAP - Mortgage Bonds halted their recent declines closing near unchanged today as Stocks ended lower as financials dragged. The benchmark Fannie Mae 4% coupon managed to close right on support two at $102.47. The 10-yr yield settled at 2.55%. WTI oil closed at $63.45/barrel, -$0.44. If you are closing within 30 days you might consider locking.

Late Morning Review - US stocks are lower to begin the holiday shortened trading week after mixed earnings numbers from Goldman Sachs and Citigroup as earnings season kicks into high gear. The S&P 500 Stock Index, currently at 2,902, is now just 26 points from its all-time closing high of 2,930 hit back on September 20, 2018. The earnings and guidance coming from Wall Street during earnings season may determine whether stocks move another leg higher or take a pause.

Chicago Fed President Charles Evans said this morning he doesn't see a recession in the near future in the coming future. Mr. Evans went on to say that recent economic data has strengthened, the economy is solid, low inflation is a bit of a concern and sees the Fed Funds Rate remaining at current levels until the fall of 2020. With global central banks keeping interest rates at extremely low levels and are seen to remain there for quite some time, there should not be a big rise in mortgage rates in the foreseeable future.



Friday - April 12  



Next Week - With just some mid-tier economic data this week, the US markets will look to the canary in the coal mine for direction...corporate earnings season. Will corporate earnings confirm that a slight economic slowdown has taken place here in the US? The numbers will give an indication, as will their guidance or forecast for the future. 

Housing data for March will also be closely watched with the kickoff of the spring homebuying season. In addition, consumer spending will be released in the form of Retail Sales. Consumer spending makes up about 68% of the US economy and is a main driver of economic growth. 

This week is shortened by the upcoming holiday. The Bond markets will close early on Thursday at 2:00 p.m. ET, and are closed on Good Friday. US Stock markets are also closed on Good Friday. 

Reports to watch:

  • Manufacturing data will come from Monday's release of the Empire State Index followed by Thursday's Philadelphia Fed Index.
  • Housing Starts and Building Permits will be delivered on Wednesday.
  • Retail Sales and Weekly Initial Jobless Claims will be released on Thursday.


Week in Review - Initial Jobless Claims is a weekly report that tracks how many people have filed for unemployment benefits. It is both a solid gauge on the state of the labor market and economy, and a leading indicator on what to expect in the months ahead. 

So, what are Initial Jobless Claims telling us today? Last week's 196,000 recorded was the lowest in over 50 years! This is what it's telling us:

  1. The labor market continues to strengthen.
  2. The chance of a recession in 2019 is near zero.

Low Initial Jobless Claims also leads to continued higher wage gains, which is wonderful for consumer spending and housing. 

Another great data point this past week was the JOLTS (Job Openings and Labor Turnover Survey) which showed the US economy still has a 1,000,000-person shortfall against the current 7,000,000 job openings. This is just another example of how tight the labor market remains. 

Bottom line -- the great story remains -- low rates + great job market = nice housing market. 

MARKET WRAP - Mortgage Bonds head into the weekend on a bit of a sour note, closing at the lows of the week. At the same time the 10-year Note yield spiked to 2.56%. As we mentioned in our MMG Recap video, next week's corporate earnings and guidance will be the focus. If companies paint a rosy picture for the future, Bonds may continue to struggle. Should companies show concern or uncertainty (which we are not expecting) Bonds may hold their ground.


Late Morning Review - Corporate earnings season kicked off on a high note today with the banking sector coming in with solid numbers. Both JPMorgan Chase and Wells Fargo beat expectations for revenues and profits. Earnings season will give investors insight as to whether or not the US economy is cooling and what will be guidance and forecasts for the coming quarters. S&P 500 earnings have risen every quarter since Q1 2016 but are expected to decline in Q1 2019.

Consumer Sentiment edged lower in early April following the small gain posted in March. The preliminary April Consumer Sentiment Index fell to 96.9 from 98.4 in March while the index during the past 30 months the index was higher than any other time since 1997 to 2000. The report showed that consumers have increasingly voiced complaints about rising vehicle and home prices, and slight declines in unit sales of both markets are anticipated in 2019.


Thursday - April 11  

MARKET WRAP - Not much action again today in the Mortgage Bond markets as prices closed flat to slightly lower with the closely watched S&P 500 unchanged. 10-yr yield unchanged at 2.50%. WTI oil settled at $63.65/barrel, -$0.96.

Late Morning Review - Inflation at the wholesale level pushed higher in March fueled by higher energy costs. The Producer Price Index heated up in March rising 0.6% from February's gain of 0.1%. It was the largest increase in five months and comes after CPI had its biggest increase in 12 months. However, the Fed's favorite gauge on inflation, Core PCE, is running at 1.9% year-over-year, slightly beneath the Fed's target of 2.00%.

Mortgage rates remained near lows seen in January 2018, though they did inch higher over the latest week. Freddie Mac reports that the 30-year fixed-rate mortgage rose four basis points to 4.12%, well below the 4.94% seen the week ended November 8, 2018. The current rate comes with an average point of 0.50. Last year this time, the rate was 4.42%. Freddie Mac expects mortgage rates to remain low, boosting homebuyer demand in the next few months.

Labor market news remained strong today as the sector continues its winning ways. The Labor Department reports that Weekly Initial Jobless Claims fell to 196,000 in the latest week to lows seen in the late 1960s. To put it into perspective as to how strong the labor market is - the population in the late 1960s was 202 million compared to the current 327 million - so today's 196,000 print is off a much larger labor pool.

Wednesday - April 10  

MARKET WRAP - Mortgage Bonds ended with slight gains today just above support levels. Stocks ended modestly higher. 10-yr yield 2.47%. WTI oil settled at $64.56/barrel, +$0.58.

Late Monting Review: Higher gas prices along with rising rental prices pushed consumer prices higher in March. The March Consumer Price Index (CPI) rose 0.4% from the 0.2% gain in February, matching estimates. It was the largest increase since January 2018. The Core CPI rose 0.1%, below the 0.2% expected. Year-over-year numbers saw the headline CPI up 1.9% while the Core rate rose 2% from 2.1% in February. Inflation continues to remain subdued.

Mortgage rates continue to hover near more than 12-month lows given the low inflation environment here in the US. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage rose four basis points to 4.40% in the week ending March 29 with an average 0.47 in points. Total mortgage application volume decreased 5.6%, the refinance index decreased 11% while the purchase index increased 0.5%. Mike Fratantoni, MBA Senior Vice President and Chief Economist said, "This spring's lower borrowing costs, coupled with the strong job market, continue to push purchase application volume much higher. Purchase applications are now up more than 13 percent compared to last year at this time."

The MBA also reported this week in its Builder Application Survey that mortgage applications to purchase new homes jumped both monthly and annually. The increase came on the heels of low mortgage rates, rising wages and a strong job market, which should boost the housing market this spring. The MBA said that applications to purchase homes rose 19% in March from February with a 7% gain from March 2018. MBA Senior Vice President and Chief Economist Mike Fratantoni said, "The confluence of declining mortgage rates with the spring buying season is supporting stronger housing demand and activity."

Tuesday - April 9  

MARKET WRAP - Not much action again today for Mortgage Bonds as they closed near unchanged to slightly lower despite the decline in US Stocks. WTI oil ended at $64.06/barrel, -$0.34. 10-yr yield unchanged at 2.50%. 

Late Morning Review: The NFIB Small Business Optimism Index rose in March from February to 101.8, 'a historically strong level and an indication that small businesses continue to power the economy after being briefly shaken by January's government shutdown,' reports the NFIB. "Small business owners continue to create jobs, expand their operations, and are enjoying strong sales," said NFIB President and CEO Juanita Duggan. The NFIB index is a leading economic indicator in many ways while giving us a "boots on the ground" perspective of the labor market. This is a solid report and it bodes well for the economy.

A recent prediction by mortgage forecast and advisory firm iEmergent, shows that home-loan volume this year could be set to hit highs seen back in 2005. iEmergent is predicting that total home loan volume will rise nearly 4% in 2019. In addition, there could be $1.2 trillion in home purchase lending in 2019 due in part to the current low mortgage rate environment. Further, a slightly slowing economy and low inflation levels have led the U.S. Federal Reserve to stop raising interest rates this year, which bodes well for the housing market.

The number of job openings edged a bit lower at the end of February but remain just below all-time high levels. The Labor Department reports that the number of job openings fell to 7.1 million in February from the 7.6 million in January. Job openings decreased in a number of industries, with the largest decreases in accommodation and food services (-103,000), real estate and rental and leasing (-72,000), and transportation, warehousing, and utilities (-66,000). This will keep the labor market tight and with wages growing ... another good sign for the housing market.

Monday - April 8  

Market Wrap: The US Bond markets were quiet today with little movement seen for Mortgage Bond prices. Stocks closed in mixed fashion. The yield on the 10-yr T Note edged higher to close at 2.52%. WTI oil settled at $64.39/barrel, +$1.31. The Monthly Bond Rollover will take place this evening. The Treasury will sell $38B 3-yr Notes tomorrow, results at 1:00 p.m. ET.

Late Morning Review: Fannie Mae reports that its key housing index surged in March just in time for the spring homebuying season. Declining mortgage rates as well as a drop in prices were two reasons behind the increase. The Fannie Mae Home Purchase Sentiment Index jumped 5.5 points in March to 89.8, the highest level since June 2018. The good time to buy and good time to sell components both increased in March. Doug Duncan, senior vice president and chief economist at Fannie Mae said, "Consumers appear to have regained some confidence in the housing market, with perceptions of both home buying and home selling conditions returning to their longer-term trends.”

Gas prices at the pumps continued to increase over the past week as demand holds steady while inventories continue to lighten, reports motor club AAA. The national average price for a regular gallon of gasoline is at $2.74, up $0.08 from last week and up $0.28 from a month ago. The increase is also due in part to the rise in oil prices, which hit five-month highs this week. A year ago, the price was $2.66 a gallon. The all-time high for a gallon of gas was $4.11 hit back on July 17, 2008.

Friday - April 5  

Forecast for Next week: After last week's risk-filled events, the upcoming week is rather light on economic data with the highlight being the inflation reading Consumer Price Index. We don't see inflation rising anytime soon, and that has been backed up by the Fed's assertion that inflation will remain subdued for several years ahead. 

Remember that inflation is the driver of long-term interest rates like mortgages - so if inflation remains low, so will mortgage rates. 

The Bond markets will have to absorb a total of $78B in Treasury auctions of 3- and 10-year Notes along with 30-year Bonds from Tuesday through Thursday. The added supply into the market could cause price/rate volatility. 

The ongoing talks and headlines between the US and China will continue to impact both Stocks and Bonds in the upcoming week. It seems like some sort of deal is near, with headlines showing that 90% of the talks are over. Should a deal come to pass, it will have a long-lasting positive effect on the US and Chinese economy - remember, Bonds generally don't like good news. 

Reports to watch:

  • With a slow week ahead for data, reports begin on Wednesday with the inflation reading Consumer Price Index, followed by the Producer Price Index on Thursday.
  • As usual, Weekly Initial Jobless Claims will be released on Thursday, with Consumer Sentiment on Friday.


/Week in Review: Spring is the peak home buying season for many parts of the country. After years of softer home sale activity - thanks to low housing inventory, affordability issues, and more - this Spring home buying season could prove to be one of the best in years. Why? 

Call it the "Goldilocks" economic scenario - and here are several bullets that should help housing not just this Spring, but for the foreseeable future:

  1. The Fed has stated they will not raise rates in 2019. Yay!!! There is actually a better chance of a rate cut before 2019 comes to an end. This means home loan rates won't go too high.
  2. Inflation remains subdued - for now. Low inflation means lower rates.
  3. Home price gains are slowing year-over-year to healthier levels, and at equilibrium with personal wage gains. In years past, housing prices were gaining 10% to 15% or more, and wages were growing at 2%. Now we are seeing house prices increase 4% to 5% year-over-year, just slightly more than wages.
  4. Housing inventory is increasing. This is a big change from years past and should it continue, buyers will continue to come to the market and take advantage of the "Goldilocks" conditions.
  5. The Labor market remains solid. People buy homes because they feel good about their job and their future. Unemployment is at a 50-year low. This is very positive for housing.
  6. Europe can't get out of their own way. Their economies are weak and that is keeping their bonds yields ultra-low. This is putting downward pressure on US Bond yields. Yes - you can thank Europeans for your low home loan rates.
  7. The Stock market is right at all-time highs. This means higher 401K and IRA values create a positive wealth effect that should provide a nice tailwind for housing. People with money spend it.
  8. Consumer Confidence and Sentiment are increasing again thanks to the Fed no longer hiking rates, the strong job market, and Stocks up nicely in 2019. "Confident" consumers purchase homes.
  9. No fear of a US recession as Friday's March Jobs Report showed 196,000 new jobs created, a great rebound higher from February's 33,000 - which had stoked some recession chatter.
  10. Home loan rates continue to hover near 14-month lows, thanks to the many bullets above.

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



MARKET WRAP - After the Goldilocks Jobs Report for March, Mortgage Bonds were able to squeak out modest gains as support continues to hold. Stocks closed marginally higher on trade optimism and the solid jobs data. WTI settled at $63.10/barrel, up $1. 10-yr yield settled at 2.50%. Consider floating brand-new files and those with time with today's bounce off support. Have a great weekend!

Late Morning Review: The Bureau of Labor Statistics reports that payroll growth rebounded in March after the weak reading in February. Nonfarm Payrolls rose 196,000 last month, above the 175,000 expected and above the 33,000 created in February. For January and February, upward revisions totaled 14,000. The unemployment rate remained at 3.8%, near 50-year lows. Hourly earnings rose 3.2% year-over-year, down from 3.4% in February. Overall, a solid report with average job growth at 180,000 for the first three months of 2019.

The MBA reports that its Mortgage Credit Availability Index (MCAI) rose in March from February. A decline in the MCAI indicates that lending standards are tightening, while increases are indicative of loosening credit. The MCAI gained 1.1% in March to 182.1. The MBA said that credit availability rose primarily due to a spike in jumbo mortgage offerings.


Thursday - April 4  

MARKET WRAP - Mortgage Bonds hovered near unchanged levels throughout today's session on hold ahead of tomorrow's Jobs Report for March. Support held today for the bennchmark Fannie Mae 30-yr coupon 4% coupon. Stocks closed in mixed fashion. WTI oil settled at $62.69/barrel, with small gains. 10-yr yield 2.51%.  

Late Morning Review - Mortgage rates remained at 14-month lows in the latest survey which has been a boon for mortgage application volume. Low rates should boost the spring home buying season which is currently underway. Freddie Mac reports that the 30-year fixed-rate mortgage rose to 4.08% this week from 4.06% last week with an average point of 0.50. Sam Khater, Freddie Mac’s chief economist, says, "The benefits of the decline in mortgage rates that we’ve seen this year will continue to unfold over the next few months due to the lag from changes in mortgage rates to market sentiment and ultimately home sales.”

Americans filing for first-time unemployment benefits fell to lows seen in the late 1960s in the latest week as the labor market tightened further. The Labor Department reports that Weekly Initial Jobless Claims fell by 10,000 in the latest week to 202,000, the lowest level since December 1969 when the US population was smaller. The four-week moving average of claims, which irons out seasonal abnormalities, fell 4,000 to 213,000. The numbers come ahead of Friday's Jobs Report for March.


Wednesday - April 3  

MARKET WRAP - Support held today for the benchmark Fannie Mae 30-yr 4% coupon as it closed with a modest loss weighed down by rising Stock prices. Stocks closed with marginal gains on trade optimism between the US and China. The 10-yr yield closed at 2.52%. WTI oil settled at $62.42/barrel, -$0.16. 

Late Morning Review:Low mortgage rates drove mortgage loan application volumes sharply higher in the latest week as borrowing costs fell to 14-month lows. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage fell to 4.36% from 4.45%, the lowest since January 2018, with an average 0.44 in points. The MBAs Market Composite Index, a measure of total mortgage loan application volume, rose nearly 19% in the latest week. In addition, the refinance index surged 39% while the purchase index saw a 3.4% increase.

Private payroll growth slowed a bit in March as employers worried over a somewhat slowing US economy. ADP reports that private payrolls rose 129,000 in March, below the 178,000 expected while February was revised higher to 197,000 from 183,000. The 129,000 was the slowest private payroll growth since September 2017. The more closely watched government Jobs report will be released on Friday morning.

The service of the economy edged lower in March reports the Institute of Supply Management (ISM). The ISM Service Index fell to 56.1 last month from the 59.7 recorded in February. In the accommodation and food service industry, employers say labor is tight and in short supply. A reading above 50 percent indicates the non-manufacturing sector economy is generally expanding; below 50 percent indicates the non-manufacturing sector is generally contracting.


Tuesday - April 2  

MARKET WRAP - Mortgage Bond prices are in holding pattern ahead of tomorrow's risk event in the March ADP Private Payrolls Report. Prices closed near unchanged while Stocks closed in mixed fashion. WTI oil settled at $62.58/barrel, +$0.99 as OPEC cuts production. The yield on the 10-yr T Note closed at 2.47%. ADP Private Payrolls will be released at 8:30 a.m. ET tomorrow morning. We continue to advise locking files that are closing in 30 to 45 days. You can consider floating brand-new files or those closing further out but if the technical markers we identified in Mortgage Bonds and Treasuries are broken - you should be locking everyone.

Late Morning Review- CoreLogic reports that home prices, including distressed sales, rose 4% from February 2018 to February 2019 as gains begin to cool to more normal levels after the 4.4% increase year-over-year seen last month in January. In early 2018, gains were seen in the 7% range. Month-over-month, prices rose 0.7% from January to February. Looking ahead, prices are expected to rise 4.7% from February 2019 to February 2020.

Ahead of two key jobs reports this week, ADP on Wednesday and Non-Farm Payrolls on Friday, the Paychex Small Business Employment Watch saw its first decline in job growth in 2019 last month. However, employers remain challenged in their ability to fill open positions with qualified candidates in a tight labor market. The ability for people to find qualified workers can put more upward pressure on wages, which would be welcome for workers given the stagnation that has taken place in wage gains in previous years.

The government will report jobs data for March this Friday and comes after the weak reading in February where just 20,000 jobs were created. Most pundits feel that February's low reading will be revised higher but that remains to be seen on Friday when the numbers for April are released. The labor market continues to be solid on all fronts with employers searching for qualified candidates to fill positions, as referenced by the Paychex data released this week. Key components within the report are hourly earnings and the unemployment rate.

Monday - April 1  

MARKET WRAP - Mortgage Bond prices are in holding pattern ahead of tomorrow's risk event in the March ADP Private Payrolls Report. Prices closed near unchanged while Stocks closed in mixed fashion. WTI oil settled at $62.58/barrel, +$0.99 as OPEC cuts production. The yield on the 10-yr T Note closed at 2.47%. ADP Private Payrolls will be released at 8:30 a.m. ET tomorrow morning. We continue to advise locking files that are closing in 30 to 45 days. You can consider floating brand-new files or those closing further out but if the technical markers we identified in Mortgage Bonds and Treasuries are broken - you should be locking everyone.

Late Morning Review

Analytics firm Black Knight reported on Monday that due to the recent steep decline in mortgage rates, there are now nearly 5 million borrowers that could qualify for a refinance which would reduce their rate by 3/4s of a point. The report went on to reveal that the population of refinanceable borrowers is now near a two-year high, after hitting a 10-year low in November.

Both manufacturing and construction spending rose in data released today. The national ISM Manufacturing Index came in at 55.3 in March, above the 54.2 recorded in February and just above the 54.5 expected. The U.S. economy has now grown for the 119th consecutive month. The Commerce Department reported that construction spending rose for a third straight month in February by 1% after January's upwardly revised increase of 2.5%.

Retail Sales unexpectedly declined in February as consumers pulled back on spending after positive gains were seen in January. Retail Sales fell 0.2% in February from January and rose just 2.2% year-over-year. Americans cut back spending on clothing, furniture, building materials and electronics. The U.S. economy relies on consumer spending for nearly 70% of its economic activity and a continued pullback in spending could slow economic growth even further. But one month does not constitute a pattern. We will have to see the upcoming months data along with possible higher revisions for last month.



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