September 2019

September 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:

Newsletter updated weekly:



Forcast for the week of September 30th 2019 - The markets will continue to be impacted by the most important news story to follow, the U.S./China trade negotiations, which have been positive of late. The circus that is Washington, D.C. will also be in focus, while key economic reports may round out what could be a volatile week.  The big report will come on Friday with the government's Jobs Report for September. How this report goes could impact what the Fed does with interest rates for the rest of 2019.  Several key manufacturing reports will be released as the sector slows under the weight of the tariff issues.


Reports to watch:

  • Manufacturing data will come from the regional Chicago PMI on Monday followed by the ISM National Manufacturing Index on Tuesday. The ISM Service Index will be released Thursday.
  • On Wednesday, the first of two labor market reports will be delivered from the ADP Private Payrolls Report.

On Friday, the government's Jobs Report will be released that covers Non-Farm Payrolls, the Unemployment Rate, and Hourly Earnings.

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Friday - September 27  

Market Wrap - Not much movement seen for Mortgage Bonds today as prices hovered near unchanged to modestly higher throughout the session. Treasury prices closed flat ... 10-yr yield 1.68%, unchanged. Stocks closed lower after the White House considers delisting Chinese companies. WTI oil settled at $55.90, $-0.51. Inflation remained tame in August as evidenced by the August Core PCE. Next week ADP Private Payrolls and the government's Jobs Report will be released. Continue to recommend locking files that are closing in 30 days or less.  Have a great weekend!

Late Morning Review - Inflation, as measured by the Core PCE, rose to 1.8% annually in August from 1.7% in July, which was revised from 1.6%. The Core PCE is the Fed's favorite inflation gauge and has set a target range of 2.0%. It has been running below that level for some time. Month-over-month, Core PCE rose 0.1% versus the gain of 0.1% expected. Inflation remains subdued and as the Fed has said, it will remain low for the foreseeable future. Inflation is a major driver for home loan rates, not the Fed.

Consumer spending slowed in August after the big surge by the consumer in the second quarter of this year. The Commerce Department reports that personal spending rose 0.1% last month after the big gains seen in the previous months. The US economy is reliant on consumer spending to fuel the economy and so far in 2019, consumers have opened their wallets and spent on goods and services in 2019. August could have been a one-time occurrence with low consumer spending and the markets will look to see if spending will pick up as we head into the crucial holiday season.

Thursday - September 26  

Market Wrap - Mortgage Bonds traded near unchanged for most of the session while stocks hovered in negative territory as equities watched the circus in DC. The impeachment headlines also weighed on stocks. The 10-yr yield ended at 1.69%. Today's GDP showed strong consumer spending in Q2 and 2.6% growth for the first half of 2019. The Core PCE will be released tomorrow. Continue locking files that are closing in 30 days or less while floating brand-new and longer-term files.

Late Morning Review - Consumer spending surged in the second quarter of 2019 due in part to a strong labor market here in the US. The government released the final read on second quarter Gross Domestic Product today showing a 4.6% increase in consumer spending, the fastest pace since the fourth quarter of 2014. For the first half of 2019, Gross Domestic Product grew at a solid 2.6% rate. The report revealed that business investment slowed which could be attributed to the trade issues between the US and China.

Mortgage rates edged lower this week and remain near multi-year lows, reports Freddie Mac. The 30-year fixed-rate mortgage fell nine basis points to 3.64% with an average 0.6 in points and fees. A year ago the rate was 4.72%. Sam Khater, Freddie Mac’s Chief Economist, says, “With both the unemployment rate and mortgage rate below four percent and near historic lows, it is no surprise that the housing market regained momentum with home sales and construction at or near decade highs. The fall housing market is poised to continue with steady gains in prices and solid sales activity.”

Americans filing for first-time unemployment benefits continued to run at 50-year lows in the latest week as the labor market continues to be a bright light for the US economy. Weekly initial jobless claims came in at 213,000 in the week ended September 21, up marginally. The four-week moving average of claims, which irons out seasonal abnormalities, fell modestly to 212,000.

Wednesday - September 25


Market Wrap - Mortgage Bonds closed just above the session lows. Today's pullback confirms negative action from the spinning top that formed yesterday, which showed indecision and that prices could push higher or lower in the coming days. Well today they moved lower and could continue to decline in the days to come. The yield on the 10-yr T Note closed at 1.73% after hitting 1.63% this morning. Stocks closed higher on the strong housing data, Trump trade deal talk and looking beyond the impeachment headlines. Pending Home Sales, Weekly Claims and the final read on Q2 2019 GDP will be released tomorrow morning. The Treasury will sell $32B 7-yr Notes. 

Late Morning Review - Low mortgage rates fueled sales of new single-family homes in August signaling a positive sign for the sector after strong Housing Starts and Existing Homes Sales in the past three weeks. August new home sales surged 7% from July to an annual rate of 713,000 versus the 659,000 expected. It was the second time sales rose above the 700,000 level since 2007.

New home sales in July were revised higher to 666,000 from 635,000. Sales were up 18% from August 2018. Strong gains in the West and South offset losses in the Northeast and Midwest. The median price of new homes sold in August was $328,400, up 2.2% from a year ago. Inventories to a 5.5-month supply. Overall, a solid report.

Mortgage application activity plunged in the latest week after the steep rise in rates in the previous week. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage inched higher to 4.02% with 0.38 in points. The Market Composite Index, a measure of total mortgage application volume, fell 10%, the Refinance Index fell 15% and the Purchase Index declined by 3%. The MBA also reports that low mortgage rates will spur on total originations in 2019 to $1.9T, the highest since the $2T recorded in 2016.

Tuesday - September 24

Market Wrap - Treasury prices surged after negative trade talk from President Trump along with a decline in Consumer Confidence. In addition, headlines that House Speaker Nancy Pelosi will formally launch an inquiry into impeaching the president also weighed on stocks. Mortgage Bonds closed flat to slightly higher. The Fannie Mae 30-yr 3.5% formed a spinning top candlestick today, which shows indecision. After a strong price advance or decline, this time an advance, spinning tops can signal a potential price reversal, if the candle that follows confirms. The yield on the 10-yr T Note fell to 1.64%. Solid demand was seen from today's $40B 2-yr Note auction. The Treasury will sell $41B 5-yr Notes tomorrow. Stocks closed with losses. WTI oil closed at $57.32/barrel, -$1.32.

Late Morning Review - Home price gains continued to slow in July and are way below the annual gains seen a year ago. The July S&P Case-Shiller 20-City Home Price Index rose 2% year-over-year, down from 2.2% in June. It was the slowest pace since 2012. The national index rose 3.2%, matching June's number. On a monthly basis, prices were unchanged. Home price gains have been on the decline since March 2018 but in this low rate environment, signs are pointing to a re-heat.

The heightened tariff and trade issues in late August and early September pushed consumer attitudes lower this month. The Conference Board released its Consumer Confidence Index showing a decline to 125.1 from the 134.2 recorded in August. The Present Situation and Expectations Index components also decline. In addition, those saying jobs are “plentiful” declined while those claiming jobs are “hard to get” declined slightly. The US economy is dependent on confident consumers to spend their hard-earned dollars, which fuels economic expansion.

The global markets continue to be gripped in the trade headlines and it will continue until some type of complete deal is struck.

China granted waivers to several Chinese companies to purchase soybeans from the US, tariff free, while Treasury Secretary Mnuchin announced that talks will resume the week of October 7. That news coupled with the fact that the US economy remains resilient is pushing stocks higher today though the gains are marginal, at best.

Monday - September 23

Market Wrap - Mortgage Bonds were able to end the day with gains after late day headlines read that China trade officials cut short the talks with the US. The yield on the 10-yr T Note closed at 1.72% while stocks closed with modest losses on the negative trade news. There were no economic reports released today.

Late Morning Review - Foreclosure starts fell to their lowest level in 18 years while low interest rates have increased prepayments by 5% from July to August, a three-year high. There were 36,200 foreclosure starts in August, down 23% from August 2018. August’s prepayment rate was up 62% from the same time last year and 2.5 times the 18-year low hit in January. Black Knight said the month's prepayment activity reflects June/July interest rates; as rates fell further in August and September, the peak in refinance-driven prepayments is likely still to come.

The decline in homes for sale on the market continued in August with inventories falling 5.5% from a year ago and down 1.5% from July, in 53 metro areas. Months Supply of Inventory decreased to 2.8 compared to 2.9 in July 2019 and eclipsed the previous August low in the report’s 11-year history. In addition, inventory has remained below four months in 39 of the last 42 months, dating back to March 2016. Six months is considered a market balanced between sellers and buyers. “The modest inventory growth that started last fall has been swallowed up by demand as buyers have returned to the market, likely spurred on by attractive interest rates,” said RE/MAX CEO Adam Contos.

There were no economic reports due for release today. The rest of the week's calendar features housing, consumer attitudes and spending, Gross Domestic Product, and the inflation reading Core PCE. The Treasury will be selling a total of $113 billion in Treasury notes this week beginning tomorrow, the results could impact bond prices and rates. Mortgage Bond prices begin the week near unchanged while US stocks are modestly higher. This week is typically the weakest week of the year for the S&P 500 stock index but it is getting off to a positive start. 

Friday - September 20  

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Forecast for the week September 23, 2019  - After a volatile week, the upcoming five trading days could continue to deliver more action with a packed economic calendar that features housing, inflation numbers, consumer confidence, spending, and sentiment.

The Fed's favorite inflation gauge, the Core PCE, will be released this week, which will be closely watched by investors and Fed Chair Powell. Inflation has been running low and should continue to be muted for the foreseeable future.

Throw in the ongoing trade issues and Mideast tensions, and we could see continued volatility. In addition, the Treasury will be selling a whopping $113B in 2-, 5-, and 7-year Notes, which could impact Bond trading.

Reports to watch:

  • Housing data comes from Tuesday's S&P Case-Shiller Index, New Home Sales on Wednesday, and Pending Home Sales on Thursday.
  • Consumer Confidence will be released on Tuesday with Consumer Sentiment on Friday.
  • The third reading on Q2 2019 Gross Domestic Product comes on Thursday along with Weekly Initial Jobless Claims.
  • On Friday, the Core PCE, Personal Spending, and Incomes will be delivered, along with Durable Orders.

Week in Review - This past week the Federal Reserve cut the Fed Funds Rate for the second time this year, lowering the rate to 2.00%. Remember that the Fed Funds Rate is a short-term, overnight rate that has little effect on home loan rates. Home loan rates respond to the trading activity in Mortgage Bonds, which are influenced by the economic outlook and inflation expectations.

Not all Fed members were on board with the .25% rate cut. A few preferred not to cut rates while another wanted a bigger .50% cut.

Along with the Fed rate cut, here are three important takeaways from Fed Chair Powell's press conference and the Monetary Policy Statement:

  1. There is no recession in sight. One of the fears in recent months and cause for home loan rates to decline this summer was the fear of a recession. Powell debunked the recession myth, which is the reason why they suggested the possibility of no more rate cuts in 2019... the U.S. economy is doing fine.
  2. The consumer is also alive and well. The main reason the U.S. economy won't slip into recession is because the U.S. consumer has never been more willing and able to spend money. Consumer spending makes up nearly two-thirds of U.S. economic growth (Gross Domestic Product), so a recession will not occur while the consumer remains confident.
  3. Exports have slowed. This was a negative point from the Fed statement. There are a couple reasons -- one being the uncertainty surrounding the U.S./China trade dispute. But there is another reason they have slowed, and it is because our exports are too expensive for other countries, because our U.S. dollar has strengthened against other global currencies. This is why the Fed will likely cut rates again, despite suggesting otherwise, to soften the U.S. dollar and make our exports cheaper to other countries.

After the Fed came and went, home loan rates actually ticked up slightly. Why? The U.S. economy is not slipping into a recession and the Fed will take measures, like cutting the overnight Fed Funds Rate, to prevent it from doing so. Think good news is bad news for home loan rates.

Bottom line: If you have a family member, friend, or client considering a refinance or home purchase, there may never be a better opportunity to lock in a home loan rate, while they hover near three-year lows.

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

Market Wrap  - Mortgage Bonds were able to end the day with gains after late day headlines read that China trade officials cut short the talks with the US. The yield on the 10-yr T Note closed at 1.72% while stocks closed with modest losses on the negative trade news. There were no economic reports released today. Have a great weekend!

Late Morning Review - The Federal Reserve cut its benchmark interest rate on Wednesday by 0.25% but there have been a few differing opinions as to what the Fed members should have done. This morning, St. Louis Fed President Bullard said that he wanted a 0.50% rate due to the fact that the manufacturing sector appears to be in a recession while inflation continues to run on the low end of the spectrum.

On the other hand, Boston Fed President Rosengren did not want a rate cut this week and sees no need for additional rate cuts, which could be an inflation risk and encourage households and firms to take on too much leverage. The markets feel more cuts are coming, despite Fed Chair Powell and Rosengren suggesting otherwise. Fed Fund Futures also think another cut is coming as they are pricing in a 66% chance of a cut at the moment by year end.

Oil and gas prices spiked this week due to the turmoil that unfolded in the Mideast last weekend. Two Saudi oil refineries were attacked by drones, which sent oil prices soaring. The average price for a regular gallon of gasoline rose to $2.67 today from $2.57 a week ago and up from $2.60 a month ago. The price of oil rose $8 on Monday to $63/barrel. Typically, gas prices tend to go down in the fall due to fewer drivers on the road. However, Saudi Arabia said the refineries will back to normal capacity within a few weeks, which should push gas prices lower as we enter the fall season.




Thursday - September 19

Late Morning Review - The National Association of Realtors (NAR) reports that existing home sales rose 1.3% in August from July to an annual rate of 5.49 million units, above the 5.36 million expected. Overall, sales were up 2.6% from a year ago. The NAR said that buyers are finding it hard to resist the current low mortgage rates. The median home price rose 4.7% from a year ago to $278,200. Inventories of homes for sale on the market fell to a 4.1-month supply, below the normal level of 6 months.

Mortgage rates jumped in the latest survey from Freddie Mac and was the largest gain since October of 2018 though they remain historically low. The 30-year fixed-rate mortgage rose to 3.73% this week from 3.56% last week with 0.5 in points and fees. Last year this time, the rate was 4.65%. Freddie Mac said that it is clear that the housing market is finally improving due to the strong labor market and low mortgage rates.

The Federal Reserve cut the short-term fed funds rate yesterday, as expected, to bring the rate to 2.0%. Not all Fed members were on board with the .25% rate cut. A few preferred not to cut rates while another wanted a bigger .50% cut. Along with the fed rate cut, there were three important takeaways from Fed Chair Powell's press conference and the monetary policy statement such as, there is no recession in sight, the consumer is also alive and well, and exports have slowed.


Wednesday - September 18  

Market Wrap - As expected, the Fed cur rates which stirred up some volatility as stocks initially fell but manage to cut losses by the session's end. Mortgage Bonds closed positive though off their best levels. The 10-yr yield edged high to 1.79% from the earlier low of 1.74%. Tomorrow's economic data includes Weekly Claims, Philly Fed and Existing Home sales. 

2:30 PM ET - Fed Chair Powell says the Fed cut rates to keep US economy strong. Economy continues to perform well.  Mortgage Bonds off highs as the market now awaits Fed Chair Powell's press conference at 2:30. 10-yr yield inching higher ... now at 1.78%.

2:13 PM ET - Fed cuts the Fed Funds Rate by 25bp to 2% in a 7-3 vote amongst members. Says uncertainties remain. No surprises in the statement.  Five Fed members forecast one or more cuts in 2019. Fed GDP forecast raised to 2.2% for 2019. Labor market strong.  .Mortgage Bonds holding gains after the fed announcement. 10-yr yield 1.76% from the 1.74% low hit just before the Fed statement.

Late Morning Review - August housing starts jumped to a 12-year high rising 12% from July to an annual rate of 1.364 million units versus the 1.255 million expected. July was revised higher to 1.215 million from 1.191 million. Housing starts were up nearly 7% year-over-year. Building permits rose 7.5% to an annual rate of 1.419 million. Single-family starts, which account for the biggest share of the housing market, rose 4.4% to a rate of 919,000 units in August, the highest level since January. Multi-family starts soared by 31%.

Fannie Mae released its September 2019 Economic and Housing Outlook this week saying that the US economy is reliant on consumer spending and could be susceptible to downside risks. The report revealed that Fannie Mae has lowered its gross domestic product forecast to 1.9% in the third quarter of 2019. Fannie Mae also reports that mortgage demand remains on solid footing but notes that the lack of existing supply continues to limit home sales even as mortgage rates push new lows. In conclusion, total mortgage originations in 2019 are expected to rise 11.6% year-over-year.

It's Fed day! The Federal Reserve will release its monetary policy statement this afternoon at 2:00 p.m. ET which will be accompanied by the Summary of Economic Projections. Immediately following the release, Fed Chair Powell will hold a press conference at 2:30. There has been a wrinkle in fed fund futures (FFR) as they now show just a 58% chance of a 25 basis point rate cut, down from 88% last week and nearly 100% from a couple of weeks ago. The decline in FFR is due to the fact that the US economy remains solid, job and wage growth is strong, consumer spending has been strong and there is no chance of a near-term recession. Future rate cuts this year are now up in the air.

Tuesday - September 17  

Market Wrap - After several weeks of volatility, US markets were on the quiet side today as the Fed kicked off its two-day meeting today. Mortgage Bonds closed flat while Stocks squeaked out gains. The 10-yr yield closed at 1.80% as Treasury prices rose with the disconnect continuing. The Fed will release the monetary policy statement at 2:00 p.m. ET and it will be accompanied by the Summary of Economic Projections. It is expected that the Fed Funds Rate will decrease by 25bp to 2.0%. Fed Chair Powell will hold a press conference immediately following the statement release at 2:30. Continue to recommend locking files that are closing in 30 days or less and float brand-new and longer-dated files. Be sure to be tuned in around 2:00 p.m. ET tomorrow for the Fed headlines and the markets reaction.

Late Morning Review - Average FICO scores have been on the rise since the end of the Great Recession due in part to missed payments on mortgages and credit cards being purged from credit files. FICO (Fair, Isaac and Company) reports that average score has risen to 706, the highest on record compared to the 690 seen at the height of the housing bubble in 2006. “Significant improvement in the overall population’s credit profile has been the key driver of the 20-point increase in national average FICO score over the past decade,” said Ethan Dornhelm, vice president at FICO.

August rental prices have been inching higher across the nation with prices up $47 from August 2018 or 3.3% to $1,472. That is a meager 0.1% increase from July. The numbers signal that there is solid demand for multi-family housing supported by low unemployment and a solid economy here in the US. Markets in New York and California continue to be the most expensive rents in the US.

Home builder confidence hit its highest level in 2019 in September as low interest rates and strong demand continue to boost builder sentiment.The National Association of Home Builders reports that its Housing Market index hit 68 this month with August revised higher to 67 from 66. Low interest rates and solid demand continue to fuel builders’ sentiments even as they continue to grapple with ongoing supply-side challenges that hinder housing affordability, including a shortage of lots and labor,” said NAHB Chairman Greg Ugalde.




Monday September 16

Market Wrap - Mortgage Bonds closed with decent gains today but Treasuries saw the bigger gains as the disconnect continues. The attacks on two Saudi Arabian oil refineries sent investors back into the safe haven of US government securities. WTI oil closed at $62.88/barrel, up $8.03. The yield on the 10-yr T Note closed at 1.84%. The September NAHB Housing Market Index will be released tomorrow. The two-day Fed meeting kicks off tomorrow but there will be no headlines until 2:00 p.m. ET on Wednesday when the monetary policy statement is released.

Late Morning Review - Foreclosure activity increased month-over-month from July to August but declined from a year ago. ATTOM Data Solutions reports that that lenders started the foreclosure process for the first time on 27,886 property owners in August, up 7% from July though down 15% from a year ago. Across the nation, one in every 2,554 properties received a foreclosure filing last month.

It's Fed week! Fed members kick off their two-day Fed meeting on Tuesday and end Wednesday at 2:00 p.m. ET with the release of the monetary policy statement. The statement will be accompanied by the Summary of Economic Projections. In addition, Fed Chair Powell will hold a press conference at 2:30 p.m. ET. It is expected that the short-term Fed Funds Rate will be cut from 2.25% to 2.0%.

Tensions in the Mideast ramped up over the weekend after two Saudi Arabian oil refineries were attacked by drones. The price of West Texas Intermediate oil has gushed higher by $6 to $61/barrel. Sources are pointing to Iran as the culprit behind the attacks. Gas prices at US pumps will most likely inch higher during the week. However, with an overabundance of oil flowing through global pipelines, this event could quickly burn out.

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Forecast for the week September 13, 2019 

It is all about the FED!

Fed members will kick off their scheduled two-day Federal Open Market Committee meeting on Tuesday with the monetary policy statement being delivered on Wednesday afternoon at 2:00 p.m. ET.

The statement will be associated with a Summary of Economic Projections with Fed Chair Powell holding a press conference immediately following the statement release at 2:30 p.m. ET.

It is expected that the Fed Funds Rate will decrease by 0.25% to bring the rate to 2.0%. What is said within the policy statement and what Fed Chair Powell says can potentially impact Stock and Bond prices, yields, and mortgage rates.

Economic data will be abundant in the upcoming week with housing data in the spotlight, but the reports will take a backseat to the Fed meeting and the ongoing headlines out of the U.S./China trade issues.

Throw in the aforementioned tug of war, and we could see more volatility during the week.

Reports to watch:

  • Housing data dominates the economic landscape this week with the NAHB Housing Market Index on Tuesday, Housing Starts and Building Permits on Wednesday, and Existing Home Sales on Thursday.

Regional manufacturing will be seen from the Empire State Index on Monday and the Philadelphia Fed Index will be released on Friday.

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Week in Review – This past week home loan rates ticked up sharply from the previous week leaving many wondering -- have rates bottomed?

For would-be homebuyers, real estate agents, and folks working in the housing industry, here are three things affecting home loan rates today and stories to follow in coming weeks and months. Which way these things go will determine the next directional move for home loan rates:

  1. U.S./China Trade Dispute: In recent weeks both sides have played "nice" with tariffs being delayed by the U.S. and China opening markets. How this story goes, so will global economies, financial markets, and home loan rates. At the moment, there is no bigger story to track.
  2. Tug of War: The push/pull action between slowing global economies and world central banks is at play. With economies slowing, central banks are cutting rates and introducing new financial stimulus to keep the economic expansion growing. If central banks are successful and economic growth reaccelerates, home loan rates will suffer further. The opposite is also true.
  3. The "Technical Picture": It has turned against home loan rates for now. Back on August 5, Mortgage Bonds hit a 2019 price high and have been unable to break above that price, and subsequently slipped lower creating a tough "ceiling of resistance" that Bonds will have to pierce in order for home loan rates to further improve.

Bottom line: The recent uptick in rates could simply be a blip on the radar and we may see home loan rates hit all-time lows in the months ahead. As mentioned, the bullets above will determine what happens next. With rates remaining near three-year lows, would-be buyers and folks looking to refinance should capture the opportunity while at hand because there could be a high cost and risk to waiting for rates to go even lower.

Market Wrap - Mortgage Bonds fell through their 50-day MA this week for the first time since last Thanksgiving, which ushered in another wave of bond selling and another spike higher in rates. Treasury prices continued to disconnect with Mortgage Bonds, this time to the downside with the 10-yr falling 100bp in price today while the Fannie Mae 30-yr 3.5% fell by 28bp. The 10-year yield has spiked to 1.90% from 1.42% last Tuesday - whew!!! In trying to determine where the rate spike will end, 2.00% on the 10-year Note looks like a place where the rate rise might pause. Continue to lock files closing in 30 days or less with a floating bias for brand-new and longer-dated files. Have a great weekend!


Late Morning Review - After suffering big losses in August due to negative trade headlines, US stock markets have reversed in September and are now just below the all-time highs seen in late July. Easing fears of an impending recession coupled with now-positive trade headlines have lifted the Dow, S&P, and NASDAQ. The closely watched S&P 500 is currently trading at 3,016, a whisker below its all-time closing high of 3,025 hit back on July 26, 2019. A solid economic environment coupled with a strong job market and rising wages are a few other reasons for the rise in the equity markets.

The US consumer continued to spend in August thanks to a strong job market and higher wage growth. August retail sales rose 0.4% versus the 0.2% expected while July was revised higher to 0.8% from 0.7%. This signals that the consumer remains alive and well with the ability and willingness to spend. With consumer spending making up two-thirds of the US economy, this is great news leading into 3rd Quarter Gross Domestic Product data and throws a wet towel on any near-term recession chatter.

Thursday - September 12  


Late Morning Review - Inflation at the consumer level remained contained in August due in part to a decline in the cost of gasoline and other energy products. The Consumer Price Index (CPI) rose by a meager 0.1% last month, down from the 0.3% increase in July. When stripping out volatile food and energy, the Core CPI increased 0.3%. Inflation continues to run on the low end of the spectrum and the Federal Reserve said it will continue to remain low for several years.

Mortgage rates edged higher this week, though they remain at three-year lows and well below what was seen a year ago. Freddie Mac reports that the 30-year fixed-rate mortgage rose seven basis points this week to 3.56% with an average 0.5 in points and fees. A year ago, the rate was 4.60%. Sam Khater, Freddie Mac’s Chief Economist says, "While there has been a material weakness in manufacturing and consistent trade uncertainty, so far, the American consumer has proved to be resilient with solid home purchase demand.”


Wednesday - September 11 

Market Wrap - Not much movement for Mortgage Bonds toay after the recent decline. Mortgage Bonds closed near unchanged and the 10-yr yield settled at 1.74% from yesterday's 1.70% close. Stocks closed higher on positive trade headlines and as the recession stigma of an inverted yield curve between 2s and 10s eases as the curve steepens. The inflation reading CPI for August will be released tomorrow. The Treasury will sell $16B 30-yr Bonds

Late Morning Review - New home construction continues to run below demand, and the rate at which housing is being built in the US has not recovered since the Great Recession. Zillow reports that new housing starts are expected to lag below historical averages through the end of 2022 or even longer. Home prices have risen considerably since the recession ended in 2009 but construction has not kept up. Builders cite a lack of land to build on, lumber and other building material shortages, and hiring qualified workers.

US household debt hit an all-time high in the second quarter of 2019, rising by $192 billion (1.4%) to $13.86 trillion. It was the 20th consecutive quarter with an increase. To break it down: mortgage balances, the largest component of household debt, rose by $162 billion in the second quarter to $9.4 trillion. In addition, student loan debt edged lower to $1.48 trillion, and auto loans totaled $155 billion while credit card balances increased to $868 billion.



Tuesday - September 10

Market Wrap - The shift from the safe haven trade continued today as the 10-yr yield surged to 1.73% from last Tuesday's low of 1.42%. In the same time the Fannie Mae 30-yr 3.5% coupon has went from $102.91 to close at $102.31 today. Rates have also moved higher in the past week. The inflation reading PPI will be released tomorrow morning though we don't see much of an impact. The Treasury will sell $24B 10-yr Notes, which could have an impact given the results. 

Late Morning  Review - Fannie Mae reports that sentiment in the housing market hit a survey high in August due in part to a very favorable mortgage rate outlook. The Fannie Mae Home Purchase Sentiment Index (HPSI) rose to 93.8 last month, a fresh survey high. Within the report, there was a big increase in the "mortgage rates will go down" component. The HPSI is up 5.8 points compared to the same time last year. Doug Duncan, Senior Vice President and Chief Economist said, "We do expect housing market activity to remain relatively stable, and the favorable rate environment should continue supporting increased refinance activity.”

Job openings across the US remained at near record levels in August as the labor market continues be a beacon of light in a somewhat slowing economy. The Labor Department reports that there were 7.2 million job openings on the last day of August, just below the all-time high of 7.6 million reached in the beginning of 2019. Job openings increased in a number of industries, with the largest increases in wholesale trade (+91,000), real estate and rental and leasing (+60,000), and information (+42,000).

Small business optimism remained just below record highs slipping in August because fewer owners said they expect better business conditions and real sales volumes in the coming months. The NFIB Small Business Optimism Index slipped 1.6 points to 103.1 last month, remaining within the top 15% of readings. NFIB President and CEO Juanita D. Duggan said, "Small business owners continue to invest, grow, and hire at historically high levels, and we see no indication of a coming recession." The report went on to say that the main impediment to more growth is the record level of no qualified workers.

Monday - September 9

Mortgage Bonds closed at the session lows and we are losing confidence in the bonds ability to push higher as it closed right on key support at the 50-day Moving Average. The decline came despite stocks closing mixed. There were no economic reports released today. The 10-yr yield has shot higher to close at 1.63% from last week's low of 1.42%. Tomorrow, there are no major economic reports but the JOLTS data and the NFIB Small Business Optimism Index will be released. Due to the recent weakness in Mortgage Bonds it might be a good oportunity to lock in before rates head higher.

Late Morning Review - Low mortgage rates have pushed the number of homeowners eligible for refinancing to record highs in July. Black Knight reports that there are 11.7 high quality borrowers who are refinance eligible across the nation, the highest since record tracking began in 2000. Refi-eligible means those who carry a credit score of 720 or above. Mortgage rates have plunged in 2019 by almost a full percentage point from 2018's highs.

The National Association of Realtors (NAR) reports that fixed mortgage rates could decline to 3.3% by year's end as the US economy slows. The lowest ever seen was 3.31% back in November of 2012. The NAR's chief economist Lawrence Yun made those comments soon after the weaker-than-expected Jobs Report for August was released last Friday. “Mortgage rates could fall to 3.3% before the year-end,” Yun said. “But lower rates may not help with affordability because home prices are re-accelerating higher, easily above the latest wage growth.”

There are no economic reports due for release while the rest of the week features inflation data from CPI and PPI, Retail Sales and Consumer Sentiment. The Treasury will sell a total of $78 billion notes and bonds this week beginning on Tuesday. The US stock markets kicked off the week with higher prices seen for the Dow, S&P, and NASDAQ due in part to easing trade tensions while fears a full-blown recession here in the US fade a bit.



Friday September 6 

Forecast for the week September 9, 2019

Trade and Brexit news, fears of a global economic slowdown, and a strong dollar will continue to influence the U.S. markets in the upcoming week while key consumer data will be released.

The post Labor Day rally for Stocks weighed on Bond prices in recent days while global yields increased. After the August decline, investors were looking for some bargains in the equity markets and have pushed the closely watched S&P 500 up 5% from the mid-August lows.

The markets will be eagerly awaiting the numbers from August Retail Sales to gauge if the consumer remains strong and continues to spend their hard-earned dollars. Consumer spending makes up a big chunk (70%) of Gross Domestic Product and is vital for economic expansion. In addition, the inflation reading Consumer Price Index will be released, though we don't see any upside pressure to inflation.

There will be no Fed speak this week as the blackout period begins ahead of the September 17-18

Federal Open Market Committee Meeting.

Reports to watch:

  • Inflation data will come from Wednesday's Producer Price Index and Thursday's Consumer Price Index.
  • Retail Sales and Consumer Sentiment will be released on Friday.

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Week in Review -Bonds and home loan rates hate good news. So, the influx of positive news abroad coupled with strong jobs data here in the U.S. pressured Mortgage Bonds lower and home loan rates higher.

The main event, which helped Stocks and hurt home loan rates, included fresh progress on the U.S./China trade front as both parties are set to meet once again in October. To be clear here, a U.S./China trade deal would be incredible for the entire global economy as it would spark more trade talks and deals around the world. If a deal is had, home loan rates will suffer -- the opposite is also true.

Bonds and home loan rates also hate uncertainty. So, when some uncertainty was lifted, as Brexit now appears to be on hold for the time being, this also helped Stocks at the expense of home loan rates. Finally, seeing uncertainty removed in Hong Kong as protests simmer down was yet another hurdle for U.S. Bonds to contend with.

The Goldilocks economy in the U.S. continues. August jobs growth remains strong, the consumer continues to spend, and there is no recession in sight. All this good news and we still have home loan rates hovering near three-year lows.

Bottom line: the ability to borrow money this cheap to either refinance or purchase a home will not last forever, so take advantage. If the Fed and global banks are successful in keeping economic expansion alive, today's rates will be in the rearview mirror.

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

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Market Wrap - Not much action in the markets after this morning's Jobs report for August was released. Mortgage Bonds and Treasury prices closed near unchanged. The yield on the 10-yr T Note closed at 1.55%. Stocks ended mixed with the Dow and S&P squeaking out gains with the NASDAQ closing slightly lower.  Have a great weekend!

Late Morning Review - Job growth slowed a bit in August though the overall market is still in good shape. The Bureau of Labor Statistics reports that non-farm payrolls rose 130,000 last month, below the 171,000 expected while June and July were revised lower by a total of 20,000. Within the report, the unemployment rate remained at 3.7% while the participation rate, or share of working people in the labor force, rose to 63.2%, up a 1/2 a point in the past year. Lastly, average hourly earnings rose 0.4% versus the 0.2% expected while annual wage growth increased 3.2%. Both were positive numbers.

A recent survey by the Bank of America shows that nearly all homebuyers surveyed are happy they stopped renting. The B of A report read that 93% percent of people who have bought a home are happier because of it, and 83% say they wouldn’t go back to renting. Most credit their happiness to an emotional attachment to their home, as well as the improved lifestyle and variety of hobbies that come with owning. The survey went to reveal that a staggering 88% of homeowners agree that buying a home is the best decision they have ever made, and 79% believe that owning a home has changed them for the better.

Thursday - September 5  

Market Wrap - Bond prices closed lower while yields pushed higher in a risk on session due in part to positive trade headlines and solid economic data. The yield on the 10-yr T Note closed at 1.56% from this morning's low of 1.46%. The Dow closed with a 370 point gain. With tomorrow's Jobs Report ushering in headline risk and the double top that has formed for the Fannie Mae 30-yr 3.5% coupon, we are advising locking files that are closing within 30 days with a longer-term floating bias. The Jobs Report for August will be released at 8:30 a.m. ET. Look to the Market News section of the MMG site for the numbers and the market's reaction.

Late Morning Review - Labor market news continued strong today with private payroll growth surpassing expectations in August. ADP Private Payrolls rose 195,000 last month, well above the 150,000 expected while July was revised lower to 142,000 from 156,000. It was the largest gain in four months. Within the numbers it showed that small business hiring rose 66,000, a four-month high, midsized added 77,000 while large companies added 52,000. The data signals that the market remains strong despite a slowdown in manufacturing.

Home loan rates continued to decline in the latest survey though they may have edged up since the survey numbers were collected. Freddie Mac reports that the 30-year fixed-rate mortgage fell nine basis points to 3.49% with an average 0.5 in points and fees. Freddie Mac says, "Going forward, the combination of low mortgage rates, a tight labor market, and strong consumer confidence will offset declining business sentiment. These factors will set the stage for continued improvement in the housing market heading into the fall."

A recent rental report showed prices increased modestly in September nationally, though prices edged lower in the three top markets that include New York, San Francisco and Boston. Rental prices rose 0.1% for a one-bedroom and 0.5% for a two-bedroom, according the Zumper's National Rent Report. The average median cost for a one-bedroom is at $1,250 while a two-bedroom rose to $1,493. The Zumper National Rent Report analyzes rental data from over 1 million active listings across the country.

Wednesday - September 4

Market Wrap - Mortgage Bonds traded in a tight range today in lackluster trading. Treasury prices ended slightly positive while the 10-yr yield settled at 1.46%. Stocks closed higher on strong Chinese data, an ease in Hong Kong tensions and positive Brexit news. Mortgage rates were reported to be at 3-yr lows. There were no major economic reports released today. ADP and Weekly Initial Jobless Claims will be released tomorrow morning. However, be on guard heading into tomorrow's ADP and Friday's Jobs Report.

Late Morning Review - Mortgage rates edged lower in the latest week and are now at three-year lows, reports the Mortgage Bankers Association (MBA). The 30-year fixed-rate mortgage fell seven basis points in the week ended August 30, 2019 to 3.87% with points decreasing to 0.34 from 0.38. In addition, the Market Composite Index, a measure of total mortgage loan application volume, decreased 3.1%, while the Refinance Index fell 7% with the Purchase Index up 3.6%. The survey covers over 75% of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.

US stocks are bouncing back today after the Dow Jones Industrial Average suffered a 300-point loss yesterday. Simmering tensions in Hong Kong, strong economic data out of China and the People's Bank of China hinting at additional stimulus to stimulate its economy are giving global stocks a boost. The Dow hit an all-time high of 27,359 back on July 15, 2019 and is currently at 26,282 after suffering losses in August.

The September Federal Open Market Committee meeting will take place next week on the 17th and 18th. It is expected that the benchmark Fed Funds Rate (FFR) will be cut by twenty-five basis points to 2.0%. The FFR is the interest rate at which banks or other depository institutions lend money to each other, usually on an overnight basis. Banks set their prime rates to the FFR by adding three points to the current FFR. The current FFR is 2.25% and by adding three points, the current prime rate is 5.25%. The prime rate is the interest rate that banks charge their preferred customers, or those with the highest credit ratings. It is used to determine borrowing costs on many short-term loan products.


+3.6%. 30-yr fixed-rate mortgage -7bp to 3.87%, lowest since November 2016.


Tuesday - September 3

Market Wrap - Lower stock prices pushed Treasuries prices higher today due to the ongoing trade issues between the US and China. However, Mortgage Bonds closed near unchanged as the disconnect continues. The yield on the 10-yr Note closed at a 3-year low of 1.46%. WTI oil settled at $53.91/barrel, -$1.19. The weak ISM Index data also weighed on Stocks during the session though the Dow, S&P and NASDAQ managed to close off their lows. There are no major economic reports due for release tomorrow

Late Morning Review - CoreLogic reports that home prices rose 3.6% from July 2018 to July 2019 while there was a 0.5% increase month-over-month from June to July. Home prices are expected to increase by 5.4% from July 2019 to July 2020. “Sales of new and existing homes this July were up from a year ago, supported by low mortgage rates and rising family income,” said Dr. Frank Nothaft, chief economist at CoreLogic. “With the for-sale inventory remaining low in many markets, the pick-up in buying has nudged price growth up. If low interest rates and rising income continue, then we expect home-price growth will strengthen over the coming year.”

National manufacturing across the US contracted in August due in part to the trade issues between the US and China. The ISM Manufacturing Index fell to 49.1 last month, down from 51.2 in July. A reading above 50 indicates that the manufacturing economy is generally expanding; below 50 indicates that it is generally contracting. The 49.1 number was the lowest reading since January 2016, when the index registered 48. Within the report, it showed that the employment component also fell into contraction, after 34 consecutive months of employment growth.

US stocks are plunging on the first day of the month and the kickoff to the fourth quarter of 2019 on continued trade woes. New tariffs went into effect September 1 on $110 billion worth of imports from China into the US while the two sides are struggling to decide on when to schedule the September talks. The closely watched S&P 500 stock index fell 1.8% in August, for only the second monthly decline in 2019. The losses came in response to the trade issues along with inverted yield curve/recession fears.

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.


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