October 2019

October 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:

Friday - November 1  


Forecaste for Next Week - After last week's risk-event filled reports, headlines, and earnings, the upcoming week's economic calendar and newsworthy events may pale in comparison.

The headlines that the markets will cling to will be the ongoing U.S./China trade issues. Late last week a Chinese official doubted a long-term deal with the White House could be hammered out but hopes for a "phase one" signing is bright in the next two to three weeks.

Corporate earnings season will also continue in the upcoming week with most companies already reporting and beating expectations. Of the S&P 500 companies that have reported thus far, about 75% have exceeded profit estimates.

The Treasury will be selling a boatload of notes and Bonds with the 10-year offering the highlight.

Reports to watch:

The only reports that could impact the markets this upcoming week are Tuesday's ISM Service Index and Friday's Consumer Sentiment Index.

Week in Review - This past week the Federal Reserve cut the Fed Funds Rate for the third time this year, by .25%. Along with the rate cut, the Fed released a statement that suggested a "pause" in further cuts, but stated they will be ready to act again should "slowing global conditions" continue or if inflation declines further.

Speaking of inflation, it is important to remind ourselves that the Fed rate cut does not affect home loan rates. Home loan rates are slightly higher than they were right before the Fed started cutting rates in July. The main driver of long-term rates is inflation. If inflation goes up, long-term rates go up. The opposite is also true.

With that said, here's an important quote from Fed Chairman Jerome Powell yesterday: "I think we would need to see a really significant move up in inflation that's persistent before we would consider raising rates to address inflation concerns." This means that the Fed is not likely to hike rates anytime soon, and long-term rates should not go too high too soon either because there is no threat of high inflation at this time.

Bottom line: home loan rates are near three-year lows and this week's modest price improvement can be quickly erased should good news regarding U.S./China emerge.

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


Market Wrap - A strong Jobs Report for October, a better than feared ISM Index along with positive trade news sent US stocks surging today with the major average closing at all-time highs. However, Mortgage Bonds showed resilience and closed near unchanged due in part to the past, current and most likely future low inflation levels. The yield on the 10-yr T Note closed at 1.71%, up 2bp for the day. WTI oil settled at $56.21/barrel, +$2.00. Next week's economic calendar is light while earnings season rolls on. The markets will also follow the US-China trade headlines.  Have a great weekend!

Late Morning Review - And the survey says ... 128,000 jobs were created in October, nicely above the 80,000 expected. Adding to the positive tone, were strong upward revisions to both August and September, where another 95,000 jobs in total were added. The three-month average for Non-Farm Payrolls is at a strong 176,000, well above the pace needed to sustain the current unemployment rate. And if you factor in the losses from the GM strike and take out the temporary Census workers whom completed their jobs, the October number would have been much higher.

Within the report it showed that average hourly earnings rose 0.2% month-over-month, up 3% year-over-year. The Labor Force Participation Rate edged higher, the Unemployment Rate inched higher to 3.6% from 3.5% while the U6 number, or total unemployed, was unchanged at 7% - and more people entered the labor force. Overall, a strong report as the labor market continues to be a bright spot in the US economy.

Manufacturing across the US picked up in October though it remained in contraction mode for the third straight month. The ISM Manufacturing Index came in at 48.3 this month, just above the 47.8 registered in September. The New Orders Index rose while the Employment Index also saw a solid gain. The manufacturing sector has slowed in the past six months due in part to tariff and trade issues.


Thursday - October 31  

Market Wrap - A shift to the safety trade lifted Mortgage Bond prices today though the gains paled in comparison to the big gains seen in the Treasury markets. The yield on the 10-yr T Note fell to 1.68%. A weak Chicago PMI reading coupled with negative trade headlines pushed stocks lower throughout the session though they closed off their worst levels. WTI oil closed at $54.18/barrel, -$0.88. Technicals take a backseat to the Jobs Report tomorrow morning.

Late Morning Review - The US manufacturing sector continues to weigh on the broader economy due in part to the tariff and trade issues between the US and China. Regional manufacturing data from the Chicago PMI fell in October to 43.2, the lowest since December 2015, in October from 47.1 in September. Any reading below 50 indicates deteriorating conditions. The new orders index fell to 37, the lowest since March 2009. National manufacturing has been on a decline with the Midwest taking a big hit.

Mortgage rates continued to inch higher in the latest survey though they remain at historically low levels. Freddie Mac reports that the 30-year fixed-rate mortgage rose three basis points to 3.78% with an average 0.5 in points and fees. It was the third straight week of gains. "Purchase activity continues to show strength, indicating obvious homebuyer demand,” said Sam Khater, Freddie Mac’s Chief Economist. “However, the lack of housing supply remains a major barrier to not just the housing market, but the overall economic recovery.”

The Federal Reserve lowered the Fed Funds Rate by 0.25% yesterday to bring the rate to the 1.50%-1.75% range. The Fed statement went on to say that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports remain weak. The problem continues to be low inflation.



Wednesday - October 30

Market Wrap - The Fed cut the benchmark short-term Fed Funds Rate by 0.25% today, as expected, to bring the rate to the 1.50%-1.75% range. There was a signal that the Fed could be done with policy changes this year, but the decision will be data dependent. By day's end, Fed Fund Futures were showing just a 17% chance of a rate cut in December, but things can quickly change. Mortgage Bonds closed modestly higher with a big gain in price for the 10-yr Note, yield down to 1.77%. The S&P 500 closed at a fresh record high (3,046) for the second time this week fueled by a solid economy, low unemployment and solid corporate earnings. Continue to float but be mindful that we may alter our position late Thursday ahead of the Jobs Report. Data to watch tomorrow - Core PCE, Personal Spending, Chicago PMI (manufacturing).

Late Morning Review - Economic growth in the third quarter of this year increased more than expected due in part to continued strength in consumer spending. The Bureau of Economic Analysis reports that Gross Domestic Product (GDP) rose 1.9%, above the 1.5% expected and near the 2% reported in the second quarter. The consumer spending numbers rose 2.9% annualized while government spending increased 2%. GDP is the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production.

Payroll growth in the private sector increased more than estimated in October while September's numbers were revised lower. ADP reports that private payrolls rose by 125,000 in October, above the 95,000 anticipated. However, September was revised lower to 93,000 from 135,000, creating a sort of push-pull data. The report comes ahead of the more closely-watched government jobs report that will be released on Friday, also for October.

Mortgage rates continued to inch higher in the latest week, a trend that has been occurring since early September. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage rose to 4.05% for the week ended October 25, up from 4.02% in the previous week. The Market Composite Index, a measure of total mortgage application volume, rose 0.6%, Purchase Index increased 2%, and the Refinance Index was near unchanged. Mortgage rates remain historically low and should continue to support the housing sector.


It's Fed Day! The Fed will release its monetary policy statement at 2:00 p.m. ET - expected 0.25% cut to the Fed Funds Rate. Fed Chair Powell will hold a press conference at 2:30 p.m. ET.

Tuesday - October 29  

Market Wrap - Once again today, no movement seen for Mortgage Bonds ahead of tomorrow's monetary policy statement from the Fed, ADP and the first reading on Q3 2019 GDP. Treasury prices inched higher - 10-yr yield settled at 1.83%. Stocks ended just below the flat line. 

Late Morning Review - The Conference Board reported on Tuesday that its consumer confidence index slipped to 125.9 this month from the September reading of 126.3 and below the 127.5 expected. Concerns over business conditions and job prospects weighed on the index. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – increased from 170.6 to 172.3. The Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – declined from 96.8 last month to 94.9 this month. Lynn Franco, Senior Director of Economic Indicators at The Conference Board said, "Confidence levels remain high and there are no indications that consumers will curtail their holiday spending.”

The National Association of REALTORS® reports that pending home sales rose 1.5% in October, the second straight monthly gain. Year-over-year, sales increased 3.9%. Historically low mortgage rates played a big part in the October gains. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. Lawrence Yun, NAR’s chief economist said, “Even though home prices are rising faster than income, national buying power has increased by 6% because of better interest rates,” he said. “Furthermore, we’ve seen increased foot traffic as more buyers are evidently eager searching to become homeowners.”

The S&P Case-Shiller 20-City Home Price Index rose 2% year-over-year in August, a sort of backward-looking report given it is almost November. The 2% was below the 2.5% gain expected and matched the July number. The national index rose 3.2% from 3.1% in July. “The U.S. National Home Price NSA Index trend remained intact with a year-over-year price change of 3.2%” said Philip Murphy, Managing Director and Global Head of Index Governance at S&P Dow Jones Indices. “However, a shift in regional leadership may be underway beneath the headline national index."


Monday - October 28  

Market Wrap - Not much movement for Mortgage Bonds today closing modestly lower, though off worst levels, weighed down by rising stock prices. The Dow, NASDAQ and the S&P all closed higher with the S&P closing at an all time high of 3,039. Positive trade headlines, strong earnings coupled with a rate cut taking place this week buoyed stock prices. The 10-yr yield closed at 1.84%, up 4bp from Friday. WTI oil settled $55.95/barrel, -$0.71. The S&P Case-Shiller Home Price Index, Consumer Confidence and Pending Home Sales will be released tomorrow morning. The two-day Fed meeting kicks off tomorrow but there will be no headlines until Wednesday at 2:00 p.m. ET when the monetary policy statement is released.

Late Morning Review - The closely-watched S&P 500 opened at a record high (3,032) this morning on the heels of more good news. Positive trade headlines between the US-China and anticipation of a an interest rate cut along with a strong kick off to earnings season are a few reasons for the surge in stocks. Of the 199 S&P 500 companies that have reported earnings so far this season, 78% have exceeded profit expectations. This week is the biggest week for earnings reports. The S&P 500 is up 21% in 2019.

It's Fed Week! The two-day Federal Open Market Committee meeting kicks off on Capitol Hill on Tuesday and ends Wednesday with the 2:00 p.m. ET release of the monetary policy statement. The Federal Reserve is expected to cut the short-term fed funds rate by 0.25% but what the statement reads and what Fed Chair Powell says at his 2:30 p.m. ET press conference will be key. The fed funds rate is the rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight on an uncollateralized basis. The fed funds rate impacts auto and student loans, Helocs, and the prime rate.

Friday - October 25  



191025 Eco

Next Week - After a week of few economic reports, the upcoming week is filled with big headline risk events with the Jobs Report, ADP, and the Fed's favorite inflation gauge, the Core PCE. In addition, quarterly earnings will continue, which have been positive so far this season.

But the big headlines will come from the two-day Federal Open Market Committee (Fed) meeting that kicks off on Tuesday and ends Wednesday with the Monetary Policy Statement release at 2:00 p.m. ET. The Fed is expected to cut the short-term Fed Funds Rate (FFR) by 0.25% to lower it to 1.75%. Fed Chair Powell will hold a press conference immediately following the statement

Reminder: Fed rate cuts do not equal lower mortgage rates. A Fed rate cut or hike impacts borrowing costs for auto and student loans, credit cards, and other short-term borrowing vehicles. Long-term rates such as mortgages are impacted by the ebb and flow of Mortgage Bond pricing, economic growth, and inflation.

It's important to remember that since the first rate cut at the end of July, mortgage rates have stopped improving and have actually increased since the beginning of September -- according to Freddie Mac and the Mortgage Bankers Association -- before leveling off last week.

Reports to watch:

  • Housing data will be seen from Tuesday's Pending Home Sales and the S&P Case-Shiller Home Price Index, along with the closely watched Consumer Confidence Index.
  • ADP Private Payrolls will be delivered on Wednesday.
  • On Thursday, Weekly Initial Jobless Claims, Personal Income and Spending, Chicago PMI, and the inflation readings Employment Cost Index and Core PCE will be released.
  • Friday brings the government's Jobs Report which includes Non-Farm Payrolls, the Unemployment Rate, and Hourly Earnings.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Oct 25, 2019)



Week in Review - This past week home loan rates were essentially unchanged from the previous week, breaking a trend of higher rates since the beginning of October.

Bonds hate good news and there is still plenty to go around:

  • U.S./China trade dispute progress
  • Brexit progress
  • Corporate earnings remain positive, as does the economic outlook
  • Fed rate cut coming?

If the week was filled with good news, then why did Bonds and home loan rates remain steady?

There's an old saying, "the cure for higher rates, is higher rates", meaning that the recent uptick in rates was enough to attract investors searching for higher yield to buy Bonds, thereby halting the increase in rates.

Before we start celebrating and thinking we are on the road to lower rates in the days ahead, the Bond market must deal with a jam-packed week of news next week. The headline risk can easily cause the recent increase in rates to resume.

Bottom line: home loan rates remain near three-year lows, but up a bit from where they were at the beginning of October. As we head into a very important news week, if you are considering a home loan now is a terrific time to seize the opportunity before it goes away.      


Market Wrap - Mortgage Bonds ended near unchanged today weighed down by rising stock prices while the 10-yr yield inched higher to 1.79%. Stocks rose on positive trade news while earnings season is off to a solid start with next week the biggest week for earnings reports. WTI oil settled at $56.44/barrel, +$0.20. Next week also features a loaded economic calendar and the Fed meeting. As always, be sure to catch Monday's MMG Daily and our MMG Weekly Video Recap and Look Ahead that we sent out yesterday via email (also posted in the MMG website under the Data tab) for more information on next week's risk-filled events.  Have a great weekend!


Late Morning Review - There will be several hurdles for the US financial markets to jump and for investors to digest next week. The ADP Private Payrolls Report and the government's Jobs Report, both for October will be delivered. In addition, quarterly earnings reports will continue, ongoing Brexit talks, the inflation reading Core PCE, and the high jump of the Fed's monetary policy statement will be released on Wednesday afternoon at 2:00 p.m. ET. The Federal Reserve is expected to cut the fed funds rate by 0.25%.

Many in the media report that when the Federal Reserve lowers the short-term fed funds rate, mortgage rates move lower. That is not the case. So, if a Fed rate cut doesn't lower mortgage rates, what drives mortgage rates? Mainly inflation expectations and economic growth, but geopolitical issues like U.S./China and Brexit may also impact mortgage rates. A lower fed funds rate affects short-term loans such as auto loans, home equity lines of credit, credit cards and oh yes, your savings deposit rate goes down too.

With the holiday shopping season just around the corner retailers are scrambling to find workers to handle the hopefully big uptick in customer demand. Some of the big-name retailers such as Target are looking to hire 130,000 seasonal workers, Kohl's 90,000, UPS 100,000, and Amazon tens of thousands, to name a few. From the consumer end, Americans are expected to spend an average of $1,047.83 this holiday season, up 4% from the $1,007.24 they said they would spend in 2018. The forecast estimated that holiday retail sales in November and December will be up between 3.8% and 4.2% over 2018 for a total of between $727.9 billion and $730.7 billion. That's a lot of gifts!





Thursday - October 24  

Market Wrap - Not much movement for Mortgage Bonds and Treasury prices today with both closing near unchanged. 10-yr yield settled at 1.76%, unchanged. Stocks ended in mixed fashion with the Dow slightly lower while the S&P and NASDAQ ended with gains. WTI oil ended at $56.23/barrel, +$0.26. Economic data is limited to Consumer Sentiment tomorrow morning. Continue to lock files closing in 30 days or less while floating brand-new and longer-dated files.


Late Morning Review - Sales of new single-family homes fell by 0.7% in September from August to an annual rate of 701,000 units, which was just below the 703,000 expected. Compared to September 2018, new home sales surged 15.5% from 607,000 units. The median sales price of new houses sold in September 2019 was $299,400. The average sales price was $362,700. Monthly supply was at 5.5 months, just below six months which is seen as normal. Sales declined in the Northeast, South and West with a gain seen in the Midwest.

From global central bank news, the European Central Bank left its benchmark interest rate unchanged and will begin quantitative easing on November 1. The US Federal Reserve will be cutting the benchmark Fed Funds Rate at next week's Federal Open Market Committee meeting that kicks off on Tuesday and ends Wednesday at 2:00 p.m. ET with the release of the monetary policy statement. Fed Chair Powell has stated that the central bank will "act as appropriate to support continued (economic) growth and a strong job market and that there's no reason why the expansion can't continue." The global punch bowl is back.

Quantitative easing or QE from Investopedia: Quantitative easing is an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to increase the money supply and encourage lending and investment. Quantitative easing increases the money supply by purchasing assets with newly created bank reserves in order to provide banks with more liquidity.

Wednesday - October 23

Late Morning Review  - Mortgage Bonds ended the session with slight gains with Treasury prices flat, 10-yr yield unchanged at 1.76%. The Dow, S&P and NASDAQ all ended in positive territory with modest gains as investors shrugged off downbeat earnings. WTI oil ended at $55.83/barrel, +$1.35 on a decline in supply. There were no economic reports released today. Economic data out tomorrow includes Weekly Claims, New Home sales and Durable orders. The Treasury will sell $32B 7-yr Notes. Tomorrow is the biggest day for earnings reports so far this season. Continue locking files that are closing in 30 days or less while floating brand-new or longer-dated files.


Late Morning Review

Positive news in the past few weeks pushed bond prices lower and in turn, home loan rates increased in the latest survey from the Mortgage bankers Association (MBA). The MBA reports that the 30-year fixed-rate mortgage rose ten basis points to 4.02% with 0.38 in points for the week ending October 18, 2019. Despite the increase, home loan rates remain just above three-year lows.

The MBA report went on to reveal that the Market Composite Index, a measure of total loan application volume, fell 11.9%, the Refinance Index decreased 17%, and the Purchase Index declined 3.6%. Mike Fratantoni, MBA's senior vice president and chief economist said, "Although purchase applications declined, application volume is still running about 6% ahead of this time last year. Low mortgage rates continue to fuel buyer interest, but supply and affordability challenges persist."

Home prices edged higher in August up 0.2% from July and increased 4.6% from a year ago, according to the Federal Housing Finance Agency (FHFA) in its House Price Index. The FHFA regulates Fannie Mae, Freddie Mac and the 11 Federal Home Loan Banks. The FHFA produces the nation’s only public, freely available house price indexes (HPIs) that measure changes in single-family house prices based on data that cover all 50 states and over 400 American cities and extend back to the mid-1970s. These government-sponsored enterprises provide more than $6.3 trillion in funding for the U.S. mortgage markets and financial institutions.

Tuesday - October 22  

Market Wrap - Not much action in the markets today with Mortgage Bonds closing near unchanged, 10-yr yield near unchanged at 1.77% while the Dow fell by a meager 40 points as traders look ahead to next week's big risk events (Fed meeting, Core PCE, Jobs Report, ADP). Conflicting Brexit news impacted stocks today. WTI oil closed at $54.38/barrel, +$1.07. There are no major economic reports due for release tomorrow. The Treasury will sell $41B 5-yr Notes and comes after today's solid demand for the 2-yr offering. Continue locking files that are closing in 30 days or less while floating brand-new and longer-term files.


Late Morning Review - Sales of previously owned homes unexpectedly fell in September from August, due in part to low inventories of homes for sale on the market. The National Association of REALTORS® reports that existing home sales fell by 2.2% in September to an annual rate of 5.38 million units versus the 5.52 million expected. The decline comes after two consecutive months of gains. Despite the monthly decline, sales rose nearly 4% year-over-year. Declines were seen in all four regions of the country.

The median existing-home price rose nearly 6% from a year ago to $272,100. Total inventories fell 2.7% from a year ago and are now at a 4.1 month where six months is seen as healthy. "We must continue to beat the drum for more inventory,” said Lawrence Yun, NAR’s chief economist, who has called for additional home construction for over a year. “Home prices are rising too rapidly because of the housing shortage, and this lack of inventory is preventing home sales growth potential.”

US financial markets are quiet this morning as traders gear up for next week's highly anticipated Federal Open Market Committee meeting. The two-day meeting kicks off on Tuesday the 29th and ends on Wednesday afternoon the 30th when the monetary policy statement is released at 2:00 p.m. ET. The central bank is expected to cut the short-term fed funds rate by 0.25% to bring it to 1.75%. The fed funds rate is the rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight on an uncollateralized basis. The fed funds rate impacts auto and student loans, helots, and the prime rate.



Monday - October 21

Market Wrap - Mortgage Bonds closed ugly and beneath the 100-day Moving Average for the first time since Nov 2018 ... not good. Prices need to rebound quickly otherwise, we might just see another leg lower for Mortgage Bonds. Bonds hate good news and there is plenty of good news the past couple of weeks, including progress in US/China, Brexit, Ukraine and solid corporate earnings. On top of that, we have another Fed rate cut coming next Wednesday. Don't let your borrowers wait until next week, if prices remain beneath the 100-day MA tomorrow. The 10-yr yield is 1.80% and will be headed towards 2.00% if the sell off continues. Stocks closed higher on positive trade news with the tech sector leading the gains. There were no economic reports released today. WTI oil ended at $53.29/barrel, -$0.49. September Existing Home Sales will be released tomorrow. The Treasury will sell $40B 2-yr Notes. Continue to lock files that are closing in 30 days or less.


Late Morning Review - Fannie Mae released its October 2019 Economic and Housing outlook recently showing that residential fixed investment and continued strong consumer spending are expected to help counteract weakness in business fixed investment. Fannie Mae sees full-year Gross Domestic Product at a solid rate of 2.2% for 2019. The housing market is expected to be a source of strength in the foreseeable future. In addition, Fannie Mae went on to say that home prices appear likely to maintain a positive growth trajectory due in part to persistently low mortgage rates and evidence of declining inventory.

Over the weekend, there were positive trade headlines out of China along with President Trump's comments on Friday that he feels a deal can be signed in Chile next month. Additionally, earnings season has been a positive surprise for US stocks. The S&P 500 company earnings were expected to decline by 3.1% compared to last year but of the 73 companies that have reported so far this season, 84% have beaten estimates, reports Reuters. This week, some big-name companies will be reporting and the numbers could impact the markets.

There were no economic reports due for release today and the rest of the week's calendar is on the light side. New and existing home sales will be released as the markets look for continued strength in the sector. The US financial markets will continue to be gripped in the US-China trade headlines, corporate earnings and the Brexit talks from the UK - all of which have been positive. The closely watched S&P 500 (3,002) is now just below its all-time closing high (3,025) hit back in late July.



Forecast for the week Monday October 21

After several weeks of heightened volatility along with geopolitical, tariff, trade, and Brexit issues, the upcoming week may cool down a bit. A limited economic calendar and the quiet period for Fed speak ahead of the October 31 FOMC meeting could quiet things down in the upcoming week.

Earnings season will ramp up with a slew of big names reporting in the upcoming week. So far, the early season numbers have been on the positive side and if the strength continues it could pressure Bond prices lower, rates higher, and vice versa.

The U.S. markets will also continue to take direction from the U.S.-China trade headlines with an eye on quarterly earnings.

Reports to watch:

  • Existing Home Sales will be released on Monday, Weekly Initial Jobless Claims and Durable Orders on Thursday, and Consumer Sentiment on Friday.



Friday - October 18th

Week in Review home loan rates ticked up, yet remain just above 3-year lows.

Here are 3 reasons why:

  1. Solid corporate earnings and future positive guidance from many public companies were a pleasant surprise for many who were bracing for a far more disappointing outlook. As a result, Stocks moved higher last week at the expense of Bonds and home loan rates.

  2. U.S./China trade deal optimism continues. It's been slightly over a week since the U.S. and China came to a "handshake" trade agreement, and all signs are pointing to the deal being papered and signed in the coming weeks. This once uncertain event has become quite positive, and was another reason for Bonds to move lower and rates higher.

  3. A "Brexit" deal, where the U.K. will leave the European Union, has been drafted. The deal still has to pass a Parliamentary vote and carries some hurdles. But much like the U.S./China story, Brexit has gone from hopeless to a pretty good chance of a fix in a short amount of time. Once again, this is another uncertain event removed, and the renewed optimism helped Stocks and hurts home loan rates.

In positive housing news, new construction of single-family homes rose for the fourth consecutive month. This along with low home loan rates for the foreseeable future should help housing and the U.S. economy.

Bottom line: the present opportunity to refinance or purchase a home may never be matched. We are seeing unemployment at 50+ year lows, yet home loan rates at three-year lows -- the best of both worlds. A strong economy AND low rates, truly a Goldilocks situation.

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

191011 Friday - October 4  

And the survey says: 136K jobs were created in September which was just below expectations of 145,000. Inside the report it was mostly upside surprises. First, there were solid upward revisions for the previous two months, adding 45,000 jobs to what was originally reported. The unemployment rate fell to 3.5%, the lowest since 1969. The Labor Force Participation Rate was unchanged at 63.2%. The Labor Force Participation Rate is the percentage of the civilian population 16 years and older that is working or actively looking for work.

The U6 rate dropped to 6.9%. The U6 measures total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force. This number was 17% back in 2010 and declining to 6.9% is remarkable. The U6 is down from 7.5% in September 2018. The one bad print was hourly earnings which came in unchanged and dropped the year-over-year increase to 2.9%. Overall, it was a solid report and keeps the recession fears on the sidelines for the foreseeable future.


Thursday - October 3  


Mortgage rates inched higher in the latest week and remain at three-year lows which has been a boon for the housing market. Freddie Mac reports that the 30-year fixed-rate mortgage rose to 3.65% this week from 3.64% in the previous week and down from 3.73% in the week ended September 19. Freddie Mac says that while mortgage rates generally held steady this week, overall mortgage demand remained very strong, rising over 50% from a year ago thanks to increases in both refinance and purchase mortgage applications.

The closely watched S&P 500 is down nearly 5% since the high seen on September 19, with most of the damage done this week. The ISM Manufacturing Index on Monday and today's ISM Service Index, both below expectations kicked off the fresh recession talk. However, yesterday, New York Fed President Williams said the baseline economic forecast remains "a positive one." "Right now, the outlook is actually very favorable," Williams said yesterday and added that GDP growth is around 2% rate, with a "very strong" labor market and inflation near a 2% rate. It's hard to imagine the holiday season being a bust with a consumer so willing and able to spend, which bodes well for the 4th quarter Gross Domestic Product.


Wednesday - October 2  


Private employment hiring rose less than expected in September and was down from the August reading though it was still a solid number. ADP private payrolls rose by 135,000 last month versus the 150,000 expected. August was revised lower to 157,000 from 195,000. ADP reports that the average monthly job growth for the past three months is 145,000, down from 214,000 for the same time period last year. Slowing global growth coupled with the US/China trade issues could be holding back hiring here in the US.

Mortgage rates were essentially unchanged in the latest week while mortgage application volume increased. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage was at 3.99% for the week ended September 26, up from 3.82% on September 6. The rate carries 0.38 in points. The MBAs Market Composite Index, a measure of total mortgage loan application volume, rose 8.1%, the Refinance Index was up 14% while the Purchase Index increased by 1%. The MBAs survey covers over 75% of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.

US stocks are plunging today after yesterday's sell-off on fears of slowing domestic growth. Yesterday's weak ISM Manufacturing Index reinforced the slowdown in the sector and it could spread to the broader economy. The Dow Jones Industrial Average lost 350 points on Tuesday and was down near 500 points this morning. With the possibility of a domestic slowdown, the US Federal Reserve will most likely cut short-term rates this month to continue the economic expansion.



Tuesday - October 1  

Market Wrap - Fears of slowing US growth coupled with a weak ISM Manufacturing Index sent the major stock averages plunging today though Mortgage Bond prices closed near unchanged. The Fannie Mae 30-yr 3.5% coupon traded as low as $102.44, then hit $102.75 before closing at $102.62. Treasury prices rose while the 10-yr yield fell to close at 1.64%, traded as high as 1.75% and a low of 1.61%. WTI oil settled at $53.60/barrel, -$0.47. With the Dow falling 350 points today and Mortgage Bonds unable to rise, along with ADP tomorrow and the Jobs report on Friday, this may be a goodf time to pospone locking.

Late Morning Review - CoreLogic reports that home prices, including distressed sales, rose 3.6% in August 2019 compared to August 2018 and increased 0.4% month-over-month from July to August. Looking ahead, CoreLogic is forecasting that prices will rise 5.8% on a year-over-year basis from August 2019 to August 2020. The 3.6% annual increase is a big slowdown from a year earlier when the report showed an annual increase of 5.5%. Dr. Frank Nothaft, Chief Economist for CoreLogic said, "This moderation in home-price growth should be welcome news to entry-level buyers.”

Manufacturing across the nation weakened last month due in part to trade issues between the US and China. The September ISM National Manufacturing Index fell to 47.8 last month from 49.1 in August. All components within the report declined including the Employment Index. “Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019. Overall, sentiment this month remains cautious regarding near-term growth,” said Timothy R. Fiore from the ISM. A reading above 50 indicates that the manufacturing economy is generally expanding; below 50 indicates that it is generally contracting.

Freddie Mac released its September Forecast on Monday revealing that housing is to remain strong heading into the fall. The forecast is for Gross Domestic Product to average 2.2% in 2019, with trade tensions likely having an impact on the second half of the year. The 30-year fixed-rate mortgage is expected to remain below 4.0% for the remainder of the year. The house price forecast remains unchanged and is expected to appreciate 3.4% in 2019, in line with long term growth. With continued low mortgage rates and strong refinance activity, expect slightly higher annual mortgage origination levels of $2.1 trillion and $1.8 trillion in 2019 and 2020, respectively. Sam Khater, Freddie Mac’s Chief Economist, says, “Despite fears of an economic slowdown, the housing market continues to be a bright spot in the economy."



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