Tuesday

June 20th, 2017

Suggestion: Mortgage Bond prices continue in their sideways pattern near resistance levels. Carefully floating is recommended.

Overview:  Residential real estate company Redfin reports that despite the shortage of supply, home sales increased 7.5% in May from last year, while the median sale price rose 6.8% year-over-year to $288,000. Inventories fell to just 2.7 months of supply where a typical number is around six months. This anemic supply number is the reason for the continued increase in sales prices. In addition, the typical home went under contract in 37 days, setting a new record for home-selling speeds.

Fannie Mae reported its June Economic and Housing Outlook revealing that the current economic expansion, now in its ninth year, is forecasted to see full year 2017 Gross Domestic Product at 2.0%. After anemic consumer spending of 0.6% in the first quarter of 2017, it is expected to rise by 3.1% in the April-May-June period. In the housing market, a labor market shortage and tight inventory is constraining sales and pushing prices higher. Fannie Mae expects total home sales to rise 3.2% this year and total single-family mortgage originations to drop about 21% to $1.62 trillion.

The National Association of Home Builders reported on Monday that demand for new construction grows as housing stock ages. Housing stock has increased to 37 years, up from 31 a decade ago, which bodes well for remodelers and the Home Depot's and Lowe's of the world. In addition, the aging market of homes could spark a demand for new construction down the road. 

Below is the news when it happened and the market’s reaction.  For a full view of the day 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 Good News and Good News is Bad news.

Commentary at the close: Lower Stock prices helped to pushed Mortgage Bonds higher in today's session as the battle for investing dollars continues. There were no economic reports released today. The Fannie Mae 30-yr 3.5% coupon rose 16bp to end at 103.19, above resistance one (R1) at the 200-day Moving Average (103.11). Stocks retreated after the Dow and S&P hit record high closes yesterday pressured lower by lower oil prices, which pushed energy shares lower, while lower retail stocks also had a hand in the weakness in the Stock markets. The Dow fell 61.95 points to 21,467.14, the S&P 500 was lower by 16.43 points to 2,437.03, while the NASDAQ declined by 50.98 points to end at 6,188.03. WTI oil fell by $0.97 to $43.34/barrel, a 9-month low. The 10-yr T Note yield closed at 2.15%. Economic data is limited to May Existing Home Sales tomorrow.
Tue, Jun 20 3:52 PM Federal Reserve Vice Chair Stanley Fischer spoke in Amsterdam early this morning, noting that house prices are "high and rising." Mr. Fischer cautioned against forgetting the lessons of the Global Financial Crisis.
Tue, Jun 20 3:52 PM Fed's Kaplan says his goal on shrinking the balance sheet is to minimize impact on Bond and Mortgage Backed Security markets.
Tue, Jun 20 1:57 PM The Fannie Mae 30-yr 3.5% coupon (103.19) trades just above resistance one (R1) at the 200-day Moving Average (103.11).
Tue, Jun 20 1:01 PM At midday, MBS holding modest gains. Stocks slightly lower. 10-yr yield 2.16%.
Tue, Jun 20 12:30 PM The losses in the Dow, NASDAQ and S&P accelerate.
Tue, Jun 20 11:34 AM Jobless rate falls to record low in California, six other states.
Tue, Jun 20 11:06 AM Fannie Mae will be raising its debt-to-income ceiling on all loan applications from the current 45% to 50% beginning July 29.
Tue, Jun 20 10:55 AM CoreLogic: Early stage mortgage performance continues to improve at a steady pace, especially for 30-59 day delinquencies which fell to 1.7%, the lowest rate for any month since January 2000.
Tue, Jun 20 10:50 AM CoreLogic reports that mortgage rates during Q1 2017 were up about 0.5% from a year ago. Since 2009, for every one-half percentage point increase in mortgage rates, the average credit score on refinance borrowers has dipped by 9 points, and this pattern will likely continue if mortgage rates move higher.
Tue, Jun 20 10:47 AM Fed's Evans says fundamentals of economy are good.
Tue, Jun 20 10:47 AM Evans: May be challenging to hit 2% inflation target.
Tue, Jun 20 10:43 AM Fed's Evans says important to get inflation up.
Tue, Jun 20 10:36 AM Plunging oil prices weigh on Stocks.
Tue, Jun 20 10:01 AM The NAHB reports that demand for new construction grows as housing stock ages. 
Tue, Jun 20 9:59 AM MBS at session highs. Stocks trade just below unchanged.
Tue, Jun 20 9:57 AM Fannie Mae expects total home sales to rise 3.2% this year and total single-family mortgage originations to drop about 21% to $1.62 trillion.
Tue, Jun 20 9:32 AM Stocks open modestly lower. Dow -22 points.

8:54 AM ET  3.5% Fannie Mae 30-yr coupon Up 7 bp at a price of 103.09 up 6 bp when rates were set Yesterday at 10:00 am Open 103.00 High 103.12 Low 103.00

Numbers to watch for:

Currently Buying Opportunities for Traders

102.89 50 day moving average

103.00  Traders keep their eye on round numbers and this is one them with lots of zeros 

Currently Selling opportunities for Traders

103.11 25 day moving average

103.11 200 day moving average

103.12  Traders keep their eye numbers that have been resistance or support in the past.  This is one of them.

103.59  High of 11/17/16

104.12  High of 11/10/16

Tue, Jun 20 8:31 AM The Fannie Mae 3.5% 30-yr coupon continues to trade near resistance at the 200-day Moving Average (103.11).
Tue, Jun 20 8:27 AM Oil prices fall to lows not seen since mid-November as supply outweighs demand. WTI oil at $43.10/barrel, -$1.10.
Tue, Jun 20 8:25 AM 
A recent report shows that from January to May there were 63,903 dwellings completed, i.e. by 3.0% more compared to the same 2016 period.
Tue, Jun 20 8:21 AM There are no economic reports due for release today.
Tue, Jun 20 8:19 AM 10-yr T Note yield 2.17% from yesterday's close of 2.18%.
Tue, Jun 20 8:13 AM MBS open flat to modestly higher after anemic volumes yesterday.

Johnmarbury.com has attempted to verify the information contained on this post.  However any aspect of such may change without notice.  Johnmarbury.com does not provide investment advice and does not represent that any of the information or related analysis is accurate or complete at any time. On October 5th we started posting our rates and leaving them on the site for you to refer back to. This will allow  you see where actual rates have been along with the news that caused the fluctuations on the rate sheet.  I ask that you forgive my spelling and grammatical mistakes. This is due writing skills that are lacking and the need to communicate quickly.  Most of the information posted on this blog along with the charts and indexes are available all during the day to the subscribers of www.themortgagemarketguide.com  The cost of subscription is very reasonable.

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