Weekly Review
It was a busy week, highlighted by Fed Chair Jerome Powell’s
remarks in front of the House and Senate.
Powell said that since June, uncertainty continues to weigh on the
economy. He also said that inflation pressure remains muted and that the
Fed will act as appropriate to sustain the expansion. This was a signal
that the Fed will still be cutting rates at their meeting July 31st, something
that was in question after the very strong June Jobs Report that was released
earlier this month. That was all the Stock and Bond markets needed to
hear, with both moving higher in reaction.
Stocks, in fact, set record highs, with the S&P 500 breaking above
3,000 for the first time ever.
In economic news, Housing Wire published an article that said that
more than 8.2 million borrowers can now benefit from refinancing their
mortgages, according to Black Night Financial. This is 1.5 million more than
before the recent rate drop and the biggest number in almost 3 years.
There are now almost 4.5 times more refinance candidates that there were in
November 2018. Of the 8.2 million mortgages that can benefit, 35% of them
were originated in 2018.
According to Black Night, borrowers who refinanced could reduce
their mortgage by 0.75% with an average savings of $266 per month. Use
our Refinance Comparison and Debt Consolidation calculators to show your
clients the benefits of refinancing.
CoreLogic released their Loan Performance report for the month of
April, and there were some big improvements. Loans 30-days or more past
due improved significantly from 4.0% to 3.6%, while seriously delinquent loans,
which is defined as 90-days or more, dropped from 1.4% to 1.3%. Seriously
delinquent homes in foreclosure were unchanged at 0.4%. Incomes and home
price growth continue to support strong loan performance.
The Mortgage Bankers Association reported their Mortgage
Application data for last week, as they do every Wednesday. Overall,
Mortgage Application volume was down 2.4%. Applications to purchase a
home were up 2.0% and are up 5.5% from this time last year, which is a
decline from the 10% year over year gain seen last week. Refinances were
down 7.0%, but are still up a very healthy 88.0% year over year. There
was an adjustment for the 4th of
July Holiday, which could be affecting the numbers a bit. This should be
smoothed rout by next week. The Refinance share of mortgage activity
decreased from 51.0% to 48.7% of total applications. Adjustable Rate
Mortgages or ARM’s increased 5.3% of all applications.
The average 30-year mortgage decreased from 4.07% to 4.04% week
over week, but rates are about 72bp or almost 3/4 lower than this time
last year. Remember that the rate the MBA cites typically has some amount
of decimal points included.
On the inflation front, the Consumer Price Index (CPI), which
measures inflation on the consumer level, showed that overall inflation
increased in June, but moderated on a year over year basis. The headline
reading was up 0.1% for the month and decreased from 1.8% to 1.6% year over
year. But this was almost all due to gasoline prices, which dropped 3.6%.
Looking at the more important Core rate, which strips out food and
energy prices, increased 0.3% for the month and on a year over year basis
increased from 2.0% to 2.1%. Bonds moved slightly lower after the hotter
than expected inflation data…although it still remains relatively tame.
Within the report, rents rose by 0.3% for the month and are
increasing at a rate of 3.9% on a yearly basis, which is a pretty big jump from
3.7% last month. Medical care costs rose by 2% year over year, which is
down from 2.1%.
Economic Calendar - for the Week of June 24, 2019
Economic
reports having the greatest potential impact on the financial markets are
highlighted in bold.
Mortgage Rate Forecast
with Chart - UMBS 30-Year 3.5% Coupon Bond
Mortgage Bonds moved lower over the course of the week, breaking beneath
some important technical levels. Bonds
fell under the 102.274 Fibonacci level, as well as their 25-day Moving
Average. These levels will now act as
ceilings on the way up. Bonds have a
significant amount of space to the downside until reaching the next floor of
support, all the way down at the 50-day Moving Average. For now, they are testing the aforementioned
ceiling at the 25-day Moving Average.
The 10-year moved back up to 2.10% also breaking some key technical
levels. Yields broke above their 25-day
Moving Average after breaking above 2.03% in the previous week. Yields find themselves in the middle of a
very wide range between support at the 25-day Moving Average and overhead
resistance at the 50-day Moving Average.
