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Compliments of

Philadelphia Mortgage Advisors

Phone: 610.834.8700

600 W. Germantown Pike | Suite 270

Plymouth Meeting, PA 19462

 

Philadelphia Mortgage Advisors is a licensed mortgage lender by the PA Department of Banking & Securities, NJ Department of Banking and Insurance, the State of DE and the Florida Office of Financial Regulation. NMLS #128570.

       

 
 

Housing Starts Rebound

 
For the second straight week, there was little reaction to the economic news. Neither key data on retail sales and inflation nor the passage of the House tax reform bill had much effect. Mortgage rates finished the week a little lower.
 

 

It was clear from Friday's report on housing starts that home building activity over the last couple of months was significantly impacted by the hurricanes. In October, single-family housing starts rose 5% from September. In the South, the region most heavily affected by the hurricanes, single-family starts jumped 17% from September to the highest level since 2007. 

 

 
A major step toward tax reform was taken this week when the House of Representatives passed its "Tax Cut and Jobs Act." There were no major surprises in the bill, so the market reaction was small. There is still much to be done before actual changes to the tax code become law.
 
The Director of the Consumer Financial Protection Bureau (CFPB), Richard Cordray, announced this week that he will step down from his position by the end of November. During Director Cordray's five years in office the CFPB implemented many regulatory requirements affecting the mortgage industry. President Trump will nominate the next Director. It is expected that the nominee, like President Trump, will favor a less regulated market. 
 
 
 
Looking ahead, Existing Home Sales will be released on Tuesday. The minutes from the November 1 Fed meeting will come out on Wednesday. These detailed minutes provide additional insight into the debate between Fed officials and have the potential to move markets. Durable Orders, Jobless Claims, and Consumer Sentiment also will be released on Wednesday ahead of the holiday. Mortgage markets will be closed on Thursday and will close early on Friday in observance of Thanksgiving.
 
 
All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
 
 
 

 
 

Compliments of

Philadelphia Mortgage Advisors

Phone: 610.834.8700

600 W. Germantown Pike | Suite 270

Plymouth Meeting, PA 19462

 

Philadelphia Mortgage Advisors is a licensed mortgage lender by the PA Department of Banking & Securities, NJ Department of Banking and Insurance, the State of DE and the Florida Office of Financial Regulation. NMLS #128570.

       

 
 

Tax Plan in Focus

 
As expected, market moving news was scarce this week. It was a very light week for economic data. The primary source of volatility was Thursday's release of additional details about the Senate tax plan, but this had just a minor net effect. Mortgage rates finished the week a little higher.
 
On Thursday, the Senate released more information about its plans for tax overhaul. Of note, the Senate plan would delay a corporate tax cut until 2019. The House and the Senate now will work to reconcile their differences to come up with a plan that both will support. Investors will be keeping a close eye on progress on this front. In general, tax reform is expected to be inflationary and negative for mortgage rates. As a result, news indicating that the package will be larger or will go into effect sooner will be viewed as worse for mortgage rates, and vice versa.
 

Friday's report on Consumer Sentiment revealed that consumers remain very optimistic about current and future economic conditions. Last month, the index reached the highest level since 2004. While it dropped a little this month to 97.8, this was still the second highest reading of the year. In October 2016, prior to the election, the index was at a level of just 87.2. 

 
With the stock market near record levels, the unemployment rate the lowest in decades, and hopes for tax cuts high, it makes sense that consumers are feeling good about the economy. 
 
 
 
Looking ahead, Wednesday will be the big day with Retail Sales and the Consumer Price Index (CPI). Consumer spending accounts for about 70% of economic activity in the U.S., and the retail sales data is a key indicator. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. Industrial Production, another important indicator of economic activity, will come out on Thursday. Housing Starts will be released on Friday. In addition, investors will be watching for any changes in the tax reform plans. 
 
 
All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
 
 
 

 
 

Compliments of

Philadelphia Mortgage Advisors

Phone: 610.834.8700

600 W. Germantown Pike | Suite 270

Plymouth Meeting, PA 19462

 

Philadelphia Mortgage Advisors is a licensed mortgage lender by the PA Department of Banking & Securities, NJ Department of Banking and Insurance, the State of DE and the Florida Office of Financial Regulation. NMLS #128570.

       

 
 

Jobs Bounce Back

 
With a Fed meeting, the selection of the next Fed Chair, details about tax reform, and an Employment report, this week had the potential to be extremely volatile. Other than disappointing wage growth, however, there were no significant surprises in any of these areas. Mortgage rates finished the week a little lower.
 
As expected, U.S. jobs bounced back in October from September's hurricane-related losses. The economy added 261,000 jobs in October. Combined with upward revisions of 90,000 jobs to the results for prior months, the total gains were close to the expected levels. The average monthly job gains over the past three months were 162K, which is in line with the levels seen earlier in the year. The unemployment rate, which is based on a separate survey, unexpectedly declined from 4.2% to 4.1%, which was the lowest level since December 2000. Since the drop was due to a large number of people choosing to leave the labor force rather than more people finding jobs, this was not viewed as a sign of strength.
 

 

After a couple of months of strong readings, it looked like wage growth was trending higher. However, the October results appear to indicate otherwise. While the consensus was for an annual rate of wage growth of 2.7% in October, it was just 2.4% higher than a year ago, down from a revised annual rate of 2.8% in September. 

 

 
Two Fed-related events in focus this week provided no surprises and caused little reaction. At Wednesday's meeting, the Fed held the federal funds rate steady and made no significant change to the language in its statement. The statement noted that "economic activity has been rising at a solid rate despite hurricane-related disruptions." On Thursday, President Trump selected Jerome Powell as his nominee to serve as Fed Chair beginning in February. Under Powell, it is expected that the Fed would maintain a course for monetary policy similar to the current one. 
 
Following the Presidential election in November, the stock market and mortgage rates rose due to expected policy changes under the Trump administration which would boost economic growth. One big component of that was tax reform. In recent weeks, progress has been made in this area, and mortgage rates have reacted. In general, reforms which appear more stimulative for the economy have been negative for mortgage rates, while less stimulative ones have been positive. On Wednesday, the House released additional details about its tax plan. The details were in line with expectations, however, and the impact on mortgage rates was minor. 
 
 
 
In contrast to this week, next week will be marked by a lack of any big events or economic reports. The JOLTS report, measuring job openings and labor turnover rates, will be released on Tuesday. There will be Treasury auctions on Wednesday and Thursday which could influence mortgage rates. Beyond that, investors will be keeping an eye on the progress on tax reform. 
 
 
All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
 
 
 

 

Compliments of

Philadelphia Mortgage Advisors

Phone: 610.834.8700

600 W. Germantown Pike | Suite 270

Plymouth Meeting, PA 19462

Philadelphia Mortgage Advisors is a licensed mortgage lender by the PA Department of Banking & Securities, NJ Department of Banking and Insurance, the State of DE and the Florida Office of Financial Regulation. NMLS #128570.

       

 

ECB Announces Taper

 
The most highly anticipated event of the week, the European Central Bank meeting, contained no surprises and caused little reaction. Reports about President Trump's favored pick for the next U.S. Fed Chair caused some volatility during the week but had only a small net effect. The key GDP report also was not much of a market mover. In the end, mortgage rates finished the week slightly higher.
 
At Thursday's meeting, the European Central Bank (ECB) announced future plans for its bond purchase program which closely matched investor expectations. The ECB will extend its bond purchase program from its current end date in December by nine months to September and will reduce its monthly purchases from its current level of 60 billion euros to 30 billion euros beginning in January. 
 
President Trump is expected to soon announce his nominee to serve the next term as Fed Chair. On Tuesday, it was reported that the two leading contenders out of the many people under consideration were Jerome Powell and John Taylor. The report that Taylor is one of the two finalists caused some concern for investors. Taylor is viewed as the candidate most in favor of a more rapid increase in the federal funds rate. The news caused mortgage rates to move higher. On Friday, however, another report named Powell as the top choice. Under Powell, it is expected that the Fed would maintain a course for monetary policy similar to the current one. Following the news, mortgage rates offset the increase from the report on Tuesday.
 

The first estimate for third quarter Gross Domestic Product (GDP) growth released on Friday was 3.0%, well above the consensus forecast of 2.5%. However, an increase in inventories accounted for 0.7% of the growth. An increase in inventories is typically viewed similar to a one-time event and is discounted when evaluating the underlying strength of the economy. 

 
Due to the large influence of inventory levels on the results, investors considered the GDP data to be close to the expected levels and showed little reaction.
 
 
Looking ahead, it will be a big week. Investors expect President Trump to announce his nominee for Fed Chair sometime next week. The next Fed meeting will take place on Wednesday. Investors do not expect any policy changes to be announced. There will be several major economic reports released as well, capped by Friday's important monthly Employment data. In particular, the Core PCE price index will be released on Monday and the ISM national manufacturing index on Wednesday.
 
 
All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
 
 
 

 
 

Compliments of

Philadelphia Mortgage Advisors

Phone: 610.834.8700

600 W. Germantown Pike | Suite 270

Plymouth Meeting, PA 19462

 

Philadelphia Mortgage Advisors is a licensed mortgage lender by the PA Department of Banking & Securities, NJ Department of Banking and Insurance, the State of DE and the Florida Office of Financial Regulation. NMLS #128570.

       

 
 

Budget Plan Passes

 
The passage of a budget plan was negative for mortgage rates this week. The economic data had little impact. As a result, mortgage rates ended the week higher.
 
Late Thursday, the Senate voted in favor of a 2018 budget plan. This was a key early step along the path to tax reform. Investors viewed the progress on tax reform as negative for mortgage rates for a couple of reasons. First, a new tax plan likely would boost economic growth, which would raise the outlook for future inflation. In addition, it would increase the budget deficit. The added supply of bonds needed to fund the deficit would push yields higher. 
 
The headline figures released on Wednesday for housing starts in September were disappointing. However, digging deeper it was clear that the data was heavily influenced by the impact of the recent hurricanes, and the market reaction was small.
 

After three months of strong results, single-family housing starts in September fell 5% from August, which was a much larger than expected drop. While starts rose in the Northeast, the West, and the Midwest, they suffered a massive 15% decline in the South, where the bulk of the hurricane damage took place.

 
 
 
Looking ahead, the big event next week likely will be Thursday's meeting of the European Central Bank (ECB). Investors expect that the ECB will announce its future plans for its bond purchase program. In the U.S., Durable Orders and New Home Sales will be released on Wednesday. Pending Home Sales will come out on Thursday. The first estimate for third quarter GDP, the broadest measure of economic growth, will be released on Friday.  
 
 
All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
 
 
 

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