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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.

       

 
 

Stocks Drive Rates

 
Early in the week, mortgage rates were driven by massive swings in the stock market, but the net result was small. Later, a budget deal and hawkish comments from European central bankers were negative for mortgage rates, and rates ended the week a little higher. 
 
Quite often, stocks and mortgage rates will move in the same direction, and this is what took place on Monday and Tuesday. Both fell on Monday and rose on Tuesday. The reason is simply that investors are shifting assets between stocks and bonds. When stocks rise, the demand for bonds falls, which causes yields to move higher. The reverse occurs on down days for the stock market.
 
On Wednesday, the Senate passed a two-year budget deal, which was signed into law early Friday morning. The deal will increase the budget deficit more than expected. This will increase the future supply of bonds, which put upward pressure on yields, including mortgage rates.
 
The primary influence on U.S. mortgage rates on Thursday was hawkish comments from central bankers in Europe. Several officials at both the European Central Bank and the Bank of England recently have supported tighter monetary policy, which has helped push global bond yields higher.
 

 

The most significant economic data released this week was the ISM national services index. The index jumped to 59.9, which was well above the expected levels and was one of the best readings in a decade. Readings over 50 indicate an expansion in the services sector. Since stronger economic growth raises the outlook for future inflation, this data was negative for mortgage rates.

 

 
 
 
Looking ahead, the big day will be Wednesday with Retail Sales and CPI. Consumer spending accounts for about 70% of economic activity in the U.S., and the retail sales data is a key indicator. The Consumer Price Index (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 growth, will come out on Thursday. Housing Starts will be released on Friday. 
 
 
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, State of MD and the Florida Office of Financial Regulation. NMLS #128570.

       

 
 

Volatile Week

 
With a wide range of news this week, mortgage rates experienced a great deal of volatility. Congress reached a deal to fund the government, there was a European Central Bank meeting, and major economic data was released. These influences were offsetting, though, and mortgage rates ended the week with little change.
 

 

While sales of previously owned homes in December did not keep up with the exceptional pace seen in November, they still were at the highest level since June. For the entire year, sales in 2017 overall were the strongest since 2006. This took place despite the fact that unsold inventory at the end of the year was at just a 3.2-month supply, which was the lowest level since tracking began in 1999. 

 

 
One big reason that so many people are buying homes is that the economy is performing well. Friday's report on gross domestic product (GDP), the broadest measure of economic growth, revealed an increase of 2.6% during the fourth quarter of 2017. This was less than expected, but the shortfall was entirely due to a drawdown in inventories. Since inventory levels eventually must be replaced, a decline in one quarter simply means that there will be additional growth in the future to offset it. Of much greater importance, both consumer and business spending was strong during the fourth quarter.
 
Two other events this week contributed to the volatility, but had little net effect on mortgage rates. After shutting down on Friday at midnight, the government reopened on Monday, as the Senate reached an agreement to extend funding until February 8. The deal included a provision to address immigration before that date, however, meaning that it may be even more difficult to gather enough votes to pass the next funding bill. On Thursday, the European Central Bank (ECB) made no policy changes, as expected. The ECB also provided very little new information in terms of guidance about future policy, and the net impact on U.S. mortgage rates was minor. 
 
 
 
Looking ahead, there will be a Fed meeting on Wednesday. No change in policy is expected, but investors will be looking for guidance about the pace of future rate hikes. The important monthly Employment report will be released on Friday. As usual, this data on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, the Core PCE price index, the inflation indicator favored by the Fed, will be released on Monday. The ISM national manufacturing index will come out on Thursday. 
 
 
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.

       

 
 

Housing Starts Fall

 
The upward pressure on mortgage rates continued this week. Investors again favored stocks over bonds. Mortgage rates ended the week higher.
 

Thursday's report on housing starts was certainly disappointing, but a look below the surface indicates that it was not as bad as the headline figures suggest. In December, single-family housing starts declined 12% from November, which was far below the consensus forecast. This data is highly volatile from month to month, however. 

 
Single-family starts also are strongly influenced by the weather, and December saw particularly bad weather conditions in many parts of the country. Despite the drop at the end of the year, single-family starts in 2017 were 9% higher than in 2016. Another reason for optimism is that building permits for single-family homes, a leading indicator of future housing starts, increased in December.
 
As of noon EST on Friday, the experts are assigning about a fifty-fifty chance that there will be a government shutdown tonight at midnight. The House passed a bill to extend government funding, but the Senate is having trouble gathering enough votes. It's not clear what effect a government shutdown would have on mortgage rates, but it would not be good for the mortgage industry in many ways. Lenders would be unable to obtain case numbers to originate FHA loans. In addition, lenders are required to verify tax return information provided by borrowers with the IRS and verify social security numbers with the SSA. Delays in providing these services would postpone many loan closings.  
 
 
 
Looking ahead, Existing Home Sales will be released on Wednesday and New Home Sales on Thursday. The first reading for fourth quarter gross domestic product (GDP), the broadest measure of economic growth, and Durable Orders will come out on Friday. In addition, there will be a European Central Bank (ECB) meeting on Thursday which could influence U.S. mortgage rates. Investors will be looking for guidance about the pace of tightening by the ECB. 
 
 
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.

       

 
 

Core Inflation Climbs

 
There was little good news to be found for mortgage rates this week. Investors continued to favor stocks over bonds, the core inflation data was stronger than expected, and it was reported that China might scale back its purchases of U.S. bonds. As a result, mortgage rates ended the week higher.
 
Investors have started the year very optimistic about the prospects for economic growth in the U.S. and globally. The Dow posted strong gains of about 400 points this week, reaching a record high. However, some of the assets entering the stock market were taken out of the bond markets, including mortgage-backed securities (MBS). The reduced demand for MBS was negative for mortgage rates.
 

 

Low levels of inflation have helped keep mortgage rates down in recent years, so it was bad news on Friday when the core Consumer Price Index (CPI) revealed a larger than expected increase in December. Core CPI, which excludes the volatile food and energy components, rose 0.3% from November, above the consensus for an increase of just 0.2%. 

 

 

Core CPI was 1.8% higher than a year ago, up from an annual rate of 1.7% last month. If core inflation continues to rise, the Fed will be more likely to increase the federal funds rate at a faster pace.

 
On Wednesday, a report was released which said that China was considering scaling back or stopping its purchases of U.S. bonds in response to trade tensions with the U.S. The potential for reduced demand for bonds pushed yields higher. Chinese officials later denied that the report was true, though, and the net effect was small.
 
 
 
Looking ahead, Industrial Production, an important indicator of economic activity, and the NAHB housing index will be released on Wednesday. Housing Starts will come out on Thursday. Consumer Sentiment will be released on Friday. Mortgage markets will be closed on Monday in observance of Martin Luther King Day.
 
 
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.

       

 
 

Retail Sales Surge

 
Central bank meetings were the focus this week. Investors viewed the U.S. Fed meeting as positive for mortgage rates, while the European Central Bank meeting provided no surprises and had little impact. However, stronger than expected retail sales data offset the reaction to the Fed, and mortgage rates ended the week with little change.
 
Heading into Wednesday's Fed meeting, the 25 basis point increase in the federal funds rate was widely expected. Investors' main interest was in guidance from the Fed for the pace of future rate hikes. The Fed's forecast revealed a slightly faster pace of rate hikes in coming years. Given the recent strength of the economy, however, investors had been worried about a faster increase, and mortgage rates improved after the meeting. 
 

 

The biggest economic report this week contained a major surprise to the upside. Excluding the volatile auto component, retail sales in November jumped 1.0% from October, which was well above the expected levels. Aside from the September results which were boosted by hurricane-related spending, this was by far the largest monthly increase since January. 

 

 
Since stronger economic growth raises the outlook for future inflation, the retail sales data was negative for mortgage rates.
 
 
 
Looking ahead, political news on tax reform or government funding could influence mortgage rates. A vote on the tax bill is expected early next week, and a bill to extend government funding is needed by December 22. The major economic data will focus on housing and inflation. Housing Starts will be released on Tuesday and Existing Home Sales on Wednesday. The Core PCE price index, the inflation indicator favored by the Fed, will come out on Friday. 
 
 
All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
 
 
 

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