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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, the Florida Office of Financial Regulation and MD Mortgage Lender #23004. NMLS #128570.

       

 
 

Retail Sales Rebound

 
Strangely, mortgage rates moved higher during the second half of the week without a clear cause. The economic data released this week produced little reaction, and there was not much change in the stock market. Still, mortgage rates finished near the highest levels in several years. 
 
There are several big picture factors which are viewed as negative for mortgage rates, but investors have been aware of them for months. First, the supply of bonds issued by the Treasury is increasing due to larger government deficits resulting from policy changes. Yields generally need to rise to entice investors to purchase additional bonds. Second, the Fed has been very clear in stating that it is tightening monetary policy by raising the federal funds rate and reducing its enormous holdings of Treasuries and mortgage-backed securities. This also adds to the supply of bonds. Finally, global economic growth in recent months has been the strongest since the financial crisis, which could increase inflationary pressures. The only potential factor that was new this week was that oil prices reached the highest level since 2014, which also could increase the outlook for future inflation.  
 

 

Since consumer spending accounts for roughly 70% of economic activity, investors keep a close eye on the retail sales data. Following strong readings during the fall, retail sales posted unexpected declines for three straight months. However, the data for March released on Monday showed that they increased a healthy 0.6% from February, breaking the unwelcome trend.

 

 
This week's report on housing starts was not as encouraging as the retail sales data. On the surface, overall home construction in March looked good with a stronger than expected increase from February, but this was completely due to strength in the multi-family segment. Single-family housing starts fell 4% from February, and permits to build single-family homes dropped even more to the lowest level since September 2017. This data tends to be volatile from month to month, however. 
 
 
 
Looking ahead, Existing Home Sales will be released on Monday and New Home Sales on Tuesday. Durable Orders will come out on Thursday. The first reading for first quarter gross domestic product (GDP), the broadest measure of economic activity, will be released on Friday. In addition, the next European Central Bank (ECB) meeting will take place on Thursday, and it could influence U.S. mortgage rates. 
 
 
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.

       

 
 

Weaker Job Gains

 
Investors were focused on Friday's Employment report and the policy on tariffs this week. Despite unexpected results on both fronts, however, there was little reaction in mortgage rates, and they finished the week nearly unchanged. 
 

Against a consensus forecast of 175,000, the economy added just 104,000 jobs in March. In addition, downward revisions subtracted 50,000 jobs from the results for prior months. Even with the shortfall, however, the economy has added an average of 202,000 jobs per month during the first three months of 2018. The unemployment rate was flat at 4.1%. 

 
Average hourly earnings, an indicator of wage growth, slightly exceeded expectations. They were 2.7% higher than a year ago, up from an annual rate of 2.6% last month.
 
On Thursday, President Trump threatened to add an additional $100 billion in tariffs on Chinese goods on top of the previously announced $50 billion. Chinese officials quickly said that they would respond with proportional measures. Some people think that both sides are just attempting to gain leverage in trade negotiations and that the tariffs will never be imposed. If these actions result in a trade war, though, it likely would have multiple effects. One would be reduced global economic activity, which would be good for mortgage rates, as it would reduce the outlook for future inflation. However, tariffs also raise the price of imported goods, which would increase inflationary pressures. These offsetting factors make the overall impact on mortgage rates difficult to predict. 
 
 
 
Looking ahead, the minutes from the March 21 Fed meeting will come out on Wednesday. These detailed minutes provide additional insight into the debate between Fed officials about future monetary policy. The Consumer Price Index (CPI) also will come out on Wednesday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. In addition, there will be Treasury auctions on Tuesday, Wednesday, and 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.

       

 
 

Stocks Dive, Mortgage Rates Flat

 
Although the stock market suffered large losses this week, mortgage markets were relatively quiet. The two primary influences were the Fed meeting and a new tariff policy. Neither had much net effect, however, and mortgage rates finished the week nearly unchanged. 
 
Following Wednesday's Fed meeting, the statement and Chair Jerome Powell's first press conference left investors divided about whether there will be three or four federal fund rate hikes this year. As widely expected, the first 25 basis point hike in 2018 took place at this meeting. Investors were much more interested in the projections of Fed officials for the pace of future rate hikes. Seven out of fifteen officials now expect that four rate hikes will be needed this year, up from just four officials in the last set of forecasts in December. The projected pace of raising rates in coming years increased as well. It appears that the forecasts were roughly in line with expectations, though, and mortgage rates at the end of the day on Wednesday were little changed from Tuesday's closing levels. 
 
On Thursday, the Trump administration announced that it will impose new tariffs on about $50 billion worth of Chinese imports. This was a less aggressive plan than investors had feared, but it still increased concerns about retaliation. A trade war likely would have multiple effects. One would be reduced global economic activity, which would be bad for stocks and good for mortgage rates, as it would reduce the outlook for future inflation. However, tariffs also raise the price of imported goods, which would increase inflationary pressures. In short, the threat of a trade war was viewed as clearly negative for stocks, but the overall impact on mortgage rates is difficult to predict. 
 

 

The data from the housing sector was pretty good and could have been even better except for severe weather in the Northeast and Midwest. In February, sales of previously owned homes increased 3% from January and were a little higher than a year ago. The inventory of homes for sale rose 5% to a 3.4-month supply, but it was 8% lower than a year ago. The median existing-home price was 6% higher than a year ago. 

 

 
 
 
Looking ahead, Pending Home Sales will be released on Wednesday. The Core PCE price index, the inflation indicator favored by the Fed, will come out on Thursday. In addition, Treasury auctions on Tuesday and Wednesday could affect mortgage rates. Mortgage markets will close early on Thursday and will be closed on Friday in observance of Good 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 and the Florida Office of Financial Regulation. NMLS #128570.

       

 
 

Job Gains Surge

 
A wide range of events influenced mortgage rates this week, including important labor market data, a European Central Bank meeting, and government policy changes. Some were positive and some were negative. The net effect was mortgage rates finished the week higher. 
 

 

An upside surprise in job gains in Friday's Employment report was negative for mortgage rates, but weaker than expected wage growth limited the damage. Against a consensus forecast of 205,000, the economy gained an enormous 313,000 jobs in February, the largest total since July 2016. In addition, upward revisions added 54,000 jobs to the results for prior months. Construction firms added 61,000 workers, the highest monthly increase in nearly 11 years. 

 

 
Partially offsetting the strong job gains was a shortfall in wage growth. Average hourly earnings were 2.6% higher than a year ago, down from an annual rate of 2.8% last month, and well below the consensus of 2.9%.
 
Also notable in the Employment data was that the unemployment rate was flat at 4.1% for the fifth straight month, which was above the consensus for a decline to 4.0%. However, this was viewed as an indicator of strength because the higher reading was due to a massive 806,000 people entering the labor force in a sign of confidence in the labor market.
 
Last week, President Trump took a firm stance on imposing global tariffs on all steel and aluminum imported into the U.S. Uncertainty about how other countries would react caused investors to shift to safer assets, which was good for mortgage rates. However, following resistance from many top political leaders and economists, Trump eased his stance this week, which was mildly negative for mortgage rates.
 
Thursday's European Central Bank (ECB) meeting contained good news for mortgage rates. Although the ECB set the stage to wind down its bond purchase program, this was not a surprise to most investors. Overall, the comments from ECB President Draghi were viewed as a little more dovish than expected, meaning in favor of a slower pace of tightening monetary policy. As a result, global bond yields declined on Thursday, including U.S. mortgage rates.
 
 
 
Looking ahead, The Consumer Price Index (CPI) will come out on Tuesday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. Retail Sales will be released on Wednesday. Consumer spending accounts for about 70% of economic activity in the U.S., and the retail sales data is a key indicator. Housing Starts will come out on Friday. In addition, there will be Treasury auctions on Monday and Tuesday which could influence mortgage rates. 
 
 
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.

       

 
 

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.
 
 
 
 

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