Philadelphia Mortgage Advisors Blog

Plymouth Meeting, PA 19462

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Government Shutdown Averted

There were few market moving events this week. The Employment report came in on target, and Congress passed the expected bill providing a two-week extension to government funding. Mortgage rates ended the week a little lower.

In November, the economy added 228,000 jobs, above the consensus forecast of 190,000. The economy has bounced back from the effects of the hurricanes, as the average job gains over the last three months were very close to the average of 174,000 jobs added per month in 2017. The unemployment rate was flat at 4.1%, matching the consensus.

Average hourly earnings, an indicator of wage growth, fell slightly short of expectations. They were 2.5% higher than a year ago, up from an annual rate of 2.3% last month. The small upside surprise in job gains was offset by the minor miss in wage growth, and there was little reaction to the data.

Central bank policy has been a major influence on mortgage rates in recent years. Next week, both the U.S. Fed and the European Central Bank (ECB) will be meeting. It is widely expected that the Fed will raise the federal funds rate by 25 basis points for the third time this year. The greater potential for a surprise will come from the release of the Fed's forecast for the pace of future rate hikes. At its last meeting in October, the ECB announced its plans for scaling back its bond purchases beginning in January. Following unexpectedly strong recent economic activity in the eurozone, investors will be more interested in any guidance about when the ECB will begin to raise rates.

On Thursday, the House and the Senate passed a bill which will fund the government through December 22. Without the bill, a government shutdown would have taken place on December 8. The bill provides an additional two weeks for Congress to negotiate a longer-term government funding bill.

Looking ahead, investors will be focused on the central bank meetings. The U.S. Fed will meet on Wednesday, and the European Central Bank on Thursday. The major U.S. economic reports will be the Consumer Price Index (CPI) inflation data on Wednesday and the Retail Sales data on Thursday. In addition, political news on Flynn, tax reform, or government funding could influence mortgage rates.

Mortgage News for the week ended December 1, 2017

Dec 1

3:30

Category | General

Mortgage Time

Mortgage Market News for the week ended December 01, 2017

Compliments of

Philadelphia Mortgage Advisors

Plymouth Meeting, PA 19462

Political Headlines

Political headlines were the main influence on mortgage rates this week and caused a great deal of volatility. Stronger than expected economic data also was a factor. The positive and negative news was offsetting, however, and mortgage rates ended the week with little change.

On Friday, it was reported that former National Security Advisor Michael Flynn would plead guilty to one charge and would cooperate fully with the Special Prosecutor. There is speculation that he will testify about President Trump. The resulting uncertainty caused investors to shift from riskier assets such as stocks to safer assets such as bonds, including mortgage-backed securities (MBS). The added demand for MBS was positive for mortgage rates.

In recent weeks, signs of progress of tax reform have been viewed as negative for mortgage rates and good for stocks. This is because tax reform is expected to stimulate economic activity, which would raise the outlook for future inflation. On Tuesday, the Senate Finance Committee passed its tax reform plan, which was unfavorable for mortgage rates.

A series of stronger than expected economic reports released this week also was negative for mortgage rates. Third quarter gross domestic product (GDP), the broadest measure of economic activity, was revised higher from 3.0% to 3.3%. The Consumer Confidence index jumped to the highest level since 2000.

Sales of new homes in October rose 6.2% from September, reaching the highest level since 2007. One of the few pieces of good news for mortgage rates in the recent data was that current levels of inflation have been holding steady at low levels, as indicated by Thursday's reading for the core PCE price index.

This week, the FHFA, the regulator for Fannie Mae and Freddie Mac, announced new conforming loan limits for 2018. The baseline limit, which affects most markets, will increase by 6.8% to $453,100. Loan limits in markets designated as " high cost areas" will increase to $679,650.

Looking ahead, investors will be focused on political news. News on Flynn, tax reform, and government funding could influence mortgage rates. To avoid a government shutdown on December 8, Congress must pass legislation to extend funding for the government. On the economic front, 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.

Mortgage News for the week ended November 17, 2017

Nov 17

5:16

Category | General

Mortgage Time

Mortgage Market News for the week ended November 17, 2017

Compliments of

Philadelphia Mortgage Advisors

Plymouth Meeting, PA 19462

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.

Mortgage News for the week ended November 10, 2017

Nov 10

4:16

Category | General

Mortgage Time

Mortgage Market News for the week ended November 10, 2017

Compliments of

Philadelphia Mortgage Advisors

Plymouth Meeting, PA 19462

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.

Mortgage News for the week ended November 3, 2017

Nov 3

4:45

Category | General

Mortgage Time

Mortgage Market News for the week ended November 03, 2017

Compliments of

Philadelphia Mortgage Advisors