MMG Weekly 2/28/18

Guy R. Vetrano NMLS# 183357
Senior Loan Officer
Bay Equity Home Loans
Phone: 480.500.6000 x 6017
Mobile: 602-692-7196
gvetrano@bayeq.com
www.vetranoteam.com

In This Issue  
Last Week in Review: Existing Home Sales slipped in January while Mortgage Bonds hit four-and-a-half-year lows.

Forecast for the Week: In a week filled with key reports, inflation news may garner the most attention.

View: Uncover the secrets of “When” in Daniel Pink’s latest bestseller.


Last Week in Review  
“Slip slidin’ away.” Simon and Garfunkel. Sales of existing homes slipped in January as low inventories of homes for sale on the market continued to challenge would-be buyers.

January Existing Home Sales declined 3.2 percent from December to an annual rate of 5.38 million units versus the 5.62 million expected, the National Association of REALTORS® reported. Sales were down 4.8 percent from a year ago, the largest decline since August 2014 and the slowest pace since last September. Inventories continue to be a problem with just a 3.4-month supply at the current sales pace. A 6-month supply is considered healthy.

Lawrence Yun, NAR chief economist, noted, “The utter lack of sufficient housing supply and its influence on higher home prices muted overall sales activity in much of the U.S. last month.”

The minutes from the Fed’s January FOMC meeting were released and they revealed that members are committed to raising the short-term Fed Funds Rate three or more times in 2018. This is the rate at which banks lend money to each other overnight and it does not directly impact home loan rates. The minutes also showed that most Fed members believe inflation will pick up this year.

Both Stocks and Bonds have worsened due to hints of inflation in recent weeks. Inflation reduces the value of fixed investments, meaning it can hurt Mortgage Bonds and the home loan rates tied to them. Stocks, meanwhile, have reacted negatively since inflation can bring higher rates and higher rates hurt corporate borrowing.

As such, the Fed and the markets will be watching closely to see if the Fed’s favorite inflation gauge, annualized Core Personal Consumption Expenditures (PCE), rose in January when the report is released on March 1. It is currently at 1.5 percent, still well below the Fed’s target of 2 percent. The markets could react strongly, depending on what the data shows.

Mortgage Bonds experienced volatility in the latest week despite the quiet economic calendar, hitting lows not seen since 2014. Home loan rates have risen but remain attractive and near historic lows.

If you or someone you know has questions about home loan products or rates, please contact me. I’m always happy to help.


Forecast for the Week  
The busy calendar brings news on housing, manufacturing, economic growth, consumer spending and inflation.
  • Housing data kicks off the week on Monday with New Home Sales, followed by Pending Home Sales on Wednesday.
  • Look for manufacturing numbers from Durable Goods Orders on Tuesday, Chicago PMI on Wednesday and the ISM Index on Thursday.
  • Consumer Confidence will be released on Tuesday while the Consumer Sentiment Index follows on Friday.
  • The second reading on Gross Domestic Product for the fourth quarter of 2017 will be delivered on Wednesday.
  • Thursday brings Personal Consumption Expenditures, Personal Income, Personal Spending and weekly Initial Jobless Claims.
Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.

When you see these Bond prices moving higher, it means home loan rates are improving. When Bond prices are moving lower, home loan rates are getting worse.

To go one step further, a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes are on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Mortgage Bonds are attempting to stabilize despite ongoing volatility in the markets. Home loan rates have risen but remain attractive.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Feb 23, 2018)
Japanese Candlestick Chart

The Mortgage Market Guide View…  
Business Book Look
“When: The Scientific Secrets of Perfect Timing”

Daniel Pink, best-selling author of “Drive” and “To Sell Is Human,” says uncovering the secrets of when, will increase your chances of striking when the iron is hottest — in both your business and personal lives.

In “When,” his latest number one bestseller, Pink shares the results of new scientific research and data of perfect timing, filtered through a distinctly human and accessible lens. Each chapter is filled with poignant illustrations and immediately practical takeaways to help readers get a personal perspective on the subject.

“When” helps you decipher the concealed patterns of the day in order to create an ideal work schedule and understand the best times to quit a job, switch careers, get married or be more effective in groups.

Check out “When,” now a New York Times bestseller, on Amazon or at your favorite local bookstore. And stay tuned for next month’s Business Book Look.

Source: Amazon

Economic Calendar for the Week of February 26 – March 02
Date
ET
Economic Report
For
Estimate
Actual
Prior
Impact
Mon. February 26
08:30
New Home Sales
Jan
NA
625K
Moderate
Tue. February 27
08:30
Durable Goods Orders
Jan
NA
2.9%
Moderate
Tue. February 27
10:00
Consumer Confidence
Feb
NA
125.4
Moderate
Wed. February 28
08:30
Gross Domestic Product (GDP)
Q4
NA
2.6%
HIGH
Wed. February 28
08:30
GDP Chain Deflator
Q4
NA
2.4%
HIGH
Wed. February 28
09:45
Chicago PMI
Feb
NA
65.7
HIGH
Wed. February 28
10:00
Pending Home Sales
Jan
NA
0.5%
Moderate
Thu. March 01
08:30
Jobless Claims (Initial)
2/24
NA
NA
Moderate
Thu. March 01
08:30
Personal Consumption Expenditures and Core PCE
YOY
NA
1.5%
HIGH
Thu. March 01
08:30
Personal Consumption Expenditures and Core PCE
Jan
NA
0.2%
HIGH
Thu. March 01
08:30
Personal Spending
Jan
NA
0.4%
Moderate
Thu. March 01
08:30
Personal Income
Jan
NA
0.4%
Moderate
Thu. March 01
10:00
ISM Index
Feb
NA
59.1
HIGH
Fri. March 02
10:00
Consumer Sentiment Index (UoM)
Feb
NA
99.9
Moderate
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