While we wait for the riches to roll in, we can meanwhile find a measure of happiness in things like Freddie Mac's monthly Outlook for July. This report tells us that the U.K.'s 'Brexit' vote to leave the European Union, plus slowing economic growth in China, played big roles in in moving mortgage rates down in the U.S. "The turbulence abroad should continue to create demand for U.S. Treasuries and keep mortgage rates near historic lows," according to Freddie Mac's chief economist.
The Mortgage Bankers Association corroborated the heightened refi action. Their Mortgage Application Survey for the week ending July 8 was up 7.2% overall, with the Refinance Index up 11% and refis making up 64% of total activity. The National Association of Realtors HOME (Housing Opportunities and Market Experience) Survey for Q2 tells us 80% of respondents feel it's a good time to buy and 61% of homeowners think it would now be advantageous to sell. Home prices are appreciating, good for sellers, but at a slower rate, good for buyers. A predictive analytics firm puts annual price gains at 3.5%, with increases forecast in 92% of markets.
Review of Last Week
Record Breaking! The blue chip Dow and the broadly based S&P 500 ended Friday hitting new record highs, as the stock market notched its third weekly gain in a row. So much for fears about the economic fallout from Brexit, the U.K.'s vote to leave the European Union. Traders' spirits were no doubt buoyed by the data that came in at the start of the second quarter corporate earnings season. The first of the big companies reporting beat expectations, which many analysts worried they would miss. And even though rate hike probabilities edged up a tad, virtually no one is worried the Fed will raise rates any time before the end of 2016.
The economic data kept Wall Street enthusiasm from getting out of hand. Yes, there was the upside surprise of June Retail Sales growing 0.6% over the prior month. Excitement over this was dampened by downward revisions to prior months but, hey, consumers are pouring money back into the economy. They're probably happy that inflation remains mild, the Consumer Price Index (CPI) coming in slightly lower than expected. This should also restrain the Fed from touching rates, as it first needs to see prices going up a bit faster. Industrial Production and Business Inventories grew, though Michigan Consumer Sentiment disappointed. Typical.
The week ended with the Dow UP 2.0%, to 18517; the S&P 500 UP 1.5%, to 2162; and the Nasdaq also UP 1.5%, to 5030.
Positive economic data and rising stocks enticed investors away from the safety of bonds, sending prices south. The 30YR FNMA 4.0% bond we watch finished the week down .29, at $107.02. National average 30-year fixed mortgage rates remained near historical lows in Freddie Mac's Primary Mortgage Market Survey for the week ending July 14. Their chief economist suggested, "mortgage rates are likely to remain low throughout the summer." Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
This Week’s Forecast
Look, nothing about this economy is booming, but at least Housing Starts and Building Permits are forecast up a bit in June. The Philadelphia Fed Index is likewise expected to report manufacturing in that key region inching ahead. But Existing Home Sales are predicted slightly down, though still at a decent 5.5 million unit annual rate. We'll take that.
The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Jul 18 – Jul 22
Jul 19 08:30 Housing Starts
Jul 19 08:30 Building Permits
Jul 20 10:30 Crude Inventories
Jul 21 08:30 Initial Unemployment Claims
Jul 21 08:30 Continuing Unemployment Claims
Jul 21 08:30 Philadelphia Fed Index
Jul 21 10:00 Existing Home Sales
Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months... Fed handicappers have finally regained their composure post-Brexit and are no longer forecasting a rate drop. But no rate hike either, as they see Janet Yellen & Co. still paralyzed by "uncertainty." Note: In the lower chart, a 2% probability of change is a 98% certainty the rate will stay the same.
Current Fed Funds Rate: 0.25%-0.5%
After FOMC meeting on:
Jul 27 0.25%-0.5%
Sep 21 0.25%-0.5%
Nov 2 0.25%-0.5%
Probability of change from current policy:
After FOMC meeting on:
Jul 27 2%
Sep 21 14%
Nov 2 16%
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Scott Synovic is a top performing mortgage loan originator providing superior levels of service and satisfaction to clients and business partners in Colorado - www.scottsynovic.com NMLS #253799 AnnieMac Home Mortgage #338923