Last Thursday, Equifax revealed it was the victim of a "cyber security incident" that could impact up to 143 million consumers. They claim the breach involved data on a U.S. website application and not their core credit reporting databases. The company said it will send direct mail notices to everyone whose data was breached. Security experts advise people affected to freeze their accounts immediately at all three credit bureaus, Equifax, Experian and TransUnion, and sign up for fraud protection services such as LifeLock, EZShield and Identity Guard.
Thanks to rising home prices and tight supply in many markets, Fannie Mae's latest Home Purchase Sentiment Index reported more respondents think now is a good time to sell than a good time to buy however the share of those who said mortgage rates will go down went up to 45%. Low rates certainly are helping, as mortgage originations went up 37% in Q2. The Mortgage Bankers Association reported purchase applications up 1% for the week ending September 1st. Finally, the head of the Small Business Administration said that her agency is set to give out $3.3 billion in Hurricane Harvey disaster loans to uninsured homeowners and businesses. Excellent.
Review of Last Week
The health of the stock market depends on investor willingness to take on the greater risk involved. In the holiday-shortened week, Wall Street's appetite for risk was trimmed by too many worries, from Hurricane Harvey to Hurricane Irma to continued geopolitical concerns about North Korea, the result? The three major market indexes headed down for the week, though not by that much. The S&P 500 in fact ended just 0.8% below its all-time high. This wasn't considered a turnaround from the positive market sentiment we've seen since the election. What little economic news we had was pretty good anyway.
The President and House and Senate leaders engineered a budget agreement that offers an extension of the government's funding and debt ceiling as well as federal money for hurricane relief. The ISM Services index rose to 55.3 in August, well above the 50 level signaling expansion in the sector of the economy that provides the vast majority of our jobs. July's Trade Balance came in at a smaller than expected $43.7 billion deficit. In the past year, exports are up 4.9%, almost matching the growth of imports, up 5.1%. A deeper look into August employment data revealed 30,000 new construction jobs, a considerable and much-needed boost.
The week ended with the Dow down 0.9%, to 21798; the S&P 500 down 0.6%, to 2461; and the Nasdaq down 1.2%, to 6360.
Wall Street's aversion to risk played nicely into the safe haven of bonds. The 30YR FNMA 4.0% bond we watch finished the week UP .20, to $105.75. Freddie Mac's Primary Mortgage Market Survey for the week ending September 7 reported national average 30-year fixed mortgage rates fell to a new year-to-date low for the third week in a row.
Where are interest rates headed?
This Week's Forecast
The forecast is for inflation to pick up a bit more with the Consumer Price Index (CPI) and Core CPI both rising in August after falling in July. The Fed is looking for growth here, so we'll watch this closely. Retail Sales are expected to continue expanding nicely, especially when you take out volatile monthly vehicle sales in the Retail Sales ex-auto reading.
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 September 11th - September 15th
Sep 13 08:30 Producer Price Index
Sep 13 08:30 Core PPI
Sep 13 10:30 Crude Inventories
Sep 14 08:30 Initial Unemployment Claims
Sep 14 08:30 Continuing Unemployment Claims
Sep 14 08:30 Consumer Price Index (CPI)
Sep 14 08:30 Core CPI
Sep 15 08:30 Retail Sales
Sep 15 08:30 Retail Sales ex-auto
Sep 15 08:30 NY Empire Manufacturing Index
Sep 15 09:15 Industrial Production
Sep 15 09:15 Capacity Utilization
Sep 15 10:00 Business Inventories
Sep 15 10:00 U. of Michigan Consumer Sentiment
Federal Reserve Watch
Speculative Forecasting Federal Reserve policy changes in coming months:
The Fed Funds Futures market shows no chance of a rate hike through the end of this year and into the spring.
Note: In the lower chart, a 0% probability of change is a 100% certainty the rate will stay the same.
Current Fed Funds Rate: 1.0%-1.25%
After FOMC meeting on:
Sep 20 1.0%-1.25%
Nov 1 1.0%-1.25%
Dec 13 1.0%-1.25%
Probability of change from current policy:
After FOMC meeting on:
Sep 20 0%
Nov 1 8%
Dec 13 42%
Where are interest rates headed?
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Nations Reliable Lending, LLC
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