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Week In Review – September 13, 2019

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Subject Matter Experts

Volume 25, Number 33

Reginald J. Smith

REGGIE SMITH

Senior Mortgage Banker

NMLS ID 492451 – rsmith@fbhl.com

FLAT BRANCH HOME LOANS

6201 College Blvd. Suite 375 Overland Park , KS 66211

Office: 913.438.8276 – Cell: 816.719.6610 – Fax: 913.686.9062


MONDAY, September 9th Consumer credit growth accelerated in July and disrupted the recent trend of being led exclusively by the non-revolving segment. Consumer credit increased by $23.3 billion In July, easily exceeding expectations for a $16.0 billion build. Non-revolving credit balances such as car loans and student debt still led, rising by $13.3 billion as revolving credit balances surged $10.0 billion on the month. For the last couple of years, consumers have not been using their credit cards or increasing their revolving credit debt balances, but in July that changed where consumer used their cards to fund spending. Credit outstanding is growing at more than twice the annual rate at the start of the third quarter compared to Q2 which bodes well for consumer spending and retailers but negative for household wealth.  

TUESDAY, September 10th The National Federation of Independent Business small business survey fell to 103.1 in August from 104.7 in July. Details in the data were generally weaker last month as plans to expand employment slipped and expectations for the economy to improve fell to the lowest level since March. More firms did report plans to increase capital expenditures however, that may be tested in September as another round of tariffs goes into effect.  

WEDNESDAY, September 11th The MBA mortgage applications index rose 2.0% for the week ending September 6. In a solid sign for the housing market, the purchase index gained 4.5% last week as the refinance index edged 0.4% higher. Lower mortgage rates, strong labor market, and solid wage growth will likely boost home sales through the rest of this year. Contract mortgage interest rates fell again last week with the 30-year fixed rate mortgage for conventional loans down 5 bps to 3.82%. The MBA mortgage applications index rose 2.0% for the week ending September 6. In a solid sign for the housing market, the purchase index gained 4.5% last week as the refinance index edged 0.4% higher. Lower mortgage rates, strong labor market, and solid wage growth will likely boost home sales through the rest of this year. Contract mortgage interest rates fell again last week with the 30-year fixed rate mortgage for conventional loans down 5 bps to 3.82%.  

THURSDAY, September 12th Hurricane Dorian may have depressed initial jobless claims last week and we may see more filings in the aftermath of the storm. Jobless claims fell 15k to 204k for the week ending September 7. The four-week moving average fell 4250 to 212,500. This average is running just below levels in August which offers an early indication of strength in the September employment report. The consumer price index rose 0.1% in August following a 0.3% gain in July. Food prices were flat while energy prices dropped 1.9% last month. Excluding the often-volatile food and energy components of the index, the core CPI was up 0.3% on the month and 2.4% on the year. The recent firming in inflation shown in this data series wont prevent the Fed from cutting rates in September or October but it does reduce the odds of a cut in December.  

FRIDAY, September 13th A strong 1.8% gain in auto sales gave a boost to total retail sales last month. Retail sales increased 0.4% in August following an upwardly revised gain of 0.8% in July. Less auto sales, retail sales were unchanged on the month. Other gainers included nonstore retailers (ecommerce) and building supply stores. Restaurants, department stores, gasoline stations and apparel stores posted declines. In August, sales were 4.1% above their year ago level up from a 3.6% gain in July. The annual rate of growth in retail sales is solid and speaks to the strength of consumer and the jobs market. Consumer spending has been holding up the economic growth so far this year. Another rate cut next week based on uncertainties related to global growth and trade, will continue to support a strong consumer.


Stock Market Close for the Week

Index Latest A Week Ago Change
DJIA 26,820.25 26,935.07 -114.82 or -0.43%
NASDAQ 7,939.63 8,117.67 -178.04 or -2.19%

WEEK IN ADVANCE

The FOMC is expected to cut rates by one-quarter point when they meet in the coming week. Though the odds have dropped somewhat in the last couple of weeks; fed funds futures traders are pricing in the probability of a rate cut at around 80% from about 95% previously, with a 20% chance of no change in rates.

Key Interest Rates Latest 6 Mos Ago 1 Yr Ago
Prime Rate5.255.50 5.00
Fed Discount 2.753.002.50
Fed Funds2.132.401.92
11th District COF 1.155 1.125 1.018
10-Year Note 1.90 2.62 2.97
30-Year Treasury Bond 2.37 3.023.11
30-Yr Fixed (FHLMC) 3.56 4.31 4.60
15-Yr Fixed (FHLMC) 3.09 3.764.06
6-Mo Libor (FNMA) 2.03650 2.68575 2.53563

Sources: IBC’ s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco

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