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Week In Review – September 20, 2019

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Subject Matter Experts
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

Volume 25, Number 34
Economic Highlights for the Week Ending September 20, 2019
MONDAY, September 16th Equites dropped and oil prices spiked in trading Monday after reports of attacks on Saudi Arabian oil facilities over the weekend which impacted production. The Dow fell 142.70 to close at 27076.82. The U.S. market reaction to the oil price spike was relatively subdued reflecting declining U.S. vulnerability to oil price shocks because the U.S is now a leading oil producer. Brent crude which serves as an international benchmark for oil prices surged over $12 representing nearly a 20% price spike to $61.71. Treasuries received a flight to safety bid in the bond market raising prices and lowering corresponding yields. The 10-year note yield was down 5 bps to 1.848%.
TUESDAY, September 17th The National Association Home Builders housing market index rose to 68 in September from a revised score of 67 in August. Builders remain optimistic with the index reaching it highest level of the year and now 18 points above the neutral 50-point mark. The gain was led by higher assessments of present home sales, up 2 points to 75 while sales projections six months from now declined 1 point to a still strong level of 70. Buyer traffic through model home was unchanged at 50. Regional composite scores were led by the West and South at 75 and 70 respectively with the Northwest at 59 and the Midwest at 57. Strong home builder optimism bodes well for new home construction and new home sales going forward.
WEDNESDAY, September 18th A sharp jump in interest rates unplugged refinancing applications last week but purchase applications continued to climb. The MBA mortgage applications index fell 0.1% for the week ending September 13. The refinance index plunged 6.0% on the week as the purchase index jumped 4.0%. Purchase applications are now up 15% over this week last year in a good sign for September home sales. Contract mortgage rates were much higher last week with the 30-year fixed for a conventional loan up 19 bps to 4.01%. New residential construction starts surged 12.3% in August to an annual rate of 1.364 million following the revised July pace of 1.215 million. Housing starts are trending higher and are now 6.6% above August 2018 levels The gain was centered in the multifamily sector as multifamily starts (5 units or more) jumped 30.9% to 424k. Single family starts increased 4.4% on the month to an annual rate of 919k. Regionally starts were mixed with a large increase of 30.5% in the Northeast, a gain of 15.4% in the Midwest, and a 14.9% rise in the South. Starts were unchanged in the West, however single-family housing starts in the West region rose 5.3% Building permit issuance was 7.7% higher in August with an annualized pace of 1.419 million. Single family permits rose 4.5% to 866k as multifamily permits surged 14.9% to 509k. Permit issuance is now well above the current pace of starts suggesting that new construction activity, for both single and multifamily units will continue to expand in the months to come. As widely expected, the FOMC cut the target for the federal funds rate by one quarter-point to a range of 1.75% to 2.00%. The Fed cited the same reasons for the cut as in July: slower global economic growth and softer business investment along with continued and muted inflationary pressures. There were three dissents for the first time since 2016 with one Fed official wanting a 50-bps cut and two others wanting no change in rates at all The Fed upgraded its assessment of consumer spending but other changes to the post-meeting statement were minor.
THURSDAY, September 19th Jobless claims rose 4k to 208k for the week ending September 14. The 4-week moving average was down slightly to 212,250. Initial claims show that there is no sign of a significant issue either in the labor market or the broader economy. Claims remain low and suggest that even though business confidence has weakened recently, it hasnt led firms to lay off workers. Existing home sales rose again in August, gaining 1.3% to an annual pace of 5.49 million following a 2.5% gain in July to an annual rate of 5.42 million. With the gain, existing home sales are trending moderately higher, and are now up 2.6% from August 2018. Regionally, sales were mixed, with gains in the Northeast, Midwest and South while sales declined 3.4% in the West. The inventory of homes available for sale decreased 2.1% in August from July to 1.860 million which represents a 4.1-month supply at the current sales pace. House price gains remain solid but have slowed over the last year. The annual gain in the median price for an existing home rose 4.7% in August to $278,200. NAR chief economist, Lawrence Yun attributed the increase in sales to falling mortgage rates. As expected, buyers are finding it hard to resist current rates, he said. Sales are up, but inventory numbers remain low and are thereby pushing up home prices.

Stock Market Close for the Week

Index Latest A Week Ago Change
DJIA 27,681.24 27,347.36 +333.88 or +1.22%
NASDAQ 8,475.31 8,386.40 +88.91 or +1.06%

WEEK IN ADVANCE

The economy appears to be humming along, supported by a strong consumer and now a somewhat revived housing market. In the coming week more housing data on tap with a couple of house price indexes, new and pending home sales. We will also get the latest imprint on consumer optimism with the consumer confidence index.

Key Interest Rates Latest 6 Mos Ago 1 Yr Ago
Prime Rate4.755.50 5.25
Fed Discount 2.253.002.75
Fed Funds1.572.402.20
11th District COF 1.127 0.958 1.018
10-Year Note 1.94 2.47 3.21
30-Year Treasury Bond 2.42 2.883.42
30-Yr Fixed (FHLMC) 3.69 4.104.94
15-Yr Fixed (FHLMC) 3.13 3.574.33
6-Mo Libor (FNMA) 1.91625 2.62200 2.80013

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

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