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Mortgage Market in Review – November 19, 2018

   

Market Comment

Mortgage bond prices finished the week higher which put sharp downward pressure on rates.  Consumer prices rose 0.3% and the core value, which excludes the volatile food and energy costs, rose 0.2%. That data was near expectations and supports the narrative from the Federal Reserve that inflation is rising as the economy continues to improve.  Weekly jobless claims printed at 216K and continuing claims, a summation of all receiving benefits, at 1,676K. Expectations were for claims at 214K and continuing claims at 1,623K.  Retail sales, an indication of the strength of the consumer, rose 0.8%. Excluding automobiles sales rose 0.7%. That data was stronger than expectations for both components to rise 0.5%. Mortgage interest rates finished the week better by 1/2 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
NAHB Housing Index Monday, Nov. 19,
10:00 am, et
68.2 Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Housing Starts Tuesday, Nov. 20,
8:30 am, et
1203K Important.  A measure of housing sector strength.  Weakness may lead to lower rates.
Durable Goods Orders Wednesday, Nov. 21,
8:30 am, et
Up 1.2% Important.  An indication of the demand for “big ticket” items.  Weakness may lead to lower rates.
Weekly Jobless Claims Wednesday, Nov. 21,
8:30 am, et
215K Important.  An indication of employment.   Higher claims may result in lower rates.
Leading Economic Indicators Wednesday, Nov. 21,
10:00 am, et
Up 0.4% Important.  An indication of future economic activity.  A smaller increase may lead to lower rates.
U of Michigan Consumer Sentiment Wednesday, Nov. 21,
10:00 am, et
98.2 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.
Existing Home Sales Wednesday, Nov. 21,
10:00 am, et
5.14M Low importance.  An indication of mortgage credit demand.  Significant weakness may lead to lower rates.

Gas Prices Fall

The U.S. Energy Information Administration reported November 13, 2018 that the price of regular gasoline averaged $2.686 per gallon across the country.  The Gulf Coast had the lowest average prices while the West Coast had the highest.  These prices reflect an approximate seven cent decrease from the prior week and a thirteen-cent decrease from two weeks ago.

 

A positive of the recently falling prices for consumers is an increase in discretionary spending.  This is great news ahead of the typically busy traveling time associated with Thanksgiving.  Fuel savings usually give purchasers a boost in spending power and the vast majority of consumers spend that money.  More money in consumer accounts could result in an increase in spending the latter portion of this year.  The recent gas price decreases aren’t dramatic in the short term but are consumer friendly considering prices remain approximately nine cents higher than this time last year.

 

Gas prices usually drop after summer travel decreases and less expensive winter blends are sold.  Excess supplies are contributing to the lower prices today.  OPEC increased output earlier this year but is expected to vote to reduce output significantly next year.

 


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