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Mortgage Market in Review – October 22, 2018

Market Comment

Mortgage bond prices finished the week lower which put upward pressure on rates.  Rates were relatively steady the first portion of the week.  Selling pressure emerged Wednesday afternoon as stocks recovered some of their recent losses.  Retail sales, an indication of the strength of the consumer, rose 0.1%. Excluding automobiles sales fell 0.1%. That data was weaker than the respective increases of 0.6% and 0.1%.  The NAHB Housing Market Index printed at 68 versus the expected 67.  Housing starts were weaker than expected.  Weekly jobless claims were in line with expectations.  The Philadelphia Fed business outlook was 22.2 versus an expected reading of 20.  LEI rose 0.5% as expected.  Mortgage interest rates finished the week worse by 1/4 to 3/8 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
FHFA House Price Index Wednesday, Oct 24,
10:00 am, et
Up 0.3% Moderately Important.  A measure of single family house prices.  Weakness may lead to lower rates.
New Home Sales Wednesday, Oct 24,
10:00 am, et
625K Important.  An indication of economic strength and credit demand.  Weakness may lead to lower rates.
Fed “Beige Book” Wednesday, Oct 24,
2:00 pm, et
None Important.  This Fed report details current economic conditions across the US.  Signs of weakness may lead to lower rates.
Durable Goods Orders Thursday, Oct. 25,
8:30 am, et
Up 3.2% Important.  An indication of the demand for “big ticket” items.  Weakness may lead to lower rates.
Weekly Jobless Claims Thursday, Oct. 25,
8:30 am, et
210K Important.  An indication of employment.   Higher claims may result in lower rates.
Q3 GDP Friday, Oct. 26,
8:30 am, et
Up 4.1% Very important.  The aggregate measure of US economic production.  Weakness may lead to lower rates.
U of Michigan Consumer Sentiment Friday, Oct. 26,
10:00 am, et
98.8 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

House Price Index

The Federal Housing Finance Agency (FHFA) was created on July 30, 2008, when the President signed into law the Housing and Economic Recovery Act of 2008.  The Act gave FHFA the authorities necessary to oversee vital components of our country’s secondary mortgage markets – Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.  FHFA’s mission is to provide effective supervision, regulation and housing mission oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Banks to promote their safety and soundness, support housing finance and affordable housing, and support a stable and liquid mortgage market.

 

FHFA issues a monthly report on house prices called the House Price Index (HPI) that looks back 2 months in time.  The FHFA HPI is calculated using home sales price information from mortgages sold to or guaranteed by Fannie Mae and Freddie Mac.

 

The housing data this week will shed light on a major component of our economy.  Signs of weakness will likely help rates stay low while any indications of strength could push rates higher in the short term.  Stay alert heading into the data.

 

 


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