Last Week in Review: Uncertainty helping rates
The ongoing and unresolved US/China trade turmoil is the biggest story to follow right now. The uncertainty and negative headlines associated with the negotiations have pushed Stocks lower for most of May, with Bonds and home loan rates being the beneficiary.
We would like to think that the talks over the past year or so will bring forth a positive agreement — but it’s unclear whether this will come to pass. The next round of talks is scheduled for June 28-29 at the G20 meeting, so there is likely to be no progress before this time. If that is the case, US interest rates will remain near multi-year lows.
One thing’s for sure…the Fed will not be hiking rates anytime soon if this trade turmoil goes unresolved or escalates. In fact, there’s actually a chance we see a Fed rate cut in 2019 — especially if the US economy reacts poorly to the US/China trade dispute.
It’s important to understand that this story, while very negative and uncertain at the moment, could change very quickly. If a positive resolution comes to pass, we should expect Stocks to reclaim all of their recent losses and more — all at the expense of bonds and home loan rates.
Bottom line: Home loan rates are back near 16-month lows and coupled with the current strong US economic backdrop, it is an incredible moment to either refinance or purchase a home.
The Lock Desk will be closed on Monday, May 27, 2019 for Memorial Day, which is a Federal Holiday. Normal lock hours will resume on Tuesday, May 28, 2019.
Additionally, the Lock Desk will close early on Friday, May 24, 2019 at 10:00 A.M. PST due to the early close of the financial markets.
Locks that expire on the holiday will automatically roll to the next business day. In addition there are some important disclosure considerations associated with the holiday:
- Monday, May 27, 2019 cannot be included in the rescission period for refinance transactions.
- Monday, May 27, 2019 cannot be included in the seven (7) business day waiting period between the date the initial Loan Estimate (LE) was provided to the borrower and the consummation of the loan
- When re-disclosure of the LE is required, Monday, May 27, 2019 cannot be included in the four (4) business day waiting period between the date the revised LE was provided to the borrower and the consummation of the loan.
- When re-disclosure of the CD is required, Monday, May 27, 2019 cannot be included in the three (3) business day waiting period between the date the revised CD was provided to the borrower and the consummation of the loan.
Issues related to locks should be sent via email to firstname.lastname@example.org.
Last Week in Review: US/China uncertainty
The biggest story in the financial markets and around the globe is the ongoing US/China trade negotiations.
At the moment, there is no resolution and it appears there will be no resolution for at least several weeks as the US and China are not expected to talk again until the G-20 Summit June 28-29.
The uncertainty surrounding the talks helped home loan rates improve this week, and are at lows seen in January 2018.
The US, China and the entire globe would benefit from a deal and should it happen, Stocks will likely recover all of their recent losses and then some. At the same time, should the story drag on and escalate as higher tariffs are instituted — it would have a negative effect on global economies and Stocks may suffer as home loan rates improve further.
Looking at the US economy, it continues to do very well. Walmart posted incredibly strong corporate earnings this past week. Seeing they have $500B in annual sales — if Walmart is doing well, the US economy is doing well.
In housing news, April Housing Starts and Building Permits came in higher than expectations, providing further evidence of confidence in the sector.
Bottom line: The backdrop to housing could not be much better. The economy is strong and home loan rates are historically low. Today presents an incredible window to consider buying or refinancing a home.
Last Week in Review: Americans favor owning
Americans Favor Owning Versus Renting a Home
The Census Bureau recently reported a homeownership rate of 64.2% in the first quarter of 2019, up from the 10-year low of 63.7% in the first quarter of 2015.
A recent study by LendingTree shows that 67% of homeowners surveyed aged 22 and older believe that owning a home is a better option that renting. In addition, the longer you remain in a home, the stronger you believe that owning is better than renting. The survey revealed that 72% of homeowners who have resided in their home for seven to nine years agree with the statement.
The survey also showed that about 15% of homeowners believe renting is easier than owning a home, and another 18% are neutral on the topic. “Just 13% of homeowners across all ages wish they could go back to renting, but when broken down by age, 1 out of every 5 homeowners ages 22 to 37 say they miss renting.”
In conclusion, the US “Goldilocks” economy includes:
- Slowing home price gains
- Rising wages
- Uptick in homes for sale
- Strong job market
- High Consumer Confidence
- Historically low rates
The above points will continue to be a tailwind for new home buyers on their way to the American Dream of owning a home.
Last Week in Review: Is low inflation finally “transitory”?
Transitory = non-permanent or lasting a very short time
“Transitory” is the word Fed Chairman Jerome Powell used this week at the Fed Meeting to describe the current low inflation environment, meaning that inflation will likely pickup from this “temporary” low level.
The problem? Inflation has been relatively low for a decade and while the Fed called low inflation “transitory” many times in the past, it sure has been anything but transitory.
Nonetheless, both stocks and bonds didn’t like the “T” word, because if inflation does move higher from here, rates will move higher, and ultimately stocks would decline because they don’t like higher rates.
Just because inflation was low the last decade doesn’t mean it has to remain low. So what could make inflation rise from the “transitory” low level?
Wages are rising at the fastest pace in a decade, and unemployment is at 50-year lows. There are one million more job openings than there are available workers to fill them. And companies are firing people at the slowest rate in years. This is the strongest economy we have seen in quite a while — for many it’s the strongest in their lifetime. All of this, should it continue, could stoke higher inflation.
Bottom line — home loan rates held steady at one-year lows from week to week, despite ticking higher in response to the Fed Meeting. Now is a great time to purchase a home and take advantage of the strong economic backdrop and low rates.
Last Week in Review: The US economy remains “durable”
Good news is typically bad news for Bonds and home loan rates. That has not been the trend of late, and certainly not this past week.
Durable Goods Orders is a report which shows buying demand for products with a life cycle beyond 4 years — think cars, washing machines and planes. And that buying demand of long-lasting goods is up at the highest levels since last summer, highlighting that the US economy continues to grow, and consumers and businesses feel confident in investing.
Adding to the good-news week were continued strong corporate earnings reports, and future guidance from the likes of Amazon, Microsoft and Facebook.
Finally, the first look at 1st quarter GDP showed the US economy grew at a blistering 3.2% pace — way above economists’ expectations of 1.9%. The US economy is reaccelerating.
In the face of all the good news, home loan rates held steady and remain near one-year lows.
Bottom line: when you consider the strong labor market, rising wages, growing economy, low inflation, high consumer confidence, and low rates — it truly is a Goldilocks situation in the economy and for anyone looking to buy a home.
In an effort to better serve our broker partners, Carrington Mortgage has created a Marketing Resouces center in brokerIQ for approved brokers. The materials available include flyers in PDF format that are customizable with your name, logo, contact information and disclaimers. The flyers can be printed and/or emailed to your prospective borrowers.
Please browse the page to see what flyers are available and contact your Account Executive if you have any questions.
Last Week in Review: Good times continue
Initial Jobless Claims is a weekly report that tracks how many people have filed for unemployment benefits. It is both a solid gauge on the state of the labor market and economy, and a leading indicator on what to expect in the months ahead.
So, what are Initial Jobless Claims telling us today? Last week’s 196,000 recorded was the lowest in over 50 years! This is what it’s telling us:
- The labor market continues to strengthen.
- The chance of a recession in 2019 is near zero.
Low Initial Jobless Claims also leads to continued higher wage gains, which is wonderful for consumer spending and housing.
Another great data point this past week was the JOLTS (Job Openings and Labor Turnover Survey) which showed the US economy still has a 1,000,000-person shortfall against the current 7,000,000 job openings. This is just another example of how tight the labor market remains.
Bottom line — the great story remains — low rates + great job market = nice housing market.
In observance of Good Friday, the Carrington Mortgage Services, LLC (CMS) Lock Desk will be closed Friday, April 19, 2019. Normal Lock Desk hours will resume on Monday, April 22, 2019.
As a reminder, pursuant to the Lock Policy all lock extensions must be requested prior to expiration. If a lock expires on Friday, April 19th, 2019 it will need to be extended no later than Thursday, April 18th, 2019.
Issues related to locks should be sent via email to email@example.com.
Spring is the peak home buying season for many parts of the country. After years of softer home sale activity – thanks to low housing inventory, affordability issues, and more – this Spring home buying season could prove to be one of the best in years. Why?
Call it the “Goldilocks” economic scenario – and here are several bullets that should help housing not just this Spring, but for the foreseeable future:
- The Fed has stated they will not raise rates in 2019. Yay!!! There is actually a better chance of a rate cut before 2019 comes to an end. This means home loan rates won’t go too high.
- Inflation remains subdued – for now. Low inflation means lower rates.
- Home price gains are slowing year-over-year to healthier levels, and at equilibrium with personal wage gains. In years past, housing prices were gaining 10% to 15% or more, and wages were growing at 2%. Now we are seeing house prices increase 4% to 5% year-over-year, just slightly more than wages.
- Housing inventory is increasing. This is a big change from years past and should it continue, buyers will continue to come to the market and take advantage of the “Goldilocks” conditions.
- The Labor market remains solid. People buy homes because they feel good about their job and their future. Unemployment is at a 50-year low. This is very positive for housing.
- Europe can’t get out of their own way. Their economies are weak and that is keeping their bonds yields ultra-low. This is putting downward pressure on US Bond yields. Yes – you can thank Europeans for your low home loan rates.
- The Stock market is right at all-time highs. This means higher 401K and IRA values create a positive wealth effect that should provide a nice tailwind for housing. People with money spend it.
- Consumer Confidence and Sentiment are increasing again thanks to the Fed no longer hiking rates, the strong job market, and Stocks up nicely in 2019. “Confident” consumers purchase homes.
- No fear of a US recession as Friday’s March Jobs Report showed 196,000 new jobs created, a great rebound higher from February’s 33,000 – which had stoked some recession chatter.
- Home loan rates continue to hover near 14-month lows, thanks to the many bullets above.