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Compliments of

Philadelphia Mortgage Advisors

Phone: 610.834.8700

600 W. Germantown Pike | Suite 270

Plymouth Meeting, PA 19462

 

Philadelphia Mortgage Advisors is a licensed mortgage lender by the PA Department of Banking & Securities, NJ Department of Banking and Insurance, the State of DE and the Florida Office of Financial Regulation. NMLS #128570.

       

 
 

Housing Data 

 
After last week's packed economic calendar, this week there was virtually no significant news except for some housing market data. It was an extremely quiet week, and mortgage rates ended almost unchanged. 
 

 

In May, sales of previously owned homes decreased slightly from April, and they were 3% lower than a year ago. The inventory of previously owned homes for sale rose 3% from April to a 4.1-month supply, but it was 6% lower than a year ago. Even with the increase, inventory levels remain very low by historical standards and are holding back sales. A 6.0-month supply is considered a healthy balance between buyers and sellers. The median home price was 5% higher than a year ago.

 

 
In an encouraging sign, home builders may be helping to address the shortage of inventory. In May, housing starts jumped a stronger than expected 5% from April, to the highest level since July 2007. Both single-family and multi-family units rose by a comparable amount. Despite rising labor and lumber costs, builders appear to be eager to supply more homes to the markets. 
 
 
 
Looking ahead, New Home Sales will be released on Monday. Durable Orders, an important indicator of economic activity, and Pending Home Sales will come out on Wednesday. Core PCE, the inflation indicator favored by the Fed, will be released on Friday. In addition, Treasury auctions on Wednesday and Thursday could influence mortgage rates. 
 
 
All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
 
 

 
 

Compliments of

Philadelphia Mortgage Advisors

Phone: 610.834.8700

600 W. Germantown Pike | Suite 270

Plymouth Meeting, PA 19462

 

Philadelphia Mortgage Advisors is a licensed mortgage lender by the PA Department of Banking & Securities, NJ Department of Banking and Insurance, the State of DE and the Florida Office of Financial Regulation. NMLS #128570.

       

 
 

Focus on Central Banks 

 
The focus was on central banks this week. While the net impact of the U.S. Fed meeting was minor, the European Central Bank meeting was positive for global bond yields. As a result, mortgage rates ended the week a little lower. 
 
As expected, the Fed announced a 25 basis point federal funds rate hike at Wednesday's meeting. After the release of the Fed statement, investors focused on a small increase in the federal funds rate forecasts for 2018 and 2019 from the 15 Fed officials. This was viewed as hawkish, meaning in favor of tighter monetary policy. However, comments from Fed Chair Powell during his press conference later came across as more dovish than expected, meaning in favor of looser monetary policy. While there was some volatility following the meeting, the net effect on mortgage rates was small.
 

Since consumer spending accounts for roughly 70% of economic activity, the Retail Sales report is closely watched each month. Following the hurricanes, retail sales surged last fall, and the trend was expected to continue. They then turned negative for three straight months, leading to questions about the strength of the consumer earlier this year. 

 
On Thursday, the European Central Bank (ECB) announced that it will begin to wind down its bond purchases in September and will end them in December, which was anticipated. Investors were surprised, however, that officials said that the first rate hike will not take place until at least September 2019, later than expected. Global bond yields, including U.S. mortgage rates, moved lower after the news.
 
However, Thursday's release revealed that retail sales in May were much higher than expected, marking the third straight month of solid gains and further easing investor concerns about the economy.
 
 
 
Next week will be a light one for economic data. Housing Starts will be released on Tuesday. Existing Home Sales will come out on Wednesday. The Philly Fed regional manufacturing index will be released on Thursday.
 
 
All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
 
 

 
 

Compliments of

Philadelphia Mortgage Advisors

Phone: 610.834.8700

600 W. Germantown Pike | Suite 270

Plymouth Meeting, PA 19462

 

Philadelphia Mortgage Advisors is a licensed mortgage lender by the PA Department of Banking & Securities, NJ Department of Banking and Insurance, the State of DE and the Florida Office of Financial Regulation. NMLS #128570.

       

 
 

Record Job Openings 

 
Following last week's stronger than expected labor market and manufacturing data, the reports released this week continued to suggest that the economy is growing at a solid pace. Since stronger economic growth raises the outlook for future inflation, mortgage rates ended the week higher. 
 

 

The JOLTS report measures job openings and labor turnover rates, and the Fed closely monitors this data. In April, job openings unexpectedly jumped to 6.7 million, a record high level. Of note, there were just 6.3 million unemployed people in the labor force that month. Until now, the number of job openings has never exceeded the number of job seekers since recordkeeping began in 2000. Investors will be watching closely to see if the tight labor market leads to a faster pace of wage increases, which would be inflationary and thus negative for mortgage rates.

 

 
The ISM national services index released this week also was stronger than expected as it increased to 58.7. Readings above 50 indicate an expansion in the service sector. Levels above 60 have been seen only a handful of times since this data began being tracked in the late 1990s.
 
Thursday was the most positive day for mortgage rates this week, but the reason was not clear. There was speculation that a large emerging market central bank was buying sizable amounts of U.S. bonds. Foreign central banks routinely buy and sell U.S. bonds to adjust the level of their currency reserves, so this explanation is plausible. Unfortunately, though, these transactions are not publicly disclosed, meaning that there is no way to confirm if this is what took place.
 
 
 
Next week will be packed with major economic news. The next U.S. Fed meeting will take place on Wednesday, and investors widely expect a 25 basis point federal funds rate hike. Then there will be a European Central Bank (ECB) meeting on Thursday. There has been speculation that the ECB will provide new guidance about the future of its bond buying program. The major U.S. economic reports will be the Consumer Price Index (CPI) inflation data on Tuesday and Retail Sales on Thursday.
 
 
All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
 
 

 
 

Compliments of

Philadelphia Mortgage Advisors

Phone: 610.834.8700

600 W. Germantown Pike | Suite 270

Plymouth Meeting, PA 19462

 

Philadelphia Mortgage Advisors is a licensed mortgage lender by the PA Department of Banking & Securities, NJ Department of Banking and Insurance, the State of DE and the Florida Office of Financial Regulation. NMLS #128570.

       

 
 

Italy and U.S. Job Gains 

 
News from Italy was positive for mortgage rates this week. However, this was partially offset by stronger than expected U.S. labor market data. Mortgage rates ended the week a little lower. 
 
Italy has one of the largest economies in the European Union (EU). In recent years, Italy's economic growth has been below the average for the EU as a whole, and its unemployment rate has been higher than average. The newly formed coalition government is proposing some major changes to attempt to address these issues. In particular, it would like to reduce the government spending constraints imposed by EU rules. Investors are concerned that this will lead to an increase in Italy's already large budget deficit and that the risk has increased that Italy could one day exit the EU. The resulting uncertainty caused investors to shift to safer assets, including U.S. mortgage-backed securities (MBS), which helped push mortgage rates lower this week. 
 

By contrast, stronger than expected labor market data pressured mortgage rates a little higher on Friday. Against a consensus forecast of 190,000, the economy added 223,000 jobs in May. In addition, upward revisions added 15,000 jobs to the results for prior months. The economy has gained an average of a very healthy 207,000 jobs per month so far this year. 

 
The unemployment rate declined from 3.9% to 3.8%, the lowest level since 2000. Average hourly earnings, an indicator of wage growth, were 2.7% higher than a year ago, up from an annual rate of increase of 2.6% last month. 
 
 
 
Looking ahead, Factory Orders will be released on Monday. The ISM national services index will come out on Tuesday. The JOLTS report, which measures job openings and labor turnover rates, will be released on Wednesday. In addition, news about Italy could influence mortgage rates again next week. 
 
 
All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
 
 

 
 

Compliments of

Philadelphia Mortgage Advisors

Phone: 610.834.8700

600 W. Germantown Pike | Suite 270

Plymouth Meeting, PA 19462

 

Philadelphia Mortgage Advisors is a licensed mortgage lender by the PA Department of Banking & Securities, NJ Department of Banking and Insurance, the State of DE and the Florida Office of Financial Regulation. NMLS #128570.

       

 
 

ECB Spooks Investors

 
The market moving economic news this week again was viewed as negative for mortgage rates. This time the source was the European Central Bank (ECB). The U.S. economic data mostly came in on target and caused little reaction. Mortgage rates reached the highest levels in seven years. 
 
On Monday, a speech from a top ECB official was viewed by investors as unexpectedly hawkish, meaning in favor of tighter monetary policy. Galhau, the governor of the Bank of France, said that the ECB might soon provide guidance about the timing of its first rate hike in years. While investors anticipate that the ECB will end its bond buying program later this year, they were somewhat surprised by the talk about rate hikes, and some investors viewed his speech as opening the door for rate hikes to take place sooner than expected. Bond yields around the world moved higher after the speech, including U.S. mortgage rates. 
 

Next to the Employment data, the report on retail sales is one of the most closely watched each month. Consumer spending accounts for about 70% of economic activity in the U.S., and the retail sales data is a key indicator of growth. Following the hurricanes, retail sales showed very strong gains for three months last fall.

 
Sales then unexpectedly posted three months of losses, causing investors to worry that economic growth was slowing. However, the most recent data released this week showed a healthy increase in April of 0.3% from March. Combined with the solid gains seen in March, it appears that the three weak months were not indicative of a longer-term trend. 
 
 
 
Looking ahead, New Home Sales will be released on Wednesday and Existing Home Sales on Thursday. Durable Orders, an important indicator of economic activity, will come out on Friday. In addition, Treasury auctions on Wednesday and Thursday could influence mortgage rates. 
 
 
All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
 
 

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