Brian Egan's Blog - Philadelphia Mortgage Advisors

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.

Mortgage News for the week ended June 1, 2018

Jun 1

1:30

Category | General

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Mortgage Market News for the week ended June 01, 2018

Compliments of

Philadelphia Mortgage Advisors

Plymouth Meeting, PA 19462

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.

Mortgage News for the week ended May 18, 2018

May 18

5:09

Category | General

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Mortgage Market News for the week ended May 18, 2018

Compliments of

Philadelphia Mortgage Advisors

Plymouth Meeting, PA 19462

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.

Mortgage News for the week ended May 4, 2018

May 4

3:19

Category | General

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Mortgage Market News for the week ended May 04, 2018

Compliments of

Philadelphia Mortgage Advisors

Plymouth Meeting, PA 19462

Quiet Week

Despite a wide range of major economic news, it was a very quiet week for mortgage rates. The key labor market report, the inflation data, and the Fed meeting caused little reaction. Mortgage rates ended the week nearly unchanged.

The economy added 164,000 jobs in April, below the consensus for an increase of 190,000. However, upward revisions added 30,000 jobs to the results for prior months, bringing the net gains very close to the expected levels. The unemployment rate declined from 4.1% to 3.9%, below the consensus of 4.0%, and the lowest level since December 2000.

There are two factors which influence the unemployment rate, and the decline was mostly due to workers leaving the labor force rather than job gains, so it was not viewed as a sign of strength. Average hourly earnings, an indicator of wage growth, fell slightly short of expectations. They were 2.6% higher than a year ago, the same annual rate of increase as last month. Overall, the modest weakness in wage growth tilted investors to view the report as a little weaker than expected.

As widely expected, the Fed made no change to the federal funds rate on Wednesday. The statement released after the meeting noted that inflation has moved "close to 2 percent" and that officials expect it to run near the Fed's "2 percent objective over the medium term." The meeting caused little change in investor expectations for the pace of future rate hikes.

The Fed's comments regarding inflation were supported by the most recent reading of their favored inflation indicator, which matched investor expectations. The core PCE price index released on Monday revealed that inflation in March increased at an annual rate of 1.9%, up from an annual rate of 1.6% last month. This was the highest reading since February 2017.

Looking ahead, it will be a light week for economic data. The JOLTS report, which measures job openings and labor turnover rates, will come out on Wednesday. The Consumer Price Index (CPI) will come out on Thursday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

Mortgage News for the week ended April 27, 2018

Apr 27

3:35

Category | General

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Mortgage Market News for the week ended April 27, 2018

Compliments of

Philadelphia Mortgage Advisors