Shelter Six:  Inflation Flat but Retail Sales Down

Inflation still not a threat.  The most recent major inflation data came in very close to expected levels and had little impact on mortgage rates.

Retail Sales way down.  Consumer spending accounts for about 70% of all economic activity in the U.S., so Retail Sales figures are a key indicator.

December Retail Sales figures were delayed due to the government shutdown, but finally came out last week and were much less than anticipated with the biggest drop since 2009.

First American’s Real House Price Index (RHPI) measures home price changes adjusted for consumers’ home-buying power as impacted by income and interest rate changes.

The RHPI indicated that 2018 U.S. home prices were up a whopping 15.3% from November 2017 to November 2018.

While unadjusted house prices are now 1.8% above the housing boom peak in 2006, the RHPI indicates that real house prices are actually 35.3% below the 2006 peak.

Rate Update

The last-minute compromise bill to avert another government shutdown put upward pressure on mortgage rates but was offset by the weak Retail Sales figures and, as a result, mortgage rates ended last week unchanged.

This Week

It’s a very light week for economic data.  The minutes from the January 30 Fed meeting are due out on Wednesday with both Durable Orders and Existing Home Sales due out on Thursday.

February 18, 2019 by · Leave a Comment

Shelter Six:  GDP Forecasts Solid for U.S. but Down in Europe

1. Although the 2019 forecast for U.S. GDP remains around 2.5%, global GDP has emerged as a key economic concern early in the new year.

2. Last week, 2019 GDP forecasts were sharply reduced for Europe (1.9% to 1.3%), Germany (1.8% to 1.1%), and the UK (1.7% to 1.2%).

3. A major concern over the next month will be ongoing trade negotiations with China, which appear to be progressing very slowly.  U.S. tariffs are set to increase again on March 1.

4. Another major concern is the British exit from the EU (Brexit), which is scheduled to occur on March 31 and the terms of the departure still have not been finalized.

5. Encouraging news to report, Fannie Mae’s January National Housing Survey showed more people believe it is a good time to buy a home.

6. The survey showed home buyer purchase sentiment rebounding nicely after a drop in December as respondents reported higher incomes and less concern about job loss.

Rate Update

Mortgage rates trickled down a little last week and are now lower than the same date a year ago for the first time since early 2018 with the Conventional 30 Year Fixed-Rate now below 4.5% for the best-qualified borrowers.

This Week

The JOLTS Report is due out on Tuesday, the Consumer Price Index (CPI) on Wednesday, and Retail Sales on Thursday.

February 11, 2019 by · Leave a Comment

Shelter Six:  Many Now Projecting Fewer Rate Hikes in 2019

1. As expected, the Fed did not increase short-term rates last week. Not expected, however, were comments from Fed members that point to fewer Fed rate hikes in 2019.

2. The Fed is now also considering selling fewer Treasuries and mortgage-back securities than previously indicated, which would go a long way in helping keep mortgage rates low.

3. Friday’s Employment figures were very strong once again with 304K jobs added in January.  What seemed like a stellar report, however, turned out to be a bit of an illusion.

4. The Employment figures were skewed due to distortions from the government shutdown and unusual weather. The report was solid but not quite as strong as it first appeared.

5. The government shutdown, which lasted from December 22 to January 25, continues to cause delays in the release of some key economic data.

6. The economic reports are produced by government agencies, which continue to play catch up and release the data as they are able.

Rate Update

Mortgage rates fell slightly last week mostly on the heels of a Federal Reserve meeting that implied there will be fewer Fed rate hikes in the future than anticipated.

This Week

The ISM National Services Index is due out on Tuesday. As government agencies continue to catch up, there may be other unplanned economic reports released during the week, too.

February 4, 2019 by · Leave a Comment

Shelter Six:  Partial Government Shutdown Temporarily Ends

1. After 35 days, the longest US government shutdown in history ended on Friday but with only a temporary three-week agreement.

2. This is still great news for 800K government employees returning to work this week and finally getting paid, but plenty of uncertainty remains around what will happen past February 15.

3. The Mortgage Bankers Association (MBA) is optimistically forecasting purchase volume to increase 4% this year, followed by 3% in 2020, and 3% in 2012.

4. According to the MBA, keys to a solid spring market are rates staying low, housing inventory continuing to grow, and the job market maintaining its strength.

5. There is plenty of optimism early in the year with strong prequalification activity and mortgage purchase applications up 11% compared to last year.

6. According to the MBA, the biggest risks in 2019 will be ongoing political tensions, slowing global growth, Brexit, rising rates, higher home prices, and a volatile stock market.

Rate Update

Most major economic data was unavailable last week due to the government shutdown and mortgage rates ended the week nearly unchanged.

This Week

The Federal Reserve meets on Wednesday but no change in interest rates is expected.  Core PCE Price Index is due out on Thursday with both Employment figures and the ISM National Manufacturing Index due out on Friday.

January 28, 2019 by · Leave a Comment

Shelter Six: IRS Resumes Providing Income Verifications

1. One key part of the government shutdown is over as the IRS has resumed providing tax transcripts for mortgage applications, thanks to efforts of the Mortgage Bankers Association (MBA).

2. MBA advocacy is also responsible for the resumption of flood insurance policies, which FEMA had halted at the beginning of the shutdown.

3. Last week was more notable for the economic reports that did not get released rather than the ones that did.  Retail Sales and Housing Starts were not released due to the partial government shutdown.

4. This month’s Retail Sales report was particularly important because it covered the holiday shopping season in December.

5. The lack of key economic data has left the Fed flying blind to a degree.  It is extremely difficult to monitor economic growth and missing data only compounds the problem.

6. As expected, the British Parliament rejected Theresa May’s Brexit deal last week.  The UK is scheduled to leave the EU on March 29 and much of the exit remains unresolved.

Rate Update

Due to the government shutdown, there was little major economic data released last week and mortgage rates ended the week slightly higher.

This Week

Existing Home Sales are due out on Tuesday, New Home Sales on Friday, and Durable Orders on Friday.  Mortgage markets will be closed on Monday in observance of MLK Day.

January 21, 2019 by · Leave a Comment

Shelter Six:  Mortgage Business as Usual Despite Government Shutdown

1. As we enter the fourth week of the partial government shutdown, the mortgage business has been mostly unaffected but concerns around FHA, verifying income, and funding all loom.

2. The shutdown is causing delays in the release of some government economic reports, which are coming out more sporadically than normal.

3. Good news on the inflation front as the latest inflation figures indicate that inflation continues to track close to the Fed’s target level of 2%.

4. Minutes released from the Fed’s most recent meeting eased investor concerns that the Fed may increase short-term rates too aggressively or too quickly.

5. Mortgage denial rates are at the lowest point since 2004.  CoreLogic estimates that only about one in ten mortgage applications were denied in 2017, the most recent year reviewed.

6. Thanks largely to affordability issues, an excessive Debt Ratio is now the number one reason for mortgage denials (30.3% of all denials) surpassing poor credit.

Rate Update

There were few surprises in last week’s economic data and mortgage rates ended the week with little change.

This Week

Retail Sales will be released on Wednesday, Housing Starts on Thursday, and Industrial Production on Friday.

January 14, 2019 by · Leave a Comment

Shelter Six:  Despite Shutdown, Mortgage Business Still Closing Loans

1. As the partial government shutdown enters its third week, the mortgage business continues to function and close loans.

2. Conforming and VA financing have not been impacted but FHA is working with a limited staff and, as things get busier, there could be delays with FHA closings.

3. Also, a prolonged shutdown could soon lead to more serious problems as lenders have growing difficulty verifying income and funding loans.

4. On a positive note, Employment figures came in much stronger than expected on Friday with a whopping 312K new jobs added to the economy in December.

5. The Unemployment Rate unexpectedly increased from 3.7% to 3.9%, but this was mostly due to additional workers entering the labor force, which is viewed as a sign of strength.

6. The Consumer Financial Protection Bureau’s plans to change its name to the Bureau of Consumer Financial Protection are dead in the water and the agency will continue to be known as the CFPB moving forward.

Rate Update

Strong Employment figures raised concerns about inflation and contributed to rates pushing higher on Friday after having dropped a good bit over the previous week.

This Week

The ISM National Services Index will be released on Monday, minutes from the latest Federal Reserve meeting on Wednesday, and the Consumer Price Index on Friday.

January 7, 2019 by · Leave a Comment

Shelter Six:  Economic Forecast Points to a Strong 2019

1. Economically, 2019 is going to be another year of positive growth for GA. According to UGA’s Terry School of Business, look for GA to outperform the U.S. as a whole for the 6th straight year.

2. The GA economy has been expanding for roughly nine years and is presently well-balanced and, absent a full-blown trade war, the risk of a recession is low.

3. Job gains will be more modest in 2019 but the state’s population is growing evidenced by 43K people new to GA last year.  This figure is projected to grow even larger in 2019.

4. GA is now the 11th largest export state and 7th largest import state in the country.  Also, 26 Fortune 1000 Companies now have headquarters in Atlanta (only behind NYC and Houston).

5. Major boosts to GA’s economy will come from large economic development projects, higher defense spending, and population growth.

6. The biggest threats are tariffs and trade tensions, rising interest rates, labor markets without enough workers, and soaring energy prices.

Rate Update

In a very slow holiday week, mortgage rates were flat last week and maintained levels that were the lowest in four months.

This Week

It’s a big end of the week with ADP Employment, Weekly Job Claims, and the ISM Index all due out on Thursday followed by Employment figures to be released on Friday morning.

December 31, 2018 by · Leave a Comment

Shelter Six:  Fed Bumps Rates up .25%

1. As expected, the Federal Reserve raised the Federal Funds Rate by .25% last week.  Fed officials now expect two rate hikes in 2019, one less than previously forecasted.

2. The most recent inflation data revealed that inflation is still rising but continues to be below the Fed’s stated target level of 2%.

3. The latest news from the housing sector was mixed.  November Existing Home Sales increased more than expected from October, but were 7% lower than a year ago.

4. Inventory fell to a 3.9-month supply, well below the 6.0-month supply that is considered healthy.  The median existing-home price was 4% higher than a year ago.

5. Housing starts rose a solid 3% from October, but the strength came from the multi-unit segment.  Single-family starts dropped 5% to the lowest level since August 2017.

6. In addition, the December NAHB Housing Index showed that home builder confidence declined from 60 to 56, far below the consensus and the lowest level since May 2015.

Rate Update

Continuing concern about the pace of global economic growth was good for mortgage rates and negative for stocks last week.  Rates ended the week slightly lower.

This Week

New Home Sales will be released on Thursday and Pending Home Sales on Friday.  The last week of the year is generally a very light period for the financial markets, which can lead to higher volatility.

December 24, 2018 by · Leave a Comment

Shelter Six:  Maximum FHA Loan Limit Up for 2019

1. The new 2019 maximum FHA loan limit for Metro-Atlanta is up 5.4% to $379,500 for a Single-Family Detached property.

2. The new FHA loan limits are also up to $485,800 for 2-unit, $587,250 for 3-unit, and $729,800 for 4-unit properties in 2019.

3. A quick reminder that the new maximum Conforming loan limit for Single-Family Detached homes is now $484,350.

4. Did you know that consumer spending accounts for an astounding nearly 70% of all economic activity in the U.S.?

5. Retail Sales is the key metric for consumer spending and has been very strong over the last few months, which bodes well economically for the holiday season.

6. More good news from last week as the most recent inflation data released is in line with expectations.

Rate Update

Despite great stock market volatility, last week was relatively a quiet week for mortgage rates.  The major U.S. economic data came in on target and rates ended with little change.

This Week

The next Fed meeting is on Wednesday and most investors expect a .25% increase in the Federal Funds rate.  In addition, Housing Starts will be released on Tuesday, Existing Home Sales on Wednesday, and Durable Orders on Friday.

December 17, 2018 by · Leave a Comment

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