Market Update for the Week of June 10, 2019


Freddie Mac’s chief economist said today’s low rates not only help buyers, they’re also “good news for current homeowners,” as the majority of conventional mortgages originated in 2018 are now “eligible to be refinanced.”

CoreLogic’s chief economist adds that mortgage rates are “below what they were one year ago, and incomes are up, which has improved affordability for buyers,” also helped by price gains slowing the past year.

Black Knight put that annual gain at 3.8%, a seven-year low, and reported it now takes only 22% of the median income to purchase the average-priced home, “far below the long-term average of 25.1%.”


BEST WEEK OF THE YEAR… Forget tariffs, trade wars, and tired global economies. Just tell Wall Street interest rates look to go lower and watch stocks shoot up to the best weekly gain we’ve seen all year.

Traders felt the 75,000 new jobs created in May mean the economy is slowing, so the Fed will cut rates to boost it. Really? The 75,000 read is within normal monthly variations, and total wages are up 4.6% the past year.

Pessimists pointed to May’s dip in ISM Manufacturing, but at 52.1, it was still in solid growth territory. Plus, ISM Services picked up the growth pace for the sector supporting most U.S. jobs, to an unexpected 56.9.

The week ended with the Dow UP 4.7%, to 25984; the S&P 500 UP 4.4%, to 2873; and the Nasdaq UP 3.9%, to 7742.

The lower jobs number predictably sent bond prices higher. The 30YR FNMA 4.0% bond ended UP .12, to $103.34. The national average 30-year fixed mortgage rate neared a two-year low in Freddie Mac’s Primary Mortgage Market Survey. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.


Last Monday Congress passed a bill extending the National Flood Insurance Program through September. A lapse in the program would have cost about 40,000 home sales a month because buyers can’t get loans without the insurance.


INFLATION COOL, RETAIL HOT… Both the CPI measure of consumer prices and the  PPI gauge of wholesale ones should come in with low temperature reads. Good. Even better, Retail Sales are expected to get back to hot growth for May, portraying a pretty healthy U.S. consumer.

NOTE: Weaker economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and higher loan rates.


Forecasting Federal Reserve policy changes in coming months… The Fed Funds Futures market now expects a quarter percent rate cut in July, and then another one in September. We’ll see. Note: In the lower chart, a 25% probability of change is a 75% probability the rate will stay the same.

Current Fed Funds Rate: 2.25%-2.50%

Jun 19 2.25%-2.50%
Jul 31 2.00%-2.25%
Sep 18 1.75%-2.00%


Probability of change from current policy:

Jun 19    25%
Jul 31    87%
Sep 18    96%
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