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Entries by Debbie Patella

By Debbie Patella at

Millennial's Define Wealth Differently

Owning a Home still is a big factor in Millennial's feeling "wealthy", but it is not the number one factor.

Schwab asked people to think about personal definitions of wealth in their lives, and the survey revealed a wide range of perspectives. When asked for their personal definition of wealth, two of the top three most popular descriptors aren’t even about money at all.

Their definition of "wealthy" is not the same as your grandparents' definition.  A new survey called the 2018 Modern Wealth Index compiled by Charles Schwab showed that owning a home was rated just above "eating out".  Here are the top 5 things that make them "feel" more wealthy:

  • Spending time with family (62 percent)
  • Having time to myself (55 percent)
  • Owning a home (49 percent)
  • Eating out or having meals delivered (41 percent)
  • Subscription services like movie/TV and music streaming (33 percent)

Other things that make people feel wealthy in their daily lives include owning the latest tech gadgets (27 percent), having a gym membership or personal trainer (17 percent), and using a home cleaning service (12 percent).

When asked to focus just on numbers, survey respondents believe it takes $1.4 million to be considered financially comfortable. To be considered truly “wealthy,” that number increases to $2.4 million.

Source: 2018 Modern Wealth Index

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained just +12 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week.  Over the past 4 weeks, the rolling average has seen a slight decline in mortgage rates.

Overview:  We had a holiday-shortened trading session which was really only 3 full days of trading in the bond market.  We had very strong domestic economic data (ISM Services, Jobs, Manufacturing) that would have normally caused mortgage rates to increase.  But offsetting our strong data was concern over the start of the trade wars with China and to a lessor effect, Canada, Mexico and Russia.  The uncertainty over the path of the trade war has kept money into long term bonds where normally, it would flow out.

Jobs, Jobs, Jobs:  Big Jobs Friday showed us that the job market continues to be very strong.
Jobs:
June Non Farm Payrolls (NFP) 213K vs est of 195K.
May NFP revised upward from 233K to 244K.
April NFP revised up[ward from 159K to 175K.
The rolling three month average increased to 211K
Wages:
The MOM change in Average Hourly Earnings increased by 0.2% vs estimates of 0.3% and is now $26.98.
The YOY change is 2.7% which matched market expectations and last month's pace.
Unemployment Rate:
The Unemployment Rate increased from 3.8% to 4.0% but that is only because more people are actually looking for work. This is reflected in an increase in the Participation Rate from 62.7% to 62.9%

Services: The June ISM Non-Manufacturing Index (2/3 of our economy) had a very robust reading of 59.1 vs est of 58.3. This is the third highest reading since 2005.

Manufacturing: The national ISM Manufacturing report was very robust and beat expectations with a 60.2 vs estimates of 58.4. Input costs (ISM Prices Paid) were very lofty at 76.8 but were smidge lower than in May.

The Talking Fed: We got the Minutes from the last FOMC meeting. There were no real surprises in the minutes. They clearly are wiling to let inflation run hotter in the near term and do have some concern over the impact of tariffs but overall feel that the economic risks to a trade war as being "balanced".

Trade Wars: Friday started the official kickoff of 25% tariffs on $34B worth of items from China and vice-versa. President Trump has said that the U.S. is ready with another $500B in tariffs on China if they don't come to terms with a more equitable agreement and protect intellectual property rights.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

 

 

By Debbie Patella at

Top Concerns for Millennial Buyers

 
According to a recent survey, the top concern among first-time millennial homebuyers was having enough money for a down payment, with 50 percent citing that response, followed by affording a home in their preferred location (45%) and rising home prices (41%).
top concerns for millenials Redfin commissioned a survey of 2,000 U.S. residents who planned to buy or sell a primary residence in the next 12 months. The purpose of the survey was to better understand the objectives, perspectives and concerns of those about to enter the real estate market.

Aside from the 69 percent who saved directly from paychecks, millennials used several tactics and sources to accumulate the money needed for a down payment on their first home. Thirty-six percent used earnings from a second job, 13 percent pulled money out of retirement funds early and 10 percent sold cryptocurrency. Some were lucky enough to have received a cash gift from their family (24%) or an inheritance (12%).

When broken down by household income levels, there were some notable differences in how millennials achieved a down payment. Millennials in households earning more than $100,000 per year were less likely than those earning less to have saved directly from paychecks, with 60 percent of high-earners having done so, compared with 75 percent of those who earn less than $100,000. Millennial households earning more than $100,000 were more than three times more likely than their less-well-off peers to have sold cryptocurrency investments and twice as likely to have sold stock investments. They were also more likely to have received an inheritance or cash gift from family or to have dipped into their retirement savings.

To afford a mortgage, 65 percent of millennials who intend to buy their first home this year plan to take some action, aside from just paying from their regular paychecks:

32% plan to pursue additional employment
19% intend to rent out a room to someone they know
15% say they will drive for a ride-sharing service
14% plan to split ownership of the home with friends or roommates

Source: RedFin

What Happened to Rates Last Week?

 

Mortgage backed securities (FNMA 4.50 MBS) gained just +7 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week.

Overview:  We had a net change of just 7 basis points.  Generally, it takes around a 21 basis point movement for rates to be impacted.  We had a big week for economic data with high inflation (PCE) and strong manufacturing data as well as very positive readings on the consumer.  Usually, that type of economic data is very negative for mortgage rates.  However, last week's data took a back seat to the swirling changes in trade talks and escalating tariffs which more than offset the downward pressure from the economic data.

Inflation Nation: The Fed's "official" measure of inflation, PCE (personal consumption expenditures) was hotter than expected with the headline YOY number hitting 2.3% vs est of 2.2%. It was at 2.0% when the Fed's raised rates at their last meeting. The Core YOY number hit 2.0% for the first time since 2012! Personal Income matched market expectations with a 0.4% MOM change and Personal Spending improved by 0.2% but that short of the estimates of 0.4%.

Manufacturing: The Bell-Weather Chicago PMI posted a block-buster reading of 64.1 vs est of 60.1. This is the second highest reading this year and one of the highest readings on record. Some internals show problems filling vacant job openings, rising costs and increased new orders and backlogs. Just about everything that points to growth in the manufacturing sector.

Consumer Sentiment Index: The final reading for June was 98.2 vs May's reading of 98.0, so MOM it did improve. Inflation Expectations for the next 12 months moved up to 3.00%. Consumer Confidence: The June data was below expectations (126.4 vs est of 128) but ANY reading above 120 is an extremely high level and points to strong consumer spending.

GDP: We got the final and third look at the 1st QTR GDP. The final revision dropped to 2.0% which is down from the last revision of 2.2%. The surprise came in the form of the Price Index which jumped up to 2.2% from the last revision of 1.9%.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

 

By Debbie Patella at

New Home Sales Jump

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New Home Sales Jump:
Sales of new single-family houses in May 2018 were at a seasonally adjusted annual rate of 689,000, according to estimates released jointly today by the U.S.Census Bureau and the Department of Housing and Urban Development.

This is 6.7 percent above the revised April rate of 646,000 and is 14.1 percent above the May 2017 estimate of 604,000.

The median sales price of new houses sold in May 2018 was $313,000. The average sales price was $368,500.

Supply still remains very tight with The seasonally-adjusted estimate of new houses for sale at the end of May was 299,000. This represents a supply of 5.2 months at the current sales rate.

Sales in the South appeared to drive last month’s growth. New-home purchases in the region rose 17.9%, the largest gain since the end of 2014. Meanwhile, sales in the Northeast and West declined and purchases were flat in the Midwest in May.

Source: U.S. Census Bureau

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained just +4 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week.

Overview:  We had a net change of just 4 basis points.  Generally, it takes around a 21 basis point movement for rates to be impacted.  We traded in a very narrow range with significant resistance at our 50 day moving average.

Taking it to the House: Weekly Mortgage Applications jumped by 5.1%. Refinances led the way with a 6.0% increase. Purchase applications increased by 4.0%.  Existing Home Sales were close to expectations (5.43M vs est of 5.52M) in May. As usual, tight inventory and rising prices are restricting sales at higher levels. May Housing Starts were stronger than expected with a seasonally adjusted annualized pace of 1.350M Units. When you strip out the multi-family sector, SFR saw a 3.9% increase with a 936K pace. Building Permits were lighter than expected with a pace of 1.301M units. SFR Permits decreased by 2.2% with a 844K pace.

The Talking Fed:
Fed Chair Jerome Powell said that there is robust growth and a generational low in unemployment. In his prepared remarks the said "Earlier in the expansion, as the economy recovered, the need for highly accommodative monetary policy was clear, but with unemployment low and expected to decline further, inflation close to our objective, and the risks to the outlook roughly balanced, the case for continued gradual increases in the federal funds rate is strong."

Trade Wars: After last week's $50B in tariffs, President Trump directed the U.S. Commerce Department to identify $200 billion worth of China goods for an additional 10% of tariffs. China said that it would respond "in-kind" but they cant as they purchase less than $200B worth of goods from the U.S. Actually, when you back out the $50B that they have already announced, that would leave only $150B that they could issue tariffs on but they don't buy that much from us...so it is unclear as to how they could match the U.S. tit-for-tat.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

By Debbie Patella at

Home Builder Confidence High Despite Rising Costs

The June National Association of Home Builders/Wells Fargo Housing Market Index came in at a very strong reading of 66. The index stood at 66 last year in June 2017. A reading above 50 is considered positive sentiment.

All three the index's components were very solid. Current sales conditions hit 75, the component gauging sales expectations in the next six months was 76 and buyer traffic fell came in at 50.

Housing starts have been climbing slowly but not as much as the market needs. There is a severe shortage of existing homes for sale, and that is pushing home prices higher at a very fast pace, weakening affordability, especially at the entry level. Homebuilders, faced with higher costs for land, labor and materials, are focused mostly on move-up and luxury home construction, as margins are squeezed at the entry level.

"Improved economic growth, continued job creation and solid housing demand should spur additional single-family construction in the months ahead," said NAHB chief economist Robert Dietz. "However, builders do need access to lumber and other construction materials at reasonable costs in order to provide homes at competitive price points, particularly for the entry-level market where inventory is most needed."

Source: NAHB.org

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained just +3 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week.

Overview:  While a net change of just 3 basis points looks like a boring week, it was anything but.  We had a lot of volatility last week with a 50 BPS swing from our best pricing of the week to our worst pricing of the week.  The main focus of the markets was the Central Bank meetings and the Trade War.  Of the three main Central Banks that had policy statements (The Fed, European Central Bank and Bank of Japan) only our Fed had any real action.

Trade War: The U.S. announced $50B of tariffs on Chinese products. This is a 25% tariff rate on 1,102 product lines. The tariffs will be implemented in two tiers, the first one on July 6, and will cover $34B in imports, and a second wave, which will cover the remaining $16B, or 284 product lines, and will undergo further review in a public notice and comment process, including a hearing. 

China's response: They unveiled $50 billion in tariffs against U.S. goods including soybeans, light aircraft, orange juice, whiskey and beef, starting on July 6th which mirrored the U.S. tariffs schedule and tier system, China's Ministry of Finance is setting a two-tier system with $34B on July 6th and $16B more to follow.

The Talking Fed:  As widely expected, the Fed raised their Fed Fund Rate by a 1/4 point to a range of 1.75% to 2.00%.  However, there was much that went on.  
You can read the official FOMC statement here
You can read their Economic Projections here. 
Here are some Key Points from the Fed Action:
 - Raised Fed Fund rate by 1/4 point to a range of 1.75% to 2.00% 
 - Raised the Primary Credit Rate (not the same as the headline Fed Fund Rate) to 2.50%
 - Raised the Interest Rate on Reserve Balances by 20 BPS to 1.9%
 - The vote was 8-0
 - FOMC statement says economy growing at "solid rate,'' job gains have been "strong,'' consumer spending has picked up and investment continued to grow "strongly''.
 - The Fed removed the low inflation line: "Market-based measures of inflation compensation remain low".
 - Language about the economy upgraded, line about rates remaining below long-run levels "for some time'' was removed.
 - The median 'dot' for the end of 2018 has been 2.125% since Dec 2016 and this time around, it shifted higher to 2.375% confirming The Fed's expectation for two more rate hikes this year, while the 2019 dot rose from 2.9% to 3.1%, suggesting the hiking carries through.
 - 2018 is 2.375% vs 2.125% in March
 - 2019 is 3.125% vs 2.875% in March
 - 2020 and longer-run medians are unchanged at 3.375% and 2.875% respectively
 - Starting in January ALL FED MEETINGS WILL INCLUDE A LIVE PRESS CONFERENCE WITH POWELL.

Retail Sales: The May data showed the biggest surge in spending in 8 months. The Headline reading increased by 0.8% which was double the market expectations of 0.4%. Plus April was revised higher. When you strip out Autos, Retail Sales increased by 0.9% vs est of 0.5%. April was also revised higher. Across the board it looked very good with discretionary spending (restaurants,etc), building materials, department stores you name it. Just about every category saw strong growth with the exception of furniture.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

By Debbie Patella at

Home Flipping Rate Matches Six Year High

Home Flipping Rate Matches Six Year High:

Inventory levels of homes for sale have been at or near all-time low's all year long.  So, it is great news that home "flipping" is going strong.  This process takes homes that are in poor shape (and out of the range of most home buyers that do not have the funds to repair the home) and puts them back into the system - all fresh and new and ready for a buyer.

ATTOM Data Solutions, released its Q1 2018 U.S. Home Flipping Report, which shows that 48,457 U.S. single family homes and condos were flipped in the first quarter of 2018.

The 48,457 homes flipped in the first quarter represented 6.9 percent of all home sales during the quarter, up from 5.9 percent in the previous quarter and unchanged from a year ago — matching the highest home flipping rate since Q1 2012.

Homes flipped in Q1 2018 sold at an average gross profit of $69,500, up from an average gross flipping profit of $68,250 in the previous quarter and up from $66,287 in Q1 2017 to the highest average gross flipping profit since ATTOM began tracking in Q1 2000.

The average gross flipping profit of $69,500 in Q1 2018 translated into an average 47.8 percent return on investment compared to the original acquisition price, down from a 48.9 percent average gross flipping ROI in Q4 2017 and down from an average gross flipping ROI of 50.3 percent in Q1 2017 to the lowest level since Q2 2015 — a nearly three-year low.

“The 2018 housing market is a double-edged sword for home flippers,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Rapidly rising home prices boosted by low available inventory of homes for sale or for rent are padding profits at the back end when flippers sell, but those same market realities are eroding flipping returns at the front end by forcing flippers to pay more to acquire homes to flip.”

Source: ATTOM Data Solutions.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost -25 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly higher for the week.

Overview:  We had a fairly light week for economic data and the few reports that we did get were very strong which is negative for rates.  The long bond market was focused on what could come of of the G7 meeting and while there were plenty of headlines out of that meeting, there was no real action.

Jobs, Jobs, Jobs: The Job Openings and Labor Turnover Survey (JOLTS) hit 6.698M vs est of 6.40M. Plus the prior month was revised upward significantly. This is a VERY strong reading and it one of the few times where there are actually more jobs available then there are people that are unemployed.

ISM Services: The May reading hit 58.6 vs est of 57.5. The services sector represents more than 2/3 of our economic engine. This is one of the top readings in recent history.

Economic Optimism: The June IBD/TIPP Economic Optimism Index improved from 53.6 in May to 53.9 in June.

G7: The G7 meeting produced plenty of headlines and tweets but didn't produce anything else.  As there was no real movement on trade/tariffs that was any different than before the G7 gathering.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

 

By Debbie Patella at

Pending Home Sales Index Strong

The National Association of Realtors latest Pending Home Sales Index was just released and came in at a very strong 106.4.  According to the NAR, any reading above 100 is above historical norms.

But it was still a mixed bag with the South leading the way with very strong growth.  Other geo-graphic regions were hampered by a severe lack of available inventory to satisfy demand.

Lawrence Yun, NAR chief economist, says the housing market this spring is hindered because of the severe housing shortages in much of the country. “Pending sales slipped in April and continued to stay within the same narrow range with little signs of breaking out,” he said. “Feedback from Realtors®, as well as the underlying sales data, reveal that the demand for buying a home is very robust. Listings are typically going under contract in under a month1, and instances of multiple offers are increasingly common and pushing prices higher.”

Added Yun, “The unfortunate reality for many home shoppers is that reaching the market will remain challenging if supply stays at these dire levels.”

Heading into the summer months, if low supply and swift price growth were not enough of a headwind for the housing market, Yun believes that rising mortgage rates and gas prices could lead to hesitation among some would-be buyers.

“The combination of paying extra at the pump, while also needing to save more for a down payment because of higher rates and home prices, may weigh on the psyche of those looking to buy,” he said. “For now, the economy is very healthy, job growth is holding steady and wages are slowly rising. However, it all comes down to overall supply. If more new and existing homes are listed for sale, it would allow home prices to moderate enough to stave off inflationary pressures and higher rates.”

Yun still forecasts for existing-home sales in 2018 to increase 0.5 percent to 5.54 million – up from 5.51 million in 2017. The national median existing-home price is expected to increase around 5.1 percent. In 2017, existing sales increased 1.1 percent and prices rose 5.7 percent.

Source: National Association of Realtors

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost -1 basis poins (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week but we had a very "choppy" session with a large spread of -59BPS from our best pricing of the week (lowest rates) to the worst pricing of the week (highest rates.

Overview:  We had a holiday-shortened week that started on a big upswing (lower rates) due to Geo-Political concerns over Italy's government and debt issues potentially crashing the Eurozone.  However, we had some very strong domestic economic data and by the end of the week both Italy and Spain were able to form new governments which calmed down the markets and caused MBS to loose their "fear factor" premium.

Jobs, Jobs, Jobs: We had our Big Jobs Friday!  And here is the "tale of the tape":
Jobs:
May Non Farm Payrolls 223K vs est of 188K
April NFP revised from 164K down to 159K
March NFP revised from to 135K up to 155K
The more closely watched rolling 3 month average is now 179K
Wages:
Average Hourly Earnings YOY 2.7% vs est of 2.7%
Average Hourly Earnings MOM 0.3% vs est of 0.2%
Unemployment Rate:
Unemployment Rate 3.8% vs est of 3.9%
Participation Rate 62.7% vs est of 62.6%

Japanese Taper:
The Bank of Japan chose to cut the size of its purchases of 5-to-10 year JGBs from 450bn to 430bn yen.

Manufacturing:
ISM Manufacturing: This was a very strong report! The headline reading beat estimates with a 58.7 vs 58.1 reading. But the Prices Paid when through the roof with a 79.5 reading. Chicago PMI was very strong with a 62.7 reading vs est of 58.4. Any reading above 60.0 is rare and very expansionary.

Inflation Nation: The Fed's "trigger" rate, PCE YOY remained at 2.0% and the Core PCE YOY hit 1.8% which matched expectations and March was revised lower from 1.9% to 1.8%. Personal Spending shot up 0.6% vs est of 0.4% and Personal Income matched forecasts with a 0.3% monthly gain.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

By Debbie Patella at

Home Prices Rise at Fastest Pace in 5 Years

 

The housing industry's bell-weather index, The Case-Shiller Home Price Index was released today and it showed a year-over-year gain of 6.79% in their key 20 Metro City Composite Index, which is the fastest appreciation rate since 2014.

Broadening out from the 20-City composite, the national home-price gauge climbed 6.5% YoY, matching February’s YoY advance that was the biggest since May 2014.

“Months-supply, which combines inventory levels and sales, is currently at 3.8 months, lower than the levels of the 1990s, before the housing boom and bust,” David Blitzer, chairman of the S&P index committee, said in a statement.

“Until inventories increase faster than sales, or the economy slows significantly, home prices are likely to continue rising.”

Source: S&P CoreLogic Case-Shiller Report

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) gained +57 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move lower for the week.

Overview:  Geo-Political concerns were the main driving factor in pricing last week as investors poured money into the low-return but safe-haven of U.S. backed bonds.  This spike in demand for our bonds caused rates to pull back to levels from two weeks ago.

Geo-Political: U.S. Treasury Secretary Steven Mnuchin declared that looming U.S. - China trade war is "on hold". The U.S. will hold off on implementing tariffs and the China has agreed to purchase more from the U.S., specifically from the agriculture segment.  The next day, China's Ministry of Finance announced that it would slash passenger car duties to 15%, further opening up the market that’s been a key target of the U.S. in its trade fight with Beijing. Car parts will be slashed from 25% down to only a 6% rate.

President Trump called off the proposed summit with North Korea but left the door open for negotiations.  He also signed the Dodd-Frank reform Bill.

The Talking Fed:
We got the Minutes from the May FOMC meeting. The bond market viewed the overall tone of the Minutes as a smidge more "dovish" than the original policy statement on May 2 but not by enough to help MBS break above our channel.  The word "symmetry" was used 9 times in the Minutes and the Fed basically stressed that inflation is HERE but that they will let it run over 2.00% before freaking out and raising rates at an accelerated pace. They will simply stay the course for awhile, and the markets will get their two more rate hikes this year.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

By Debbie Patella at

Homeowners Plan to Pump over $13B in Tax Savings into the Housing Market

Both current Home Owners and Renters plan to use their tax savings in the housing market.

Zillow estimates both homeowners and renters could put $13.2 billion in tax savings directly into the American housing market in 2018, using some of their tax cut to rent or buy a bigger home. Americans will likely spend almost double that amount – an additional $24.7 billion – on home renovations in 2018, and will add about $62.6 billion to their savings and investments, according to results of the most recent Zillow Housing Aspirations Report (ZHAR)

  • Zillow estimates homeowners and renters could put $13.2 billion in tax savings directly into the American housing market in 2018, using some of their tax cut to rent or buy a bigger home.
  • Americans will likely spend almost double that amount – an additional $24.7 billion – on home renovations in 2018.
  • Lower-income households are likely to spend a larger portion of their tax cut on housing: 12.2 cents on the dollar for households in the bottom income quintile, compared to 3.6 cents on the dollar for households in the top income quintile.

The Tax Cuts and Jobs Act (TCJA) enacted in December is likely to result in tens of billions of dollars being reinvested into housing in some form or another – despite the fact the legislation expressly limited a number of longstanding tax benefits for homeowners.

The net effect of the TCJA was to reduce most Americans’ federal tax liability and increase their after-tax income, in large part by lowering marginal tax rates and increasing the standard deduction. Many are likely to spend at least some of these gains, however small, on housing – despite new limits on tax benefits historically aimed at homeowners, including the mortgage interest deduction and deductions for state and local property taxes.

Source: Zillow Housing Aspirations Report

 

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) lost -40 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move higher for the week.

Overview: Inflation concerns drove rates higher last week. Inflation is the number one enemy of long bond investors as it eats away at the real rate of return. We have solid economic growth and are seeing increased wages and input prices in some regional Fed manufacturing surveys which pressured MBS last week.

Retail Sales: We had a mixed bag for the April data but the real story is the upward revisions to March. April Headline Retail Sales matched market expectations of a monthly gain of 0.3%. But March was revised upward from 0.6% to 0.8%. When you strip out Autos, Retail Sales improved by 0.3% vs est of 0.5%. However, March was revised higher from 0.2% to 0.4%..so actually without that revision, April matched market expectations.

Manufacturing: The regional Empire Manufacturing Survey was much stronger than expected (20.1 vs est of 15.0). Of particular interest is that the survey responders were very concerned about import tariffs in April, but no so much in May.

Inflation Nation: Joining the recent PCE report that shows inflation over 2.0% (net of a drop in auto prices), the NY Fed’s UIG inflation metric shows inflation to be 3.1% and the Atlanta Fed’s Sticky Inflation metric shows inflation to be 2.5%

Philly Fed: The May Philadelphia Fed Business Outlook Survey jumped to a very robust reading of 34.4 vs est of 21.0 and included a new 45 year high for new orders, selling prices increased by 7 points which is the highest levels since 1981
Leading Economic Indicators: The April reading hit 0.4% which matched expectations and March was revised upward from 0.3% to 0.4%. The report showed a rise in the factory work week but contained no surprises.

The Talking Fed: Dallas Fed President Robert Kaplan thinks we are at full employment. He said “Our judgment at the Dallas Fed is that we are either at or already past full employment.”
April New Housing Starts were lighter than expected (1.287M vs est of 1.310M) But March was revised upward from 1.319M to 1.336M. Building Permits were higher than estimates (1.352M vs est of 1.350). The prior month was also revised upward, from 1.354M to 1.377M. Single-family permits rose 0.9 percent to an 859,000 rate.

What to Watch Out For This Week:

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

By Debbie Patella at

What's the Best Day to Put Your Home on the Market?

While the timing of listing your home for sale should be determined with your Realtor based upon the right solution for your unique circumstances, we do have some national data that simply can't be ignored.

To sell for the most money, you should put your home on the market on a Wednesday. To sell the fastest, list on a Thursday. Avoid Sunday, which is the worst day to list. This is according to Redfin that analyzed a sample of 100,000 homes that sold in 2017 and reviewed the results.

Because homes listed on Sunday perform the worst, they used Sunday as a baseline to compare how much better homes do when listed on the other days of the week.

Homes listed on Wednesday had an advantage of $2,023 in sale price over homes listed on a Sunday, a sale-to-list premium of 0.53 percent. For a $500,000 house, that means you could make $2,650 more just by listing on a Wednesday instead of a Sunday.

For speed, Thursday had a clear advantage, with Thursday-listed homes finding buyers five days faster than the baseline. Homes listed on Thursday also had the edge as far as being more likely to be sold within 90 and 180 days.

Source: Redfin Analytics

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) lost -22 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move higher for the week.

Overview: Domestic economic data continued to show steady growth but bonds focused on geo-political news more than economic news last week. The United States has decided not to extend the agreement with Iran and we got a firm meeting date between President Trump and North Korea's leader, we also received three "detainees" back from North Korea. Overall, this removed some of the "fear factor" support that has been in long bonds for some time.
Inflation Nation: April Headline Consumer Price Index was bang inline with market expectations (2.5% vs est of 2.5% YOY). The closely watched core (ex food and energy) increased by 0.1% on a MOM basis which was lighter than expectations of 0.2% and YOY, it increased by 2.1% which matched March's pace of 2.1% but was just off expectations of 2.2%.

April Producer Price Index was very close to market expectations. The closely watched core (ex food and energy) increased by 0.2% on a MOM basis which matched forecasts and increased by 2.3% vs 2.4% on a YOY basis.

The Talking Fed: Atlanta Fed President Raphael Bostic summed up the prevailing sentiment in the bond market perfectly last week when he said “swelling optimism over tax policy in the beginning of the year has now been replaced almost completely by uncertainty regarding the proposed tariffs and the possibility of a trade war,” and “I come away with the sense that for now, many firms may be responding to increased uncertainty by moving to the sidelines with respect to new cap-ex plans.”

Small Business Optimism: The NFIB Index improved from 104.7 in March to 104.8 in April. Capital Expenditure Plans, Earnings and Adding Employees all showed good gains.

Jobs, Jobs, Jobs: Another blockbuster reading with the March JOLTS report with 6.550M openings reported which is a half-million more than in February.

What to Watch Out For This Week:

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

By Debbie Patella at

Housing Trust All-Time High

The Fannie Mae Home Purchase Sentiment Index® (HPSI) rose 3.4 points in April to 91.7, marking a new all-time survey high.

Americans expressed an increased sense of job security, with the net share who say they are not concerned about losing their job increasing 5 percentage points this month.
The net share reporting that their income is significantly higher than it was 12 months ago increased 1 percentage point in April.
The net share who said home prices will go up in the next 12 months increased 7 percentage points in April.
The net share who reported that now is a good time to sell a home increased 6 percentage points month over month.
"The latest HPSI reading edged up to a new survey high, showing that consumer attitudes remain resilient going into the spring/summer home buying season," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "High home prices and good economic conditions helped push the share of Americans who think it’s a good time to sell to a fresh record high. However, the upward trend in the good-time-to-sell share seen since last spring has done little to release more for-sale inventory. The tightest supply in decades, combined with rising mortgage rates from historically low levels, will likely remain a hurdle for mobility and a persistent headwind for home sales."

Source: Fannie Mae National Housing Survey

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) gained just +1 basis point (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week.

Overview: The bond market had a very big week for economic data and events. It started with PCE hitting 2% (the Fed's "trigger") rate but then was followed by the Fed meeting where they stressed that they wont react to inflation hitting 2% just once, they want to see a trend line. We also got very strong manufacturing and services data as well as a very solid jobs report.
Fed's Target Rate met? Yes....but there is a catch. While the Fed's official measure of inflation is the Personal Consumption Expenditures (PCE), there are several key reports that are all at 2.00% or above, lets take a look (all reports have been released in the last 30 days):
PCE YOY - 2%
Average Hourly Earnings - 2.7%
GDP - 2.3%
CPI YOY - 2.4%
PPI YOY - 3.0%
WTI Oil - $68.89 now vs $48.84 1 year ago, 36.36% increase.

PCE: The March YOY Headline PCE showed an increase from 1.7% in Feb to 2.0% in March. The Core (Ex food and Energy) reading moved from 1.6% in Feb to 1.9% in March. Both of these data points matched the market expectations.

The Talking Fed: The FOMC voted unanimously to keep their key federal funds rate in the range of 1.5% to 1.75% which was widely expected with markets only giving them a 25% to 30% of raising rates at this meeting.
Here are some key highlights:
• They removed the line about "monitoring inflation developments closely"
• They also removed the prior statement that "the economic outlook has strengthened in recent months."
• Change in inflation language: "On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent"
• FOMC statement now twice uses the word `symmetric' to describe its inflation objective, emphasizing they view a persistent overshoot the same way that they view a persistent undershoot
• Removal of the following language in its entirety: "The economic outlook has strengthened in recent months"
• "Risks to the economic outlook appear roughly balanced" instead of "Near-term risks"

Manufacturing: April ISM Manufacturing hit 57.3 vs est of 58.3, anything above 50 is expansionary and a reading near 60 is very very strong. ISM Prices Paid (another key measure of inflation) jumped to 79.3 vs est of 78.0

Services: The national ISM Non-Manufacturing Services report (2/3 of our economy) was lighter than expected (56.8 vs est of 58.1) but still at a very moderate and expansionary pace.

Jobs, Jobs, Jobs: Its Big Jobs Friday!!
April Non-Farm Payrolls 164K vs est of 190K
March NFP revised upward from 103K to 135K
February NFP revised downward from 326K to 324K
The rolling three month average is now 208K, so the bottom line is the trend is still above 200K.

Unemployment:
The headline Unemployment Rate (U3) dropped from 4.1% down to 3.9%, the market was expecting 4.0%. And is the lowest since 2000.
The Participation Rate dropped to 62.8% from 62.9%
The U6 Unemployment Rate (which includes part time workers for economic reasons and discouraged workers) dropped to 7.8% which is the lowest since 2001.
Wages:
Average Hourly Earnings increased again, this time by 67 cents to get to YOY level of $26.84 which is a 2.6% gain which matches March's pace of 2.6% (downwardly revised).
On a MOM basis, Average Hourly Earnings increased by 4 cents for a change of 0.1% vs estimates of 0.2%.

Hours Worked:
The Average Weekly Hours remained at its longer term trend of 34.5 hours, however Overtime ticked up by 0.1 to 3.7 hours which is normally a precursor to an increase in weekly hours.

What to Watch Out For This Week:

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

By Debbie Patella at

Mortgage Delinquencies Fall to 12 Month Low

In yet another sign of the seemingly ever-strengthening housing market, homeowners are keeping current on their mortgage payments as mortgage delinquencies fall to a 12 month low. This is key because delinquencies can turn in to foreclosures which can disrupt the housing market with "zombie" inventories or below market-price liquidations.

According to a recently published report by Black Knight, the total US loan delinquency rate, which represents loans 30 or more days past due, but not in foreclosure, was at​ 3.73% in March, marking a year-over-year change of 3.09%. The delinquency rate declined 13.24% compared to February.

March data also revealed a continuous improvement in the active foreclosure inventory. The total dropped another 10,000 loans in March to its lowest level since late 2006. Additionally, Black Knight found that prepayment activity during the month rose by 22% from February’s 4-year low. The improvement came despite interest rates remaining above 4.4%.

Source: Black Knight, Inc.

What Happened to Rates Last Week?

What Happened last week

Mortgage backed securities (FNMA 4.00 MBS) gained just +3 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week.

Overview: Just a net three basis point move for the entire week seems really tame on the surface but in reality, we had a very volatile week with mortgage rates increasing Monday through Wednesday. We had a swing -57BPS from our best pricing of the week (lower rates) to our worst pricing of the week (higher rates). Overall, it was another week with stronger than expected domestic economic data with strong GDP and Durable Goods data as well as very high Consumer Sentiment and Consumer Confidence levels which did combine to pressure pricing but a more "dovish" than expected European Central Bank and Bank of Japan helped MBS to climb off of their worst levels of the week.

Jobs, Jobs, Jobs: The Employment Cost Index for the 1st QTR showed an increase of 0.8% vs est of 0.7% with Wages and Salaries up 0.9% and benefits up 0.7%.

GDP: The Preliminary 1st QTR GDP was hotter than expected with at 2.3% vs 2.0% estimated growth rate due to a sharp rise in service spending (2.3%) while consumer spending increased modestly (1.1%). The QTR over QTR PCE increased by 2.7% vs est of 2.6%.

Durable Goods: The Preliminary March reading (will be revised) saw a much stronger than expected reading on the headline number with a 2.6% MOM gain vs expectations for a 1.6% gain. Plus, February was revised upward from 3.1% to 3.5%. But when you strip out the volatile Transportation sector, the Core Durable Goods reading was flat at 0.0% which was lower than market expectations calling for a small gain of 0.5%.

Consumer Sentiment: The Final April University of Michigan's Consumer Sentiment Index rose to 98.8 vs est of 98.0.

Consumer Confidence: The April MOM reading hit 128.7 vs est of 126.1 with is a block-buster type reading and reflective of consumers seeking larger net paychecks due to the tax cuts.

Taking it to the House: The March Existing Home Sales data was stronger than expected, rising 1.1% vs est of 0.2%. Key takeaways: Median Sales Price increased to $250,400 and marks the the 73rd straight month of year-over-year gains. Inventories fell to 3.6 months of supply and the average time on market dropped from 37 days in Feb to 30 days in March with just over 50% of all inventory selling in 15 days or less.

What to Watch Out For This Week:

What to WAtch out for

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

By Debbie Patella at

Home-Buying Demographics

Home Buying Demographics:



Who is driving the super-hot demand in housing right now? The answers are found in the newly published National Association of Realtors 2018 Home Buyer and Seller Generational Trends.



Millennials are now buying more homes than any other group with thirty-six percent of all home purchases were made by that generation over the last year. That makes millennials the most active generation in home buying for the fifth straight year. Gen-Xers ranked second at 26%, followed by younger and older baby boomers at 18% and 14%, respectively. The silent generation – those born between 1925 and 1945 – accounted for 6% of homebuyers over the last year.



Here are some more important statistics from the report:



First-time buyers made up 34 percent of all home buyers, a decrease from last year at 35 percent. Sixty -five percent of buyers 37 years and younger were first -time buyers, followed by buyers 38 to 52 years at 2 4 percent.

Sixty-five percent of recent buyers were married couples, 18 percent were single females, seven percent were single males, and eight percent were unmarried couples. The highest percentage of single female buyers was found in the 72 and older age group. The highest share of unmarried couples were found in the 37 and younger age group.

The most common reasons for recently purchasing a home differed between the generations. For all three groups under the age of 62 years, the main reason for purchasing was the desire to own a home of their own. Among the 63 and older age groups, the desire to be closer to friends and family was the top reason to purchase at 25 percent. Buyers between 72 and 92 years also purchased for the desire for a smaller home at 19 percent.

Overall, buyers expect to live in their homes for a median of 15 years, while 18 percent say that they are never moving. For buyers 37 years and younger, the expected length of time is only 10 years compare to 20 years for buyers 53 to 62 years.



What Happened to Rates Last Week?





Mortgage backed securities (FNMA 4.00 MBS) gained +13 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week.



Overview: We continued to see sideways movement in long bond yields throughout the month of March as the market is awaiting the first Fed rate hike of the year. Overall, last week had very strong labor market data and both small business and consumers had some of the highest sentiment readings on record. Inflation was tame but above 2.00% on headline CPI.



Jobs, Jobs, Jobs: January JOLTS (Job Openings and Labor Turnover Survey) showed over 6 million vacant jobs....just waiting for the right person (that can pass a drug test, and has experience/skills). This was a much stronger than expected reading (6.312M vs est of 5.890M) and is at a record high.



Consumer Sentiment: The University of Michigan's Consumer Sentiment Index Preliminary March reading hit 102.00 vs est of 99.3 and is one of the hottest readings on record.



Small Business Optimism: The February NFIB index moved higher from January's level of 106.9 to Feb's reading of 107.6. It the 2nd highest level in 45 years!



Inflation Nation: Across the board, the Consumer Price Data matched market expectations with the closely watched YOY headline reading rising to 2.2% in February from 2.1% in Jan. The Core YOY remained at the 1.8% level. Producer Price Data matched also market expectations with the closely watched YOY Headline reading rising to 2.8% in February from 2.7% in Jan. The Core PPI YOY rose from 2.2% to 2.5%.



Atlanta Fed: Their Year ahead inflation expectations rose from 2.0% in February to 2.1% in March. However, their GDPNow forecast model dropped the 1st QTR GDP expectations down to 1.9%. If you recall, this was 5.2% in January, dropped to 4.3% and then 2.5% and now 1.9%.



Manufacturing: The February Industrial Production figures were almost three-times stronger than expected with a 1.1% vs an estimated 0.2% reading. Capacity Utilization was also a beat (78.1 vs est of 77.6). There was strength in mining, business equipment and building supplies.



What to Watch Out For This Week:





 


By Debbie Patella at

More Taxes = More Homes For Sale?

More Taxes = More Homes For Sale?



Sounds bizarre but Vancouver, British Columbia is going to try just that.



You see, they have the same problem that we have here in the U.S.A, tight inventory. With inventory levels so low, they have been struggling to find a way to get inventory controlled by "hoarders" back into the market place.



Vancouver is slapping thousands of empty homes with a new tax as part of a government effort to tame the out-of-control Real Estate bubble that just won't quit there and is being closely watched by many U.S. metro markets to see if it works.



Approximately 4.6% or 8,481 homes in Vancouver have stood empty or underutilized for over six months in 2017, down from 10,800 in 2016 according to declarations submitted to the municipality by homeowners. Empty properties will be charged a 1% tax on the assessed value - not much, but with average detached home prices hovering below C$1.8 million, attached units going for C$715K and condominiums at C$571K, 1% is still a large sum of money.



The problem of a hot housing market and tight inventory levels gets even worse as foreign buyers move in which effectively takes a residence out of the market and it sits vacant as thousands of home buyers are scrambling to find a home for sale. According to local sales agents, investors from Hong Kong, Mainland China and other parts of Asia have been acquiring as much as 40% of the units going up for sale and just sitting on them afterwards.



What Happened to Rates Last Week?





Mortgage backed securities (FNMA 4.00 MBS) lost -7 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week.



Overview: We continue to see very strong economic data with Jobs (ADP Private Payrolls and BLS Non-Farm Payrolls) as well as a very upbeat economic review by the 12 districts of the Federal Reserve. Both of those are providing pressure on mortgage rates. But the resignation of Gary Cohn and the uncertainty of tariffs and a potential trade war is providing support for rates.



Jobs, Jobs, Jobs: We had Big Jobs Friday! You can read the official BLS report here.

Here is the Tale of the Tape:



Jobs - Non Farm Payrolls:

February 313K vs est. of 200K

January was revised upward from 200K to 239K

December was revised upward from 160K to 175K

The more closely watched rolling 3 month moving average increased to 242K which is very robust.



Wages: Monthly Average Hourly Earnings increased by 0.1% over the prior month. Market was expecting 0.2%.

YOY Average Hourly Earnings increased by 2.6% form this time last year. Market was expecting 2.8%.

The national average hourly rate for private non-farm workers increased to $26.75

Hours Worked picked up by 0.1% to 34.5 which was higher than expectations of 34.4



Unemployment Rate: The February Unemployment Rate hit 4.1% which is the same rate as January. The market was expecting a small improvement to 4.0%.

The Participation Rate had a very rare increase and hit 63.0% vs est. of 62.5%

The February ADP Private Payrolls came in hotter than expected (235K vs est. of 195K), plus January was revised higher from 234K up to 244K (10K).



Productivity: The revised 4th QTR data was revised a little higher. Non-Farm Productivity was revised from -0.1% up to 0.0% and Unit Labor Costs were revised higher from 2.0% to 2.5%.



Geo-Political: President Trump's Senior Economic Advisor Gary Cohn resigned presumably over his objection to the proposed tariffs.



The Talking Fed: On Wednesday we got the Fed's Beige Book. This is prepared specifically to be used in the decision making process during the March Fed policy meeting. It is a compilation of all 12 Fed districts on their views of how each of their fiefdoms are doing economically. You can read the official release HERE.

Overall, the picture is stable growth and concern over impending wage inflation.



What to Watch Out For This Week:




By Debbie Patella at

Home Prices up 51% from the bottom in 2011

Home Prices up 51% from the bottom in 2011



Home prices across the US have grown 51% since they bottomed out in March 2011, with prices in most markets returning to peak levels after dropping 33% during the recession, according to a new report released by CoreLogic.



The increase in home prices is further evidence that the housing market has more than recovered from housing crisis.



CoreLogic said home prices are now 1% higher compared to their peak in 2006. Additionally, year-over-year gains in home equity averaged $14,888 during the third quarter.



“Homeowners in the United States experienced a run-up in prices from the early 2000s to 2006, and then saw the trend reverse with steady declines through 2011,” CoreLogic Chief Economist Frank Nothaft said. “After reaching bottom in 2011, our national price index is up more than 50%. West Coast states, such as California, Washington, and Oregon, are seeing some of the largest trough-to-current growth rates in home prices. Greater demand and lower supply – as well as booming job markets – have given some of the hardest-hit housing markets a boost in home prices. Yet many are still not back to pre-crash levels.”



Source: Core Logic Special Report



What Happened to Rates Last Week?





Mortgage backed securities (FNMA 4.00 MBS) gained +3 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week.



Overview: We had a choppy session with a net swing of -66 basis points from the best pricing (lowest rates) to our worst pricing (highest rates) but when the smoke cleared - pricing was basically the same at the end of the week as it was at the beginning of the week. While we did get some big name economic reports (ISM/GDP) and Powell's first testimony in front of Congress, it was the Trump Tariff announcement that caused the most volatility.



Trade Wars: President Trump announced tariffs on steel and aluminum imports today which concerns traders that it will spark a trade war which may provide some headwinds to our growing economy. The White House has yet to release the specifics but "next week" he will put forth his plan on 10% aluminum and 25% on steel.



The Talking Fed: Fed Chair Jerome Powell has his first round of Semi-annual Monetary Policy hearings. Tuesday in front of the House Financial Services Committee and Thursday in front of the Senate Banking Committee. Here are a few of his statements:

- "some of the headwinds the U.S. economy faced in previous years have turned into tailwinds"

- "inflation remains below our 2 percent longer-run objective. In the FOMC's view, further gradual increases in the federal funds rate will best promote attainment of both of our objectives. As always, the path of monetary policy will depend on the economic outlook as informed by incoming data."

- "These interest rate and balance sheet actions reflect the Committee's view that gradually reducing monetary policy accommodation will sustain a strong labor market while fostering a return of inflation to 2 percent."



Overall he did very well in his responses to questions from committee members and kept to the same theme as his prepared remarks. He painted a picture of global growth, tax reform helping the economy, MBS purchases decreasing, concern over the lack of labor slack and was concerned that we might begin to see rising wages "soon".



Personal Income and Outlays: Personal Income increased by 0.4% in January which was a tic higher than expected. Personal Spending matched expectations with a monthly gain of 0.2%. The Fed's key measure of inflation, PCE YOY came in at 1.7% vs est of 1.6%. Core PCE YOY matched forecasts with a 1.5% reading.



Manufacturing: February ISM Manufacturing was the best since 2004 with a 60.8 reading which handily beat out estimates calling for a reading of 58.7. ISM Prices Paid jumped to a 6 1/2 year high (74.2 vs est of 70.5)



GDP: We got the first revision to the 4th QTR GDP and it was revised lower from 2.6% down to 2.5% which is exactly what the market was expecting.



What to Watch Out For This Week:




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