Weekly Mortgage Update – 2/18/2019

What if there was a Financial Dashboard for Your Home?

Do you know that 83% of personal wealth comes from your home at retirement age? Ever wondered, “How much is my home worth?”? If you’re hoping to sell your home, knowing your property’s value is essential for pricing it right to make buyers bite. Or, maybe you don’t want to sell your home right now but are just curious whether your real estate investment has risen in value (which would merit some much-deserved back-patting). In either case, having an accurate grasp of your home’s estimated market value can come in handy.

What if there was a financial dashboard for your home? One that could tell you how much equity you have, what you could afford if you sold to trade up, how much cash you could take out for home renovations or repairs, even how much you rent your property for on AirBNB or VRBO. What if that financial dashboard could tell you how fast your home could be paid off if you added money consistently to your monthly mortgage payment?

It’s called Homebot and this little robot will send you a monthly digest chock full of financial details that will get you thinking about your most important investment and how it can help you achieve your financial goals. Want to know more? Claim your financial dashboard.

Your Weekly Update Begins Here:

The major stock market indexes recorded gains for the eighth consecutive week and were mostly powered by investor optimism that a trade deal would be forged between the U.S. and China before the March 1 deadline set by the U.S. to raise tariffs on $200 billion of Chinese goods to 25% from the current 10%.  This past Tuesday, President Trump remarked that he is open to extending the deadline if the two countries are close to reaching an agreement by the beginning of March. However, Larry Kudlow, the National Economic Council Director, stated no decision to extend the deadline has yet been made.

In economic news, the Commerce Department reported on Thursday that retail sales fell 1.2% in December – the largest monthly drop since September 2009.  Consensus expectations were for a 0.2% gain in retail sales.  Also on Thursday, the Labor Department reported an unexpected rise in weekly jobless claims to 239,000 when only 225,000 claims were expected.  However, the latest round of inflation data was encouraging as it showed limited upward pressure on prices with the Consumer Price Index (CPI) coming in flat at 0.0% for January with the Core CPI at 0.2% to match expectations.  On a year-over-year basis the CPI has increased just 1.6%.  Meanwhile, the Producer Price Index (PPI) fell 0.1% in January with the Core PPI rising 0.3%.

In housing, mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications decreased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) decreased 3.7% for the week ended February 8, 2019.  The seasonally adjusted Purchase Index decreased 6% from a week prior while the Refinance Index decreased 0.1%. 

Overall, the refinance portion of mortgage activity increased to 43.2% from 41.6% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 7.5% of total applications from 7.8% the previous week.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.65% from 4.69% with points decreasing to 0.43 from 0.45 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond fell 28.1 basis points to close at $102.016 while the 10-year Treasury yield increased 3.0 basis points to end at 2.664%.  The Dow Jones Industrial Average gained 776.92 points to close at 25,883.25.  The NASDAQ Composite Index added 174.21 points to close at 7,472.41.  The S&P 500 Index advanced 67.72 points to close at 2,775.60.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 10.96%, the NASDAQ Composite Index has gained 12.62%, and the S&P 500 Index has advanced 10.72%.

This past week, the national average 30-year mortgage rate rose to 4.49% from 4.44%; the 15-year mortgage rate increased to 4.10% from 4.05%; the 5/1 ARM mortgage rate rose to 4.39% from 4.38% while the FHA 30-year rate increased to 4.18% from 4.13%.  Jumbo 30-year rates increased to 4.34% from 4.28%.

Economic Calendar – for the Week of February 18, 2019

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Date Time ET Event /Report /Statistic For Market Expects Prior
Feb 19 10:00 NAHB Housing Market Index Feb 59 58
Feb 20 07:00 MBA Mortgage Applications Index 02/16 NA -3.7%
Feb 20 14:00 FOMC Minutes Jan NA NA
Feb 21 08:30 Durable Goods Orders Dec 1.3% 0.8%
Feb 21 08:30 Durable Goods Orders excluding transportation Dec 0.2% -0.3%
Feb 21 08:30 Initial Jobless Claims 02/16 225,000 239,000
Feb 21 08:30 Continuing Jobless Claims 02/09 NA 1,773K
Feb 21 08:30 Philadelphia Fed Manufacturing Index Feb 12 17.0
Feb 21 10:00 Existing Home Sales Jan 5.05M 4.99M
Feb 21 10:00 Index of Leading Economic  Indicators Jan 0.1% -0.1%
Feb 21 11:00 EIA Crude Oil Inventories 02/16 NA +3.6M

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

The FNMA 30-year 4.0% coupon bond ($102.016, -28.1) traded within a narrower 34.3 basis point range between a weekly intraday high of $102.234 on Monday and a weekly intraday low of 101.891 on Wednesday before closing the week at $102.016 on Friday.

Mortgage bond prices trended lower to technical support during the week while stocks moved higher and are neither overbought nor oversold.  This suggests bond prices this coming week should trade between a triple layer of support highlighted by the 61.8% Fibonacci retracement level ($101.856) and a dual layer of resistance beginning at $102.469.  Trading between current support and resistance levels with a bias toward slightly higher prices should result in stable mortgage rates or rates moving slightly lower, especially if the stock market encounters stiff resistance and retreats like the chart of the S&P 500 Index shown below suggests.  The S&P 500 is likely going to have a tough time moving above the 2,800 mark where a triple top pattern is located.  

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