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For the week of Jan 08, 2018 --- Vol. 16, Issue 2

In This Issue

Last Week in Review: Despite the chill across much of the country, Retail Sales and consumer inflation warmed in December.

Forecast for the Week: December Housing Starts and Building Permits will shed light on inventory across the country.

Last Week in Review 

"Hey, big spender. Spend a little time with me." Shirley Bassey. Consumer spending ended 2017 on a high note as Americans purchased an array of goods and products.

Retail Sales rose 0.4 percent in December, in line with estimates, the Commerce Department reported. November's reading was also revised higher to 0.9 percent from 0.8 percent. Overall, Retail Sales rose 4.2 percent in 2017 compared to the 3.2 percent increase in 2016. Consumer spending makes up more than two-thirds of U.S. economic activity, so this reading is an important measure when it comes to gauging the strength of our economy.

Another important measure to watch is inflation, as inflation reduces the value of fixed investments like Mortgage Bonds and impacts the home loan rates tied to them. The closely-watched Core Consumer Price Index (CPI), which strips out volatile food and energy readings, saw its largest increase in 11 months, rising 0.3 percent compared to the 0.2 percent expected. Moreover, year-over-year Core CPI increased to 1.8 percent from the 1.7 percent registered in November.

Wholesale inflation did remain tame in December, as the Producer Price Index declined 0.1 percent in December from November. This was the first decrease in nearly one-and-a-half years. It will be important to see which way the trend continues with inflation in the weeks and months ahead, as this could impact the direction of home loan rates.

Despite the mixed news, home loan rates still remain attractive and near historic lows.

If you or someone you know has questions about home loan rates please contact me. I'm always happy to help.

Forecast for the Week

Manufacturing and housing news will be the key reports to watch.

  • Look for manufacturing data in Tuesday's Empire State Index and Thursday's Philadelphia Fed Index.
  • The NAHB Housing Market Index will be released on Wednesday, followed by Housing Starts and Building Permits on Thursday.
  • As usual, weekly Initial Jobless Claims will be delivered on Thursday.
  • The Consumer Sentiment Index releases on Friday.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.

When you see these Bond prices moving higher, it means home loan rates are improving. When Bond prices are moving lower, home loan rates are getting worse.

To go one step further, a red "candle" means that MBS worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes are on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Mortgage Bond prices dropped in recent days thanks in part to headlines from China. Home loan rates remain attractive.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Jan 12, 2018)

Japanese Candlestick Chart

Economic Calendar for the Week of January 15 - January 19

Date

ET

Economic Report

For

Estimate

Actual

Prior

Impact

Tue. January 16

08:30

Empire State Index

Jan

NA

18.0

Moderate

Wed. January 17

10:00

Housing Market Index

Jan

NA

74

Moderate

Thu. January 18

08:30

Housing Starts

Dec

NA

1297K

Moderate

Thu. January 18

08:30

Building Permits

Dec

NA

1298K

Moderate

Thu. January 18

08:30

Jobless Claims (Initial)

1/13

NA

NA

Moderate

Thu. January 18

08:30

Philadelphia Fed Index

Jan

NA

26.2

Moderate

Fri. January 19

10:00

Consumer Sentiment Index (UoM)

Jan

NA

95.9

Moderate

 


The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

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Pam Woodall
11 Racetrack Road NE Suite A
Fort Walton Beach

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