Doylestown/Bucks County Branch's Blog - Philadelphia Mortgage Advisors

Plymouth Meeting, PA 19462

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Little Reaction to Big Events

During a light week for economic reports, investors were focused on three big events. There was little reaction to the events, however. For the first time in a month, mortgage rates ended the week a little higher, rising from the best levels of the year.

Three events on Thursday had the potential to significantly affect mortgage rates. However, none of the three caused much reaction. In the U.S., the testimony of former FBI director James Comey did little to change expectations for the investigation of the Trump administration's dealings with Russia. In Europe, the European Central Bank (ECB) made no change in policy, and there was no additional guidance provided about the timing for a reduction in bond purchases. The third event did produce a surprising result, but it still had little impact on U.S. markets. In the election in the United Kingdom, Prime Minister Theresa May's party unexpectedly failed to gain a majority in Parliament. This will weaken her position in the upcoming negotiations for the British exit from the European Union.

On Tuesday, the Bureau of Labor Statistics released the JOLTS (job openings and labor turnover rates) report. Fed Chair Yellen has described this data as being very useful in evaluating current labor market conditions. It revealed that job openings in April rose to a record high level and that the quits rate held steady at an elevated level of 2.1%.

Both readings are viewed as signs of a strong labor market. A high quits rate is viewed as a signal of strength because workers are more likely to leave their jobs willingly when they are confident about their ability to get another one.

Looking ahead, Wednesday will be the big day next week with a Fed meeting, Retail Sales, and CPI. Investors widely expect a federal funds rate hike from the Fed, and they will be looking for guidance about future monetary policy. Consumer spending accounts for about 70% of economic output in the U.S., and the retail sales data is a key indicator. The Consumer Price Index (CPI), a widely followed monthly inflation report, looks at the price change for goods and services which are purchased by consumers. After that, Housing Starts will come out on Friday.

Mortgage News for the week ended June 2, 2017

Jun 2

2:01

Category | General

Mortgage Time

Mortgage Market News for the week ended June 02, 2017

Compliments of

Philadelphia Mortgage Advisors

Plymouth Meeting, PA 19462

Job Gains Fall Short

Weaker than expected labor market data and tame inflation readings were favorable for mortgage rates this week. Mortgage rates ended the week lower, at the best levels of the year.

Friday's report from the Bureau of Labor Statistics showed that the economy added just 138,000 jobs in May, well below the consensus of 185,000. In addition, downward revisions subtracted 66,000 jobs from the results for prior months. Through May, the economy has added an average of 162,000 jobs per month this year, down from an average pace of 187,000 jobs per month during all of 2016.

The unemployment rate, which is based on a separate survey, unexpectedly fell from 4.4% to 4.3%, which was the lowest level since May 2001. This was mixed news, however, as a good portion of the decline in the unemployment rate was due to people leaving the labor force. Since slower economic growth reduces the outlook for future inflation, the labor market data was good for mortgage rates.

The inflation readings released this week showed that current inflation levels remain low, which also was positive for mortgage rates. The core PCE price index, the inflation indicator favored by the Fed, revealed that core inflation was just 1.5% higher than a year ago, down from an annual rate of 1.8% two months ago. In addition, annual wage growth remained steady near the levels seen since late 2015.

Despite the tame inflation data, recent comments suggest that most Fed officials still expect inflation to gradually rise toward the Fed's target level of 2.0% over the medium term. For example, the Fed's Jerome Powell said on Thursday that weak inflation readings over the last couple of months can be explained by "transitory" factors and that he expects wage inflation to increase. However, some key officials are beginning to question whether this will take place. The Fed's Lael Brainard this week said that she might soften her outlook for future monetary policy if we continue to see weak inflation data.

Looking ahead, it will be a light week for economic data. The ISM national services index and Factory Orders will come out on Monday. The JOLTS report, which measures job openings and labor turnover rates, will be released on Tuesday. In addition, there will be a European Central Bank meeting on Thursday which could influence U.S. markets.

Mortgage News for the week ended May 26, 2017

May 26

3:20

Category | General

Mortgage Time

Mortgage Market News for the week ended May 26, 2017

Compliments of

Philadelphia Mortgage Advisors

Plymouth Meeting, PA 19462

Fed Minutes Reveal Plan

With few new political headlines or major surprises in the economic data, it was a quiet week. Wednesday's release of the Fed minutes was the biggest market mover, but those gains were offset by small losses on other days. Mortgage rates ended the week with little change.

Wednesday's release of the detailed minutes from the Fed meeting on May 3 said that Fed officials expect to raise the federal funds rate again "soon." To explain the need for the rate hike, they said that they viewed the slow economic growth during the first quarter as "transitory." Fed officials also expect inflation to gradually rise. This information was in line with the Fed statement on May 3 and recent comments from Fed officials.

The minutes did contain new information about the Fed's plan to reduce the $4.5 trillion of mortgage-backed securities (MBS) and Treasuries on its balance sheet. The plan calls for a gradual reduction by no longer reinvesting all of the principal payments received. The amount that will not be reinvested will be announced in advance and will increase over time on a fixed schedule. Although many questions remain unknown, investors were pleased to see a plan which is intended to minimize disruptions to the market, and mortgage rates improved slightly after the minutes were released.

On Friday, the first revision to first quarter Gross Domestic Product (GDP) showed an increase to 1.2% from the original estimate of 0.7%. GDP is the broadest measure of economic growth. First quarter GDP has been coming in at low levels in recent years, so these weak results were not surprising. Early estimates for second quarter GDP are for much stronger growth of around 3.0%.

Looking ahead, the important monthly Employment report will be released on Friday. As usual, this data on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, the Core PCE price index, the inflation indicator favored by the Fed, will be released on Tuesday. The ISM national manufacturing index will come out on Thursday. Mortgage markets will be closed on Monday in observance of Memorial Day.

Mortgage News for the week ended May 19, 2017

May 19

4:25

Category | General

Mortgage Time

Mortgage Market News for the week ended May 19, 2017

Compliments of

Philadelphia Mortgage Advisors