Steve O'Donnell - Fort Funding Corp.

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06/23/2023

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Consumer Spending Surges Again While the most significant economic data was stronger than expected this week, investors ...
07/17/2020

Consumer Spending Surges Again


While the most significant economic data was stronger than expected this week, investors remained more focused on the concerning spread of the coronavirus in many areas. Mortgage rates dropped slightly to fresh record low levels.

Due to the shutdown of much of the economy to combat the pandemic, consumer spending dropped sharply in March and April. A swift rebound has been taking place, however, as the latest results again far exceeded expectations. In June, retail sales jumped 7.5% from May, and strength was seen in a wide range of areas. Since consumer spending accounts for about 70% of all economic activity in the US, the retail sales data is a key indicator of current financial conditions.

The housing market also has been recovering more quickly than expected. In June, housing starts surged 17% from May, while building permits, a leading indicator of future construction, rose modestly from May. The NAHB housing index showed that home builder confidence shot up from 58 to 72, which was far above the consensus forecast. Several large home building companies have commented that they are hiring back workers and restoring disrupted supply chains for materials as quickly as possible to help meet the unexpectedly large demand for homes. Since a lack of inventory has been holding back home sales in many regions, this news was very encouraging.

Thursday's European Central Bank (ECB) meeting revealed no policy changes or significant surprises. ECB officials expect rates to remain at their "present or lower" levels until they see the outlook for inflation rise to their target level of 2.0%, and they project that European economic growth will decline by 8% to 10% this year.


Looking ahead, investors will continue watching for news about medical advances, Fed actions, government fiscal stimulus programs, and plans for reopening the economy. Beyond that, the housing data will be the focus during a light week for economic data. Existing Home Sales will be released on Wednesday and New Home Sales on Friday.

Services Sector Shines While it was a light week for economic data, the most significant report once again contained muc...
07/10/2020

Services Sector Shines


While it was a light week for economic data, the most significant report once again contained much stronger than expected results. Investors were more focused on the concerning spread of the coronavirus, however, and mortgage rates dropped slightly to record low levels.

Like the vast majority of recent economic reports, the most significant data released this week again showed clear signs of a faster than expected recovery after the partial shutdown of the economy due to the pandemic. The ISM national services index jumped from 45.4 in May to 57.1 in June, which was far above the consensus forecast. Readings above 50 indicate an expansion in the sector. Since services account for more than two-thirds of US economic activity, this report is closely watched by investors.

Although the economic data for the last couple of months has shown unexpectedly swift improvement, the question is whether this trend will continue. Investors have been growing more concerned that rising levels of coronavirus cases in many states may lead to delays in the reopening of the economy. Since slower economic activity reduces the outlook for future inflation, this has been positive for mortgage rates.

In fact, both Freddie Mac and the Mortgage Bankers Association reported that average rates for 30-year fixed-rate mortgages reached record low levels this week. Even more encouraging, the MBA revealed that applications to purchase a home were a solid 33% higher than a year ago at this time, and refinance applications were a stunning 111% higher.


Looking ahead, the primary focus will continue to be news about medical advances, plans for reopening the economy, government stimulus programs, and Fed monetary actions. Beyond that, the Consumer Price Index (CPI) will come out on Tuesday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. Retail Sales will be released on Thursday. Since consumer spending accounts for about 70% of all economic activity in the US, the retail sales data is a key indicator of the strength of the economy. Housing Starts will come out on Friday. In addition, the next European Central Bank meeting will take place on Thursday.

Exceptional Job Gains The big economic news this week was a second straight Employment report which far surpassed expect...
07/03/2020

Exceptional Job Gains


The big economic news this week was a second straight Employment report which far surpassed expectations. Nearly all of the recent data has indicated that the recovery from the partial shutdown of the economy due to the pandemic has been faster than anticipated. Despite the strong data, though, it was another quiet week for mortgage markets, and rates remained near record low levels. (Graph posted)

To get a sense of the unprecedented magnitude of the recent monthly changes in the labor market, typical monthly readings were for job gains of around 200,000 in 2019. In June, the economy added a massive 4.8 million jobs, which was well above the consensus forecast for an increase of 3.0 million and a record high. The unemployment rate dropped sharply from 13.3% to 11.1%, which also was much better than the consensus forecast.

The details of the report contained nothing to diminish the extremely positive results. The leisure and hospitality sector gained 2.1 million jobs in June, and retail added another 740,000. In general, the sectors which were hurt the most by the shutdown of much of the economy due to the pandemic showed the largest rebounds.

Another major economic report released this week also contained clear signs of a strong recovery. The ISM national manufacturing index unexpectedly jumped from 43.1 to 52.6, which was the highest level since April 2019. Readings above 50 indicate an expansion in the sector.

In the minutes from the June 10 Fed meeting released on Wednesday, the Fed again said that it will use all its available tools for as long as necessary to support the economy and that "highly accommodative" monetary policy likely will remain appropriate for quite a while. In particular, the Fed does not expect to raise the federal funds rate through at least 2022 and will continue to buy at least $80 billion in Treasuries and $40 billion in mortgage-backed securities (MBS) each month.

Looking ahead, investors will continue to watch for news about medical advances, government stimulus programs, Fed monetary actions, and plans for reopening the economy. Beyond that, it will be a very light week for economic data. Most notably, the ISM national services index will be released on Monday. Mortgage markets will be closed today in observance of July 4.

Source MBSQuoteline

Central Banks Actions Expand Once again, the coronavirus dominated financial market news this week and caused extraordin...
03/20/2020

Central Banks Actions Expand


Once again, the coronavirus dominated financial market news this week and caused extraordinary daily movements. For the second straight week, mortgage rates rose roughly one-half percent, meaning that they are now about one percent above the record low levels reached earlier this month.

Mortgage rates have increased over the last couple of weeks for two main reasons. First, many investors simply want to hold large amounts of cash during this period of uncertainty, so they are selling nearly every type of asset including mortgage-backed securities (MBS). The situation for MBS is amplified by the large amount of new issuance due to the recent surge in mortgage activity. The Fed has stepped in as a massive buyer, but supply still has been exceeding demand lately. In addition to bond purchases, global central banks have announced many other special operations to help address temporary strains in financial markets.

The second reason that investors may be reluctant to buy bonds is that government fiscal stimulus relief programs under consideration may add trillions of dollars to the budget deficit. This which would be funded by increased issuance of Treasury securities, and a larger supply of bonds would push yields higher.

The recently released economic data continued to show that the housing market had been performing very well prior to the epidemic. In February, sales of existing homes exceeded expectations with an increase of 7% from January to the highest level since February 2007. National median existing-home prices were up 8% from a year ago. The number of homes for sale was at just a 3.1-month supply nationally and was 10% lower than a year ago.


Looking ahead, the coronavirus will remain the main focus for investors. Daily announcements of special operations from the Fed and other global central banks are likely to continue, and investors will be watching for news about government fiscal stimulus relief programs. The major economic data will begin to reflect the negative impact of the epidemic to a greater degree

Check out the latest mortgage market update:
03/07/2020

Check out the latest mortgage market update:

Nearly across the board, recent economic data has shown that the US economy was performing very well prior to the outbreak of the coronavirus, and Friday's important labor market report was a prime example. Against a consensus forecast of 175,000, the economy gained a massive 273,000 jobs in Februar...

Check out the latest mortgage market update:
02/24/2020

Check out the latest mortgage market update:

On a positive note, there was some encouraging news this week suggesting that we may soon see an increase in the supply of homes. For perspective, the report released last month revealed a massive unexpected surge in housing starts in December to the best level in 13 years. 

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