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For the week of Sep 18, 2017 --- Vol. 15, Issue 38

Last Week in Review: August Retail Sales dropped while consumer inflation popped.

Forecast for the Week: The Fed said ...? Find out Wednesday.

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Last Week in Review 

"Never worry about the price of gas." Luke Bryan. Retail Sales dropped in August while higher fuel prices revved up consumer inflation.

Families may have pulled back on back-to-school shopping, but Hurricane Harvey played a role too. The Commerce Department reported that consumers pulled back on spending in August due in part to a drop in car sales attributed to Hurricane Harvey in southern Texas. Retail Sales fell 0.2 percent versus the 0.1 percent increase expected, while July's sales figures were revised lower to 0.3 percent from 0.6 percent. Retailers have been suffering a bit with in-store traffic, but sales at online retailers declined 1.1 percent in August too, the biggest drop since April 2014.

On the inflation front, the Consumer Price Index (CPI) had its largest month-over-month increase in seven months, rising 0.4 percent from July to August. But one month does not make a trend; the increase was due in part to a spike in gasoline prices that posted the biggest jump since January. Core CPI, which excludes volatile energy and food prices, was in line with expectations at 0.2 percent. The Producer Price Index (PPI), which measures wholesale inflation, came in just below expectations in August. But on an annual basis, PPI rose 2.4 percent after increasing 1.9 percent in July.

Any signs of ongoing inflationary pressure are bad for fixed investments, like Mortgage Bonds, so inflation is an important metric to watch. When Mortgage Bond prices worsen, the home loan rates tied to them can worsen as well.

At this time, home loan rates remain near historic lows.

If you or someone you know has questions about home financing or home loan rates, please contact me. I'd be happy to help.

Forecast for the Week

Fed Chair Janet Yellen and the Fed's monetary policy statement will capture attention midweek.

  • Housing Starts and Building Permits will be released on Tuesday, followed by Existing Home Sales on Wednesday.
  • The Fed's monetary policy statement also will be released Wednesday, and it could be a market mover.
  • Thursday brings weekly Initial Jobless Claims and regional manufacturing data in the Philadelphia Fed Index.

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, Bonds have been trading in a sideways pattern after recent declines. Home loan rates are still near historic lows.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Sep 15, 2017)

Japanese Candlestick Chart

Economic Calendar for the Week of September 18 - September 22

Date

ET

Economic Report

For

Estimate

Actual

Prior

Impact

Tue. September 19

08:30

Housing Starts

Aug

NA

1155K

Moderate

Tue. September 19

08:30

Building Permits

Aug

NA

1223K

Moderate

Wed. September 20

10:00

Existing Home Sales

Aug

NA

5.44M

Moderate

Wed. September 20

02:00

FOMC Meeting

Sep

NA

1.125%

HIGH

Thu. September 21

08:30

Jobless Claims (Initial)

9/16

NA

298K

Moderate

Thu. September 21

08:30

Philadelphia Fed Index

Sep

NA

18.9

HIGH



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
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Fort Walton Beach

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