Todays Rates: Purchase - 30 Year Fixed: 3.125%   APR: 3.221%     15 Year Fixed: 2.375%   APR: 2.494%      30 Year Fixed High Balance: 3.375%   APR: 3.424%      15 Year Fixed High Balance: 2.625%   APR: 2.709%          Refinance - 30 Year Fixed : 3.250%   APR: 3.317%     15 Year Fixed: 2.500%   APR: 2.584%      30 Year Fixed High Balance: 3.500%   APR: 3.529%      15 Year Fixed High Balance: 2.750%   APR: 2.871%

The Casil Report – A Financial Commentary on the Mortgage Markets, March 1, 2017

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Good afternoon,
Today, Wednesday (03/01/17): The 10 Year Treasury Yield rose to 2.46%, meaning generally higher mortgage rates than yesterday, due to positive market reaction to President Trump’s joint address to Congress along with an increase in market expectations for a Fed rate increase this month.
– January 2017 U.S Personal Income increased by 0.4% (previous month increased by 0.3%), meeting market expectations (0.4% increase).  In addition, January 2017 U.S. Personal Spending increased by 0.2% (previous month increased by 0.5%), coming in below market expectations (0.3% increase). This drop in consumer spending was driven mostly by a decrease in spending as people put a portion of the added income towards savings.  However, a continued rise in wages could eventually be a positive indicator for future U.S. consumption and economic growth, if personal spending picks back up.
– The January 2017 PCE (Personal Income and Consumption) Index increased by 0.3% from last month (the previous month increased by 0.1%), coming in greater than market expectations (0.2% increase).  This rise in PCE inflation shows that consumer prices are starting to rise again, which could make the Fed possibly push ahead any future rate hikes (to maybe even this month), since this is their preferred measure on inflation readings.
– The February 2017 U.S. ISM (Institute for Supply Management) Manufacturing Index increased to a 57.7 Index Level (56.0 Index Level during the previous month), coming in better than market expectations (56.1 Index Level). This report shows that U.S. factories manufacturing output is still expanding, due to strength in new manufacturing export orders.
– January 2017 U.S. Construction Spending decreased by 1.0% (0.1% increase during the previous month), coming in lower than market expectations (0.6% increase).  This month’s drop in construction activity was mostly to a slowdown in public projects that more than offset gains in private residential projects.
Here are the U.S. Market Data / Releases for next week that could drive treasury yields / mortgage rates up or down:
Thursday (03/02/17): Weekly Jobless Claims
Friday (03/03/17): ISM Services (Non-Manufacturing) Index
Monday (03/06/17): Factory Orders
Tuesday (03/07/17): U.S. Trade Balance / Deficit, Consumer Credit Debt Report
Wednesday (03/08/17): ADP Employment Report, Productivity Report, Wholesale Inventories
Thursday (03/09/17): Weekly Jobless Claims
Friday (03/10/17): U.S. Employment (Jobs) Report
Here is a recap of the major economic reports from the prior week (a rising 10 Year Treasury Yield means generally higher mortgage rates):
Tuesday (02/28/17): The 10 Year Treasury Yield rose to 2.38%.  
– The 2nd Estimate of 4th Quarter 2016 U.S. GDP (Gross Domestic Product – all of the nation’s total economic output) rose by 1.9% (3rd Quarter 2016 U.S. GDP increased by an annualized 3.5% rate), coming in lower than market expectations of a 2.1% annualized increase.  The major reasons for this drop in U.S. 4th Quarter 2017 GDP was due to slower growth in non-residential fixed investment spending that offset stronger consumption expenditures.   Overall, this report shows that 4th Quarter U.S. GDP reading has still been steady, which shouldn’t delay any upcoming Fed interest rate hikes.
– The January 2017 U.S. S&P / Corelogic Case-Shiller Home Price Index showed that house prices (for 20 major cities in the U.S.) increased by 5.6% from January 2016 (5.6% increase during the previous month), coming in greater than market expectations (5.4% increase). This month’s reading in overall housing prices shows that U.S. housing price appreciation is still stable in the largest U.S. cities, which is a neutral indicator for the overall U.S. housing market recovery. 
– The February 2017 U.S. Consumer Confidence Report increased to an Index Level of 114.8 (111.6 Index Level during the previous month), coming in much greater than market expectations (Index Level 111.5).  This month’s rise in consumer confidence was due to a rise in both the current sentiment and expectations sentiment portions of this report.  Overall, this rise in U.S. consumer confidence could be a positive indicator sign for future consumer economic growth, since approximately 70% of U.S. economic activity is derived from consumer spending.
– The February 2017 Chicago PMI Manufacturing Index increased to an Index Level of 57.4 (Index Level of 50.3 during the previous month), coming in greater than market expectations (Index Level of 53.0).  This report shows that overall factory production in the Chicago region of the county is starting to pick up, due to a rise in new manufacturing orders and manufacturing production.
Monday (02/27/17): The 10 Year Treasury Yield rose to 2.37%.  
– January 2017 U.S. Durable Orders (demand for goods with lifespan over three years, such as electronic products and machinery) increased by 1.8% (0.8% decrease during the previous month), meeting market expectations (1.8% increase). The major reason for this month’s rise in durable orders was due to a big rise in demand for new defense and non-defense aircraft orders.  However, the non-transportation, core-capital portion of durable goods actually decreased, by 0.4%, which shows a new possible slowdown in business investment spending, which could end up being a negative sign for future U.S. economic growth.
Friday (02/24/17): The 10 Year Treasury Yield dropped to 2.32%.  
– January 2017 U.S. New Home Sales rose to a seasonally adjusted 555K (535K during the previous month); however, it came in lower than market expectations (566K).  This lower than expected increase in new home sale activity was mostly due to the recent rise in mortgage rates, which could be a negative indicator going forward for the U.S. Housing Market.
– The final reading of the February 2017 U.S. Michigan Consumer Confidence Sentiment dropped to an Index Level of 96.3 (98.5 Index Level during the previous month), coming in greater than market expectations (Index Level of 95.8).  Even with this drop, this month’s continued strength in consumer confidence, due to a big increase in the current conditions portion of this report, could be a positive signal for future U.S consumer spending and economic growth.
Thursday (02/23/17): The 10 Year Treasury Yield dropped to 2.39%.  
– U.S. Weekly Jobless Claims rose to a 244K reading this week (238K during the previous week), coming in slightly greater than market expectations (242K).  In addition, the less volatile, four week moving address for jobless claims dropped to an almost fifty year low to 241K level. This continued low level of jobless claims shows a continued decline in Americans filing for unemployment insurance, which, once again, is a very positive indicator for continuing recovery of the U.S. Labor Market. 
– The December 2016 U.S. FHFA (Federal Housing Finance Agency) Housing Price Index based on Fannie Mae / Freddie Mac single-family purchase mortgages) rose by 0.4% (0.7% increase during the previous month), meeting market expectations (increase of 0.4%).  This continued strength in overall single family housing prices could again be a positive indicator for the U.S. housing market.

Stephen Casil Vice President Secondary Marketing Manager scasil@elyons.com

 

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