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SteveBott
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AG
I get a few email updates from my lenders and this one is the best. I cannot copy the graphs from the email so I will try to manually add the data.

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GDP Jumps

The big news this week was Friday's GDP report, and it was favorable for mortgage rates. As a result, rates ended a little lower, ahead of several major economic releases next week.

While the headline figure for first quarter GDP, the broadest measure of economic growth, was much stronger than expected, mortgage rates declined after its release. This was due to the details of the report. First quarter GDP increased 3.2%, which was far above the consensus forecast of 2.3%, and was up from 2.2% growth during the fourth quarter. This was the best reading for Q1 since 2015, and it took place despite an estimated 0.3% loss in growth resulting from the government shutdown.

However, a closer look revealed a couple of factors which were much more positive for mortgage rates. First, the broad measure of inflation contained in the report was much lower than expected during the first quarter. In addition, the surprising strength was seen in inventories and exports, which are volatile from quarter to quarter and thus are viewed by investors as less informative. The "core" components such as consumer spending and business investment, which better reflect the underlying trend in the economy, showed slower growth than during the previous quarter, and the housing sector again was weak.

The other news from the housing sector released this week was mixed. In March, sales of previously owned (existing) homes were weaker than expected and 5% lower than a year ago. On the other hand, sales of new homes surprised to the upside and were at the highest level since November 2016. Since new home sales represent signed contracts, while existing home sales are based on actual closings, the new home sales report is a more forward-looking indicator of housing market activity.

Looking ahead, it will be a packed week. The next Fed meeting will take place on Wednesday. No change in rates is expected, and investors will be looking for guidance about future monetary policy. The monthly Employment report will be released on Friday. As usual, these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. In addition, the core PCE price index, the inflation indicator favored by the Fed, will be released on Monday. The ISM national manufacturing index will come out on Wednesday and the ISM national services index on Friday.

SteveBott
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AG
Here is another update. Last week the only surprise was job report which came in higher then expected. But the market absorbed that news with out much movement, in fact rates very slightly went down but not enough to change rates. This coming week only the CPI has that much importance. It measures inflation which is the number one threat to increase rates. The economy is doing well and that could lead to inflation.

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This week was packed with major economic news highlighted by Wednesday's Fed meeting and Friday's Employment report. The result was a lot of volatility, but the various influences were offsetting, and mortgage rates ended the week nearly unchanged.

As expected, the Fed made no change to the federal funds rate. The statement released after the meeting noted "solid" gains in recent economic activity and job gains, but it also explicitly acknowledged that inflation has been running below the Fed's target annual rate of 2.0%. As a result, the initial reaction was a drop in mortgage rates on increased expectations for a rate cut this year due to this lack of inflationary pressures. The declines were later reversed, however, when Fed Chair Powell suggested during his press conference that low inflation appears to be mostly due to "transitory" rather than "persistent" factors and said that officials "don't see a strong case for moving" the federal funds rate "in either direction."

Normally, stronger economic activity results in higher inflation due to increased demand for goods and services. However, the latest Employment report provided yet another clear example of the healthy economic growth with surprisingly tame inflation cited by the Fed. Against a consensus forecast of 190,000, the economy added 263,000 jobs in April. The unemployment rate unexpectedly declined from 3.8% to 3.6%, which was the lowest level since 1969.

Wage inflation fell a little short of expectations, though. Average hourly earnings were 3.2% higher than a year ago, which was the same annual rate of increase as last month. The net effect of the mixed labor market data on mortgage rates was small.

Looking ahead, the JOLTS report, which measures job openings and labor turnover rates, will be released on Tuesday. Fed officials value this data to help round out their view of the strength of the labor market. The Consumer Price Index (CPI) will come out on Wednesday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. In addition, Treasury auctions on Wednesday and Thursday could influence mortgage rates. Investors also will be watching for news about the trade negotiations between the U.S. and China.
mazag08
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AG
Thanks for posting these Bott.
SteveBott
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No problem Maz. I think the more you understand what affects my rates the better off we are. Here is another newsletter from a different lender. A slightly different angle. But the common denominator is the market's close watch on inflation right now.

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Last Week in Review: Is low inflation finally "transitory"?

Transitory = non-permanent or lasting a very short time

"Transitory" is the word Fed Chairman Jerome Powell used this week at the Fed Meeting to describe the current low inflation environment, meaning that inflation will likely pickup from this "temporary" low level.

The problem? Inflation has been relatively low for a decade and while the Fed called low inflation "transitory" many times in the past, it sure has been anything but transitory.
Nonetheless, both stocks and bonds didn't like the "T" word, because if inflation does move higher from here, rates will move higher, and ultimately stocks would decline because they don't like higher rates.
Just because inflation was low the last decade doesn't mean it has to remain low. So what could make inflation rise from the "transitory" low level?

Wages are rising at the fastest pace in a decade, and unemployment is at 50-year lows. There are one million more job openings than there are available workers to fill them. And companies are firing people at the slowest rate in years. This is the strongest economy we have seen in quite a while for many it's the strongest in their lifetime. All of this, should it continue, could stoke higher inflation.

Bottom line home loan rates held steady at one-year lows from week to week, despite ticking higher in response to the Fed Meeting. Now is a great time to purchase a home and take advantage of the strong economic backdrop and low rates
insulator_king
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AG
So what is going on with rates currently?
Just had our offer on a home accepted today in ABQ 87110.
I'm getting a VA loan.
Martin Q. Blank
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Largely the same. NFCU VA loan @ 3.125% with 1 point and 1% origination fee. Probably 3.625% with no points or origination fee.
SteveBott
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AG
First unless you are dead set on keeping a home for 8-10 years don't pay points. On a 30 year loan break even is around 5.5 years and even then it's not that great of a return.

I would be at 3.375-3.5 no points but do not do NM. VA loans are very good deal for vets. They have a few quirks but not a big deal to close. VA does really try to help them buy homes
SteveBott
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AG
Also rates are at their lowest in around 18 months
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