Market update January 25th 2019 – Lender updates and trends for 2019

There has been a lot of chatter and headlines about rate activity, and many continue to speculate how interest rates will behave this year. It is important to us that we do our best to stay in front of the information and inform our clients of what is happening.

RATE MOVEMENT (from prior week): SLIGHTLY HIGHER. Due to the government shutdown, there was little major economic data released this week, and mortgage rates ended slightly higher.

Economic Data Released and Fed Sentiment – This week was more notable for the economic reports which did not get released rather than the ones that did. Tuesday’s Retail Sales report became the most significant data so far to be delayed by the government shutdown which began on December 22. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a key indicator of growth, and this month’s report was particularly important because it covered the holiday shopping season in December. The report on housing starts during the month of December also was postponed. It is generally not known in advance whether impacted data will be released as scheduled or how long it will be delayed.

The lack of several key pieces of economic data has left investors and Fed officials flying blind to a degree. Under the best of circumstances, it is extremely difficult to determine the pace of economic growth, and missing information compounds the problem. On top of this, the shutdown adds another layer of complexity which involves separating the temporary effects of reduced spending from out of work government employees and the underlying trends in economic activity.

Home Builder Sentiment – One monthly housing report released by an outside source contained positive news. After a couple of months of declines, the National Association of Home Builders (NAHB) housing index showed that home builder confidence increased in January from 56 to 58, above the consensus for a flat reading of 56. Levels above 50 are viewed as positive. According to the NAHB, declining mortgage rates in recent weeks boosted the results, and “low unemployment, solid job growth, and favorable demographic trends” provide a solid foundation for future activity.

Jay Bru 480-466-4917


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