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Rising rates aren’t hurting demand in this week’s Markets in a Minute!

Rising rates aren’t hurting demand in this week’s Markets in a Minute!
May 18, 2018 Fred Kreger




For the Week Ending May 18, 2018

The Economy:

The economy is humming along when it comes to manufacturing and corporate profits. Most of the benchmark corporations like Alphabet (the parent company of Google) Apple, etc… all reported profits higher than expected.
Consumer spending remains strong and unemployment remains at an all-time low. The labor market continues to have far more jobs available than people willing, or qualified to fill them. Consumer spending continues to rise.


Housing Starts:

Despite the upbeat reports on the economy, the latest housing data may have put a wrinkle on the picture of the brightening economy. Housing starts declined unexpectedly by 3.7 percent in April to the lowest rate since December. The one factor of stability in the report is that single-family homes only dipped 0.1 percent. Apartment construction is where the decline is most notable with a drop of 12.6 percent. The silver-lining is that the starts of single-family homes are up 10.5 from this time last year.


The Housing Market Index:

Despite the decline in housing starts, confidence of home builders remains strong. The Housing Market Index moved higher in May to a level of 70 vs a downwardly revised index of 68 for April. Confidence in the current sales pace is where the index got its lift. The measure of buyer traffic visiting new construction sites remained the same for the third month in a row. First time buyers seem to be the largest missing component from buyer activity in new construction.


Mortgage Financing:

Mortgage financing declined once again for the week ending May 11th. Mortgage rates inched higher last week which resulted in a 2.0 percent decline in purchase loan activity. Refinances dropped 4.0 percent. Not be a pessimist, but we are likely to see a further decline in applications next week given that mortgage rates rose even more this week. The next MBA report is due out on Wednesday.


Inflation and Interest Rates:

Bond yields continue to rise which is causing mortgage rates to do the same. The benchmark 10YR bond rose over 3.0 percent this week which was considered a major line to cross for interest rate trends.


Next week’s potential market moving reports are:

• Tuesday May 22nd – Richmond Fed Manufacturing index
• Wednesday May 23rd – MBA Mortgage Applications, New Home Sales, FOMC Minutes
• Thursday May 24th – First Time Jobless Claims, FHFA House Price Index, Existing Home Sales

• Friday May 25th – Durable Goods Orders


As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can.


Please enjoy this quick update on what happened this week in the housing and financial markets.



Retail sales rose 0.3% in April, matching expectations. Consumer spending is also picking up, but higher gas prices are cutting into discretionary spending.
The increase in sales and spending is driving investors’ concerns about increasing inflation. These concerns have helped push mortgage rates higher.
Although jobless claims were slightly higher last week at 220,000, the number of people on unemployment rolls fell to the lowest level since 1973.


Home builder confidence rose in May, according to the NAHB. Low unemployment and strong demand have builders looking favorably on the market.
However, housing starts were down slightly in April from March. Lumber costs and difficulty hiring as many workers as needed are contributing factors.
Rising rates don’t seem to be affecting demand for housing. Although mortgage applications fell slightly last week, the decline was mostly for refi applications. 

I get plenty of exercise—jumping to conclusions, pushing my luck, and dodging deadlines.


Rate movements and volatility are based on published, aggregate national averages and measured from the previous to the most recent midweek daily reporting period. These
rate trends can differ from our own and are subject to change at any time.


Fred Kreger
American Family Funding
Certified Mortgage Consultant
NLMS # 1850 / 214640 BRE# 01215943 / 01371184
(661) 505-4311
28368 Constellation Road
Suite 398
Santa Clarita, CA



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