November 2019 mortgage rates – are things changing for mortgage rates in November?
Looking back; there were a lot of headwinds for mortgage rates in October. US – China agreed on a “phase 1” trade deal, it looked like an orderly Brexit was going to happen and some of the economic data (early on) was showing signs of strength. Mortgage rates moved higher and there were some concerns we might see a spike in rates similar to October/November 2018.
However, mortgage rates only increased about a .25% (generally speaking) which is much smaller than the 0.75% increase in October/November 2018. And this was before we learned that the trade deal was only based on a general agreements (nothing written), Brexit was going to be delayed….again and the economic data was starting to reverse. And there are signs that the early-mid October bump up in mortgage rates is leveling out as the market starts to improve heading into November.
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Heading into the second week of November 2019 mortgage rates remain near 2019 lows however there remain some risks for mortgage rates to move higher in the coming weeks. The two main issues facing mortgage rates are:
- US – China trade deal
Another “unknown” factor is how the economic data is going to play out and will it negatively impact mortgage rates. A stronger than expected CPI report may trigger some additional selling in the bond market (specifically the Mortgage Backed Securities market) which could easily push mortgage rates higher. Another “unknown” factor is investor fears of significant selling as we move closer to 2020.
The good news is that mortgage rates are still significantly below where they were this time last year. Back in November 2018 some lenders were above 5.00% on 30 year fixed rate loans; more than 1% above where the market is today.
What an interesting three weeks it’s been for mortgage rates. At one point it seemed like mortgage rates were going to continue to move higher; potentially moving well above 4.00% on a 30y fixed rate loan however that has yet to materialize. Mortgage rates have somewhat improved in the last 3-5 days as fears of a potential “Phase One” trade deal with China seem to be less prevalent among bond traders. As a reminder; consumer mortgage rates originate in the bond market – specifically the Mortgage Backed Securities market.
This week we’ll see several economic reports hit the wires. The two most important reports this week (to the bond market and consumer mortgage rates) are the Philly Fed Index on Thursday and the Markit PMI report on Friday. If you are looking at locking in a rate you may want to do so before these reports come out; especially if the quoted rate/terms are for a purchase that is closing in the next 14-21 days.
Thanksgiving week for mortgage rates is usually a stable period in which mortgage rates barely move. That being said; it’s not a guarantee and there have been times the market has moved. It’s unlikely the economic data will significantly move the market but if the market was to move significantly it would probably come from one or a combination of the following reasons:
- China trade deal
- An unknown event
The China trade deal is the biggest risk for mortgage rates heading into the Thanksgiving holiday. A rock-solid announcement that a “Phase One” deal has been reached will push mortgage rates higher. After the initial reaction to the deal markets will want to know the details. If the “Phase One” deal is significant and the expectation is that it positively impacts the economy than mortgage rates will probably continue to move higher as the bond market would almost certainly sell off.
However, if the details showed the deal was limited in nature and most likely would have little to no impact on the economy you might start to see mortgage rates return to previous levels. That’s a big if and it could take months.
Wednesday is the big day for economic reports, and we’ll get a good glimpse as to how the economy is performing heading into the 2019 holiday season.
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Important Economic November 2019:
Here we cover the daily economic events that might impact mortgage rates. After the report comes out, we’ll update the post with that information and comment on if there is a potential impact on on the Mortgage Backed Securities market and consumer mortgage rates.
On November 1st we have the all-important Jobs report and the ISM Manufacturing report for October. Then on Monday we have ISM-NewYork Index and Factory Orders. On Tuesday it’s the ISM Non-Manufacturing report. Wednesday, we have the weekly Mortgage Market Index, and an important 10y Note Auction. On Thursday it’s the weekly unemployment claims and Consumer Credit for September. On Friday it’s the 1y and 5y Inflation Outlook, Wholesale Sales and Wholesale Inventories.
Friday – November 1st:
- Employment Report: The October Employment report was stronger than expected. The market anticipated 89,000 jobs created (non-farm) and the report showed 128,000 jobs created despite the GM auto workers strike which lowered the number of jobs created by approximately 50,000 (rough estimate).The unemployment rate was steady at 3.6% and Average earnings increase 0.2% (below expectations) after last month’s dismal report of no growth in wages. Employment continues to be a bright spot in the economy however we are creating far fewer jobs then we were in 2018.
- ISM Manufacturing: The market is expecting a reading of 48,9 after last month’s reading of 47.8. A reading below 50 shows contraction. The reading came in at 48.3. The prices paid component dropped to 45.5 vs 49.7 in September and the employment index increased from 46.3 to 47.7.
Tuesday – November 6th:
- ISM Non-Manufacturing PMI:The market was anticipating a reading of 53.5 after last month’s reading of 52.6. The actual reading came in higher than expected; 54.7. Post report the bond market sold off significantly.
Wednesday – November 7th:
- Mortgage Market Index: The Mortgage Market Index came in at 518.7; slightly down from last week’s reading of 519.2. The Refinance component reading came in at 2102.7 after last week’s reading of 2066.0. The Purchase component came in at 241.0 which is below last week’s reading of 247.2.
Thursday – November 8th:
- Jobless Claims: The report showed fewer claims this week compared to last – 211,000 vs 215,000.
- Consumer Credit for September: Last month’s reading came in at 17.90 and current market expectations are for a 15.00 reading.
Friday – November 8th:
- Wholesale Inventories and Wholesale Sales: Market expectations for Wholesale Inventories is -0.3% and for Wholesale Sales it’s 0.1%. Last month the Wholesale Inventories reported at -0.3% and Wholesale Sales reported at 0.0%.
- 5y and 1y Inflation Outlook: Last month’s reading for the 5y Inflation Outlook was 2.3% and the 1y Inflation Outlook was 2.3%.
Wednesday – November 13th:
- Mortgage Market Index: Last week the index came in at 518.7, the purchase component came in at 241.0 and the refinance component came in at 2102.7. This week’s reading showed an increase from 518.7 to 568.4. The purchase component came in at 253.4 and the refinance component came in at 2374.6. The average 30-year fixed rate was 4.03%.
- Core CPI: Last month’s reading came in at 2.4% and the market is expecting this month’s reading to show another gain of 2.4%. If the report shows a gain greater than what the market is expecting than it could mean trouble for mortgage rates heading into the last few days of the week.
Update – 11.13.19: The report showed annual CPI a bit lower than market expectations, it came in at 2.3%, however the month-month reading came in a bit higher than market expectations at a 0.4% increase.
Thursday November 14th:
- Jobless Claims: After last week’s reading of 211,000 claims this week’s reading came in at 225,000 claims.
- Core Producer Prices: The market was expecting a reading of 1.5% (year over year) and a reading of 0.2% (monthly). This morning’s report showed a 1.6% increase (year over year) and 0.3% (monthly).
Monday – November 18th:
- NAHB Housing Market Index: The market was expecting a reading of 71 after last month’s reading of 71. The actual reading came in at 70 and there was no market reaction to the report.
Tuesday – November 19th:
- Building Permits: Last month the report showed a decline of -2.4% however today’s reading showed a turn around and came in at 5.00%.
- Housing Starts: Market expectations were for a reading of 1,320,000 units (annual rate) and the reading came in at 1,314,000 units. Last month’s reading was 1,256,000 units.
Wednesday – November 20th:
- Mortgage Market Index: The report decreased from 568.4 to 556.0. The Refinance component dropped significantly from 2374.6 to 2190.6 and the Purchase component increased from 253.4 to 270.4.
Thursday – November 21st:
- Philly Fed Business Index: In October the report came in at 5.6 and expectations for the November reading was 7.0. The actual reading came in at 10.4. This was a stronger report with the headline number at 104 however an underlying component came in significantly weaker than last month. New Orders fell from a reading of 26.2 in October to 8.4 in November.
- Jobless Claims: Jobless claims increased again this week; from 225,000 to 227,000.
Friday – November 22nd:
- PMI Composite – Markit: Last month the reading came in at 50.9 and the reading this morning came in at 51.9.
- Consumer Sentiment: The market was expecting a reading of 95.7 and the reading came in stronger than expected (96.8).
- Consumer Inflation Expectations: The 1-year report came in at 2.5% and the 5 yr report came in at 2.5%.
Tuesday – November 26th
- Consumer Confidence: Last month’s reading came in at 125.9 and the market was expecting this month’s reading to come in at 127.0 however the reading came in at 125.5.
- New Home Sales: The market was expecting a reading of 709,000 units (annual rate) and the reading came in at 733,000 units (annual rate). Last month’s reading came in at 701,000 unites (annual rate).
- Mortgage Market Index: The overall index came in at 564.1; last week’s reading was 556.0. The Purchase component came in at 267.1; last week it was 270.4. The Refinance component came in at 2282.2 after last week’s reading of 2190.6.
- Q3 GDP Prelim: The reading came in higher than expectations; 2.1% vs 1.9%. Not a huge beat but nonetheless a beat. There was little to no market reaction to the GDP report.
- Durable Goods Report: Last month the report showed a decline of -1.2% and this month’s reports completely reversed course and showed a 0.6% gain. The market was expecting a -0.8% decline.
- Jobless Claims: This week’s report came in at 213,000 claims after last week’s reading of 221,000 claims.
- Chicago PMI: The reading came in higher than last month (46.3 vs 43.2) however it was still below expectations (47.0).
- Core PCE: Expectations were for a reading of 1.7% however the actual reading came in at 1.6%.
- Personal Income: Last month’s report showed a 0.3% growth however the most recent report showed zero growth (0.00%).
Mortgage Backed Securities & Treasury Snapshot:
Mortgage Backed Security FNMA 3.0 Monday at 101.59, and the FNMA 3.5 coupon started the day at 102.64. The 10y Treasury yield started the day at the 1.68% level. On Friday Mortgage Backed Security FNMA 3.0 started the day at 100.91 and the FNMA 3.5 coupon started the day at 102.42. The 10y Treasury yield started the day at the 1.94% level.
Mortgage Backed Security FNMA 3.0 started the day at 100.84 and the FNMA 3.5 coupon started the day at 102.39. The 10y Treasury yield started the day at the 1.93% level. On Friday Mortgage Backed Security FNMA 3.0 started the day at 101.19 and the FNMA 3.5 coupon started the day at 102.52. The 10y Treasury yield started the day at the 1.84% level
Mortgage Backed Security FNMA 3.0 started the day at 101.28 and the FNMA 3.5 coupon started the day at 102.59. The 10y Treasury yield started the day at the 1.85% level. At the end of the week Mortgage Backed Security FNMA 3.0 started the day at 101.45 and the FNMA 3.5 coupon started the day at 102.69. The 10y Treasury yield started the day at the 1.75% level.
To start the week Mortgage Backed Security FNMA 3.0 started the day at 101.31 and the FNMA 3.5 coupon started the day at 102.61. The 10y Treasury yield started the day at the 1.77% level. To finish things off Mortgage Backed Security FNMA 3.0 started the day at 101.48 and the FNMA 3.5 coupon started the day at 102.69. The 10y Treasury yield started the day at the 1.74% level.