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Network Funding
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Residential Mortgage Lender, NMLS# 2297, Equal Housing Opportunity Lender
Residential Mortgage Lender, NMLS# 2297, Equal Housing Opportunity Lender

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Saturdays are made for creating memories.

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Weekly Market Update: Fed's the Focus

The primary influence on mortgage rates this week was the Fed minutes, which were considered to be modestly negative. The major economic data released this week was generally weaker than expected, but its impact was minor, and mortgage rates ended a little higher.

Pricing is -.125 to -.250 worse in price since last Friday.

The minutes from the September 26 Fed meeting released on Wednesday contained no major surprises, but investors viewed them as slightly more hawkish (meaning in favor of tighter monetary policy) than expected. Fed officials indicated that a gradual path of rate increases remains the appropriate policy given their projected pace of economic growth. What surprised investors a bit was the degree to which Fed officials appeared willing to raise the federal funds rate above the "neutral" rate if needed. The neutral rate is the level which the Fed estimates is balanced between tight and loose monetary policy such that it neither boosts nor restrains economic growth in the long-term. Tighter monetary policy generally is negative for mortgage rates, and rates rose a little due to the minutes.

The most significant economic report this week was the retail sales data, and the results were much worse than expected by nearly any measure. In September, total retail sales rose just 0.1% from August, far below the consensus for an increase of 0.6%. Excluding the volatile auto component, retail sales posted a slight decline from August, which also was well short of the expected levels. Since the data often has wide swings from month to month, though, the reaction was relatively small.

The most recent housing sector data also fell short of expectations. In September, sales of previously owned homes fell 3% from August, and they were 4% lower than a year ago. A major factor holding back home sales has been a lack of inventory in many regions, but the news on this front also was not particularly encouraging.

Housing starts in September were down 5% from August. One piece of relatively good news, however, was that most of the decline came from the multi-family segment, and single-family starts declined just 1%.

Looking ahead, New Home Sales will be released on Monday. Pending Home Sales and Durable Orders will come out on Thursday. The first reading for third quarter gross domestic product (GDP), the broadest measure of economic growth, will be released on Friday. In addition, there will be a European Central Bank (ECB) meeting on Thursday which could influence U.S. mortgage rates.

Weekly Change:

Mortgage Rates rose 0.03
DOW rose 200
NASDAQ rose 50
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Home is what you make it.

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"As the housing market heated up this spring there were fourteen metro areas around the country where half or more of the homes that were listed for sale between March 5 and April 29 went under contract within two weeks.

By mid-September, every single market saw its share of homes selling that quickly fall to below 50 percent, with spring’s fastest markets, namely Seattle and San Jose, California, seeing the largest declines, falling by more than 35 percentage points since spring and over 20 percentage points from a year earlier...

There are a few exceptions. Although they have slowed since spring, a few metro areas are still seeing more listings go pending quicker now than they were a year ago...

The common factor among the metro areas that are not slowing down: They’re all smaller cities away from the coasts where homes are much more affordable. This points to a lack of affordability as potentially the biggest factor in why the previously red-hot markets have slowed so much this year."

Source: redfin.com
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Kinda like Yoda, but for mortgages... And we're more straightforward.

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The moment dreams become reality...

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Cozy like Saturday morning.

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Weekly Market Update: Stocks Fall

The big news this week was a major selloff in the stock market, with the Dow down more than 1,000 points. Normally that would be positive for mortgage rates, but this time the impact was minor. Weaker than expected inflation data was mildly positive, and mortgage rates ended slightly lower, but remain near their highest levels in many years.

Pricing is -.375 worse than last Friday. We saw some bounce back this week but do not count on it holding. There is still another expected rate hike coming in December.

It is common to see mortgage rates fall when the stock market declines, and vice versa, but this is not always the case. It depends on the reason for the movement. Most of the time, the cause is shifting expectations for economic growth based on newly released data. Stronger growth is good for stocks, but it raises the outlook for future inflation, so it is negative for mortgage rates, and the reverse is true as well.

This week, a wider range of factors influenced financial markets, most of which were negative for stocks. However, their expected impact on mortgage rates was mixed, and the net overall effect was small. For example, tariffs generally are a drag on economic growth, but they also raise prices, which leads to higher future inflation. In addition, the supply of bonds around the world is increasing. One reason is that global central banks are reducing their holdings of bonds. Also, the U.S. budget deficit is growing due to boosted spending and tax cuts, forcing the government to issue more bonds. To summarize, higher inflation and greater supply roughly offset slower growth.

The most significant economic report released this week was Thursday's inflation data. The Consumer Price Index (CPI), the most closely watched monthly inflation report, looks at the price change for finished goods and services. Thursday's data revealed that inflation was lower than expected in September.

Core CPI, which excludes the volatile food and energy components, was 2.2% higher than a year ago, the same annual rate of increase as the prior month. Since lower inflation is good for mortgage rates, this weaker than expected data caused rates to decline a bit.

Looking ahead, Retail Sales will be released on Monday. 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. The minutes from the September 26 Fed meeting will come out on Wednesday. These detailed minutes provide additional insight into the debate between Fed officials about future monetary policy and have the potential to move markets. In the housing sector, Housing Starts will be released on Wednesday and Existing Home Sales on Friday.


Weekly Change:

Mortgage Rates fell 0.02
DOW fell 1,100
NASDAQ fell 300
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Home is where the best stories begin.

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