Market Commentary as of August 6, 2018. Mortgage rates spent most of the week trending upward with the Fed’s meeting ending as expected. The Fed noted that economic growth and inflationary pressures are in line with what they have been predicting. While inflationary pressures have grown, they have remained around the Fed’s “speed limit.” The market is now fully expecting the next rate increase at the Fed’s September meeting. The first bits of economic data for July continue to show a solid economy, but potentially are a bit softer than June. While the unemployment rate was notched downward to 3.9%, July only saw 157,000 new jobs. However, June’s number was adjusted upward to 248,000. Consumer Confidence remained strong. However, both the ISM Indices stepped downward but remained in expansion territory.
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This week is a slower week for fresh economic data, so we might see mortgage rates remaining level or even moving slightly downward. Of course, if the Producer and Consumer Price Indices show an unexpected flare- up in inflationary pressure, then rates could return to trending upward.
Millennial Homeownership on the Rise
According to Zillow.com, the homeownership rate rose to 36.5% for those under the age of 35, which is the highest level since 2013 and up from 35.3% this time last year. However, many Millennials are still struggling to become homeowners, with the top reasons being:
Saving for a down payment
Lack of home inventory to choose from
Despite the barriers to homeownership, many Millennials are making the jump and purchasing homes. 78% want to own a home and 67% believe owning a home is necessary to live the American dream. With low down payment programs available, only requiring 3-5% down, young homebuyers are realizing that a 20% down payment is not required and that homeownership is easier to obtain than they realized.
Read more: https://www.zillow.com/research/millennials-struggling-homeowners-20829/
That One Non-Feature That’s Most Important
When home shopping many folks know what they want in a house. An updated kitchen, ample garage, a large backyard, and a desired number of bedrooms often dominate the list. As important as these items may be, a newly released survey shows that one item will outdo them all – the school district. The survey revealed that in 2017, 78% of buyers had given up on at least one of their desired home features to purchase a house that was in a school district that they wanted to be in.
This Week’s Top Economic Reports and Events
JOLTS (Job Openings)
While many positions continue to remain unfilled, the upward pressure on employment costs has remained muted, which minimized this reading.
After a surge upward in credit last month, a second month with credit roaring above $20B could help push mortgage rates slightly higher.
Producer Price Index (core)
After last month’s bump to 0.3%, an under-expectations reading of 0.1% would provide some lessening in overall upward pressure on rates.
Weekly Jobless Claims
The labor market continues to power along nicely, and as long as this number remains below 250K, rates will feel some upward pressure.
Consumer Price Index (core)
Even if we see a flare up to 0.3% in this indicator, we might not see too much additional upward pressure on rates, at least in the near term.