Market Recap: Mortgage Apps Slide, Consumer Price Index and Retail Sales Surge

Blog posted On November 16, 2018

Mortgage rates continued to hold steady last week and did not move significantly up or down.  Both new purchase and refinance mortgage application submissions declined.  The consumer price index had the biggest increase in nine months and retail sales exceeded expectations.  Federal Reserve Chair Jerome Powell gave a speech to the Dallas Fed on Wednesday and shared his optimistic economic outlook heading into 2019.

The Mortgage Bankers Association (MBA) weekly mortgage application survey declined for the week ending 11/9, down 3.2%.  New purchase application submissions decreased 2.3% and refinance application submissions declined 4.3%.  MBA economist, Joel Kan, attributed the declines to, “recent volatility in the financial markets and increasing rates.”  He also noted the drop in conventional mortgage applications, suggesting that first-time home buyer demand for government-sponsored loans, like FHA loans, is still strong.

The consumer price index increased 0.3% month-over-month in October, the largest rate of expansion in nine months.  Not counting food and energy, the index is still up 0.2% month-over-month.  Higher gas prices nudged the figure forward, as well as increases in the cost of rent, used vehicles, medical care, home furnishings, and insurance.  However, a more recent decline in oil prices might signal a slowdown in gas price increases.  The rate of inflation is down slightly from the six-month high of 2.9% to an annual rate of 2.5%.  Inflation has been spurred by the strong economy and will likely remain stable heading into the end of the year.

Retail sales surpassed forecasts in October, up 0.8% month-over-month.  Again, rising gas prices contributed to the gains, sales increased 3.5% at gas stations.  New vehicle sales are also up 1.1%.  Even struggling department stores saw a 1.3% increase.  Economists expect the upcoming holiday shopping season to be a strong one. 

Federal Reserve Chair Jerome Powell gave a speech on Wednesday and acknowledged the recent economic strength.  He stated, ““I’m very happy about the state of the economy right now. We’re in a good place, and I believe our economy can grow and grow faster.”  Despite some criticism from the White House about interest rate policy, the Federal Reserve is a nonpartisan entity that operates independently.  With one more Federal Open Market Committee (FOMC) meeting scheduled before the end of the year, economists are expecting a fourth rate hike.  If you are looking to make a real estate move before rates continue rising, get preapproved for mortgage financing before you make an offer.  Mortgage preapproval starts the financing transaction and ensures a faster closing.  

Sources: CNBC, Econoday, MarketWatch, MarketWatch, MarketWatch, MarketWatch, Mortgage News Daily