Morning Report: Mortgage purchase applications the highest in a decade

Posted on January 15, 2020 by Brent Nyitray

Vital Statistics:

 

Last Change
S&P futures 3282 -5.25
Oil (WTI) 58.13 0.04
10 year government bond yield 1.79%
30 year fixed rate mortgage 3.87%

 

Stocks are lower this morning as China and the US sign a Phase I deal on trade. Bonds and MBS are up.

 

Note we will have some Fed-speak later this morning.

 

Trump characterized his Phase I deal with China as a “big, beautiful monster” and encouraged farmers to buy bigger tractors. China is agreeing to purchase an additional $200 billion of US goods over the next two years, which represents about half of the US trade deficit. Energy, agricultural, and industrial exports are all set to increase, while the US will cancel new tariffs on cellphones and laptops. Some other tariffs will be reduced while others will remain in place.

 

Mortgage applications increased 30% last week as purchases rose 16% and refis rose 43%. This was the first week after the holidays, so there is probably are some weird adjustments playing out. Rates fell 4 basis points to 3.87%. Most notably, purchase activity increased 8% from a year ago and is at the highest level since October 2009.  A few homebuilders specifically mentioned on their earnings calls that they are seeing no season slowdown this year. At any rate, the Spring selling season is just around the corner. Note that while we are at a 10 year high on the purchase index, we are still well below bubble levels

 

MBA purchase index

 

Inflation at the wholesale level remains below the Fed’s target, with the headline producer price index up 0.1% MOM and 1.3% YOY. Ex-food and energy, it rose 0.1% and 1.1%. While the producer price index is not the preferred inflation index for the Fed, it confirms we are still not seeing much in the way of inflationary pressures.

 

 

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