Consumer Inflation Below Expectations

Last Week in Review:
Consumer and wholesale inflation were tame in April, while geopolitical events also made headlines.

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The Consumer Price Index (CPI) rose 0.2 percent in April, just below expectations, the Bureau of Labor Statistics reported. This was down from the 2018 high of 0.5 percent recorded in January. The numbers revealed an uptick in energy and food prices which was offset by a decline in demand for used cars and trucks. The Core CPI, which strips out volatile food and energy prices, rose 0.1 percent, also below expectations.

Inflation at the wholesale level was also tame in April as the Producer Price Index (PPI) rose 0.1 percent. Core PPI rose 0.2 percent, as expected.

Tame inflation is typically good for Mortgage Bonds, as well as the home loan rates tied to them, because inflation reduces the value of fixed investments like Bonds. And Mortgage Bonds were boosted by the tame inflation data in the latest week.

It’s also important to remember that many factors impact both Stocks and Bonds. Strong economic news can benefit Stocks (sometimes at the expense of Bonds), while geopolitical turmoil can have the opposite effect. Stocks received a boost in the latest week when energy Stocks lifted the entire market, as oil prices spiked after President Trump announced his decision to withdraw from the Iran nuclear deal. The release of prisoners from North Korea and the scheduling of a meeting between President Trump and Kim Jong-un also lifted some uncertainty and helped the recent rise in Stock prices.

Investors will be watching headlines from the Middle East and Korea closely in the coming weeks as they decide where to put their investing dollars.

For now, though, home loan rates have trended higher this year, they remain attractive and near historically low levels.

If you or someone you know has any questions about home loans, please contact us. We’d be happy to help.

Jobs, Inflation and the Fed

Last Week in Review:
The April Jobs Report disappointed while inflation ticked up in March. Plus, the Fed met.

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The Jobs Report for April was a bit of a disappointment, as job creation rose from March but came in below expectations. There were 164,000 new jobs added in April, below the 190,000 expected, the Bureau of Labor Statistics reported. This was up, however, from the 135,000 recorded in March (which was revised higher from 103,000). The Unemployment Rate fell to an 18-year low of 3.9 percent. Wage growth fell to 2.6 percent on an annual basis, down from the 2.9 percent recorded in January. Month-over-month hourly earnings rose 0.1 percent versus the 0.2 percent expected.

The Fed’s favorite inflation measure, annual Core Personal Consumption Expenditures (PCE), showed that inflation rose 1.9 percent in the 12 months through March. This was up from the 1.6 percent annual increase recorded in February. The Core reading excludes volatile food and energy prices. March’s number was the biggest increase since February 2017, and it brings annual Core PCE closer to the Fed’s target of 2.0 percent.

Inflation reduces the value of fixed investments, like Mortgage Bonds, meaning inflation can hurt Mortgage Bonds and the home loan rates tied to them. It will be important to see if signs of inflation remain in the air.

The Fed met and, as expected, left its benchmark Fed Funds Rate unchanged at 1.5 to 1.75 percent. This is the rate at which banks lend money to each other overnight, and it is not directly tied to home loan rates. The Fed noted, as mentioned above, that inflation has moved closer to its 2.0 percent target, employment growth has been strong, and that the economy is growing at a moderate rate.

Over in the housing sector, high demand plus a limited supply of homes for sale on the market pushed home prices higher in March. Research firm CoreLogic reported that home prices, including distressed sales, rose 7 percent from March 2017 to March 2018, while there was a 1.4 percent gain from February to March. Looking ahead, CoreLogic forecasts a 5.2 percent rise in home prices from March 2018 to March 2019.

Despite the warm inflation reading, the disappointing labor market news in part helped Mortgage Bonds bounce off five-year lows. Home loan rates improved this week and remain historically attractive.

If you or someone you know has any questions about rates or home loans, please get in touch. We’d be happy to help.

Introducing a new Near-Prime Product

Overview

Effective May 3, 2018 Carrington Mortgage Services, LLC (CMS) will introduce a new Near-Prime Product to broaden our commitment to serving the underserved borrower!

The Near-Prime product is well suited for borrowers who may have credit challenges but need pricing that is closer to prime rates. The program features Fixed and Adjustable Rate loan programs with FICO scores down to 620.

General Highlights

  • Recent Mortgage / Rental Lates up to 1 x 30 x 12
  • Foreclosure, Short Sale, Deed in Lieu and Bankruptcy with 36-month seasoning
  • Max Debt Ratios from 50% up to 55%
  • First Time Home Buyers allowed
  • Non-warrantable Condo Permitted (max 80% LTV)
  • Fully Documented Loans, 24 Months Bank Statements, 12 Month Bank Statements, and 1-Year Alternative Documentation
  • No Mortgage Insurance required
  • No Prepayment Penalties

Near-Prime Program Terms

  • Purchase, Rate/Term and Cash-Out Transactions (up to $500,000 cash-out)
  • 30 Year Fixed, 5/1 and 7/1 LIBOR ARMs
  • Maximum Loan Amount to $1.5MM
  • Cash-Out available to $500K
  • Primary Residence and Second Homes
  • Max LTV/CLTV: Up to 95%*
  • Min FICO: 620
  • Not Available in AK; MA; WV

*Refer to the CMS Near-Prime Matrix for LTV requirements.

Housing Starts, Retail Sales Rise

Last Week in Review:
Retail Sales and Housing Starts blossom in March.

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Retail Sales rose 0.6 percent in March, above the 0.4 percent expected and up from the decline of 0.1 percent in February, the Commerce Department reported. Leading the boost was spending on automobiles and health and personal care items. Consumer spending makes up two-thirds of U.S. economic activity and is crucial to a healthy economy.

Housing Starts also bloomed in March, rising 1.9 percent from February to an annual rate of 1.319 million units, per the Commerce Department. February’s figure was also revised higher to 1.295 million units. Housing Starts got a big boost from a 16.1 percent monthly increase from the multi-dwelling sector. However, things were less rosy for those interested in single family homes, as single-family starts fell 3.7 percent from February. From March 2017 to March 2018, Housing Starts were up 10.9 percent.

Building Permits, a sign of future construction, rose 2.5 percent from February to March to an annual rate of 1.354 million. Limited inventory remains a challenge in many areas of the country, so it will be important to see if Housing Starts continue to blossom and if single family starts shift gears higher.

Mortgage Bonds struggled in the latest week, approaching five-year lows, due to strong economic news and positive data. Home loan rates have edged higher but still remain historically attractive.

If you or someone you know has any questions about rates or home loans, please get in touch. We’d be happy to help.

Newsflash! Carrington on CNBC

CNBC highlights Carrington’s new Non-Prime programs with Rick Sharga

See what Rick Sharga, Executive Vice President of Carrington Mortgage Holdings has to say about Carrington’s new Non-Prime loan programs, in this CNBC video clip.

 

Inflation Tame, GDP Edged Lower

Last Week in Review:
GDP edged lower in fourth quarter 2017, while inflation remained tame in February.

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Fourth quarter 2017 Gross Domestic Product (GDP) edged lower to 2.9 percent, down from 3.2 percent in the third quarter, the Bureau of Economic Analysis reported. However, the report showed that consumer spending rose 4.0 percent, up from 2.2 percent in the third quarter. The jump in consumer spending was the quickest pace since the fourth quarter of 2014. Consumer spending makes up two-thirds of economic activity and is a key driver of economic growth.

Home prices continued to rise in January due in part to the low amount of homes for sale on the markets. The S&P/Case-Shiller 20-City Home Price Index rose 6.4 percent from January 2017 to January 2018, up from 6.3 percent recorded from December 2016 to December 2017. Home prices were also up 0.8 percent from December to January. Inventory continues to be a real challenge for many would-be buyers. Currently, there is a 3.4-month supply of homes for sale, well below the 6-month supply that is seen in a healthy market.

Consumer inflation remained low in February. The Bureau of Economic Analysis reported that Personal Consumption Expenditures (PCE) and Core PCE rose 0.2 percent from January to February, both in line with estimates. The more closely watched Core PCE reading excludes volatile food and energy prices and February’s figure was just below the 0.3 percent recorded in January. From February 2017 to February 2018, Core PCE came in at 1.6 percent, just above the 1.5 percent recorded in January. However, the reading is still well below the Fed’s target range of 2 percent.

When inflation starts to rise, a rise in home loan rates can follow. Inflation reduces the value of fixed investments like Mortgage Bonds, and home loan rates are tied to Mortgage Bonds.

For now, home loan rates remain attractive and near historically low levels.

If you or someone you know has any questions about home loans, please reach out. We’d be happy to help.

Non-Prime Product Primary and Second Home Guideline Updates

Effective for Non-Prime Primary Residence and Second Home loans with applications taken on and after Monday, April 2, 2018, Carrington Mortgage Services, LLC (CMS) will introduce the following guideline enhancements:

  • New Credit Grades – Non-Prime Program revised to Credit Grades A, B, and C (formerly grades A-, B+, B and RHE). See CMS Non-Prime Matrix for complete LTV and credit score details.
  • Cash Out Limits – Non-Prime standard cash-out limit has been increased to $500,000 (previously $250,000) with no LTV reduction required.
  • Expanded Debt to Income (DTI) Expanded DTI available for A and B up to 50% with minimum FICO of 620. Expanded DTI available for A and B up to 55% with minimum FICO of 680
  • Mortgage and Payment Verification – Credit Grade A housing history – 0 x 60 x 12 (previously 1 x 30 x 12) for Purchase and Rate/Term Refis with 620 FICO up to 85% LTV. See CMS Non-Prime Matrix for complete Non-Prime housing history requirements.
  • Enhanced Ratios Removed the 40% Maximum Housing Ratio requirements
  • Calculating Qualifying Income Updated income calculations for the Business Bank Statement Program. Option 1 can now be a Borrower prepared P&L.  Additionally, the variance on bank statements vs. P&L has increased to 10% (previously 5%).
    Note: This applies to Investment Bank Statement program as well.

In addition to the enhancements above, the Non-Prime program will have the following additional guideline changes:

  • First Time Homebuyer and Second Homes Minimum credit score increased to 580 from 560.
  • Maximum Loan Amounts loan amounts greater than $1MM available only to credit grades A and B

All loans with APPLICATIONS on and after Monday April 2, 2018 must comply with the new Non-Prime Underwriting Guidelines.  All loans with Applications prior to Monday April 2, 2018 must be fulfilled using the prior Non-Prime Underwriting Guidelines.

New AMC Available – Coester VMS Nationwide Appraisal Management and Valuation Services

Carrington Mortgage Services, LLC (CMS) is pleased to announce the addition of a new appraisal vendor, CoesterVMS Nationwide Appraisal Management and Valuation Services, effective March 30, 2018. Coester VMS is a nationwide appraisal management company and provides lenders with the most accurate valuations.

As of the effective date, Coester VMS will be live in Smart fees and Retail Associates will be able to place orders through the Mercury Network.

CoesterVMS Contact Information

Website: www.coestervms.com
Address: 7529 Standish Place, Suite 200 Rockville, MD 20855
Toll-Free: (888) 485-1999
Email: Partners@coestervms.com

Fed Hikes Rates

Last Week in Review:
Sales of new and existing homes showed different results in February while the Fed raised the Fed Funds Rate.

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February Existing Home Sales rose 3 percent from January to an annual rate of 5.54 million, above the 5.42 million expected, the National Association of REALTORS® (NAR) reported. Gains were seen in the South and West with declines in the Northeast and Midwest. Sales were up 1.1 percent from a year ago. Unsold inventory is at a 3.4-month supply, well below the 6-month supply that is seen as normal.

Sales of new homes had the opposite result in February, falling for the third straight month. New Home Sales edged lower by 0.6 percent from January to an annualized rate of 618,000, just below expectations, the Commerce Department reported. Sales increases were seen in the Northeast and South, with declines in the Midwest and West. New Home Sales were up 0.5 percent from February 2017 to February 2018. And there was good news regarding inventory. There was a 5.9-month supply of new homes for sale on the market, which is near the 6-month supply seen as normal.

The Fed also made headlines in the latest week. As expected, the Fed raised its benchmark Federal Funds Rate 0.25 percent, bringing the new target rate range to between 1.5 and 1.75 percent. The Fed acknowledged inflation remains low, but it is expected to rise in the coming months as tax cuts further stimulate the economy.

If inflation does begin to rise, an increase in home loan rates could follow. Inflation reduces the value of fixed investments like Mortgage Bonds, and home loan rates are tied to Mortgage Bonds. However, many factors impact the direction of the markets, including possible tariffs, trade wars and the direction of other economic reports. We’ll continue to monitor all of these developments closely.

In the meantime, home loan rates remain historically attractive.

If you or someone you know has any questions about home loan rates or products, please reach out. We’d be happy to help.

State of the Nation Webinar – Presented by Rick Sharga, Carrington Mortgage Holding, EVP


Want to know what’s in store for the real estate and mortgage industries in 2018? Will low inventory, rising rates, and falling affordability derail the housing recovery? Get the answers to these and other questions in an informative webinar hosted by Rick Sharga, Executive Vice President, Carrington Mortgage Holdings, on the State of the U.S. Housing Market. Rick will share insights on US Economic Performance, Home Sales Trends, Mortgage Industry Trends and what the outlook is for the real estate market for the rest of 2018. We’ll also cover current events such as immigration policy and tax reforms, and their potential impact on the market. Don’t miss this great opportunity to get informed. Register now to save your spot!

Register Now

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