Rachel Collins

Provided to you Cardinal Financial

Office # 469.299.4731
by Cell # 214.460.7109
rachel.collins@cardinalfinancial.com
Rachel Collins NMLS: 289039
Txmortgagegal.com

• Weekly Review: week of February 19, 2018

• Economic Calendar - week of February 26, 2018
• Mortgage Rate Forecast with Chart
Contents

Weekly Review
The major stock market indexes were able to register a modest move higher this past week due to
a late rally on Friday that erased losses recorded on Tuesday and Wednesday when the indexes
displayed increased intra-day volatility. Mid-week, investors were worried over recent market
volatility, rising interest rates, and the S&P 500 Index breaking below its 50-day moving average of
2,726.

The economic calendar was relatively quiet with the notable exception of Wednesday’s release of
the minutes from the Federal Reserve’s January FOMC meeting. The minutes showed a majority
of FOMC members expect inflation to increase in 2018 with most members believing in stronger
economic growth that will raise the "likelihood that further gradual policy firming would be
appropriate." The stock and bond markets reacted negatively to the release with the yield on the
benchmark 10-year Treasury note moving up to a four-year high on Wednesday to 2.94% before
pulling back to 2.866% by Friday's close to finish flat for the week.

However, stocks seemed to get a boost late Friday after the Fed released its semiannual Monetary
Policy Report to Congress, indicating the Fed expects inflation to remain below their 2% target in
2018. New Fed Chair Jerome Powell will be testifying about monetary policy before Congress this
week.

Elsewhere, the National Association of Realtors reported Existing Home Sales fell 3.2% month-
over-month during January to a seasonally adjusted annual rate of 5.38 million compared to
December’s rate. On a year-over-year basis, the decline in sales was an even worse 4.8%, the
largest annual decline since August of 2014. Although the inventory of homes for sale at the end
of January increased 4.1% to 1.52 million units, it is 9.5% lower than the same period a year ago
and remains a headwind for future Existing Home Sales. Unsold inventory is at a 3.4-month supply
at the current sales rate compared to 3.6 months a year ago.

Low inventory is also leading to higher home prices. The median price for all categories of homes
in January was $240,500, 5.8% higher than the same time a year ago and the 71st straight month
of year-over-year gains in home prices. The median price for existing single-family homes
increased 5.7% from a year ago to $241,700.

The number of mortgage applications showed a decrease according to the latest data from the
Mortgage Bankers Association’s (MBA) weekly mortgage applications survey. The MBA reported
their overall seasonally adjusted Market Composite Index (application volume) fell by 6.6% during
the week ended February 16, 2018. The seasonally adjusted Purchase Index decreased by 6.0%
from the week prior while the Refinance Index decreased 7.0%.

Overall, the refinance portion of mortgage activity increased to 44.4% of total applications from
46.5% in the prior week. The adjustable-rate mortgage share of activity increased to 6.4% of total
applications from 6.3%. According to the MBA, the average contract interest rate for 30-year fixed-
rate mortgages with a conforming loan balance increased to 4.64% from 4.57% to its highest level
since January 2014, with points increasing to 0.61 from 0.59.

For the week, the FNMA 4.0% coupon bond was unchanged to close at $102.469 while the 10-
year Treasury yield decreased 0.71 basis points to end at 2.866%. The major stock indexes
moved modestly higher on the week.

The Dow Jones Industrial Average moved 90.61 points higher to close at 25,309.99. The
NASDAQ Composite Index added 97.93 points to close at 7,337.39 and the S&P 500 Index gained
15.08 points to close at 2,747.30. Year to date on a total return basis, the Dow Jones Industrial
Average has risen 2.39%, the NASDAQ Composite Index has gained 6.29%, and the S&P 500
Index has advanced 2.76%.

This past week, the national average 30-year mortgage rate was unchanged at 4.53%; the 15-year
mortgage rate increased to 3.90% from 3.89%; the 5/1 ARM mortgage rate increased to 3.54%
from 3.49% and the FHA 30-year rate was unchanged at 4.33%. Jumbo 30-year rates increased
to 4.55% from 4.53%.

Economic Calendar - for the Week of February 26, 2018

Economic reports having the greatest potential impact on the financial markets are highlighted in
bold.

Time Market
Date Event /Report /Statistic For Prior
ET Expects
Feb 26 08:30 New Home Sales Jan 645,000 625,000
Feb 27 08:30 Durable Goods Orders Jan -2.0% 2.9%
Feb 27 08:30 Durable Goods Orders excluding transportation Jan 0.5% 0.6%
Feb 27 08:30 International Trade in Goods Jan -$72.2B -$71.6B
Feb 27 09:00 S&P Case-Shiller Home Price Index Dec 6.4% 6.4%
Feb 27 09:00 FHFA Housing Price Index Dec 0.4% 0.4%
Feb 27 10:00 Consumer Confidence Index Feb 126.5 125.4
Feb 28 07:00 MBA Mortgage Applications Index 02/24 NA -6.6%
Feb 28 08:30 Second Estimate of 4th Qtr. GDP Qtr. 4 2.5% 2.6%
Feb 28 08:30 Second Estimate of 4th Qtr. GDP Deflator Qtr. 4 2.4% 2.4%
Feb 28 09:45 Chicago Purchasing Managers Index (PMI) Feb 64.5 65.7
Feb 28 10:00 Pending Home Sales Jan 0.4% 0.5%
Feb 28 10:30 Crude Oil Inventories 02/24 NA -1.6M
Mar 01 08:30 Personal Income Jan 0.3% 0.4%
Mar 01 08:30 Personal Spending Jan 0.2% 0.4%
Mar 01 08:30 PCE Prices Jan 0.4% 0.1%
Mar 01 08:30 Core PCE Prices Jan 0.3% 0.2%
Mar 01 08:30 Initial Jobless Claims 02/24 227,000 222,000
Mar 01 08:30 Continuing Jobless Claims 02/17 NA 1,875K
Mar 01 10:00 ISM Index Feb 58.4 59.1
Mar 01 10:00 Construction Spending Jan 0.3% 0.7%
Mar 02 10:00 Final Univ. of Michigan Consumer Sentiment Index Feb 99.5 99.9

Mortgage Rate Forecast with Chart - FNMA 30-Year 4.0% Coupon Bond
The FNMA 30-year 4.0% coupon bond ($102.469, unchanged) traded within a 65.6 basis point
range between a weekly intraday high of $102.547 on Friday and a weekly intraday low of
$101.891 on Wednesday before closing the week at $102.469 on Friday.

The bond traded in a “V” pattern during the holiday-shortened (Presidents’ Day) week. After selling
off hard on Wednesday following the release of the January FOMC meeting minutes, the bond
rebounded off of support at the $102 level to erase Wednesday’s loss. The bond ended the week
unchanged and just below overhead resistance found at $102.49.

The economic calendar heats up this week with Wednesday, March 1 being a significant news day.
Personal Income, Personal Spending, and key inflation data from PCE and Core PCE Prices will
be reported and could trigger a sizeable market reaction. In all likelihood, bond prices will be
driven more by economic news this week than by technical factors. There was a weak buy signal
on Friday and even though bonds are “oversold” they are bumping up against resistance, so it will
take tame inflation numbers on Wednesday for bonds to have a chance to move higher. If PCE
and Core PCE Prices jump higher, bonds will sell off and move back toward support resulting in
slightly higher mortgage rates.