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Mortgage Market Guide: GDP Jumps in Q3!

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Mortgage Market Guide: GDP Jumps in Q3!

  In This Issue

Last Week in Review: The first reading of third quarter Gross Domestic Product and September New Home Sales had some things to celebrate.

Forecast for the Week: In a data-driven week, all reports may take a back seat to the Fed‘s monetary policy statement and the October Jobs Report.

View: Whether you’re traveling for business or pleasure this season, these tips can help in the event of any issues.

  Last Week in Review

“You got growing pains.” Sammy Hagar. After trudging along during the first and second quarters of 2016, Gross Domestic Product (GDP) got a little more spring in its step.

Weekly: GDP Jumps in Q3!

The government reported that the first reading on third quarter GDP rose by 2.9 percent, above the 2.5 percent expected and well above the anemic 1.4 and 0.8 percent reported in the second and first quarters respectively. GDP measures the pace of economic activity and represents the total dollar value of all goods and services produced over a specific time period. A reading of 2.5 to 3 percent is considered optimal. This initial third quarter reading marks the fastest pace of growth in two years.

Yet, all was not rosy within the report. Consumer spending grew by just 2.1 percent, well below the 4.3 percent in the second quarter. Corporate investment on equipment fell for the fourth straight quarter, the longest stretch since the end of the Great Recession in mid-2009. Residential investment also declined. GDP‘s inflation gauge was near unchanged.

In housing news, September New Home Sales rose 3.1 percent from August to an annual rate of 593,000 units, the Commerce Department reported. However, this was below the 610,000 expected and after August was revised lower to 575,000 units from the 609,000 originally reported. The good news is New Home Sales are up nearly 30 percent from September 2015. The median price for a new home also rose 6.7 percent in the past year due in part to lower inventory numbers. Currently, there is a 4.8-month supply of new homes, below the August inventory level.

Also of note, the August S&P/Case-Shiller Home Price Index rose 5.1 percent annually, which was in line with estimates and comes after a 5.0 percent increase in July. From July to August, prices were up 0.2 percent.

Attractive home loan rates help offset rising home prices, and for now home loan rates remain near historic lows.

If you or someone you know has any questions about home loan rates or products, please don’t hesitate to contact me. I’m happy to help.

  Forecast for the Week
This action-packed week will revolve around two market-moving releases: the Fed‘s monetary policy statement and the Jobs Report for October.
  • Economic data kicks off Monday with the Fed‘s favorite inflation gauge, Personal Consumption Expenditures. Personal Income and Personal Spending also will be released Monday.
  • Manufacturing data will come with Monday’s Chicago PMI and the national ISM Index on Tuesday.
  • Look for the first labor market news of the week via the ADP National Employment Report on Wednesday, followed by weekly Initial Jobless Claims Thursday.
  • While not an economic report, the Fed‘s monetary policy statement will be released Wednesday after the close of the Federal Open Market Committee (FOMC) meeting.
  • Productivity and the ISM Services Index will be delivered on Thursday.
  • The monthly Jobs Report for October will be released on Friday, which includes Non-farm Payrolls, Hourly Earnings, Average Work Week and the Unemployment Rate.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.

When you see these Bond prices moving higher, it means home loan rates are improving. When Bond prices are moving lower, home loan rates are getting worse.

To go one step further, a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes are on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Mortgage Bonds have been up and down recently, however home loan rates remain near historic lows.

Chart: Fannie Mae 3.0% Mortgage Bond (Friday Oct 28, 2016)
Weekly: GDP Jumps in Q3!
  The Mortgage Market Guide View…

How to Overcome Travel Delays and Cancellations

Travel hiccups are unavoidable. Here’s how to navigate them.
By Ryan Ermey, Kiplinger.com

Everyone has a tale of travel gone wrong. The recent computer crash at Delta was just the latest in a long line of airline mishaps that have causedwidespread disruptions. A hiccup here and there won’t ruin your trip. But if you encounter a full-on snafu on your next flight, knowing your rights and planning ahead can save you from becoming another horror-story victim.

Most airline delays and cancellations are caused by technological failures, such as the Delta outage, or weather-related problems. In either case, virtually all airlines promise to book you a seat on the next available flight at no additional charge. (A handful of airlines, including Delta and United, may book you on another airline at their discretion.) For individual cases, that might be the end of your troubles. But in the case of a massive disruption, delays can derail your trip for days. If you decide not to proceed with your trip, you can apply for a full refund, even if you hold a nonrefundable ticket. But if packing it in and going home isn’t an option, you’ll have to proceed to Plan B.

You’ll generally fare better if the delay or cancellation is the fault of the airline. For instance, in a long delay (typically four hours) due to equipment malfunction, Alaska, Hawaiian, United and WestJet provide meal vouchers. And those four as well as American, Delta and Sun Country will provide overnight accommodations in the case of a delay that continues after 10 p.m. until 6 a.m. If the airline can’t get you into one of its affiliate hotels, you’ll get a voucher worth the price of a stay to spend toward a future flight. Other airlines might be willing to provide assistance if you explain your situation, but they are not required to do so.

If you’re delayed by weather or some unforeseen event, such as a workers’ strike, airlines will offer little assistance, and you may have to foot any delay-related bills yourself. It pays to act quickly. The TripIt Pro smartphone app for Apple and Android ($49 a year) will send you alerts about cancellations, delays or gate changes on the fly, sometimes even ahead of an airline announcement. The free FlightAware app (Apple, Android and Windows) will also let you keep tabs on your flight. If you wake up the day of your flight and the weather looks dicey, book a refundable hotel room near the airport.

Hedge Your Bets
Travel insurance can compensate you for the costs associated with a trip interruption. You can purchase some policies up until the day of your trip, but err on the side of buying early. If you buy after it’s apparent that bad weather will ground your flight, for instance, you may forfeit coverage. George Hobica, founder of Airfarewatchdog.com, recommends that you reject the airline’s coverage and compare policies at third-party sites such as Squaremouth.com and TravelInsurance.com. The insurance will likely pay expenses such as meals and hotel stays during a delay, and policies will often cover nonrefundable costs for unused hotel rooms or tour packages at your destination. But read the fine print, says Hobica: The insurer’s definition of a delay may be very different from yours.

Your credit card company may also be able to help. If you’re delayed by more than six hours, or if you need to stay overnight, the Chase Sapphire Reserve card will reimburse you for up to $500 per day in necessary expenses, such as hotel rooms and meals. The Chase Sapphire Preferred, American Express Platinum and Citi Prestige cards offer similar coverage.

Reprinted with permission. All Contents 2016 The Kiplinger Washington Editors. Kiplinger.com.


Economic Calendar for the Week of October 31 – November 04
Weekly: GDP Jumps in Q3!


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