Provided to you by Lee McLain

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1 Provided to you by Lee McLain Lee McLain First Federal Bank of Kansas City NMLS: Contents Weekly Review: week of June 18, 2018 Economic Calendar week of June 25, 2018 Mortgage Rate Forecast with Chart Weekly Review Although the Nasdaq Composite Index set a new all-time high last Wednesday, the three major stock indexes finished the week lower amid escalating trade tensions primarily between the U.S. and China and the U.S. and the European Union. The Trump Administration wants to level the playing field when it comes to trade and tariffs by negotiating better deals to protect American workers and the economy. U.S. tariffs are among the lowest in the world and in our nation s history. U.S. trade policy has long favored lower tariffs and fewer restrictions on the movement of goods and services across international borders while our trading partners have been more restrictive. The U.S. is currently running the following trade deficits: China - $636 billion traded with a $375 billion deficit. Mexico - $557 billion traded with a $71 billion deficit. Japan - $204 billion traded with a $69 billion deficit. Germany - $171 billion traded with a $65 billion deficit. Canada - $582 billion traded with an $18 billion deficit. In response to all of the tariff and trade war talk, longer-term bond yields slipped marginally lower resulting in relatively stable mortgage rates.

2 There were several housing-related reports released this past week. Last Monday, the National Association of Home Builders/Wells Fargo Housing Market Index (NAHB) measuring home builder sentiment was reported to have slipped two points to 68 in June. A reading above 50 is considered to indicate positive sentiment. Yet, June s decline was attributed to soaring lumber prices that have added almost $9,000 to the average price of a new single-family home since January Robert Dietz, NAHB chief economist, commented Improved economic growth, continued job creation and solid housing demand should spur additional single-family construction in the months ahead. However, builders do need access to lumber and other construction materials at reasonable costs in order to provide homes at competitive price points, particularly for the entry-level market where inventory is most needed.

3 Tuesday, the U.S. Census Bureau and the Department of Housing and Urban Development reported Housing Starts increased 5.0% month-over-month in May to a seasonally adjusted annual rate of million, exceeding the consensus forecast of million. However, Building Permits declined 4.6% to million falling below the consensus estimate of million. Permits are a leading indicator of housing market strength and were lower in May for both singlefamily units (-2.2%) and multi-unit dwellings (-8.8%). This suggests we may see some weakness in the June Housing Starts report. Wednesday, the National Association of Realtors reported sales of Existing Homes declined 0.4% month-over-month in May to a seasonally adjusted annual rate of 5.43 million. This was slightly below the consensus forecast of 5.55 million. The median existing home price for all housing types jumped 4.9% to an all-time high of $264,800 the 75th straight month of year-over-year gains. Existing home inventory for sale at the end of May rose 2.8% to 1.85 million, but this is 6.1% lower than the same period a year ago. Unsold inventory is currently at a 4.1-month supply at the current sales rate compared to a usual 6.0-month supply associated with a more balanced market. The song remains the same limited home inventory coupled with rising prices and mortgage rates is hampering affordability, especially for first-time home buyers. Wednesday, the latest data from the Mortgage Bankers Association s (MBA) weekly mortgage applications survey showed an increase in mortgage applications. The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 5.1% during the week ended June 15, The seasonally adjusted Purchase Index increased 4.0% from the week prior while the Refinance Index increased by 6.0% from a week earlier.

4 Overall, the refinance portion of mortgage activity increased to 36.8% from 35.6% of total applications from the prior week. The adjustable-rate mortgage share of activity increased to 7.0% from 6.8% of total applications. According to the MBA, the average contract interest rate for 30- year fixed-rate mortgages with a conforming loan balance remained unchanged at 4.83% with points decreasing to 0.48 from For the week, the FNMA 4.0% coupon bond gained 9.3 basis points to close at $ while the 10-year Treasury yield decreased 2.36 basis points to end at %. The Dow Jones Industrial Average lost points to close at 24, The NASDAQ Composite Index fell points to close at 7, The S&P 500 Index dropped points to close at 2, Year to date on a total return basis, the Dow Jones Industrial Average has lost 0.56%, the NASDAQ Composite Index has gained 11.44%, and the S&P 500 Index has advanced 3.04%. This past week, the national average 30-year mortgage rate increased to 4.70% from 4.65%; the 15-year mortgage rate rose to 4.15% from 4.11%; the 5/1 ARM mortgage rate increased to 3.99% from 3.95% while the FHA 30-year rate rose to 4.42% from 4.38%. Jumbo 30-year rates increased to 4.73% from 4.68%. Economic Calendar - for the Week of June 25, 2018 Economic reports having the greatest potential impact on the financial markets are highlighted in bold. Date Time Market Event /Report /Statistic For ET Expects Prior Jun 25 10:00 New Home Sales May 666, ,000 Jun 26 09:00 S&P Case-Shiller 20-city Index Apr 6.8% 6.8% Jun 26 10:00 Consumer Confidence Index Jun Jun 27 07:00 MBA Mortgage Applications Index 06/23 NA 5.1% Jun 27 08:30 Durable Goods Orders May -1.0% -1.7% Jun 27 08:30 Durable Goods Orders excluding transportation May 0.4% 0.9% Jun 27 08:30 Advance International Trade in Goods May NA -$68.2B Jun 27 08:30 Advance Wholesale Inventories May NA 0.0% Jun 27 10:00 Pending Home Sales May 0.8% -1.3% Jun 27 10:30 Crude Oil Inventories 06/23 NA -5.9M Jun 28 08:30 Third Estimate of 1 st Quarter GDP Q1 2.2% 2.2% Jun 28 08:30 Third Estimate of 1 st Quarter GDP Deflator Q1 1.9% 1.9% Jun 28 08:30 Initial Jobless Claims 06/23 220, ,000 Jun 28 08:30 Continuing Jobless Claims 06/16 NA 1,723K Jun 29 08:30 Personal Income May 0.4% 0.3% Jun 29 08:30 Personal Spending May 0.4% 0.6% Jun 29 08:30 PCE Prices May 0.2% 0.2% Jun 29 08:30 Core PCE Prices May 0.2% 0.2% Jun 29 09:45 Chicago Purchasing Managers Index (PMI) Jun Jun 29 10:00 Final Univ. of Mich. Consumer Sentiment Index Jun Mortgage Rate Forecast with Chart - FNMA 30-Year 4.0% Coupon Bond The FNMA 30-year 4.0% coupon bond ($ , +9.3 bp) traded within a far narrower 28.1 basis point range between a weekly intraday high of on Tuesday and a weekly intraday low of $ on Thursday before closing the week at $ on Friday.

5 The bond traded along a convergence between the 25-day and 50-day moving averages (MAs). These MAs act as both short-term support and resistance. Should the 25-day MA cross above the 50-day MA, it would signal market strength and a buy signal likely resulting in a slight improvement in mortgage rates. However, technical resistance is also found at the 76.4% Fibonacci retracement level at $ so any upward move will have to contend with this layer of resistance plus that from the 100-day MA at $ These levels may temper any upward move resulting in stable rates.