Mortgage Bonds closed on Friday near unchanged in an uneventful abbreviated session closing at 2pm ET. The 4% finished at 104.31 up 3bp. Stocks closed lower but the losses were limited. The Dow – 16,086.41, the S&P – 1,805.81, the Nasdaq – 4,059.88. Oil was last seen at $92.78/barrel down 48 cents. Next week’s economic data includes housing, Q3 GDP and the November Jobs Report.

Weekly Survey of Rates from the Mortgage Bankers Association

For the week ending Nov. 20, 2013-  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.46 percent from 4.44 percent, with points decreasing to 0.38 from  0.44 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 4.47 percent from 4.48 percent, with points decreasing to 0.22 from 0.34 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages was unchanged at 3.52 percent, with points increasing to 0.33 from 0.27 (including the origination fee) for 80 percent LTV loans.

Fannie Mae and Freddie Mac 2014 base conforming loan limits will be maintained at the existing 2013 levels. The loan limits in designated high-cost areas will also remain unchanged with the exception of some counties where the loan limit will increase. The Fairfield County CT high-cost loan limit has increased to $601,450 from $575,000. The Guide Bulletin is in line with the Federal Housing Finance Agency (FHFA) announcement regarding the 2014 conforming loan limits.

Housing News

Home Sales Average Days on the Market

Pending Sales of U.S. Existing Homes Drop for Fifth Month

The number of contracts Americans signed to buy previously-owned homes unexpectedly fell in October for a fifth consecutive month amid higher borrowing costs that are denting the real-estate recovery.

The gauge of pending home sales decreased 0.6 percent after a 4.6 percent drop in September, the National Association of Realtors said today in Washington. The median projection in a Bloomberg survey of economists called for a 1 percent gain in the index from the month before. Read more

Negative Equity Rate Drops at Record Pace

The national negative equity rate plummeted at the fastest pace ever in the third quarter, with 21% of all mortgage homeowners in an underwater state, real estate website Zillow said.  The new rate is an improvement with it equating to more borrowers landing in positive territory, the latest data from Zillow says.  Since its peak in the first quarter of 2012, the rate has fallen by one-third, to 21% from 31.4%.

“Rising home prices and a greater willingness among lenders to engage in short sales have both contributed substantially to the significant decline in negative equity this quarter. We should feel good that we’re moving in the right direction and at a fast clip,” said Zillow Chief Economist Stan Humphries. Read more

Economist Elliot Eisenberg, Ph.D – In a sign that household deleveraging may be over, outstanding household debt grew by $127 billion in Q3 and now stands at $11.28 trillion. While down 11% from the peak of $12.7 trillion set in 2008, after essentially 20 straight quarters of deleveraging, this is great news.  Mortgage debt rose by $56 billion, credit card debt by $4 billion, auto loans by $31 billion and student loans by $33 billion.

Economic News

Jobless claims surprise

Sources: Bloomberg, CNBC, Housingwire, MMG, Reuters, MBA

Mortgage Rates increased in the past week, as Mortgage Bonds lost $1.375.  Lenders were quick to re price rates, as economic data and talk of the Fed Taper is responsible for the increase.  However, its important to note that rates have been volatile for some time. So, as long as the rates stay range bound, then it is still possible to lock into a low rate.

The S&P 500 (1,804.74, +8.91) closed above 1,800 for the first time and had a record close today. The Dow closed at a new all-time record of 16,064.77 up 54.78 points while the Nasdaq finished at 3,991.64 up 22.49 points. Oil was last seen at $94.79/barrel up 54.78 points. Remember, next week is holiday shortened with Thanksgiving on Thursday – markets are closed. On Friday, Bonds are open and close at 2:00pm ET. Stocks are closed Thursday and are open Friday with a 1:00pm ET close.

Weekly Survey of Rates from the Mortgage Bankers Association

For the week ending Nov. 15th- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.46 percent from 4.44 percent, with points decreasing to 0.38 from  0.44 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 4.47 percent from 4.48 percent, with points decreasing to 0.22 from 0.34 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages was unchanged at 3.52 percent, with points increasing to 0.33 from 0.27 (including the origination fee) for 80 percent LTV loans.

Christmas Taper Coming?

On Wednesday, St. Louis Fed President James Bullard said tapering is on the table in December, according to reports from an address in Chicago. A strong November jobs report would increase chances of a December taper, he said. He also said he would like to study impact of negative deposit rates, which could make sense to boost bank lending.

Bernanke didn’t offer any surprises in a speech Tuesday evening at the National Economic Club in D.C. saying that easy money policy (Fed Funds Rate) will stay low for as long as needed and the Fed will only begin to taper Bond buying once it is assured that the improvements in the labor markets would continue.

The Kiplingers Letter reported that the odds are good that the Federal Reserve will dial back stimulus later, not sooner.  The retreat from its massive bond buying program had been expected to begin as early as the end of this year. But it’s likely to be put off well into 2014, based on Fed Chm.-to-be Janet Yellen’s interpretation of the underlying data.  Despite recent improvement in job creation numbers, Yellen sees the job market as underperforming and inflation as staying stable. Those are some broad hints that the Fed will stay the course and keep buying $85 billion in bonds each month.  Next to no chance, though, of the central bank raising short-term rates soon.  No matter when the weaning begins, no official hike is likely until sometime in 2015.

Senate Committee Backs Yellen for Fed Chief

Janet Yellen’s candidacy to become the first woman to lead the Federal Reserve Board got a boost Thursday, as the Senate Banking Committee sent her nomination to the full Senate by a 14-8 vote.  Not that the vote was without contentiousness. The political nature of monetary policy in the modern economy was on full display Thursday:

The committee’s vote showed how the Federal Reserve’s policies to keep money flowing to the ailing economy have made the Fed a part of the ongoing partisan wars in Washington. It broke largely along party lines, with three Republican senators — Bob Corker of Tennessee, Mark Kirk of Illinois and Tom Coburn of Oklahoma — voting in favor of her nomination. One Democrat, Senator Joe Manchin III of West Virginia, voted against her.

If Yellen assumes Ben Bernanke’s seat, most in the financial markets expect her to continue with much of her predecessor’s policies and maintain quantitative easing, keeping mortgage rates low.

Housing News

Home Prices Post Strong Growth in Q3

Home prices experienced strong growth in the third quarter as the housing recovery continued to broaden across the country, the latest FNC Residential Price Index posted.  The index increased 2.5% between the second and third quarters, making third-quarter growth the fastest in the current recovery.  The firm attributed the uptick to rising home sales and relatively low foreclosure sales.  Read more

Existing Home Sales fall by -3.2% in October to 5.12M units annualized, below the 5.20M expected.  Earlier Tuesday, existing home sales volume fell, disappointing economists who were expecting a better result.  That drop may have had something to do with upcoming Qualified Mortgage and Ability-to-Repay rules affecting mortgage underwriting already, one analyst claims.

… NAR and LaVorgna pointed to the impact of the upcoming Qualified Residential Mortgage rules that “will require a lot more time, documentation and scrutiny to process loans,” according to NAR. 

“Lenders may be hesitating in order to ensure compliance with the new measures which take effect in January of next year,” said LaVorgna. “In general, lending standards for anything other than prime mortgages remain relatively restrictive.”  Read more

U.S. Homebuilder Confidence stabilized in November after falling for two straight months, though steady home demand was tempered by worries about further fiscal battles in Washington, the National Association of Home Builders said on Monday.  The NAHB/Wells Fargo Housing Market Index came in at 54 in November. The October figure was downwardly revised to 54 from the originally reported 55.  Economists polled by Reuters had predicted a November reading of 55.

Economic News

Import prices fell 0.7 percent in October, while export prices declined 0.5 percent. Import prices were forecast by economists to have fallen by 0.4 percent, with export prices expected to rise 0.1 percent.

The U.S. employment cost index rose 0.4 percent in the third quarter, following a 0.5 percent increase the previous quarter. Economists polled by Thomson Reuters had expected employment costs to rise 0.5 percent in the period.

Weekly claims for state unemployment benefits totaled 323,000 in the latest week. Economists had expected initial claims at 335,000. In a separate report, October producer prices fell 0.2 percent, matching estimates and faster than the prior month’s dip of 0.1 percent.

Chain Store Sales rose by 0.1% in the latest week and was the second straight week of gains. Year-over-year, sales were up 2.8%, the biggest gain since October 19, 2013.

U.S. retail sales rose 0.4 percent in October, while consumer prices ticked down 0.1 percent. Economists had expected retail sales to rise 0.1 percent in the month, and consumer prices were forecast to have been unchanged.

Inflation remains tame – CPI in October declines by -0.1% when the Street was looking for 0.0%. Core CPI at 0.1%, below the 0.2% expected.

A report alleges that the Unemployment Rate was faked ahead of the 2012 Presidential Election. It went from 8.1% in August to 7.8% in September. This according to a recent probe and documents from the Census Bureau. The manipulation could be because of time constraints and not for political gain. More to come on this subject.

Sources: Bloomberg, CNBC, Business Insider, MBA, Housingwire, MMG, Kiplingers

Mortgage Bonds and Rates had a good week as the 4% coupon gained back nearly 100bp closing at 104.75 up 9bp. Today’s weaker than expected Empire State Index helped to support Bonds.

The Dow (15,961.70, +85.48) and the S&P (1,798.18, +7.56) both closed at record highs as the printing presses at the Federal Reserve rage on. The Nasdaq gained 13.22 points to 3,985.96. Next week’s economic calendar is packed with a broad array of data that will encompass a large portion of the U.S. economy.  I recommend floating interest rates, not locking into rates at this time.

Weekly Survey of Rates from the Mortgage Bankers Association

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.44 percent, the highest level in a month, from 4.32 percent, with points increasing to 0.44 from  0.42 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) increased to 4.48 percent, the highest level in a month,  from 4.37 percent, with points increasing to 0.34 from 0.26 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.52 percent, the highest level in a month, from 3.44 percent, with points decreasing to 0.27 from 0.30 (including the origination fee) for 80 percent LTV loans.

Housing News

Despite Improvements, Housing Remains Fragile

Although the market has exhibited strong improvement in home prices, purchases of new homes and sales of existing homes, officials caution that the overall recovery remains fragile. Read more

Mortgage Delinquency Rates Improve Across the Nation

The housing market continued to heal as the national mortgage delinquency rate plummeted 4.09% in the third quarter, a drop of more than 23.3% when compared to the same time period last year, according to TransUnion’s quarterly report.  The mortgage delinquency rate dropped on a quarterly basis, 5.33% from 4.32% — the seventh straight quarterly decline. Read more

Economic News

Weekly claims for state unemployment benefits totaled 339,000, compared with economists’ expectations of a drop to 331,000. Meanwhile, in separate reports, the September U.S. trade deficit came in at $41.78 billion, compared with a forecast of $38.8 billion, while third-quarter productivity rose by 1.9 percent, compared with expectations of a 2.4 percent increase.

The Empire State Manufacturing Index falls by -2.2 in October, below the 4.3 expected.

Sources: CNBC, Bloomberg, MBA, Housingwire, MMG

Mortgage Bonds suffered their largest one day loss since August 13th, dropping 88 Basis Points today.  In response, Lenders re priced Mortgage Rates Higher.  The better than expected Labor Department’s Non-Farm Payroll Report released this morning is responsible for the sell off in Bonds.

August and September were revised higher by 60K. However, the Unemployment Rate ticked up to 7.3% as furloughed workers were counted as “out of work”. In addition, 720,000 people exited the workforce in October causing the Labor Force Participation Rate to drop by 0.4% to 62.8%.

The 4% coupon fell by 88bp to end the session at 104.31. Stocks opened lower, but soon rallied on the Jobs Report – the Dow gained 167.80 points to end at 15,761.78 – an all-time high record close. The S&P 500 finished at 1,770.61 up 23.46 points while the Nasdaq rose by 61.90 points to finish the week at 3,919.23. Oil was last seen at $94.37/barrel unchanged.  The Bond markets will be closed on Monday in observance of Veterans Day.

I recommend floating Mortgage Rates, Not Locking , headed into the shortened week and look for signs of stabilization.

Weekly Survey of Rates from the Mortgage Bankers Association

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.32 percent from 4.33 percent, with points increasing to 0.42 from  0.26 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) increased to 4.37 percent from 4.36 percent, with points decreasing to 0.26 from 0.27 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.44 percent from 3.42 percent, with points remaining unchanged at 0.30 (including the origination fee) for 80 percent LTV loans.

Housing News

American Dream Slipping –Home Ownership at 18 Year Low

The U.S. homeownership rate, which soared to a record high 69.2 percent in 2004, is back where it was two decades ago, before the housing bubble inflated, busted and ripped more than 7 million Americans from their homes. Read more

 Home Prices Rise by 12% Year over year in September

CoreLogic a leading residential property information, analytics and services provider, today released its September CoreLogic Home Price Index report. Home prices nationwide, including distressed sales, increased 12 percent on a year-over-year basis in September 2013 compared to September 2012. This change represents the 19^th consecutive monthly year-over-year increase in home prices nationally. On a month-over-month basis, including distressed sales, home prices increased by 0.2 percent in September 2013 compared to August 2013*.

Consumer Confidence in Homebuying Hits All-Time low

Looming government uncertainty, lack of affordability weigh on industry

Consumer confidence in housing significantly widened last month, as most taxpayers were turned off by the federal government shutdown and the ongoing debt ceiling debate, taking a toll on American’s outlook toward the housing market. The share of consumers who believe it’s a good time buy a house declined to 65% — an all-time low — while the number of those who believe mortgage rates will go up in the next year fell to 57%, according to Fannie Mae’s latest monthly survey.  Read more

Economic News

The October nonfarm payroll report showed 204,000 jobs were created in the month, while the unemployment rate came in at 7.3 percent in line with estimates. Economists had expected 120,000 new jobs in October.

August Factory Orders slipped 0.1 percent following a 2.4 percent drop in July orders, while September factory orders climbed 1.7 percent, in line with estimates. Economists in a Reuters survey had expected August orders to rise 0.3 percent.

ISM Nonmanufacturing Index Rises to 55.4, Above Expectations

U.S. nonmanufacturing sector expanded last month at a slightly faster pace  than expected, according to data released Tuesday by the Institute for Supply  Management. The reading on employment last month improved significantly.  The ISM’s nonmanufacturing purchasing managers’ index rose to 55.4 in October  from 54.4 in September.  Forecasters surveyed by Dow Jones Newswires had expected last month’s PMI  to be little changed at 54.0. Readings above 50 indicate activity is  expanding.

Consumer Sentiment falls to 72.0 in early November, below the 75.3 expected.

Bonds closed below the 200-day Moving Average, which makes us very cautious.  If you were one of those that headed our advise on Friday and locked into a rate, you locked in at the right time.  Mortgage Bonds continued to drift lower and Mortgage Rates higher on fears that the recent strong manufacturing data could prompt the Fed to taper sooner rather than later.  The better than expected ISM Index numbers helped to push Bond prices lower throughout the session. The 4% coupon fell by 28bp to end the session at 105.00. Stocks were able to close in positive territory – the Dow was up 69.80 points to 15,615.55, the Nasdaq was up 2.33 points to 3,922.04 while
the S&P 500 rose by 5.10 points to end at 1,761.4. Oil was last seen at $94.64/barrel down $1.74. Next week brings the delayed October Non-farm payrolls report where employers are expected to have hired 100K workers, down from the 148K created in September.

Weekly Survey of Rates from the Mortgage Bankers Association

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.33 percent, the lowest rate since June 2013,  from 4.39 percent, with points decreasing to 0.26 from  0.41 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 4.36 percent, the lowest rate since June 2013,  from 4.43 percent, with points increasing to 0.27 from 0.26 (including  the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.42 percent, the lowest rate since June 2013, from 3.51 percent, with points remaining unchanged at 0.30 (including the origination fee) for 80 percent LTV loans.

The Fed’s Meeting

The Federal Open Market Committee had their meeting Wednesday. The Fed said it has “decided to await more evidence that progress will be sustained before adjusting the pace of its purchases. Accordingly, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40B per month and longer-term Treasury securities at a pace of $45B per month.”  This means that QE Unlimited will rage on.  Good news   for Mortgage Rates and the Housing Market. Read more

Housing News

U.S. Home Prices Rise at Fastest Pace Since February 2006

The Case Shiller 20-city Index on a year-over-year basis rose to 12.8% in August versus the 12.4% expected and above the 12.4% recorded in July.  From July to August there was a 1.3% increase.  Overall it was a solid report, but double digit gains are not expected going forward as the uptick in rates have slowed price appreciation in many parts if the country.  Read more

Pending Home Sales Fall on Declining Home Affordability

Pending home sales declined 5.6% from August to September, as home affordability receded under the influence of higher mortgage rates, home prices and consumer uncertainty over the state of the U.S. government and national economy. Read more

Economic News

Retail Sales in September fell by 0.1%, but was inline with estimates and when stripping out autos, sales rose more than expected by 0.4% versus 0.2%.  The government shutdown and debt ceiling issues impacted consumer spending habits.

Inflation at the wholesale level remained tame at the Producer Price Index (PPI) declined by 0.1% and was inline with expectations as was the Core PPI coming in at 0.1%.

Social Security benefits to rise 1.5% after inflation adjustment in 2014.

Consumer Confidence in October came in at 71.2, below the 73.1 expected and well below the 80.2 recorded in September due to the impact of the government shutdown.

Weekly Jobless Claims for state unemployment benefits totaled 340,000. Economists in a consensus survey had expected initial claims to dip to 335,000, following last week’s 350,000 jobless claims.

Sources: Bloomberg, Reuters, Fox News, CNBC, MMG, Housingwire

Mortgage Rates continued to improve as Bond Prices traded sideways and above the two hundred day-Moving Average since Tuesday.  Stocks saw modest gains today as the Dow rose by 61.07 points to end at 15,570.2 , the S&P 500 was up 7.70 points to 1,759.77, while the Nasdaq gained 14.40 points to 3,943.36. Oil was last seen at $97.95/barrel up 83 cents. Next week’s events – FOMC meeting and a boatload of economic data.  The recommendation is to lock into rates, as frothy Bond Prices could bring out the profit takers.

Mortgage Rate Chart April to Oct 2013

Weekly Survey of Rates from the Mortgage Bankers Association

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.39 percent, the lowest rate since June 2013, from 4.46 percent, with points increasing to 0.41 from  0.31 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 4.43 percent, the lowest rate since June 2013, from 4.51 percent, with points increasing to 0.26 from 0.15 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 4.15 percent from 4.16 percent, with points decreasing to 0.27 from 0.44 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.51 percent, the lowest rate since June 2013, from 3.53 percent, with points decreasing to 0.30 from 0.31 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 5/1 ARMs was unchanged at 3.25 percent, with points decreasing to 0.26 from 0.32 (including the origination fee) for 80 percent LTV loans.

Senator Paul Threatens to hold up Janet Yellen Federal Reserve Nomination

Sen. Rand Paul is threatening to put a hold on the nomination of Janet Yellen to chair the Federal Reserve, a source close to the Kentucky Republican said Friday.  Paul is insisting on a vote on his Fed transparency bill, and has informed Senate leadership of his intentions, the source said.

“As part of Senate consideration of the Janet Yellen nomination to be Chair of the Federal Reserve, I will request a vote on my bipartisan Federal Reserve Transparency Act, S. 209. The American people deserve transparency from the federal reserve and the federal government as a whole,” Paul said in a statement following the reports.        Read more

Housing News

Can You Trust JP Morgan with Your Home Loan?

Many are staying away from applying for a Mortgage with JP Morgan and the country’s Big Banks that participated in dishonest activities that were responsible for the country’s economic disaster.  They don’t believe that we should forgive and forget or reward bad behavior.  Remember, these institution’s are responsible for many Americans loosing their retirement nest eggs and equity in their homes.  So, next time you are in need of home financing, use only professionals with a proven honest reputation.

JPMorgan’s reported $13 billion settlement with U.S. authorities over shady investment practices sets a precedent that could have ghastly consequences for the bank, as well as for its main rivals. In rolling over so completely, the bank has made itself vulnerable not only to further attacks from various government agencies, but also to civil trial lawyers out for blood on behalf of wronged investors. The result could be an orgy of expensive and draining litigation that could ensnarl Wall Street for years to come. Read more

Plenty of Demand for Housing in 2014

Plenty of pent-up demand will help support the housing recovery in 2014 and beyond, helping to offset the impact from increasing mortgage rates as stated in the recent Kiplinger Letter.  Last year, 13.6% of adults aged 25 to 34 were living at home with their parents…the highest share in over a decade and two percentage points over the historical norm.  That’s 800,000 young adults who will be in the market to buy or rent their own digs.  Expect more slow seepage than a swift flood, given high student debt levels, the tough job market and rising mortgage rates. Years…not months…of readjustment.

Home Prices Rise Again in September

Home price growth resumed in September after slowing down a bit, DataQuick noted in a new research report.  Besides the short summer pause, home price growth has spread consistently across the country over the past 12 to 18 months. Here’s a small excerpt from the DataQuick report.

According to Gordon Crawford, Ph.D. and vice president of analytics for DataQuick, this steady increase in home prices should have some immediate implications on various areas of the housing market.

“We expect that the home price growth we have experienced as of late will begin to affect multiple areas of the housing landscape,” Crawford said. “Some immediate implications to look for include an increase in home price listings and overall sales as homeowners with negative equity are gradually swept toward a position of positive equity, a decrease in foreclosures as homeowners have the equity to sell and avoid default, and an increase in demand for home equity lines of credit as borrowers look to tap into increased equity from home price growth.”

Just how important is home buying to the U.S. economy? It’s worth trillions…not just from home sales, but in state and local government revenue, sales of furniture, appliances, etc., and the spin-off from income earned by construction crews, Realtors and more. All told…$1.30 to $1.80 in economic activity from every $1 of housing sales.  And some state economies are more dependent than others on real estate.  It accounts for 17% to 19.5% of the economies of Fla., Ariz. and Nev., for example, compared with only about 12% of all economic activity in Neb., Ky. and W.Va.

Economic News

Sales of Existing U.S. Homes Fall As Affordability Drops

Purchases of previously owned U.S. homes fell in September for the first time in three months, retreating from an almost four-year high as rising prices and mortgage rates discouraged would-be buyers.

Sales dropped 1.9 percent to a 5.29 million annual rate, the National Association of Realtors reported today in Washington. The median forecast of 67 economists in a Bloomberg survey called for the pace to slow to 5.3 million. Prices climbed 11.7 percent, pushing affordability to an almost five-year low, the group said. Read more

Jobs Report

The Sept Jobs numbers were released.  But at the end of the day the figures didn’t matter because the markets continue to feel that QE Unlimited will continue to ride on…and rightly so.

The Labor Department reported that employers added 148K workers in September, below the 183K expected.  For July and August, the numbers were revised up by a total of 9K while the Unemployment Rate fell to 7.2%, the lowest level since November 2008.  The Labor Force Participation Rate, a measure of how many people are looking for work, was unchanged at 63.2% after falling in August to a 35-year low. There was nothing in this Jobs Report to get excited about.

More Americans Than Forecast Filed Jobless Claims

More Americans than forecast filed applications for unemployment benefits last week as California continued to work through a backlog.

Jobless claims decreased by 12,000 to 350,000 in the week ended Oct. 19 from a revised 362,000 in the prior period, a Labor Department report showed today in Washington. The median forecast of 48 economists surveyed by Bloomberg called for a decrease to 340,000. Applications in California remained elevated and analysts weren’t able to determine how many non-federal workers filed due to the government shutdown, a Labor Department spokesman said. Read more

Consumer Sentiment falls to 73.2 for the last reading in October and the lowest
since December 2013. and below the 74,5 expected.

Durable Goods Orders Rise

Orders for long-lasting U.S. goods increased by 3.7 percent in September. Economists in a consensus survey had expected durable goods to rise by 2 percent, following August’s 0.1 percent rise.

Sources: CNBC, Bloomberg, CNN, MMG, Housingwire

Mortgage Bond Prices have improved since Washington ended the threat of a shut  down. Interest rates continue to fall as Bond Prices rise. Mortgage Bond prices are up – $105.12, only $1.97 away from their high of 107.09  on April 30th and has gained back $3.49  since the multi year low hit back on September 5th. This is Great News for Mortgage Rates.  Headed into the weekend, we recommend locking into Mortgage Rates as Mortgage Bonds retreated from resistance at their 200-day Moving Average.  As always, things can change quickly, so don’t procrastinate.

Stocks had a decent day – the Dow was up 28 points to 15,399.65, the S&P rose by 11.35 points to 1,744.50 (record close) while
the Nasdaq gained 51.13 points to end the week at 3,914.27. Oil was last seen at $100.89/barrel also near unchanged levels.

Weekly Survey of Rates from the Mortgage Bankers Association

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.46 percent from 4.42 percent, with points decreasing to 0.31 from  0.44 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) increased to 4.51 percent from 4.45 percent, with points decreasing to 0.15 from 0.21 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 4.16 percent from 4.15 percent, with points increasing to 0.44 from 0.37 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.53 percent from 3.52 percent, with points decreasing to 0.31 from 0.34 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 5/1 ARMs remained unchanged at 3.25 percent, with points increasing to 0.32 from 0.29 (including the origination fee) for 80 percent LTV loans.

Housing News

Is the Housing market Making a Major Shift?

The real estate market has been one of the strongest pillars of the economy following the greatest financial downturn since the Great Depression. Amid low interest rates and a great deal of intervention from policymakers, home buyers received an added incentive to purchase a home. Meanwhile, sellers enjoyed low inventory levels and rising prices. However, a new survey finds that sellers might be losing their control on the market. Read more

Homeowners Impact on Net Worth

Mortgage Bonds tried to rally Friday morning but were soon overtaken by equities as the day unfolded. Optimism that a deal will be reached in D.C. regarding the shutdown and the debt ceiling issues the catalyst that fueled Stocks higher. The 4% Mortgage Bond closed near unchanged down 9bp to 104 31.  Bonds failed to break through the 200-day average, which moved rates off their recent lows.  We are recommending Floating, not Locking into Mortgage Rates at this time.

Stocks ended higher – the Dow rose by 111.04 points to 15,237.11, the S&P 500 was up 10.64 points to 1,703.20 while the Nasdaq gained 31.13 points to 3,791.87. Oil was last seen at $101.82 down $1.19.

Weekly Survey of Rates from the Mortgage Bankers Association

The refinance share of mortgage activity increased to 63 percent of total applications, the highest level since August 2013, from 61 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6 percent of total applications.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.49 percent, the lowest rate since June 2013,  from 4.62 percent, with points decreasing to 0.34 from  0.41 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.  The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 4.53 percent, the lowest rate since June 2013, from 4.66 percent, with points decreasing to 0.22 from 0.29 (including the origination fee) for 80 percent LTV loans.  The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.55 percent, the lowest rate since June 2013, from 3.68 percent, with points increasing to 0.33 from 0.28 (including the origination fee) for 80 percent LTV loans.  The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs decreased to 3.26 percent, the lowest rate since June 2013, from 3.39 percent, with points decreasing to 0.28 from 0.35 (including the origination fee) for 80 percent LTV loans.  The effective rate decreased from last week.

Janet Yellen will be the first woman to lead the Federal Reserve

The president has reportedly selected his nominee to replace outgoing Federal Reserve Chairman Ben Bernanke, and his official pick is Janet Yellen, according to members of the Senate Banking Committee.

Yellen, already vice chair of the Federal Reserve Board of Governors, took over as the official ‘Fed Chair nominee’ Tuesday night, creating some certainty for a stock market that has been on shaky ground since the start of the government shutdown.

Tim Johnson, chairman of the Senate Banking Committee, released a statement applauding the president’s plan to nominate Yellen.  Read more

Tighter Underwriting Standards Squeeze Mortgage Credit

Mortgage credit availability declined in September, suggesting a gradual tightening of lending standards, the Mortgage Bankers Association reported Tuesday.

Credit availability continues to weigh on the market as more lenders remove key product offerings such as loans with terms greater than 30 years and/or interest-only features, explained Mike Fratantoni, the MBA’s vice president of research and economics.

“Just as before, we believe this reflects lenders implementation of the ability to repay/qualified mortgage regulation which comes fully into effect in January,” Fratantoni stated. Read more

Housing News

Economic News

Fidelity Sells off Short-Term U.S. Debt Ahead of Ceiling

The nation’s largest manager of money market mutual funds said Wednesday that it no longer holds any U.S. government debt that comes due around the time the nation could hit its borrowing limit. Read more

Weekly Jobless Claims

Weekly claims for state unemployment benefits rose to 374,000. Economists in a consensus survey had expected initial jobless claims to rise by 3,000 to 311,000. Read more

Consumer Confidence Falls to four month Low

Consumer confidence fell for the first time in four weeks as citizens’ view of the economy deteriorated to its lowest point since May. Per Businessweek: The Bloomberg Consumer Comfort Index fell in the week ended Sept. 29 to minus 29.4 from minus 28.1. A measure of attitudes about the economy slumped as lawmakers failed to resolve their differences over the nation’s budget, culminating this week in a shutdown of the government that risks slowing the expansion.

“Political tensions that led to the current government shutdown, and the coming policy fight over the debt ceiling, are likely behind the decline in consumer comfort,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. A prolonged fight over the budget “carries significant risk to overall consumer and business sentiment.”

The National Federation of Independent Business (NFIB) reported this week that small business sentiment declined in September to 93.9 from 94.1 in August.  Business owners are watching the events in Washington and there was a large drop in the percentage who expect the economy to improve.

Sources: CNBC, Bloomberg, Housingwire, MMG, Businessweek

I am recommending locking into rates for short term transactions, as prices not only stalled today, but also dropped. The jobs report was not released due to the government shutdown, so there was no catalyst to move prices. The 4% Bond fell by 16bp to end the week at 104.94, up just a meager 10bp for the week. The Dow gained 76.10 points to 15,072.58, the S&P 500 rose by 11.84 points to 1,690.50 while the Nasdaq was up 33.41 points to end at 3,807.75. Oil was last seen at $103.62/barrel up 31 cents.

The National Average 30 Year Fixed Rate reported by Freddie Mac on Oct 3rd, was 4.22% with 0.70 points and the 15 Year Fixed Rate was 3.29% with 0.70 points.

Fed Gevernor Rosengren says taper can happen when Fed has compelling evidence of recovery – sees very slow removal accommodation over several years. Read more

Housing News

First-time homebuyers sidelined by financial challenges

By most accounts, this year is shaping up to be a positive one for housing, with prices, sales and construction numbers consistently on the rise.  However, there is a catch. Investors may be buying homes — along with some homeowners — but the overall homeownership rate among Americans continues to fall behind historic homeownership levels. In fact, the homeownership rate declined for the fifth consecutive year in a row, reaching 63.9%, according to the Census Bureau’s latest American Community Survey. Read more

Economic News

U.S. Default

The government shutdown will soon take a backseat to the looming October 17 deadline for the debt ceiling.  Yesterday, the U.S. Treasury put out the following statement: “In the event that a debt limit impasse were to lead to a default, it could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth—with many private-sector analysts believing that it would lead to events of the magnitude of late 2008 or worse, and the result then was a recession more severe than any seen since the Great Depression.”

Strong words from the Treasury.  Speaker of the House John Boehner pledged to avoid a default and would use a combination of Republican and Democratic votes to increase the debt limit if necessary.

Jobs- ADP reported private employers added 166K jobs in September, below the 170K expected. August revised lower to 159K from 176K.

Jobless claims inch higher; mired at pre-recession levels

The number of Americans filing new claims for jobless benefits edged higher last week but remained at pre-recession levels, a signal of growing strength in the labor market.  Initial claims for state unemployment benefits rose 1,000 to a seasonally adjusted 308,000, the Labor Department said on Thursday. Read more

Sources: Bloomberg, CNBC, MMG, Housingwire, KCM, Reuters

Home Loan Rates have moved lower again as Bond Prices are about half way back to their best levels seen in April of this year. Much of the recent Fed speak, some of which is noted in this article, has been responsible for the market improvement, which is a complete reversal of the Fed’s comments earlier in the summer that roiled the Bond market and pushed Home Loan Interest Rates higher.                                                                                                                                                                                                                  Mortgage Bonds continued to drift higher Friday aided by a decline in Stock prices as the threat of a government shutdown looms. The Bond rose by 25bp to end the session at 104.81; another good day for Interest Rates. Stocks ended lower – the Dow ended at 15,258.24 down 70.06, the S&P lost 6.92 points at 1,691.75 down 6.92 points while the Nasdaq dropped 5.83 points to 3,781.59. Oil was last seen at $102.78/barrel down 25 cents.

Wait for Rates to move Lower or Lock in Now

I have lived through this many times and while it’s human nature to want to catch the bottom, some have kicked themselves for holding out.  I think it will take a lot more “Easing” talk from the Fed, a poor Jobs Report and poor reports for other leading economic indicators to move Bond Prices back to levels seen on April 30th of this year.  Hence, the “Bird in the Hand” logic.   What would you do? Lets say you can save $300 dollars per month based on where rates are now, but can save an extra $50 per month if you wait and rates move lower. Would you wait?  This has been a fast moving volatile market and betting $300 to save an extra $50 is not a bet I would make. Not with the current market conditions.

Technically, the rise in Mortgage Bonds has stalled a bit.  We are still floating, but ever so more cautiously.  So, have your home loan application in process and be ready to lock into a rate at a moments notice.

Rates Improve in Latest Freddie Mac Survey

Freddie Mac reported in their Weekly Survey for the week ending September 26th, that the average contract interest rate for conforming 30-year fixed-rate mortgages decreased to 4.32 percent from 4.50 percent, with points 0.70 respectively for 80 percent loan-to-value ratio (LTV) loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.37 percent from 3.54 percent, with points of 0.70 respectively for 80 percent LTV loans.

Fed’s Dudley: Two key tapering tests not yet met

The Federal Reserve still needs to push hard against threats to the U.S. economic recovery, and fiscal uncertainties in particular “loom very large right now,” an influential Fed policymaker said on Monday.

New York Fed President William Dudley defended the U.S. central bank’s shock decision last week not to trim its aggressive bond-buying, arguing in a speech that any changes to the quantitative easing program mush be based on the most recent measures of economic health. Read more

More Good News for Mortgage Rates

Home Loan rates got a little more help on Thursday when Narayana Kocherlakota, head of the Minneapolis Federal Reserve Bank said the U.S. central bank needs to take a far more aggressive approach to lowering high levels of unemployment in a situation that has strong parallels with the radical action the Fed took to break the back of high inflation a generation ago.  Read more

As per the most recent Kiplinger Letter- Look for long-term interest rates to climb back from this week’s dip following the Federal Reserve’s announcement that it’s not prepared to start tapering off bond buying. Once the sugar high wears off, financial markets will realize that not much has changed: The Fed will start slowly reducing its support, though probably not earlier than Dec., and only if the economy shows more strength.

Meanwhile, a small lift for housing activity, which has zigzagged this year…rising swiftly in spring, then slowing sharply in summer. With housing a rare pillar of growth in this economy, the Fed wants to make sure the upward trend continues.

Housing News

New Home Sales Rise in August

Sales of new U.S. single-family homes rose by a seasonally adjusted annual rate of 421,000 units in August. Economists polled by Reuters were expecting new home sales to rise by 423,000 from 394,000 the month before. Read more

Pending Home Sales Fall 1.6% in August

U.S. home buyers signed fewer contracts to purchase existing homes in August, as higher mortgage rates and higher home prices weighed on housing affordability.  So-called pending home sales fell 1.6 percent month-to-month, according to the National Association of Realtors, but are still 5.8 percent higher from a year
ago. Read more

Are we in a Housing Bubble? Not Even Close, experts say

While some borrowers might pull out of the housing market at the sight of the the slowdown in home prices, market experts are cautioning consumers not to slam on the housing brakes just yet. Home prices only increased from June to July by 0.6%, Lender Processing Services revealed Monday in its U.S. Home Price Index.  However, from last year, July prices soared 8.7% above 2012 levels, the company said.  Read more

Fact 45% of residential home sales in August were all cash.

Economic News

Durable Orders rise by 0.1% in August, below the 0.5% expected. July revised to -8.1% from -7.4%.

Jobless Claims Hit a Six-Year Trough as U.S. Growth Pushes Along

The number of Americans filing new claims for jobless benefits fell last week to a near six-year low, a promising sign for the labor market. Separately, the U.S. government left its estimate for economic growth in the second quarter unchanged, but said prices for goods and services purchased by U.S. households fell for the first time in four years.  Initial claims for state unemployment benefits dropped 5,000 to a seasonally adjusted 305,000, the Labor Department said on Thursday. Read more

U.S. personal income increased by 0.4 percent in August, while consumer spending came in at 0.3 percent. Economists had expected personal income to rise by 0.4 percent, from the prior reading of 0.1 percent. Consumer spending was forecast at 0.3 percent, up from 0.1 percent in the previous month.  The personal savings rate climbed to 4.6% from 4.5%.

Inflation remained tame as measured by the Core PCE coming in at 0.1% last month while the year-over-year PCE was unchanged at 1.2%, well below the Fed upper target of 2%.  The low inflation and weak labor market gives the Fed cover to keep printing money.

Consumer Sentiment was reported to be inline at 77.5 for the final reading in September.

Sources: Housingwire, CNBC, Bloomberg, MMG, Wall Street Journal