This week mortgage rates moved lower as the 4% Bond is nearing levels hit only twice this year. We will continue to float Mortgage Rates, not locking, but very cautiously. Rates are favorable, be careful as the technicals don’t give us any clear signs. Seeing this formation after an uptrend doesn’t mean you can sit back and take a vacation; for it does show indecision for Bonds.

Mortgage Bond prices rallied this week pushing Mortgage Rates lower, as Stocks were pressured on heavy selling as investors evaluated valuation levels against economic growth uncertainty. The major Stocks indexes had declines between 2.5% and 3.5%. This despite weekly initial jobless claims falling to near 7-yr lows. Today’s better than expected Consumer Sentiment capped Bond gains to a minimum, despite the plunge in Stocks. The 4% coupon closed at 104.59 up 6bp. Stocks fell as investors grow jittery and looked to secure profits. The Dow fell 143.47 points to 16,026.75, the S&P 500 lost 17.39 points to end at 1,815.69, while the tech heavy Nasdaq fell below 4,000 to end at 3,999.73 down 54.37 points. Oil was last seen at $103.37, closing near unchanged. Next week’s economic reports will touch on key sectors – housing, manufacturing, inflation and the job market (weekly claims).

U.S. Treasury Secretary Jack Lew told CNBC on Wednesday, by U.S. standards, we still have a lot of work to do to boost the economy. Read more

Fed minutes: Committee agreed 6.5% threshold was ‘outdated,’ vote to remove was unanimous

The members of the Federal Open Market Committee agreed unanimously in March that a 6.5 percent unemployment target for raising interest rates was ‘outdated’ and should be removed, according to Fed meeting minutes. Read more

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) remained constant at 4.56 percent, with points increasing to 0.33 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) increased to 4.49 percent from 4.46 percent, with points decreasing to 0.14 from 0.27 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages remained constant at 3.62 percent, with points increasing to 0.31 from 0.23 (including the origination fee) for 80 percent LTV loans.

Commercial Real Estate Lending

Commercial Mortgage backed Securities (CMBS)– The 10 Yr Swap rate moved lower to finish the week at 2.798%, down from last weeks 2.80%.

Housing News

Three Reasons to Sell Your Home this Spring –by KCM

Many sellers are still hesitant about putting their house up for sale. Where are prices headed? Where are interest rates headed? These are all valid questions. However, there are several reasons to sell your home sooner rather than later. Here are three of those reasons:

1. Demand is about to skyrocket

Most people realize that the housing market is hottest from April through June. The most serious buyers are well aware of this and, for that reason, come out in early spring in order to beat the heavy competition. We also have a pent-up demand as many buyers pushed off their home search this winter because of extreme weather. Sellers in markets where seasonal weather is never an issue must realize that buyers relocating to their region will increase dramatically this spring as these purchasers finally decide to escape the freezing temperatures of the winters in the north.

These buyers are ready, willing and able to buy…and are in the market right now!

2. There Is Less Competition – For Now

Housing supply always grows from the spring through the early summer. Also, there has been a growing desire for many homeowners to move as they were unable to sell over the last few years because of a negative equity situation. Homeowners have seen a return to positive equity as prices increased over the last eighteen months. Many of these homes will be coming to the market in the near future.

The choices buyers have will continue to increase over the next few months. Don’t wait until all the other potential sellers in your market put their homes up for sale.

3. There Will Never Be a Better Time to Move-Up

If you are moving up to a larger, more expensive home, consider doing it now. Prices are projected to appreciate by approximately 4% this year and 8% by the end of 2015. If you are moving to a higher priced home, it will wind-up costing you more in raw dollars (both in down payment and mortgage payment) if you wait. You can also lock-in your 30 year housing expense with an interest rate at about 4.5% right now. Freddie Mac projects rates to be 5.1% by this time next year and 5.7% by the fourth quarter of 2015.

Moving up to a new home will be less expensive this spring than later this year or next year.

Economic News

Happy days here again? Jobless claims tumble to near 7 year low

The number of Americans filing new claims for unemployment benefits fell sharply last week to the lowest level in almost seven years, which could bolster views of an acceleration in job growth after a cold winter dampened hiring.  Initial claims for state unemployment benefits dropped 32,000 to a seasonally adjusted 300,000 for the week ended April 5, the lowest level since May 2007, the Labor Department said on Thursday. Claims for the week ended March 29 were revised to show 6,000 more applications received than previously reported. Read more

U.S. wholesale inventories rose at a slower pace in February than in the prior month, increasing 0.5 percent after a revised 0.8 percent gain in January, which could support views that restocking will not help the economy in the first quarter.

U.S. consumer credit rose more than expected in February, likely reflecting a surge in demand for student and automobile loans.

The Bank of England left its key interest rate unchanged at 0.5 percent and made no changes to its asset purchase target.

Consumer sentiment in the U.S. came in at 82.6. Economists had expected April’s advance reading of consumer sentiment to check in at 81.0, up slightly from March’s 80.0 reading.

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

A not too hot, not too cold March Jobs Report sent Stocks higher at the open, but closed lower while Bonds drifted higher throughout the session. Employers added 192K jobs last month, just below the 195K expected, while the Unemployment Rate remained steady at 6.7% with the previous 2 months revised higher by a total of 37K. The 4% coupon rose by 47bp to end at 104.16. As mentioned, Stocks declined – the Dow lost 159.84 points to 16,412.71, the S&P 500 declined by 23.68 points to 1,865.09, while the tech heavy Nasdaq plunged by 110.01 points or 2.6% to end the week at 4.127.72.  Oil was last seen at $101.17/barrel up 89 cents.

The current recommendation is to float, not lock into mortgage rates at this time.

Fed Chairman Yellen’s Damage Control

After last weeks sell off in stocks and bonds on the heels of Yellen’s first press conference, the Fed Chairwoman attempted to convince the markets that the Federal Reserve will continue to bolster the U.S. economy, Fed Chair Janet Yellen said on Monday, given the halting pace of the recovery and a still moribund job market.

In some ways, labor conditions are tougher now than in any other recession, Yellen said at a speech in Chicago. She added the Fed’s “extraordinary commitment,” in the form of massive bond-buying and ultra-low interest rates, is “still needed, and will be for some time.” read more

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) was unchanged at 4.56 percent, with points increasing to 0.31 from 0.29 (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 4.46 percent from 4.45 percent, with points remaining constant at 0.27 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages was unchanged at 3.62 percent, with points decreasing to 0.23 from 0.24 (including the origination fee) for 80 percent LTV loans.

Commercial Real Estate Lending

Commercial Mortgage backed Securities (CMBS)– The 10 Yr Swap rate moved lower to finish the week at 2.798%, down from last weeks 2.80%.

Housing News

Home prices rose 12.2% from February 2013 to February 2014.

CoreLogic reported that home prices, including distressed  sales, rose by 12.2% year-over-year in February, which represents 24 months of  consecutive year-over-year increases.  From January to February, prices were up  0.8%.  Corelogic forecasted that prices could rise by 10.5% year-over-year in  March 2014 and 0.5% from February to March.  However, despite the rosy gains,  prices are still nearly 17% below their peak, which was set in April 2006.  The  big gains from 2013 are starting to cool and come back down to more normal  historical levels.
“As the spring home-buying season kicks off, house price appreciation continues to be strong.  Although prices should remain strong in the near term due to a short supply of homes on the market, price increases should moderate over the next year as home equity releases pent-up supply”. Dr. Mark Flemmming, Chief economist for Corelogic

Economic News

March manufacturing activity came in at 53.7. The Institute for Supply Management’s (ISM) had been expected to show a reading of 54.0 versus the prior month’s reading of 53.2.  Any reading above 50 indicates growth.

Jobs market bounces back as weather effects wane

Job creation returned to form in March as companies shook off some winter blues, albeit in a manner slightly below Wall Street expectations.

The economy added 192,000 new jobs for the month, while the unemployment rate held steady at 6.7 percent, according to the Bureau of Labor Statistics. The numbers were around consensus and less than indicative of a robust rebound, but still a sign that slowdowns in January and February likely were influenced at least somewhat by inclement conditions.

“It probably means the Fed just stays on steady, but it also means that everybody who said, ‘Oh, we finally turned the corner and we’re going to be booming like crazy,’ they’re going have to hold off for a few months,” former White House economist Austan Goolsbee told CNBC.

The number was slightly below February’s 197,000 gain, which was revised upward by 22,000. January’s total also moved higher in the revised count, from an anemic 129,000 to 144,000. Read more

Orders for U.S. factory goods rose 1.6 percent in February. Economists had expected factory orders to rise by 1.2 percent, reversing the prior month’s 0.7 percent drop.

Sources: CNBC,Bloonberg, Reuters, MMG, Housingwire

We are floating Mortgage Rates, Not Locking and will  say “Thank You” for the Treasury auctions being “Over the Hills and Far Away” as  the Bond always seems to perform better with the additional supply on the  rearview mirror.  Technically, the 4% Bond has successfully closed above resistance at the 100  and 200-day Moving Averages, which now become support.

It is worth noting that the trading action in Stocks and  Bonds have been a mirror image.  Stocks have been opening higher and closing  well off those best level each day.  And oh, by the way, this trading trend  started last week, exactly when the Fed announced another $10B taper, so if  anyone says the decline in Stocks is anything but removal of the Fed’s Kool-Aid  pack…they should think again.  There is a saying, “don’t fight the Fed”…if the  Fed is removing easy money, Stocks may not be a great place to be….especially  with prices at historical highs.

Americans spent in February at its fastest pace since November… but the biggest  gains were in healthcare costs and utilities, certainly not areas we think makes  the world go around.  Personal Spending was up 0.3%, inline with estimates and  up from the 0.2% (revised from 0.4) in January.  Personal Incomes were also up  0.3%, also in line with expectations.  Inflation remained non-existent…the  Core PCE came in at 0.1%, inline and matched the January reading, while  year-over-year Core PCE is at 1.1%, well below the upper end of the Fed’s target  of 2%.   While we see inflation in areas like healthcare and college costs, many  other areas are seeing prices recede.   This low inflation reading is likely  going to keep the Fed Funds Rate at zero for quite some 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 4.56 percent, the highest level since January 2014, from 4.50 percent, with points increasing to 0.29 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 4.45 percent from 4.39 percent, with points increasing to 0.27 from 0.19 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.62 percent, the highest level since January 2014, from 3.52 percent, with points decreasing to 0.24 from 0.25 (including the origination fee) for 80 percent LTV loans.

Commercial Real Estate Lending

Commercial Mortgage backed Securities (CMBS)– The 10 Yr Swap rate moved lower to finish the week at 2.80%, down from last weeks 2.83%.

Fed’s Plosser: Market reaction to the Fed statement was surprising

Philadelphia Federal Reserve President Charles Plosser told CNBC Tuesday that Fed policymakers found the market’s reaction to its recent policy statement surprising, and that they tried to say very explicitly that they hadn’t changed their view. Read more

Housing News

Pending home sales fell for the eighth straight month in February, down 0.8 percent month-to-month from a downward revised January reading, according to an index from the National Association of Realtors. Sales are now down 10.5 percent from a year ago. read more

Economists in a consensus survey expected new home sales to rise by 0.5 percent in February, against a similar rate of increase in the prior month. March’s consumer confidence index was expected to have risen to 78.6, from 78.1 in the previous month.  Read more

A composite index of home prices in 20 major metropolitan cities rose 13.2 percent in January from the year-earlier period, S&P/Case-Shiller reported Tuesday. Economists had expected  the 20-city index to increase 13.3 percent.  Read more

Economic News

U.S. consumer sentiment fell to 80.0, according to the Thomson Reuters/University of Michigan’s final March reading, down from 81.6 during the month before. Economists polled by Reuters expected a reading of 80.5.

U.S. personal income rose 0.3 percent in February, while consumer spending climbed 0.3 percent. Economists had expected personal income to increase by 0.2 percent, slower than the prior 0.3 percent reading. Consumption had been seen up 0.3 percent, against the previous reading of 0.4 percent.

First-time claims for state unemployment benefits came in at 311,000 in the most recent week. Economists had expected initial claims to rise by 5,000 to 325,000. Read more

Fourth-quarter U.S. gross domestic product
The Bureau of Economic Analysis (BEA), an arm of the Commerce Department, reported on Thursday that the final reading of 4th quarter 2013 Gross Domestic Product (GDP) came in at 2.6%, well below the 4.1% recorded in the 3rd quarter.  For all of 2013, GDP averaged 2.6%, a modest number considering how much and how long the Fed has been underwriting the economic recovery through Quantitative Easing.  Within the report it revealed that consumer spending in the final quarter rose by 3.3%, the best in three years.

GDP measures the output of goods and services produced by labor and property in the U.S.

Orders for long-lasting U.S. factory goods increased 2.2 percent in February. Economists polled by Reuters had expected durable goods orders to rise by 1 percent, compared with the prior month’s 1 percent drop.

Sources: CNBC, Reuters, MMG, Housingwire, Bloomberg

Mortgage Bonds traded higher during Friday’s session, but the gains were modest as Stock prices traded much higher for most of the session. But towards 4pm ET, Stocks turned negative. There were no economic reports released. The 4% coupon rose by 12bp to end the session at 103.81. The Dow lost 23.40 points to 16,307.39, the S&P fell by 5.38 points to 1,866.59, while the Nasdaq dropped by 42,49 points to 4,276.78. We will continue to recommend floating, not locking into Mortgage Rates as Mortgage Bonds seem to be stabilizing.

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 4.50 percent from 4.52 percent, with points decreasing to 0.26 from  0.29 (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 4.39 percent from 4.41 percent, with points decreasing to 0.19 from 0.20 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.52 percent from 3.53 percent, with points decreasing to 0.25 from 0.28 (including the origination fee) for 80 percent LTV loans.

Commercial Real Estate Lending

Commercial Mortgage backed Securities (CMBS)– The 10 Yr Swap rate moved lower to finish the week at 2.83%, down from last weeks 2.71%.

Fed tapers another $10 billion

At its first meeting under new Chair Janet Yellen, the Federal Reserve agreed to dial down its stimulus package another notch, and changed its view on when interest rates will rise.  In moves widely anticipated by financial markets, the Fed Open Market Committee voted to reduce the pace of its monthly asset purchase program by $10 billion to $55 billion—a continuing process in the market known as “tapering.” Read more

Housing News

U.S. Home Resales drop 0.4% to 19-month Low 

U.S. home resales dropped slightly in February to a 19 month-low as cold weather and a shortage of homes for sale continued to sideline potential buyers. A separate survey showed factory activity in the U.S. mid-Atlantic region expanded far more than expected in March.

The National Association of Realtors said on Thursday home sales dropped 0.4 percent to an annual rate of 4.60 million units, the lowest level since July 2012, and in line with economists’ expectations. January’s sales pace was unrevised at 4.62 million. Read more

Home builders still cold on spring market

Confidence among the nation’s home builders edged up slightly in March but is still mired in the negative, way down from recent highs.  After plummeting 10 points in February, a monthly sentiment index from the National Association of Home Builders (HMI) rose just 1 point to 47. The line between positive and negative sentiment is 50 on the survey.

“The March HMI mirrors last month’s sentiment, as builders continued to be affected by poor weather and difficulties in finding lots and labor,” said NAHB Chairman Kevin Kelly, a home builder from Wilmington, Del.  Read more

Housing starts slide for 3rd straight month; price pressure dormant

U.S. housing starts fell for a third straight month in February, but a rebound in building permits offered some hope for the housing market as it struggles to emerge from a soft patch.  The Commerce Department said on Tuesday groundbreaking slipped 0.2 percent to a seasonally adjusted annual rate of 907,000 units. That followed January’s revised 11.2 percent decline and suggested underlying weakness in housing activity apart from the drag of cold weather. January starts were previously reported to have tumbled 16 percent.

Economists polled by Reuters had expected starts to rise to a 910,000-unit rate last month. Read more

Economic News

U.S. Weekly Jobless claims tick higher; four week average hits 4- month low

The number of Americans filing new claims for unemployment benefits rose less than expected last week, pointing to some underlying strength in the labor market.

Initial claims for state unemployment benefits increased 5,000 to a seasonally adjusted 320,000, the Labor Department said on Thursday. Claims for the week ended March 8 were unrevised. Economists polled by Reuters had forecast first-time applications for jobless benefits rising to 325,000 in the week ended March 15.

The four-week moving average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, fell 3,500 to 327,000, the lowest level since November. Read more

U.S. industrial production rose 0.6 percent in February. Economists polled by Reuters had expected industrial production to rise 0.2 percent. A separate report released earlier Monday showed factory activity in the New York state region accelerated in March.

Inflation tame at the consumer level – Consumer Price Index at 0.1% vs the 0.2% expected in February. Core at 0.1%, inline.  U.S. consumer prices rose marginally in February, but the lack of inflation pressures will probably not dissuade the Federal Reserve from dialing back its monetary stimulus.

The Labor Department said its Consumer Price Index nudged up 0.1 percent as a decline in gasoline prices offset an increase in the cost of food. The CPI had ticked up 0.1 percent in January and last month’s gain was in line with economists’ expectations. Read more

Sources: CNBC, Bloomberg, MMG, Housingwire, Reuters

Its a no brainer when it comes to lending on Single Tenant Investment grade Retail.  CMBS lenders are eagerly lending up to 75% LTVs.  We funded a CMBS loan on a CVS property located in MA. as part of a 1031 exchange for our client at the end of February.  The best part was the 159 basis point spread over the 10 year Swap rate, minimal fees and closing in only 18 days.

There are those that prefer not to use CMBS financing, as they believe that the underwriting requirements are to demanding.  However,  common sense underwriting seems to be playing more of a role in the CMBS market as of late.

CMBS loans have become more available and easier to underwrite in recent months and as rates climb, they become a more competitive choice for commercial financing.

We will continue to float Loan Rates, but we are extremely cautious given that Stocks fell on Friday as did Mortgage Bonds. If rates are favorable we recommend locking short term, measured in a few days to a few weeks. Otherwise, float if you can.
Tame inflation, a weak reading from Consumer Sentiment and a declining Stock market couldn’t boost Bond prices
today as traders grow jittery after the recent Bond rally. The 4% coupon finished at 104.41 down 12bp. Stocks got roughed up this week – for the week, the Dow fell 2.3% to end at 16,065.67, the S&P lost 2% to 1,841.13, while the Nasdaq dropped 2.1% to 4,245.39. Oil was last seen at $99.03/barrel up 81 cents.

Bond Prices struggle to stay above the important 200-Day Moving Average.   Remember that Mortgage Rates take their direction from Mortgage Bond Prices.  Lower Mortgage Rates are the result of higher Bond Prices, which in turn is the result of investors seeking the safe haven of U.S. Bonds due to uncertainty in global financial markets or global unrest, like the concerns over Crimea, as evidenced with the spike in Thursday’s Bond Prices, noted by the tall green candle in the chart below.  Seasoned mortgage professionals use these technical signals to help their clients lock into a low interest rate.

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 4.52 percent from 4.47 percent, with points increasing to 0.29 from  0.28 (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 4.41 percent from 4.37 percent, with points unchanged at 0.20 (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 increasing to 0.28 from 0.18 (including the origination fee) for 80 percent LTV loans.

Commercial Real Estate Lending

Commercial Mortgage backed Securities (CMBS)– The 10 Yr Swap rate moved lower to finish the week at 2.71%, down from last weeks 2.871%.

Still trust big Banks with your loan? –  Don’t.  US FDIC sues 16 banks for rigging Libor

The Federal Deposit Insurance Corporation sued 16 of the world’s largest banks on Friday, accusing them of collusively suppressing interest rates.  The lawsuit, filed in the federal district court in New York, was the latest to accuse financial institutions of conspiring to manipulate Libor, or the London Interbank Offered Rate.

The FDIC said the defendants’ conduct caused substantial losses to 38 banks that the U.S. regulator had taken into receivership since 2008, including Washington Mutual Bank and IndyMac Bank.

Among the banks named as defendants include Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank AG, HSBC Holdings, JPMorgan Chase, the Royal Bank of Scotland Group and UBS.

The lawsuit also named as a defendant the British Banks’ Association, the U.K. trade organization which during the period at issue administered Libor.

Housing News

Buying A Home Is Now 38% Cheaper Than Renting

Is renting or buying a better financial bet? Every six months, Trulia’s chief economist Jed Kolko runs the numbers to answer that question and help you stay on top of the trends.  So what does Trulia’s Winter 2014 Rent vs. Buy Report tell us? Although the gap between renting and buying is narrowing across the U.S., homeownership is still 38% cheaper than renting. Read more

Economic News

Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 315,000, the Labor Department said on Thursday. That was the lowest reading since late November. Economists had expected a reading of 323,000. Read more

Despite the harsh winter weather, employers created more jobs than expected in February.  The Labor Department reported that Non-farm Payrolls rose by 175,000 last month, above the 163,000 expected. This was the largest gain in three months.

U.S. retail sales rose slightly more than expected in February, pointing to some strength in the economy after harsh weather abruptly slowed activity in recent months.

Producer prices rose by 0.2 percent in February, the same rate of increase as the prior month. Core prices were seen gaining by 0.1 percent, versus the previous rise of 0.2 percent.

Consumer sentiment dipped modestly in early March to 79.9, from the 81.6 final reading in February. That was below analyst expectations for a reading of 82 and the lowest level since November.

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

After Friday’s fireworks supplied by the Jobs Report, we will float, not lock Mortgage Rates into the new week as Mortgage Bonds seems to have found support at the 200-day Moving Average.
The better than expected jobs data pushed Mortgage Bonds considerably lower Friday morning, but they did manage to cut some of the losses before the close of trading. The Mortgage Bond closed down 25bp to end the session at 104.16. The Dow finished at 16.452.72 up 30.83 points, the S&P 500 gained 1.01 points to end at 1,878.04, another record close. The Nasdaq fell by 15.90 points to end at 4,336.22. Oil was last seen at $102.55/barrel up 96 cents.

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 4.47 percent from 4.53 percent, with points decreasing to 0.28 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 4.37 percent from 4.47 percent, with points increasing to 0.20 from 0.13 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.52 percent from 3.56 percent, with points decreasing to 0.18 from 0.28 (including the origination fee) for 80 percent LTV loans.

Commercial Real Estate Lending

Commercial Mortgage backed Securities (CMBS)  – The 10 Yr Swap rate moved higher to finish the week at 2.871%.

Housing News

Home Prices Continue to Rise

CoreLogic reported that home prices, including distressed sales, rose by 12.02% in January 2014 compared to January 2013.  January marks the 23rd consecutive month of year-over-year prices gains.  The 12.02% year-over-year gain in January is up from the 11.02% rise recorded from December 2012 to December 2013.  In addition, prices increased 0.9% month-over-month from December to January.

Kiplingers– The housing recovery will remain somewhat spottyin the months ahead.  Mass., N.Y., Md., W.Va., Minn., Iowa, the Dakotas, Neb., Texas,
Colo., Utah and Mont…plus Washington, D.C., the median home price now matches or fell…
that much.) By the end of the year, Vt., Pa., Va., N.C., Tenn., Ky., Ind., Kan., Ark. ll take till 2016 or so before that benchmark is hit in Fla., Ariz. and Nev., states where the median is still 20% below the 2007 level.

By Jan. 1, 2015: 8 million home mortgagors still underwater, owing more on their loans than their properties are worth. With price gains slowing to 4%-4.5% on average this year, fewer mortgages will be pulled out of the depths than in 2013, when home values gained an average of 11% nationwide. Nearly 10 million borrowers…
representing 19% of all mortgaged homes…are trapped by such circumstances now.

Economic News

Surprise Rise in February Job Creation

Despite the harsh winter weather, employers created more jobs than expected in February.  The Labor Department reported that Non-farm Payrolls rose by 175,000 last month, above the 163,000 expected. This was the largest gain in three months.

New orders for U.S. factory goods fell 0.7 percent in January, slightly more than the 0.5 percent drop that was expected.  It’s another sign of slowing manufacturing activity.

The European Central Bank left its benchmark interest rate unchanged at 0.25%, euro briefly rises to session high

In its latest report on economic conditions around the country, the Federal Reserve said the effects of severe winter weather can be seen throughout the U.S. economy. Despite those headwinds, the economy continues to expand, with eight Fed districts showing improvement.

Sources: CNBC, Bloomberg, Kiplingers, Housingwire, MMG

We will continue to float Mortgage Rates into next week , but be prepared to lock ahead of next Friday’s Jobs Report.  Mortgage Bond Prices took a breather Friday from their recent run higher closing slightly lower due to a mixed bag of economic data this morning. The Bond fell by just 6bp to end the session at 104.81 and near the upper end of Friday’s range.   Remember Mortgage Rates move opposite Bond Prices.

Stocks had a seesaw day, trading positive, then negative and back to positive by day’s end. The Dow rose by 49.06 points to 16,321.71, the S&P 500 finished at 1,859.45 while the Nasdaq closed lower by 10.81 points to end the trading week at 4,308.11. Oil was last seen at $102.45/barrel near unchanged. Next week, the government will release the February Jobs Report where
it is expected that employers added 163K workers.

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 4.53 percent, the highest rate since week ending January 17, 2014, from 4.50 percent, with points increasing to 0.31 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 4.47 percent, the highest rate since week ending January 24, 2014, from 4.45 percent, with points increasing to 0.13 from  0.11 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.56 percent, the highest rate since week ending January 24, 2014, from 3.55 percent, with points decreasing to 0.28 from 0.33 (including the origination fee) for 80  percent LTV loans. The effective rate increased from last week.

Commercial Real Estate Lending

After three years of momentum building in commercial property lending, analysts are projecting that institutional lenders will place what could be record amounts of capital into commercial real estate in 2014.  Commercial Mortgage backed Securities (CMBS)  – The 10 Yr Swap rate move down from 2.80% earlier in the week to finish the week at 2.728%.

Commercial property lending is fundamentally strong, and lenders still maintain disciplined underwriting standards,  according to comments by Jones Lang LaSalle (JLL) executives attending the Mortgage Bankers Association’s Commercial Real Estate Finance/Multifamily Housing Convention on Feb.3, 2014.  At the same time, they said, fundamentals in the real estate market are improving due to growth in housing markets, construction, industrial production and improved consumer sentiment. Read more

Housing News

Home Prices in 2013 Post Biggest Annual Gain Since 2005 -S&P Case-Shiller

Home prices posted their largest annual gain last year since 2005, according to a report released Tuesday, amid a frenzy of sales activity, low mortgage rates, and reduced inventories during the first half of the year.  U.S. prices increased 11.3% in the fourth quarter compared to a year earlier, according to the S&P/Case-Shiller price index. An index that measures home prices in 20 major metro areas rose 13.4%.  But there are growing signs that, amid a slowdown in sales activity that began last fall, the pace of price gains could soon moderate. Read more

Toll Brothers revenue surges as home selling prices jump – the largest U.S. luxury home builder reported a 52% increase in quarterly revenues.

Upside Surprise for New Home Sales

Despite the harsh weather last month, New Home Sales rose by 9.6% from December to January to an annual rate of 468,000, well above the 400,000 expected.  The 468,000 was the highest level since July of 2008 and eases concerns of a housing slowdown.

US pending home sales up 0.1% in January vs. 2.0% estimate

Amid harsh weather that battered much of the U.S., signed contracts to buy existing homes held steady last month, according to the National Association of Realtors.  The nearly-flat reading caught economists by surprise.  Pending home sales edged up 0.1 percent to 95.0 in January, disappointing analysts who had expected sales to gain 2.0 percent, according to a consensus estimate from Reuters. Read more

Economic News

Unemployment Claims Spike

The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, but the underlying trend suggested no shift in labor market conditions.  Initial claims for state unemployment benefits increased 14,000 to a seasonally adjusted 348,000, the Labor Department said on Thursday. Claims for the prior week were revised to show 2,000 fewer applications received than previously reported.

Economists polled by Reuters had forecast first-time applications for jobless benefits slipping to 335,000 in the week ended Feb. 22, which included the Presidents Day holiday. While last week’s increase pushed them to the upper end of their range so far this year, it probably does not signal labor market weakness as claims tend to be volatile around federal holidays. Read more

Consumer Confidence dips to 78.1 in February, versus 80 estimate. The January Consumer Confidence Index was revised to 79.4 from 80.7.

U.S. gross domestic product growth in the fourth quarter was lowered to 2.4 percent. GDP had been expected to be lowered to a 2.4 percent annual rate, according to a Reuters poll of economists. That would be down sharply from the 3.2 percent pace reported last month and the 4.1 percent logged in the third quarter.

The February Chicago Purchasing Managers’ Index, a gauge of regional manufacturing activity, came in at 59.8. Chicago PMI had been expected to come in at 57.0, following the prior month’s 59.6. A reading above 50.0 indicates expansion in the sector.

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

Good day for Mortgage Rates and Bonds –but the gains stopped right at a ceiling of resistance at the 200-day MA.  The 200-day MA is falling in value each day, if the Bond continues to cling to the 200-day MA, Mortgage rates will continue to move higher and worsen. With that said… consider locking into rates at this time. Mortgage Bonds were able to bounce back today as the seesaw battle between Stocks and Bonds continued. Weak Existing Home Sales was a catalyst to push prices higher and rate lower as the Bond closed near resistance at the 200-day Moving Average at 104.19 up 16bp.  The Dow finished at 16,103.30 down 29.93 points, the S&P 500 lost 3.53 points to 1,836.25 while the Nasdaq lost 4.13 points to end the week at 4,263.41. Oil was last seen at $102.26 down 49 cents.

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 4.50 percent from 4.45 percent, with points decreasing to 0.26 from  0.34 (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 4.45 percent from 4.40 percent, with points decreasing to 0.11 from 0.14 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.55 percent from 3.49 percent, with points increasing to 0.33 from 0.25 (including the origination fee) for 80 percent LTV loans.

Housing News

Housing Starts in January declined by 16% from December, while Building Permits, a sign of future construction, fell by 5%.

Existing home sales down 5.1% in January, versus -3.5% estimate

Existing home sales fell more than expected in January and hit an 18 month-low as the combination of cold weather and a lack of housing stock sidelined potential buyers. The National Association of Realtors cites the disruptive and prolonged winter weather patterns, tight credit, limited inventory, higher prices and higher mortgage rates for the slip in Existing Home Sales.  Read more

Home builder sentiment tumbled in February to 46 from 56, according to the National Association of Home Builders’ monthly sentiment index, the largest drop in the history of the survey.  Fifty is the line between positive and negative sentiment.

Home Sales Up in 3 of 4 Regions

Some industry gurus are questioning whether the housing momentum we saw early in 2013 began to dissipate later in the year. The more dramatic have claimed the housing sector is still on shaky ground. Others have blamed the slowdown in sales on a lack of consumer confidence or rising interest rates.

The National Association of Realtors (NAR) just released their 2013 4th Quarter Housing Report. The report revealed that home sales numbers barely outperformed (an .08% increase) those in the 4th quarter of 2012.  We believe the leveling in home sales is directly attributable to a lack of salable listing inventory; specifically in the West.

Three of the four regions in the NAR report had an increase in sales: Northeast (+7.1%), Midwest (+2%) and South Regions (+3.6%). A big fall-off in sales occurred in the Western Region. The dramatic fall-off in the West (-8.1%) can be directly linked to a shortage of inventory in their hottest markets.  If the decrease in sales was caused by an eroding of consumer confidence and/or rising interest rates, we believe each region would have seen similar decreases.

Economic News

Inflation at the wholesale level continues to be nearly non-existent.

A revamped U.S. government reading on producer prices rose by 0.2 percent in January. Economists had expected January producer prices to rise by 0.1 percent, the same rate as the prior month’s advance.

U.S. household debt posted its largest quarterly increase since before the recession, according to the New York Fed.  Read more

A reading on New York State manufacturing activity came in at 4.48 in February. The Empire State manufacturing survey had been expected to show a reading of 9, down from 12.51 in January, according to a Reuters survey of economists.

Weekly claims for state unemployment benefits totaled 336,000. Economists had expected initial claims to dip by 4,000 to 339,000.

January’s consumer price index rose 0.1 percent, in line with expectations and against the previous month’s 0.3 percent gain.

Sources: CNBC, Bloomberg, KCM, MMG, Housingwire

We will continue to float Mortgage Rates, as Mortgage Bonds desperately cling to support.  Mortgage Bonds declined today and fell for the week after failing
to break above resistance levels from mid-November. Better than expected   Consumer Sentiment coupled with rising Stocks the culprits behind the move
lower. The Bond finished at 104.19 down 16bp, closing just beneath support at the 25/100/200-day Moving Averages. Stocks rose – the Dow was up 126.80 points to
16,154.39, the S&P gained 8.80 points to 1,838.63, while the Nasdaq had just a slim gain of 3.35 points to end the trading week at 4,244.02. Oil was last
seen at $100.27/barrel near unchanged.

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 4.45 percent from 4.47 percent, with points increasing to 0.34 from  0.25 (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 4.40 percent from 4.42 percent, with points increasing to 0.14 from 0.11 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.49 percent from 3.53 percent, with points decreasing to 0.25 from 0.28 (including the origination fee) for 80 percent LTV loans.

Yellen Says Recovery in Labor Market Far From Complete

Federal Reserve Chairman Janet Yellen said more work is needed to restore the labor market to health and pledged to maintain her predecessor’s policies by scaling back stimulus in “measured steps.”

While growth has picked up, “the recovery in the labor market is far from complete,” Yellen said today in the text of remarks to the House Financial Services Committee. “I am committed to achieving both parts of our dual mandate: helping the economy return to full employment and returning inflation to 2 percent while ensuring that it does not run persistently above or below that level.” Read more

Economic News

Retail Sales in January fell by 0.4% versus the 0.0% expected.  Retailers cited the harsh January weather for the decrease, which slowed shopping and auto buying. It was the second straight monthly decline.

Optimism among owners of small business in the U.S. crept higher in January, continuing a trend, amid hopes for higher sales.  The National Federation of Independent Business’s small business optimism index rose to 94.1 from 93.9 the previous month. It was the third straight month in a row that the index has improved.

Despite the upbeat direction, the NFIB said in a statement that the “index is still just treading water.”  The industry group said its real sales expectations subindex jumped to 15 percent in the month.  Hopes for an increase in sales resulted in expectations of a pick up in hiring. The employment-plans subindex climbed to 12 percent, its highest level since 2007. The NFIB said small firms added an average 0.12 workers per small business in the last three months.

U.S. weekly claims for unemployment benefits totaled 339,000, while retail sales in January fell 0.4 percent. Economists had expected initial claims to dip to 330,000. Meanwhile, January retail sales were expected to fall by 0.1 percent, against the prior month’s 0.2 percent rise.

Economists in a consensus survey expected business inventories to rise by 0.4 percent in December, the same rate of increase as November.