We recommend Floating/Not Locking Mortgage Rates at this time, as Bond Prices attempt to recover.  The 4% coupon rose by 56bp to end the session at 102.78.  Comments from Fed members on delaying QE taper past September coupled with weak data from New Home Sales gave Bonds a big lift on Friday. Lending some support to Bonds on Thursday was the jump in Weekly Initial Jobless Claims rising by 13K to 336K, inline with estimates.  The jobs data will be closely watched by the Fed in its decision on tapering.

St. Louis Fed President James Bullard told CNBC Friday that he didn’t think there was a need to hurry to cut back on the Fed’s bond-buying program. Read more

Stocks rose after getting beat up in the past two weeks – the Dow was up 46.77 points to 15,010.51, the S&P 500 was up 6.54 points to 1,663.50 while the Nasdaq rose by 19.08 points to end at 3,657.79. Oil was last seen at $106.34/barrel up $1.31.

Housing News

The Federal Housing Finance Agency reported that home prices rose 7.7% in the year ended in June as the housing recovery continues.  From May to June, prices rose by 0.7%.

New Home Sales drop 13.4% in July from June to 394K units annualized and below the 485K expected. June’s numbers were revised lower to 455K from 497K.

Uncertainty binds U.S. Mortgage Finance System

While there’s no doubt a type of housing recovery is underway, analysts are at odds about the stability of the market, which is blocking private capital from making a comeback. On the reverse side, others feel housing is in full swing and the right policies are in play. Read more

Economic News

Initial Jobless Claims rising by 13K to 336K, inline with estimates.  It is the highest level in a month, but remain near post recession lows.  The 4-week average, which smoothes out seasonal abnormalities, fell by 2,250 to 330,500, near 6 year lows.

Mortgage Statistics

At the end of 2011, 8.2% of mortgages had at least 1-payment past due and another 4.4% of mortgages were in the foreclosure process.  At the end of 2012, 7.5% of mortgages were late and another 3.7% of mortgages were in foreclosure.  At the end of June 2013, 6.8% of mortgages were late and another 3.3% of mortgages were in foreclosure (source: Mortgage Bankers Association).

Sources: CNBC,Bloomberg, Housingwire, MMG

Mortgage Bonds  plunged for the week on taper fears and positive economic data. The 3.5% fell 50bp to end at $99.06.  We recommend floating Mortgage Rates into next week.  Technically, the Bond is near the lower end of the recent trading range – this is good news as prices could bounce.  Couple this with Stocks on shaky ground, gives us cover to start the day Floating.  It would not surprise us to see Stocks continue to selloff after yesterday’s drubbing due to the Middle East uncertainty and weak retail earnings and guidance.  The Dow fell 30.72 to 15,081.47, the S&P lost 5.49 points to 1,655.83 while the Nasdaq fell 3.33 points to 3,602.77. Oil was last seen at $107.80/barrel up 49 cents.

Dennis Lockhart from the Atlanta Fed said yesterday that economic data remains too mixed for Fed voting members to lay out a clear plan for tapering at the next FOMC meeting.  Fed Chairman Bernanke has said that tapering may begin at the end of the year, but could be extended into the first quarter of 2014.

Housing News

Housing Recovery Continues to Heat Up

Despite all odds against the housing recovery, the market is steadily improving and housing experts do not expect the sector to lose its momentum any time soon.  Regardless of an inadequately housing supply, rising home prices reacting to strong demand and difficult lending environment, market expectations remain bullish on housing.  Nonetheless, housing is in its early stages of recovery and panelists at the Bipartisan Policy Center’s conference believe it’s not time for the Federal Reserve to take their foot off the bond-buying gas pedal just yet.  “There is a cyclical and structural nature to the problem,” explained Paul Weech of Housing Partnership Network.  He added, “We haven’t solved for the underlying structural problem and if we revert back to the norm, we still have millions of homes trying to get back in the full market recovery.” Read more  

Housing Starts rose by 5.9% from June to July to 896K units annualized, inline with estimates while Building Permits were up 2.7% to 943K, above the 934K expected.

Economic News

Weekly Initial Jobless Claims fell by 15K to 320K, a level not seen since October of 2007.  The 320K was below 339K expected.  There were no apparent seasonal distortions in the numbers. The jobs market has been improving and the Fed will be closely watching the numbers leading up to the mid-September FOMC meeting.

Inflation in July, as measured by the Consumer Price Index (CPI) and the Core CPI, both remained tame at 0.2%, inline with estimates.  On a year-over-year basis, CPI is at 2% while the Core is at 1.7% – both numbers within the Fed’s target.

Empire Manufacturing Index fell to 8.6 in August from the 9.4 registered in July but better than the 6.0 expected.  At 10:00am the Philly Fed and the NAHB Housing Market Index are set to be released.

Sources: CNBC,MMG, Housingwire,

Technically, Bonds continue to receive support from the 25-day Moving Average. Good news for Mortgage Rates.  With Stocks looking weak, we will continue to Float Mortgage Rates/Not locking.

The capital markets were very quiet  with low volumes on Friday. There were no economic reports. The 3.5% ended at 100.97 up 12bp and closed just near where it closed last Friday. Stocks continued to drop with 4 days of losses in five and had their worst weekend since June. The Dow fell 72.81 points to 15,425.51, the S&P 500 dropped 6.06 points to 1,691.42 while the Nasdaq finished the week at 3,660.10 down 9 points. Oil was last seen at $106.01/barrel up $2.62. 

Housing News

Representing a new post-bubble high, Las Vegas experienced a 31.2% jump in annual home prices in July, becoming the first metro to surpass 30% growth since the beginning of the recovery.

In the latest home data index released by Clear Capital, July home price trends continued to be strong both nationwide and when broken down between the nation’s four major regions.

Nationally, home prices grew 9.3% from last year, and were up 1.6% over the previous quarter. Interestingly enough, national home prices remained 33.4% below peak values, indicating the new norm for the nation’s housing.

“While July home prices continue to ramp up throughout the country led by Las Vegas posting more than 30% yearly growth, let’s not forget a healthy recovery means moderation as the new normal takes hold,“ said Alex Villacorta, vice president of research and analytics at Clear Capital. Read more

Economic News

Weekly claims for state unemployment insurance totaled 333,000 in the most recent week. Economists had expected claims to rise to 337,000, compared with 326,000 in the previous week.

U.S. self-reported daily consumer spending was $89 in July, little changed from the $90 reported in June and May, according to a poll by Gallup. The relatively flat spending levels of the past five months are consistent with the weak gross domestic product reports of the past three quarters, the polling company said.

Sources: MMG,CNBC,Housingwire, Bloomberg

Wishful thinking – but we have been calling for a Summer rally and have pointed out how Bonds rallied each of the past two years in the month of August. That theory received a tailwind on Wednesday, as the Fed talked down the economic recovery and confirmed that the Fed’s Bond buying program will continue for a while longer. Great news for Mortgage Rates as the Bond moved above it’s 25-Day Moving Average.

However, volatility was back on Thursday as a stronger than expected ISM Manufacturing Report and better than expected Initial Jobless Claims tanked Bonds. Then Bonds reversed higher again on Friday with the news of a weaker than expected Jobs Report.  Mortgage Rates, which move in the opposite direction of Bond Prices, went along for the ride as well.  Looking at the technical picture, Bond Prices and Mortgage Rates have improved significantly, as the move above the 25-Day Moving Average and a “Bullish Hammer” pattern which appeared in the chart on Thursday, may indicate the beginning of a Summer rally for Bond Prices and Lower Rates for Mortgage’s. We recommend floating, not locking Mortgage Rates at this time.

The Dow closed at 15,658.36 up 30.34 points, the S&P 500 was up 2.80 points to 1,709.67 while the Nasdaq was up 13.84 points to 3,689.59. Oil was last seen at $106.73/barrel down $1.16.

Freddie Mac reported Thursday that the 30-yr fixed rate conventional mortgage is at 4.39% when paying 0.7 in points and fees.

Steady Fed: Printing Presses to Keep on Rolling

Interest rates will hold near zero and the Federal Reserve will continue buying $85 billion in bonds every month while the economy continues to improve at a “modest” pace, the central bank said Wednesday.

Amid a backdrop of gradually improving economic data and concerns of asset price inflation, the Fed provided no further clues after its policy meeting this week that it will be easing back the throttle on easy money.

No changes are imminent to interest rates, but the $85 billion monthly money-printing program known as quantitative easing will be trimmed back only if the data points, particularly on unemployment, continue to improve.

“There is nothing in the latest FOMC statement released today to suggest that Fed officials have changed their minds about starting to taper the monthly asset purchases in September,” said Paul Ashworth, chief U.S. economist at Capital Economics. Read more

Housing News

Home Prices Rise Most Since 2006, Pace Cools – S&P Case/Shiller

U.S. single-family home prices rose in May, though the pace of gains cooled compared to the month before, a closely watched survey showed on Tuesday.

The S&P/Case Shiller composite index of 20 metropolitan areas gained 1 percent on a seasonally adjusted basis, shy of economists’ forecast for a 1.5 percent increase. That marked a slower pace from April’s 1.7 percent rise. Read more

Pending Home Sales Declined by 0.4% vs the -1.7% expected in June, down from the 6.7% registered in May as higher home loan rates put a crimp on sales. Pending Home Sales is a contract that has been signed, but that has not closed.

14,000 Home Sales Daily

That is the average number of homes that sell each and every day in this country according to the National Association of Realtors’ (NAR) latest Existing Home Sales Report. NAR reported that sales had increased 15.2% over the year before. According to the report, annualized sales now stand at 5.08 million. Divide that number by 365 (days in a year) and we can see that, on average, almost 14,000 homes sell every day.

Economic News

The Associated Press reports that four out of five U.S. adults experience poverty at some point during their lifetime.

Consumer Confidence for July declines to 80.3 from the 81.4 registered in in June and below the 81.6 expected.

U.S. Gross Domestic Product rose 1.7 percent in the second quarter. Economists in a Reuters survey forecast a 0.9 percent rise in GDP in the second quarter, compared to the previous quarter’s 1.8 percent gain.

The U.S. Economy Created 200,000 Jobs in July. Economists surveyed by Reuters had expected the report from ADP and Moody’s Analytics to show the private sector created 180,000 jobs in the month.

Weekly claims for state unemployment benefits fell to 326,000. Economists in a Reuters survey forecast that jobless claims would rise to 345,000 in the latest week, up 2,000 from the week prior.

The Institute for Supply Management reading for July rose to 55.4 from 50.9 the month before. Economists polled by Reuters were expecting the ISM reading to rise to 51.9. A separate report showed construction spending in June fell 0.6 percent. Construction spending had been forecast to rise 0.4 percent after a 0.5-percent increase the month before.

 The Jobs Report showed that employers added 162K new jobs in July, below the expected range of 175K – 224K.

Mortgage Bonds were able to close above the 25-day Moving Average for two consecutive weeks – good sign for Mortgage Rates. However, Bond Prices still remain beneath the Falling Trend Line for Bond Prices. In order for Mortgage rates to fall, Bond prices need to close above the falling Trend Line.

Bond Prices rose by 9bp to end the session at 100.88, and above resistance  at the 25-day Moving Average for the second straight week. Stocks ended just slightly positive, after spending the majority of the day in the red. The Dow closed up 3.22 points to 15,558.83, the S&P 500 Index was up 1.40 points to 1,691.65 while the Nasdaq added 7.98 points to end the week at 3,613.16. Oil was last seen at $104.49/barrel down $1.00.

Looking ahead, next week will start off slow with just a few economic releases on Monday and Tuesday.  But – things really heat up come “hump day, as it will be Fed Day along with GDP and the ADP Report.  Then next Friday we receive the all-important Jobs Report.  Next week will likely determine whether the Fed starts tapering QE Unlimited in September.  If the numbers are soft – which we expect, we may just see QE3 roll on as is.

No matter what happens next week, we see the selling in Mortgage Bonds overcooked with prices ripe for a recovery.  Maybe next week will set the stage for an August Bond rally like we have seen each of the last two years. So the advise for now, is to Float and Not Lock Mortgage Rates at this time.

Government Regulations to Require 20% Down to Buy a Home

The recent Kiplinger Letter wrote –  The initial proposal, requiring borrowers to make a 20% down payment or banks to take the first 5% of loss on a securitized mortgage that winds up going bad, is under fire. Opponents say too many middle-class borrowers can’t muster 20% and banks can’t afford to risk a 5% loss, so the reg would severely crimp home buying.  The feds will back down a bit in the end. By mid-2014…a lower threshold for down payments and maybe less risk for banks that lend outside that parameter.

Housing News

Economic News

U.S. consumer sentiment rose in July to the highest level in six years as Americans felt better about the current economic climate, though they expected to see a slower rate of growth in the year ahead, a survey released on Friday showed. Read more

Weekly claims for state unemployment benefits totaled 343,000, versus the previous week’s total of 334,000. Economists polled by Thomson Reuters had expected 340,000 claims. In a separate report, orders for long-lasting goods were up 4.2%. Economists polled by Reuters had expected an increase of just 1.7%.

Durable Orders had an upside surprise surging by 4.2% in June, well above the 1.8% expected.  The Durables news has pushed Bonds into the red.

Sources: CNBC, Bloomberg, Kiplinger, MMG, Housingwire

*Disclaimers

Mortgage Bonds fell off a cliff Friday after the Labor Department reported that 195K jobs were created in June, well above the 166K expected while the April and May numbers were revised higher by 70K. In addition, hourly earnings rose by 0.4%, up from 0.0%, which can be viewed as inflationary. Mortgage Bond Prices fell 203bp to 98.88, pushing Mortgage Rates higher. Mortgage Bond players are hearing that consensus is calling for a September taper, which also influenced the move lower. Stocks finished on a high note – the Dow was up 147.29 to 15.135.84, the S&P 500 was up 16.48 points to 1,631.89 while the Nasdaq was up 35.71 points to end the week at 3,479.38. Oil was last seen at $103.63 up $1.98.  Bonds are severely oversold and are due for a bounce. Therefore, we recommend Floating Mortgage Rates, Not Locking and see if prices can stabilize.

Rising Mortgage Rates Boosted Pending Home Sales in May

Pending home sales increased 6.7%, month over month, in May to reach the highest level since late 2006, according to the National Association of Realtors’ (NAR) Pending Home Sales Index. That is an increase of 12.1% from May 2012. The jump was mostly a result of the fact that consumers were looking to lock in on favorable interest rates.

“Even with limited choices, it appears some of the rise in contract signings could be from buyers wanting to take advantage of current affordability conditions before mortgage interest rates move higher,” said Lawrence Yun, NAR chief economist, in a statement. “This implies a continuation of double-digit price increases from a year earlier, with a strong push from pent-up demand.” Mortgage rates surged to the highest level in almost two years last week after the Federal Reserve announced a plan to wind down its stimulus program by mid-2014. The announcement incited a sell-off in the bond market that drove rates even higher.

In addition, home prices keep rising. The national median home price is forecast to spike by more than 10% to nearly $195,000 by the end of this year, Yun said. This would be the strongest increase since 2005, when the median increased 12.4%.  Existing-home sales are forecast to increase 8.5% to 9%, reaching about 5.07 million in 2013, the highest in seven years. This would be slightly above the 5.03 million total recorded in 2007.

CoreLogic reported that home prices, including distressed sales, rose by 12.2% in May 2013 compared to May 2012, the biggest annual gain since February 2006.  Excluding distressed sales, prices increased by 11.6% year-over-year.  From April to May, prices rose by 2.6% including distressed sales, excluding prices rose by 2.3%.  However, prices are 20.4% below the peak set back in April 2006.  Tight inventories and historically attractive home loan rates have been the fuel behind the rise.   CoreLogic went on to say that prices are expected to rise by 13.2% from June 2013 to June 2014 and see a monthly rise nearly 3% from May to June.

Bank America Home Appraisals being Reviewed in India?

Wow! How would you feel if the appraisal for your home loan was sent to India to be reviewed?  Probably not so good.  It’s bad enough appraisals are done through central management companies that are outside of the State in which the property is located.  But now, Bank of America will be sending Appraisals to be reviewed outside of our country, to India.  Yeah, that makes a lot of sense.

Economic News

The June ISM index was reported at 50.9 and the employment component of the index was below 50, shows the economy barely expanding.

Jobs report– The U.S. economy created 195,000 new non-farm payroll jobs in June, the Labor Department reported, after an upwardly revised 195,000 jobs were created in May. The unemployment rate was unchanged at 7.6 percent as more people entered the labor market.  To put the current jobs environment in perspective, in 2009, at the height of the recession, there was an average of 421,000 jobs lost each month.  So far this year, employers added an average of 189K workers each month.

Sources: CNBC, Bloomberg, MMG, Housingwire, MortgageOrb

We are currently recommending Floating Mortgage Rates headed into the weekend as Bonds close near the highs.

Mortgage Rates had another crazy week, with intraday swings of one quarter to one half of a percent.  Rates changed several times during each day of the past week.  However, there are low rate opportunities; you just have to be able to lock the rate at that very moment and that’s difficult to do in this type of market.  So, make sure you have your paperwork in so you can lock in when the time is right.

On Thursday, Mortgage Bonds continued to stabilize and move higher which moved Mortgage Rates lower, on dovish QE talk from several Fed members and also due to noted fund manager Jeffrey Gundlach saying he was bullish on the sector.

Mortgage Bonds managed to close near unchanged after a big drop earlier in the session closing at 101.47 up 3bp.
The Dow dropped 114.89 to 14,909.60, the S&P 500 fell by 6.92 points to 1,606.28 while the Nasdaq closed near unchanged at 3,403.25. For the quarter the Dow gained 2.2%, the S&P rose 2.3% and the Nasdaq was up 4.2%. Oil was last seen at $96.48/barrel down 58 cents. Next week is holiday shortened – the Bond markets will close early at 2:00pm ET on Wednesday and Stocks will close at 1:00pm. All capital markets will be closed on Thursday for 4th of July. Non-farm payrolls will be
released on Friday morning and it is expected that employers added 165K new jobs in June.

Economic Data confirmed the Fed will be active buyer of Bonds for a while, good for Mortgage Rates, as the Core Personal Consumption Expenditures (PCE) rose by just 0.1%, inline with estimates while year-over-year Core PCE was a scant 1.1%, well below the Fed’s upper end range of 2%.

Mortgage Rates Skyrocket on Fed Fears

Mortgage Rates Rose last week on fears of less Fed intervention in the mortgage-bond market.

“Interest rates moved up sharply following the Federal Reserve press conference last Wednesday, June 19th, where it was indicated that the Fed could begin tapering their asset purchases later this year,” said Mike Fratantoni, MBA’s vice president of research and economics.

The 4.46% Fixed home loan rate that carries an additional 0.8 point/fees is up from 3.93% in the previous week. It was the largest weekly increase since 1987 and the highest it’s been since August 2011.

Fed In Overdrive Trying to Curb Rising Mortgage Rates

After this month’s Federal Open Market Committee minutes reached the public, the market took a hefty kick and mortgage rates surged higher.  As a result, the Federal Reserve intensified its efforts to curb a growth-threatening rise in long-term interest rates, Bloomberg reports.

“It is pretty obvious that the Fed was caught off guard by the market’s reaction given the lengths to which they have gone to reshape market expectations,” Drew Matus, deputy U.S. chief economist at UBS Securities, said. “The range of both speakers and outlets suggests that these comments are, if not coordinated, then at least part of a collective — likely futile — effort to re-mold the market’s view of the June FOMC press conference.”  Read the full story

Spiking Mortgage Rates Even with their recent rise, mortgage rates are still “incredibly low” by historical standards, so they will not halt the housing recovery, Trulia Chief Economist Jed Kolko told CNBC on Tuesday. Full Story

Tight Credit Is Slowing Housing Recovery

Tight credit, particularly for young people, is hindering the housing recovery, according to research published at the Joint Center For Housing Studies at Harvard University.
According to the State of the Nation’s Housing 2013 report, the recession has significantly boosted the rental market in the past several years. In 2012, the number of renter households in the U.S. increased by 1.1 million, and construction of new multifamily units increased at a double-digit rate.
However, this has come at the expense of the housing market.
Meanwhile, interest rates and home prices, although now on the rise, have hit historic lows, the unemployment rate is improving, inflation has stabilized, and the country’s economic picture has improved overall.

So why are so many young people still opting to rent?
As the study reveals, banks have tightened their lending standards, which in turn is preventing young people from buying homes. People age 25 – 54 saw their homeownership rates reach the lowest point in 2012 (record keeping began in 1976), according to the report.
“Tight credit is limiting the ability of would-be home buyers to take advantage of today’s affordable conditions and likely discouraging many from even trying,” says Chris Herbert, director of research at the Joint Center for Housing Studies. “At issue is whether, and at what cost, mortgage financing will be available to borrowers across a broad spectrum of incomes, wealth and credit histories moving forward.”

Currently, more than 20.6 million households are spending more than half of their household income on housing, the report finds. And with so many homeowners struggling just to keep their homes, it could be that many younger people simply do not want to face the burden of having a mortgage.
Considering current economic conditions, the need for a strong rental market remains important, the research finds. However, federal budget sequestration will pare down the number of households receiving rental housing assistance.
“Given the profoundly positive impact that decent and affordable housing can have on the lives of individuals, families and entire communities, efforts to address these urgent concerns as well as longstanding housing affordability challenges should be among the nation’s highest priorities,” says Eric S. Belsky, managing director of the Joint Center for Housing Studies.

Housing News

Home Prices took a major leap in April, setting a new monthly record for gains.  From March to April, home price gained 2.6 percent and 2.5 percent for the top 10 and top 20 U.S. markets, respectively, according to the latest S&P/Case-Shiller Home Price Indices.  Average prices rose 11.6 percent and 12.1 percent in April from a year ago.

New Home Sales jumped to 476,000 in May, much higher than the 462,000 that analysts expected, according to the Commerce Department.  Compared with May 2012, sales were up 29 percent.  Home sales data will be closely watched in the coming months for signs of strain from the rise in mortgage rates.  The housing market recovery, which is helping to soften the blow on the economy from tight fiscal policy, has been largely driven by record-low mortgage rates, thanks to the Federal Reserve’s generous monetary stimulus.

Pending Home Sales rise by 6.7%, above the 1.5% expected.

Spiking Mortgage Rates Even with their recent rise, mortgage rates are still “incredibly low” by historical standards, so they will not halt the housing recovery, Trulia Chief Economist
Jed Kolko told CNBC on Tuesday. Full Story

Economic News

U.S. orders for long-lasting goods rose a better-than-expected 3.6 percent in May, compared to a 3.5 percent increase the prior month. Economists polled by Reuters had expected goods orders to rise by 3.0 percent.

US consumer confidence rose to the highest level since January 2008.

First quarter Gross Domestic Product (GDP), came in at 1.8% versus expectations of 2.4%.  The drop was attributed towards lower consumer spending and an pullback in business investment.

Weekly Jobless Claims fell 9,000 last week to a seasonally adjusted 346,000, according to the Labor Department, largely in line with expectations. The four-week moving average for new claims fell 2,750 to 345,750.

Consumer Spending rebounded 0.3 percent in May, matching estimates, after a revised 0.3 percent decline in the prior month, according to the Commerce Department.

Core Personal Consumption Expenditures (PCE) rose by just 0.1%, inline with estimates while year-over-year Core PCE was a scant 1.1%, well below the Fed’s upper end range of 2%.

Personal Spending rose by 0.3% in May after a 0.3% decline and was just below the 0.4% expected.  Personal Incomes jumped by 0.5% versus the 0.2% anticipated.

The Personal Savings rate moved up to 3.2% from 3%

Consumer Sentiment at 84.1, above the 82.7 expected and up from the initial May reading of 82.7.

Chicago PMI falls to 51.6 in June from the My reading of 58.7 and below the 55.5 expected.

Sources: CNBC, Housingwire, MMG, Bloomberg, Mortgageorb

Once again, we will try to cautiously float after another day of plunging  Bond Prices. Mortgage Bonds continued their downward spiral today as sellers kept coming out of the woodwork screaming, “GET ME OUT!” The 3.5% coupon ended at 100.31 down a whopping 112bp. The drop in prices can be attributed towards the layout of tapering by Mr. Bernanke at Wednesday’s Fed meeting along with better than expected economic data this week. The yield on the 10-yr T Note rises to 2.54% for the biggest weekly selloff since 2003.

The blow off occurred after the Fed statement read that the downside risks to the labor market and the economy has improved since the fall. In addition, at his press conference, Fed Chair Bernanke said that if the Fed’s forecasts come in as expected, the committee sees likely reduction in Bond purchases this year.

Stocks were able to finish high on the Quadruple Witching Friday. The Dow gained 43.38 points to 14,801.70, the Nasdaq finished at 3,357.25 down 7.30 points while the closely watched S&P 500 settled at 1,592.52 up 4.33 points. Oil was last seen at $93.92/barrel down $1.22.

Below is a chart of the FNMA Bond.  It’s easy to see the damage done to Bond Prices since May 13th.

Important to note is that Mortgage rates move higher when Bond Prices move lower.  Hence the reason why mortgage rates moved up as much and as fast as the did.

The Fed more or less met market expectations for this meeting, though some traders thought it would lay out a groundwork that could lead to at least a modest tightening of its $85 billion a month bond-buying program by September.

What to do Now?

Many market analysts believe that the sell off in Bonds is extremely over done and due for a correction.  Rates are still very low by historical standards and the recommendation is to watch for a correction that may move rates lower and then look to lock into a Mortgage rate.  However, that does not mean delaying you Mortgage Application, as you want to be in a position to lock into a rate at a moments notice.

Housing News

For the first time in over seven years, the nation’s home builders are feeling solidly confident about the housing market. A monthly sentiment index from the National Association of Home Builders jumped eight points in June to a reading of 52.  Anything above 50 means builders view sales conditions as good.

Housing starts rose 6.8 percent to a 914,000 annualized rate in May, versus 853,000 in April. Reuters estimated housing starts would grow to 950,000.

S&P expects Home Prices to Keep Rising

Surging home prices throughout the country have spurred talk of a housing bubble, as many markets are still recovering from the last bubble bursting in 2007.

But Standard & Poor’s Ratings Services states that, although double-digit gains are ultimately unsustainable, we may not have reached bubble status quite yet.

Home price appreciation can be attributed to a number of factors, including historically low rates, property purchases by investors who are renting homes out and a shortage in home inventory. In fact, recently the S&P/Case-Shiller home price index hit an 11% year-over-year increase, from 8%.

Economic News

Weekly claims for state unemployment benefits rose to 354,000. Economists polled by Reuters had forecast that claims would rise to 340,000, from the previous week’s 334,000 claims.

Another volatile week for Mortgage Rates as Bonds tried clawed their way higher.  Bonds started the day Friday in positive territory only to give back gains at 1pm.  The 3% coupon traded as high as 100.88 and as low as 100.38 closing at 100.47 up 6bp. Remember when the Bond was just below $105.  Bonds will have to make up that spread in order for rates to revisit their lows.

Thursday afternoon Mortgage Bonds soared in the last hour and a half of trading (closing 66 basis Points higher on the day) after a source close to the Fed at the Wall Street Journal suggested that the Fed members may not talk of tapering at next week’s FOMC meeting. Considering the volatility, Bonds may be slowing inching their way back and Mortgage Rates will continue to move sideways and lower as long as the fed doesn’t talk about ending their Bond purchasing program and as long as reports on the economy are not to positive.

The advise is to lock into rates short term -days to weeks and Float them longer term- weeks to months.

Freddie Mac reported on Thursday that the 30-yr fixed rate rose to 3.98% in the latest week and to obtain that rate an average point of 0.7 must be paid. If not paying
the point, the rate would be 4.16%.

Home Price Growth Expected to Exceed 7% in 2013

Home prices could grow as high as 7.2% in 2013, JPMorgan Chase concluded in a new report.  Analysts with the bank claim prices are posting historically strong gains as the market moves into the more active summer season.   With high investor demand contributing to booming home prices as well as growth in prices of lower-tiered units posting stronger gains than higher-tiered units in major metropolitans, JPMorgan is confident in its 7.2% growth projections.   Furthermore, the banking giant has revised its projections to 3.9% in 2014 and 3.2% in 2015, with surprises likely to be on the upside.  “Despite the lack of data for investor demand, we saw all-cash sales remain higher than 30% of housing sales,” analysts at JPMorgan said.

Given the limited housing inventory, net demand in April has climbed to the highest level since 2006.  At the same time, the market share of distressed sales declined below 20% for the first time since 2008, accounting for 18% of April’s sales, which is 10% lower than last year, JPMorgan explained.

Economic News

Initial Jobless Claims fall 12K to 334K, below the 345K expected.

Retail Sales rise by 0.6% in May, above the 0.3% expected and up from the 0.1% registered in April, x-autos sales rose by 0.3%, inline with expectations.

Wholesale inflation rises as the Producer Price Index rose by 0.5% in May, above the 0.1% expected.

The University of Michigan’s consumer sentiment index came in at 82.7 for June. Economists polled by Reuters were expecting the index reading to remain flat at 84.5, the highest level since 2007.

Sources: CNBC, Bloomberg, Housingwire, MMG,

Volatility continued Friday after the Labor Department reported that there were 175,000 new jobs created in May, which was better than expected. And even though the it beat expectations, the jobs were mostly in the service sector -the Bureau of Labor Statistics said food services and drinking places and retail trade were the jobs created. The 3% fell 69bp to end at 100.00, right on upport. Stocks blasted off again on the jobs data, the Dow was up 207.50 to 15,248.12, the S&P gained 20.82 to 1,643.38 while the Nasdaq was up 45.16 to
3,469.22. Oil was last seen at $96.23/barrel up $1.47.

Rates are Up. Now What?

Over the last three weeks mortgage rates have moved up by about a half of one percent.  Comments made by Fed Chairman Bernanke regarding Bond purchase tapering and better than expected economic news spurred Bond selling which is why Mortgage Rates have moved higher.

So what do you do now?  Well if your buying a home, be sure you and the sellers have clear closing date expectations.  This will help you to time locking into a rate.   If you are refinancing, be sure to work with a Mortgage Professional that monitors the Markets for signals of interest rate movements.  A word of caution to those refinancing.  If refinancing provides you with significant savings at the current rates,  don’t hold out for them to move lower, as you put at risk guaranteed savings, to save a few more dollars.  Be sure to have you Home Loan Application in process and don’t wait to do so until you hear of a good rate. The point is these markets are volatile and fast moving. So, you want to be in a position to Lock a Low Rate the instant its available.

Of course, the big question is what’s ahead for Mortgage Rates.  Many market experts believe the rise in interest rates due to the sell off in Bonds is very over blown and expect to see a rebound.  But no one really knows, as the markets swing in either direction depending on economic and world news.  But lets get real; even at current levels Mortgage Rates are a great deal by historical standards.

Did You Blow Your Once-In-A-Generation Chance To Buy A Home?

The U.S. housing market crash of 2007-2008 presented a big opportunity for  those in the market to buy a home. Mortgage rates lurched lower, continuing their downward trajectory to  historic lows reached in late 2012. And, of course, home prices came way  down.  Now, there is concern that these trends are starting to reverse. Increased talk  of tapering of monetary stimulus by the Federal Reserve has provided the impetus  for the rise in interest rates in recent weeks.  Read more

 In a dramatic about-face for the housing market, sellers are now calling the shots.

A survey of more than 2,000 Americans found that 33% of the 365 who were searching for a home have been on the hunt for more than a year and many were willing to make compromises on where they live or the type of home they would buy in order to close the deal, Century 21 Real Estate reported Wednesday.  “The recovery has transformed the mindset of many buyers and sellers who grew accustomed to the buyers’ market we saw for years,” said Rick Davidson, CEO of Century 21. “Buyer confidence is building back up and demand is strong… sellers are now in a more favorable position.” Read more

Economic News

ISM manufacturing unexpectedly contracted to 49.0 in May. Economists polled by Reuters were expected an ISM manufacturing reading of 50.7 in May, unchanged from April.

Construction spending rose 0.4 percent, compared to a forecast of a rise of 0.8 percent, and up from a 1.7-percent decline in March.

The Labor Department reported that there were 175,000 new jobs created in May, which was better than expected.

FROM VOLCKER TO BERNANKE – The target range for the short-term fed funds rate is between 0% and 0.25% today.  The range was between 19% and 20% in January 1981 (source: Federal Reserve).

Sources: CNBC, MMG, CNN Money, Business Insider, Bloomberg, Housingwire