There seemed to be some stabilization in the Mortgage Bond markets and Mortgage rates on Thursday due to a  jump in weekly initial jobless claims, and the slight downward move in GDP. But then on Friday Bond Prices fell again pushing Mortgage Rates higher again.

Michael Schumacher, UBS; and CNBC’s Rick Santelli, both agreed that the sell of in Bonds and the Rise in interest rates is very over blown.  Schumacher expects the 10 Year to drop back down to 1.70%.                Watch interview

So, if you thought you missed the boat for low interest rates; you may have another shot at it.

The advice is to have your Mortgage applications in process and have your finger on the trigger to lock into rates once they move lower.  Waiting for word of lower rates before you to get your application in will not work.  This market has been volatile and fast moving.

With the recent fall in Mortgage Bond prices, home loan rates have hit the highs not seen in a year.  Freddie Mac reported yesterday that the average 30-year fixed conventional rate was at 3.81%, but to obtain that rate a borrower would have to pay 0.7 in points and fees.

S&P Home Prices Rise 10.9% Beating Expectations

The 20-city  S&P Case-Shiller house price index for March climbed 10.87% on the year.  This beat expectations for a 10.2% rise.  This is also the fastest pace of increase since April 2006.  February’s number was revised up modestly to show a 9.35% rise.  On the month home prices were up 1.12%, above expectations for a 1% rise.  February’s number was also revised up on a monthly basis to show a 1.32%  rise.  Q1 home prices were up 10.17% on the year, beating expectations for a 9.6%  rise. Q4’s number was revised down modestly to show a 7.25% rise.  Read more

Signed contracts to buy existing homes rose 0.3 percent in April from the previous month, according to the National Association of Realtors. The increase was less than the 1.5 percent rise analysts had expected.

Homes Selling as Fast as They Did During the Housing Boom

Strong demand and still limited supply mean homes are now selling nearly three times as fast as they normally would. The average number of days a listing stayed on the market in April was 46, down from 62 in March and down from the normal pace of 90-120 days, according to the National Association of Realtors. Read more

Suburban Sales Swell

House prices in the New York City suburbs, after a six-year roller coaster ride in which they lost roughly a quarter of their value, are climbing again. Read more

Total Increase a Buyer May Pay if They Wait

Experts have projected that U.S. home prices will appreciate by approximately 5% in 2013. The Mortgage Bankers Association, Fannie Mae and the National Association of Realtors have all projected that the 30-year mortgage rate will be at least 4% by the end of 2013. If we assume that prices and interest rates will rise as projected, here is the monthly difference a buyer may pay if they wait a year.

Almost Half Of U.S. Homeowners Still Underwater With Their Mortgages

More than 13 million homeowners were still underwater with their mortgages in the first quarter of 2013 – and about 9 million of them simply do not have enough equity to move, according to Zillow’s Negative Equity Report.  Although the national negative equity rate fell to 25.4% in the first quarter, most homeowners who are underwater will be staying put for now. It’s even tough for those homeowners who have some equity built up: According to Zillow, about 18.2% of homeowners who are not underwater simply do not have the financial means to get out of their current situation.
It’s especially tough for those who have 20% or less equity in their homes. According to Zillow, when these homeowners are included, the “effective” negative equity rate at the end of the first quarter was 43.6%, or a total of 22.3 million homeowners.
“Looking at the effective negative equity rate could explain why recent, healthy declines in the number of underwater borrowers haven’t yet translated into more homes for sale,” said Dr. Stan Humphries, Zillow’s chief economist, in a release. “The only cure is patience, as rising home values continue to build equity to the point where more homeowners can realistically sell.”
Interestingly, the trend is contributing to a shortage of available housing stock, which in turn is driving up home prices. As values increase, the situation is expected to improve.
As such, Zillow predicts the negative equity rate among all homeowners with a mortgage will fall to 23.5% by the first quarter of 2014.

Economic News

Consumer Confidence surges to 76.2 in May, well above the 68.1 in April and above the 72.5 expected.

Personal income was unchanged in March, and consumer spending was down 0.2 percent. Economists had expected personal income to rise 0.1 percent following a 0.2 percent increase in March, while consumer spending was seen unchanged after rising 0.2 percent in March.

The Labor Department reported that Weekly Initial Jobless Claims rose by 10K in the latest week to 354K and above the 340K expected.

Gross Domestic Product (GDP) rose by 2.4%, just below the 2.5% for the first quarter from the initial reading and just below the expectations of 2.5%.

Consumer Sentiment rises to 84.5, above the 83.7 expected.

Sources: CNBC, Bloomber, Housingwire, MMG, KCM Crew, Business Insider, Mortgageorb

Our thoughts and prayers go out to those who perished and survived the devastating tornado in Moore, Oklahoma. 

What a week for Mortgage Rates and Bond Prices. On Wednesday, an over reaction to Bernanke’s comments sent Mortgage Bond prices plunging. The Bonds were hit hard and about 5 times the magnitude of a typical trading day.  By the time the day was over Bonds lost 106 basis Points in Price.  Mortgage Rates, which move in the opposite direction moved higher. Bernanke was unclear as to whether the Fed will or will not pare back purchases. Bond Traders sold into the confusion and as technical support levels were broken, programmed trading kicked in which further exasperated the sell off.  As evidenced by the sell off in Stocks – nobody won on Wednesday’s confusing Fed testimony.

Wednesday was another glaring example that technicals mean nothing when you get surprise news. The volatile trading action also reminds us that exiting QE3 may not be as smooth as they might think. Even though prices are at their worst levels in a year – the Bond is within just a few basis points of support (101.75) seen last August – and at that time, Bonds staged an amazing rally.

With Bonds and Mortgage Rates trying to stabilize, we currently recommend locking into rates in the short term days-weeks and floating longer term.

Bernanke Roils Markets

Mortgage Rates Move Higher for Second Straight Week

U.S. mortgage rates moved higher for a second consecutive week, with the benchmark 30-year fixed mortgage rate climbing to 3.71%, according to Bankrate.com‘s weekly national survey. The average 30-year fixed mortgage has an average of 0.34 discount and origination points, Bankrate.com adds.
The average rate for a 15-year fixed mortgage increased to 2.92%, while the average jumbo 30-year fixed rate inched lower to 3.99%. Rates for adjustable-rate mortgages (ARMs) also rose: Rates for five-year ARMs increased to 2.68%, while rates for 10-year ARMs climbed to 3.22%.
According to Bankrate.com, sudden “glass half-full” economic sentiment continues to push bond yields and mortgage rates higher, and the benchmark 30-year fixed mortgage rate is now the highest since early April.
Despite the increase, however, mortgage rates have been in a narrow one-third of a percentage point range since December, the company adds. The last time the average mortgage rate exceeded 5% was April 2011.

Housing News

Annual Home Value Appreciation Exceeds 5% for Sixth Straight Month

April home values reached similar levels from nearly nine years ago, according to the latest Zillow real estate market report.

On a monthly basis, home prices increased 0.5% from March with the Zillow Home Value Index now at $158,300. Furthermore, annual home value appreciation exceeded 5% for the sixth straight month, as prices rose 5.2% year-over-year. The Seattle-based real estate information provider said this is the longest such streak since the height of the housing bubble in 2006.

Out of the 365 metropolitans analyzed by Zillow in this report, 55% saw home values climb in April from March. Of the 30 biggest markets, Sacramento experienced the largest monthly increase, with home values rising 3.4%. Other areas that experienced an uptick in home prices during this time period include Las Vegas (3%) and San Francisco (2.8%).

Meanwhile, over the last year, 29 major markets had a surge in home values, with more than half up by double-digit percentages. Phoenix had the largest increase in home prices, up 25.5%, followed by Sacramento (25.4%), San Francisco (24.8%) and Las Vegas (23%). The only major city tracked by Zillow where home values declined year-over-year was Chicago.

However, national rents declined 0.2% in April from the prior month with the index now at $1,288. But rents were still up 3.9% from a year ago.

“In the short term, this has been welcome news for homeowners. But in the long term, this cannot be sustained, and consumers entering the market today should not expect this kind of appreciation to last,” said Stan Humphries, chief economist for Zillow.

For example, starting in April 2013, Zillow is predicting for only a 4% rise in home values for the next 12 months to approximately $164,648. This represents a decrease from 5.2% annual rate of appreciation recorded between April 2012 and the present time.

“Overall, we expect home value appreciation to moderate as more supply comes on line over the next year, but in some areas, runaway home value appreciation, combined with expected interest rate hikes in coming years, runs a real risk of pricing out many potential buyers,” Humphries added. “Home values in these areas will have to flatten or even fall to come back in line.”

Home Price Increases are Robust and are likely to Stay that Way

CoreLogic has released a new analysis of home price trends that finds prices increased by 7.3% in 2012, the strongest rate of appreciation in nearly seven years. The data draws from the CoreLogic Case-Shiller Indexes, which cover more than 380 U.S. markets.  The analysis also projected that the trend of rising home prices will continue in 2013 and beyond. In the five-year period from the fourth quarter of 2012 to the fourth quarter of 2017, home prices are expected to rise at an annualized rate of 3.9%, the company says.
“Home prices were up in seven out of every 10 metro areas in 2012. By comparison, in 2011, prices appreciated in fewer than one in five markets,” says Dr. David Stiff, chief economist for CoreLogic Case-Shiller. “We expect strong buying activity this spring will lead to stabilization of home prices in most lagging markets, resulting in rising home prices in nearly every metro area by the end of 2013.”

The largest year-over-year price gains were recorded in many of the metro areas that were at the epicenter of the housing bubble/crash, including Phoenix (24%), Miami (14%) and Las Vegas (13%). In addition, price declines moderated in metro areas with lagging recoveries, such as Long Island, N.Y. (-4%), Virginia Beach, Va., (-2%) and Philadelphia (-1%).
The data point to continuing price appreciation, but the overall national rate of home price increases in 2013 is projected to decelerate from 2012 levels. The CoreLogic Case-Shiller Indexes project a 2.5% home price increase in 2013, as the market dynamic shifts again in bubble/crash metro areas.

While homes in these markets are still significantly undervalued, the strong investor demand for foreclosed properties, record levels of housing affordability and other demand factors that have driven recent double-digit price gains are unlikely to persist throughout the year. In addition, as prices rebound, more existing homes will be listed for sale, particularly those of homeowners who had negative equity prior to the recent price jump. Price appreciation will also be limited by the increase in supply as more new homes are built.

The FHFA says that housing prices nationwide rose by 1.3% in March from February and rose 7.2% year-over-year.

New home sales for April rose to 454K, beating consensus estimates of 425K.  March sales were revised higher to 444K from 417K.

Economic News

Jobless claims in the U.S. reversed back down, falling by 23,000 filings for the week ending May 18 and hitting 340,000 total claims. This slight increase comes after last week’s revised figure of 363,000, according to the Department of Labor.   The four-week moving average was 339,500, a drop of 500 filings from the previous week.  Analysts with Econoday said there have been a few bright spots on the outlook for May’s economic data.  “This report is definitely a strong positive for the employment outlook. Whether this correlates with gains for the Dow is uncertain given the possibility, following yesterday’s hawkish sounding FOMC minutes, that strong data could begin to trigger withdrawal of Federal Reserve stimulus,” Econoday said.

Sources: CNBC,Housingwire, Mortgage.orb, Bloomberg, MMG, Origination News

Mortgage Rates and Mortgage Bonds have had quite a ride this week.  Rates have been pushed higher and bond Prices lower since may 13th.  Then this past Thursday, Bon prices rallied, only to give back the gains on Friday.  Mixed economic signals are causing the volatility in the markets.  However, the volatility makes for opportunities to lock into a very low rate, if your timing is good.  The best way to time getting that really low rate, is to have your application in process, then wait for a day when rates are low, and lock in.

Mortgage Bonds opened flat this morning, but quickly began to drop as investors saw an opportunity to lock in both short termandlong term gains. The debate over whether the Fed will end the stimulus injections sooner rather than later wasthe fuel behind the move lower along with the S&P and the Dow hitting fresh record highs almost on a daily basis. The 3% coupon fell by 59bp to end at 102.50. The Dow (15,354.40, +121.18) and the S&P (1,666.12, +15.65) both closed at fresh record highs while the Nasdaq (3,498.97, +33.72) still has a ways to go before it can reach its all-time closing record of just over 5,000. Oil was last seen at $95.54/barrel up 78 cents.

Fixed-mortgage rates inched higher for the second consecutive week amid signs of stronger consumer spending, Freddie Mac said in a report Thursday.The 30-year, fixed-rate mortgage came in at 3.51%, up from 3.42% last week, but down from 3.79% last year, Freddie noted in its Primary Mortgage Market Survey.  The 15-year, FRM increased to 2.69%, up from 2.61%, while falling from 3.04% last year.   Meanwhile, the 5-year Treasury-indexed adjustable-rate mortgage averaged 2.62%, up from 2.58% last week and down from 2.83% a year ago.  Additionally, the 1-year Treasury-index ARM rose to 2.55% this week, compared to 2.53% last week and was also down from 2.78% a year earlier.

“Mortgage rates followed U.S. Treasury bond yields higher this week on signs of stronger consumer spending. Advanced retail sales rose 0.1% in April, above the market forecast consensus of a 0.3% decline. Excluding such items as automobiles and gasoline, sales were up 0.5% for the second time in three months,” said Frank Nothaft, vice president and chief economist of Freddie Mac.   He added, “Households are also shoring up their balance sheets. Total household debt fell by about $110 billion in the first quarter. In addition, approximately 3 million homeowners were seriously delinquent (90 days or more delinquent or in foreclosure) on their first mortgages, down from a peak of about 5.1 million in the fourth quarter of 2009.”

Bankrate data also shows mortgage rates moving higher.   Bankrate’s 30-year, FRM increased to 3.71% from 3.6% a week earlier.

In addition, the 15-year, FRM increased to 2.92%, up from 2.82% last week, while the 5/1 ARM rose to 2.68% from 2.64%.

Economic News

Consumer Sentiment surges to 83.7 in May, well above the 78.5 expected.

U.S. retail sales unexpectedly rose 0.1 percent in April. Economists in a Reuters survey had expected a 0.3 percent decrease, compared with a 0.4 percent drop in March.

U.S. industrial production fell 0.5 percent in April. Economists had been expecting a smaller decline of 0.2 percent.

Sources: CNBC, MMG, Housingwire, Bloomberg

“Sell in May and go away”…that is how the old saying goes for Stocks.  But it is Bonds that are having a very rough May.  And for you long-time readers, this isn’t the first time we have seen Bonds get roughed up headed into the Summer months.  In fact, over the last two years Bonds started rising from very low levels on the heels of a May selloff and then rallied sharply in August 2011 and 2012.  Let’s hope this is the case this year and we may see Mortgage Rates move to the lower levels seen earlier this year.  Now this doesn’t mean that you should wait until August to lock into a low mortgage rate.  Rates are still very low historically. The advise is to lock into Mortgage rates in the short-term (days weeks) and float rates longer-term, weeks and months if your time horizon allows for it.  With possible global pitfalls like Japan, Europe, etc – we would not be surprised to see Bond prices higher than current levels in the not too distant future.

For you new readers, its important to understand the connection between Mortgage Bonds and Mortgage Rates.  Higher Bond Prices means Lower Mortgage Rates and vice-versa.

Mortgage Bonds opened lower and selling accelerated after Retail Sales unexpectedly rose by 0.1% in April, better than the -0.3% anticipated.  Bond prices are attempting to stabilize, but a drop below the next floor of support, 75 basis points beneath current levels could signal aggressive selling and push Mortgage Rates higher.

There are a lot of economic reports this week that could affect Mortgage rates, such as housing, inflation, manufacturing and consumer sentiment.  The recent selloff in Bonds is a bit overdone and prices are due for a bounce.

Feds Bond Buying Program Keeps Mortgage Rates Low. How long will it last?

When will the Fed end ultra-easy money?  Not before year-end…maybe well into 2014.  Even then it’ll be a gradual weaning, a year or more from start to end. And the Federal Reserve will maintain the flexibility to change direction…tacking back and forth…as the economic winds shift.  It might even increase its easing at first…an effort to lift an economy burdened by federal budget cuts.  The first step: Cut back Fed bond buying to about half the current pace of $45 billion in Treasuries and $40 billion in mortgage debt a month.  Next, quit replacing maturing securities purchased under its policy of quantitative easing, letting them roll off the central bank’s balance sheet.  Then, start selling off securities it holds.  And finally, ratchet up interest rates.

For the Fed to begin pulling out the props, it will take consistent, strong signals of growth.  Three straight months of robust job gains… 200,000-plus net new jobs in each. That’s a tall order, especially considering that with the budget sequester, Uncle Sam, as well as many government contractors, will shed jobs in coming months.  An unemployment rate headed down. Though the Fed has made it clear that it won’t hike interest rates till unemployment is near 6.5%, it won’t take that much to spur a shift into neutral on quantitative easing. And strengthening GDP growth.

Other signals that Fed Chm. Ben Bernanke and company will watch for:  More hours worked, indicating that employers anticipate better sales.  Up from 33.8 a week in mid-2009, the current 34.4 average is around the 2006 level.  Steady to increasing utilization of industrial capacity, too. Now at 78.5%, it’s well up from the recession low of 66.9% and approaching the 80% threshold that typically signals “full” use. Much over 80%, and the danger of inflation sets in.  And an uptick in real disposable personal income… still 2% lower than in 2008 on a per capita basis.  To fuel growth, consumers need more in their pockets.  Odds of such a scenario much before 2014 are slim.  Indeed, we expect the economy to weaken this summer as budget cuts take a toll. But that should be temporary.  GDP should start to pick up somewhat this autumn.  But the monetary gurus won’t be quick to pull the trigger.  Growth has swelled, then swooned, multiple times since the recession ended. The Fed will want to be sure of steady gains before it tightens the money supply.

Bad Players Still Behaving Badly-

N.Y. Attorney General to Sue Bank of America & Wells Fargo

New York Attorney General Eric Schneiderman said Monday he plans to sue Bank of America Corp. BAC +4.25%and Wells Fargo WFC +0.60%& Co., alleging they breached the terms of a landmark mortgage settlement.

Mr. Schneiderman alleges that the banks violated agreements over how to deal with homeowners seeking mortgage relief under the $25 billion settlement reached between 49 states and the country’s five largest mortgage servicers. The settlement included 304 “servicing standards,” or rules over how to conduct fair and timely service to homeowners applying for some sort of relief. Mr. Schneiderman said his office found 339 violations of those standards by Wells Fargo and Bank of America since October 2012.

Mr. Schneiderman said Wells Fargo and Bank of America “flagrantly violated” their obligations under the terms of the settlement and put “hundreds of homeowners across New York at greater risk of foreclosure.”

Read more

Sources: CNBC, Bloomberg, Kiplinger, MMG, Housingnewswire, NY Times

Our thoughts and prayers go out to those affected by the tragedy that occurred in Boston.

Mortgage Markets

We are recommending Locking into Mortgage Rates for the Short Term and Floating for longer term transactions.  Not much movement in Mortgage Rates & Bond markets this week, as the benchmark 3% coupon closed near where it closed last Friday – down 6bp to 104.16. The S&P 500 finished up 13.64 points to 1,555.25, the Nasdaq gained 39.69 points while the Dow closed up 10.37 points to end at 3,206.06.
Stocks did suffer their worst week of the year. IBM ($190.00, -$17.15) fell 8% and had its worst trading day in 8 years.
A helpful indicator for the direction of Mortgage Rates is the direction of the Stock market.  While this does not always hold true, a down day for stocks can result in a down day for Mortgage Rates, as more investors flock to Bonds, hence the term “Flight to Quality” pushing Bond Prices higher and Mortgage Rates lower.

Mortgage Applications Rise

Mortgage applications increased 4.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 12, 2013.

The Market Composite Index, a measure of mortgage loan application volume, increased 4.8 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 5 percent compared with the previous week.  The Refinance Index increased 5 percent from the previous week and is at its highest level since mid-January of 2013.  The seasonally adjusted Purchase Index increased 4 percent from one week earlier is at its highest level since May of 2010 and the adjusted Conventional Purchase Index increased 3 percent to the highest level since October 2009. The unadjusted Purchase Index increased 5 percent compared with the previous week and was 20 percent higher than the same week one year ago.

The refinance share of mortgage activity was unchanged at 75 percent of total applications from the previous week. The adjustable-rate mortgage (ARM) share of activity was unchanged at 5 percent of total applications.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.67 percent from 3.68 percent, with points increasing to 0.50 from  0.43 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.  The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 3.77 percent from 3.79 percent, with points decreasing to 0.27 from 0.36 (including the origination fee) for 80 percent LTV loans.  The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.37 percent from 3.43 percent, with points increasing to 0.55 from 0.52 (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 2.91 percent from 2.92 percent, with points remaining constant at 0.34 (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 2.57 percent from 2.58 percent, with points decreasing to 0.29 from 0.37 (including the origination fee) for 80 percent LTV loans.  The effective rate decreased from last week.

Housing News

Housing Inventory, Buyer Demand are Market Drivers

JPMorgan Chase expects home prices to rise 7% in 2013. That level of continued confidence is driven by tighter-than-normal inventory, robust demand, high affordability levels, and a stronger economy.  As a result, housing net demand is expected to be slightly higher than 3 million in 2013. Two technical factors supporting such demand include the downward trend in distressed sales and the continuous use of short sales, JPMorgan ($49.01 0%) said in its April report.  “However, unemployment is still elevated and we see no signs that lending standards will ease significantly in the near term,” analysts of JPMorgan Chase explained.

With a historically lean inventory, the current housing market is more likely to be a seller’s market compared to a buyer’s market.  However, previously discouraged sellers could return to take advantage of rising home price thanks to the Federal Housing Finance Agency announcing a new initiative to help streamline modifications for eligible borrowers.  “Although the size of the eligible universe is relatively small and there is a risk for borrowers who are 30-60 days delinquent to go 90 days delinquent, the new initiative offers servicers of GSE loans another path to handle delinquencies earlier and to avoid foreclosure,” the report noted. Meanwhile, economists remain bullish on home prices.

The latest Zillow housing survey shows that home prices are expected to increase 4.6% in 2013 and another 4.2% in 2014 before moderating somewhat to annual increases between 3.6% and 3.8% for 2015 through 2017.

Nonetheless, recent housing and economic indicators have posted mixed results.  For instance, housing inventory rose after falling the previous eight months, putting increased pressure on net housing demand.  “While February sales were at the highest level since the payroll tax credit was adopted in November 2009, the reversed trend in inventory kept net demand from gaining further, remaining flat from last month at a 1.7-million level,” the analysts stated.

While housing transaction traffic remained strong, there was an upward bump in the distressed and investor share of sales.  The median time on the market for all homes was 74 days in February, 24% below 97 days in the same month last year.  For example, one out of three homes sold in February were on market for less than a month, according to JPMorgan.

Housing Starts Shoot Up In March

Housing starts in the U.S. climbed 7% from February to March and rose a dramatic 46.7% from year ago levels, the U.S. Census Bureau said Tuesday.  Starts last month rose to an annual rate of 1.03 million units, up from 968,000 starts in February and above the 706,000 units recorded a year ago.  However, single-family starts alone declined reaching a rate of 619,000 in March, down 4.8% from the 650,000 units recorded in February.

Building permits also fell 3.9% from February to March, with only 902,000 permits filed last month. That compares to 939,000 units in February, but is still 17.3% above the 769,000 permits filed in March 2012.  Home completions, on the other hand, rose to a rate of 800,000 units in March, 11% above February’s level of 721,000 units and 36.3% above last year’s estimate. “This morning’s housing starts report showed a 7% rise in new home construction in March, the highest level in nearly five years,” said Quicken Loans Chief Economist Bob Walters.  “Pent up demand is spurring growth in building as housing starts rose 7% in March. Homebuyers are itching for their dream home, and since the current inventory can’t keep up, consumers are opting to build. This is yet another sign of a strengthening economy along with last week’s boost in mortgage applications and ever growing home prices.”

Economic News

The Labor Department reported that Weekly Initial Jobless Claims rose by 4K to 352K, versus the 355K expected, with no clear signs of any significant move lower as the labor market continues to slog along with no meaningful growth.

Influential Vice Chairman Fed Member William Dudley from New York said today that the weak March jobs report has made him more cautious on the speed of the economic recovery, which underscores the need for continued Bond buying and support for the Mortgage Bond market.

The Labor Department reported that the Consumer Price Index (CPI) declined by 0.2% in March versus the -0.1% expected.  When stripping out volatile food and energy, prices rose by 0.1%, below the 0.2% anticipated.  The Fed continues to tell us that inflation remains in check and will continue to do so for some time.  The recent inflation and jobs data gives the Fed cover to keep on printing money.

Nonfinancial companies are sitting on a record pile of cash…$1.8 trillion.  But don’t look for them to spend it quickly to expand or to create jobs.  Most businesses, especially smalls, remain concerned about the business climate  and how the ongoing political battles in Washington will affect the tepid U.S. economy.  They’re especially wary of on-and-off talk of tax reform. Lowering corporate tax rates, which has much support from both parties in Congress, would be a welcome step.  But those who make spending decisions want to see details of offsetting measures such as scaled-back or eliminated deductions. Also a factor: The recession in Europe.  There will be much rejoicing when the purse strings are eventually loosened.  Putting the cash in play could add about a percentage point to GDP growth.

One reason consumer spending growth isn’t more robust: Lower incomes.  Median household income will dip again this year, deepening the $5,000 drop (after adjusting for inflation) since 2000. At about $49,750…the lowest since 1994. And wages are stagnant, with little or no increase in real compensation likely this year. Workers in seven of the 10 largest occupations…retail salespeople, cashiers, food prep workers, office clerks, waiters, laborers and janitors/cleaners… nearly 20 million people, earned an average of less than $30,000 last year.

Consumer Sentiment Disappoints, Falls to 72.3 in April from 78.6 in March. Analysts polled by Reuters had expected the University of Michigan Consumer Sentiment survey to edge slightly lower to 78.5 in April from 78.6 in March.

The Labor Department reported that the Consumer Price Index (CPI) declined by 0.2% in March versus the -0.1% expected.  When stripping out volatile food and energy, prices rose by 0.1%, below the 0.2% anticipated.

Source: CNBC, MMG, Kiplingers, Housingwire, Bloomberg

It’s important to remember that Mortgage Rates move in the opposite direction of Bond Prices, and Bond’s stabilized last week and are now testing resistance at the 100 and 200-day Moving Averages.  With Stocks taking a breather at record levels and investors looking to cash in some profits. We are Cautiously Floating, Not Locking Mortgage Rates at this time, as the trend is our friend.  However, this can quickly change in this fast moving market.

Fixed Mortgage Rates Continue to Drop

Fixed-Mortgage Rates moved lower for the second consecutive week, aligning with weak employment reports, Freddie Mac said in its latest Primary Mortgage Market Survey. “Mortgage rates fell further this week following a lackluster employment report for March. The economy added just 88,000 net new jobs last month, about one-third as many as February and the fewest since June 2012,” said Frank Nothaft, vice president and chief economist of Freddie Mac.

He continued,”In addition, approximately 496,000 people left the workforce causing the unemployment rate to fall to 7.6%. Further, average hourly earnings were unchanged in March, indicating income growth remains tepid.”

The 30-year, fixed-rate mortgage continued to drop, coming in at 3.43%, down from 3.54% last week and 3.88% a year earlier.  Similarly, the 15-year, FRM also slipped to 2.65% from 2.74%, significantly lower than the 3.11% level reached last year. The 5-year Treasury-indexed adjustable-rate mortgage came in at 2.62%, slightly down from 2.65% last week and a drop from 2.85% a year ago. Meanwhile, the 1-year Treasury-indexed ARM fell back to 2.62% this week, after increasing to 2.63% last week and falling from 2.80% a year earlier. These rates are the national average and reflect a cost of 1.50 points.

When the Fed Hikes Rates- The last time the Federal Reserve began raising interest rates was almost 9 years ago.  The Federal Reserve raised short-term interest rates 17 times over 2 years, from 6/30/04 to 6/29/06.

Housing News

Easing Credit Standards

Laurie Maggiano of the Treasury’s Homeownership Preservation Office, is supporting the push for easing credit standards as potential homebuyers find it difficult to meet the high credit criteria. In November, Fed Chairman Bernanke stated that mortgage lending standards appeared to be overly tight and is preventing borrowers from purchasing homes.  Ms. Maggiano said that from 2007 to 2012, for those with a FICO score of over 780, new home sales dropped by 30% and in that same timeframe, those with credit scores between 620 and 680 saw a 90% drop.  Ms. Maggiano went on to say that the industry needs to get to a place where it’s no longer just the buyers with perfect credit scores and 25% to 30% down to be able to get financing.

The Wall Street Journal pointed out that rising home prices coupled with high unemployment, low savings, high debt loads and tighter credit standards is making it hard for the first time homebuyer.  There already has been some guideline relaxation and we think we will see more of it to help remedy this situation.

Vacation Home Sales Up 10.1% In 2012

Vacation home sales rose 10.1% to 553,000 last year, up from 502,000 in 2011, according to new data from the National Association of Realtors (NAR). Investment home sales declined 2.1% to 1.21 million from 1.23 million in 2011, while owner-occupied purchases jumped 17.4% to 3.27 million last year from 2.79 million in 2011.
Vacation home sales accounted for 11% of all transactions last year, unchanged from 2011, while the portion of investment sales was 24% in 2012, down from 27% in 2011, marking the second highest share since 2005.
The median investment-home price was $115,000 in 2012, up 15% from $100,000 in 2011, while the median vacation-home price was $150,000, compared with $121,300 in 2011. All-cash purchases remain common in the investment- and vacation-home market – half of investment buyers paid cash in 2012, as did 46% of vacation-home buyers. Forty-seven percent of investment homes purchased in 2012 were distressed homes, as were 35% of vacation homes.

“We had a strong stock market recovery, which helps more people in the prime ages for buying vacation homes,” says Lawrence Yun, NAR’s chief economist. “Attractively priced recreational property is also a big draw. Investors have been very active in the market over the past two years, attracted mostly by discounted foreclosures that could be quickly turned into profitable rentals. With rising prices and limited inventory, notably in the low price ranges, investors are likely to step back in coming years.”

Foreclosure Filings Drop to six Year Low

The U.S. recorded 442,117 foreclosure filings in the first quarter of 2013, a steep 23% drop from a year ago and the lowest level reached since 2007, real estate data firm RealtyTrac said in a new report.

Foreclosure filings also fell 1% from February to March, with 152,000 filings reported last month.

Economic News

Jobless Claims-Better than Expected

The number of Americans filing new claims for unemployment benefits fell more than expected last week, which could ease fears of a marked deterioration in labor market conditions after a surprise stumble in job growth in March.  Also in economic news, U.S. import prices fell in March as weak petroleum costs offset a spike in food prices, according to a government report that pointed to benign inflation pressures.

Initial claims for state unemployment benefits dropped 42,000 to a seasonally adjusted 346,000, the Labor Department said on Thursday, unwinding the jump in the prior week related to difficulties adjusting the data for seasonal variations. That was the largest weekly drop since mid-November. Read more

Sources: Bloomberg, CNBC, MMG, Mortgageorb, Fox Business. Wall St. Journal, BTN

A much weaker than expected March payrolls number sent the Bond markets soaring this morning, but as the day wore on, investors felt that the weaker than expected economic data this week will keep the printing presses running longer than expected at the Fed. The 3% coupon was up 59bp at one point earlier in the session, but closed higher by 34bp at 104.31. Stocks finished lower but as mentioned, were able to cut some of those losses near the close. The Dow fell by 40.86 to 14,565.25 after being down almost 160 points after the jobs numbers were released. The S&P lost 6.70 points to 1,553.28 while the Nasdaq fell by 21.12 points to end at 3,208.86.

The chart below shows how Bond Prices were up against a ceiling of resistance prior to todays run up in prices and has since broken through that ceiling. This makes the trend our friend.  Mortgage Rates to moved lower, as Mortgage Rates move in the opposite direction of Bond Prices. Hence, my recommendation to Lock into Mortgage Rates in the short term and float for longer term transactions.

The Federal Reserve could begin cutting back on its massive bond-buying program this summer if the economy continues to improve, San Francisco Fed President John Williams said Wednesday. He pegs growth at 2.5 percent in 2013 and 3.5 percent in 2014.  The Stock Market reacted negatively dropping 100 points on Wednesday and such action would not bode well for Mortgage Rates.

Housing News

Home prices nationwide are going into the second quarter on solid ground and are expected to remain positive throughout the year, according to data from Clear Capital.  For the nation, the three-quarter forecast is 1.7%, which would bring home price growth for the entire total year to 2.6%.  Compared to January’s one-year forecast, growth is anticipated to be even stronger, due partly to the solid winter season in which home prices stayed positive over the winter for the first time since 2006.  “It has been seven years since home price growth continued throughout winter. This is very strong evidence of the start to a new leg of the recovery, one that should give further confidence to consumers and lenders alike that the recovery is real,” said Alex Villacorta, director of research and analytics at Clear Capital.  Villacorta notes that as buyers become more confident the recovery is sustainable, this sentiment should grow to create a positive feedback loop.

Broken down, the Northeast is expected to see the largest gain in home prices over the next three quarters with a 2.1% jump. The Midwest, South and West are expected to see gains of 1.9%, 1.8% and 0.7%, respectively.

According to Clear Capital, this year should experience a balance in growth across the regions, with the hardest-hit markets seeing buyer interest cool due to price appreciation. Conversely, more fair market sellers may help boost supply.  While regional trends do indicate national trends, the Clear Capital report analyzes market-by-market behavior. Major metro markets are likely to continue seeing noteworthy variability in price trends over the next three quarters, according to the report.  Over the next 9 months, Seattle is expected to see 6.9% growth, indicating healthy fundamentals overall. On the other hand, Phoenix is predicted to cool off substantially over the next nine months after staying hot for so long.

“Phoenix is a great example where we expect to see that cooling trend support a more sustainable recovery. After a strong year of growth, rising prices should bring the metro back into a more normal range of growth,” said Villacorta.  He added, “In addition, the typical influx of spring and summer supply will also help subdue price gains. All in all, this is great news for housing, where prices are sustainably on the rise, demand continues to grow, and the expected supply influx should curtail any bubble-like price trend behavior.”

CoreLogic reports that home prices across the country, including distressed sales, rose by 10.2% on a year-over-year basis in the month ended in February.  It was the largest annual gain since March of 2006 and the 12th consecutive monthly rise in prices.

Hot local housing markets will cool as builders rush in in coming months, pumping up inventories depleted by a scarcity of new construction since 2007.  Nationwide, a third of U.S. homes now sell within 14 days. A year ago…24%.  And the current 4.4-month supply of unsold homes is well under the six-month figure deemed healthy.  Where the pendulum has swung much too far…San Francisco, Los Angeles and San Jose, Calif., for example…over 50% of homes are snapped up within two weeks. And the pace isn’t much slower in Seattle, Portland, Ore., and Denver. Metro areas that didn’t suffer the construction drought but have strong job growth… Washington, D.C., Dallas and Austin, Texas, for example…are also seeing hot sales. Despite the current heat, the housing industry is a long way from robust.  It’s two or three years away from matching the 6.5-million-a-year pace of home sales and 1.5 million building starts a year racked up before the mid-2000s run-up.

Don’t Be Fooled By These 3 Real Estate Myths

As the real estate market significantly rebounds,  some buyers and sellers are dipping their toes in the waters  for the first time. Inevitably, they come into the market with assumptions about  how it works.

Their assumptions may come from TV reality shows or watching their parents’  house-hunting experiences. Maybe they’ve learned about real estate from a  co-worker’s recent home buying or selling experience. The trouble is, the new  buyer or seller’s assumptions are sometimes based on outdated or generalized  “real estate myths.” Here are three such myths that many less-seasoned home  buyers and sellers assume are true.

Economic News

Jobs Market

The Labor Department reported that Weekly Initial Jobless Claims surged by 28K in the latest week to 385K, the highest number since November and well above the 345K expected.  In addition, Challenger Gray & Christmas reported that planned layoffs are up 30% from the same period last year.  All of a sudden things are not so rosy in the Labor Market…a positive for Mortgage Rates.

It’s not just the modest rate of job growth that’s worrying policymakers.  It’s also the quality of the jobs being created. Two-thirds of the jobs lost during the recession were in decent-paying occupations in manufacturing, construction and office administration. But most of the jobs created since then are low-paid positions in home health care, retail sales and manual labor.  At least 28% of workers have jobs that pay poverty-level wages… less than about $24,000 a year, the minimum needed to support a family of four.  That’s up about five percentage points from 2002, and it’s headed higher still.  The low-pay problem isn’t only an issue of equity and compassion… An economy can’t grow if too many workers don’t have money to spend.

ADP reported  that private employers added 158K new jobs in March, below the 197K that was expected, but the month of February was revised higher to 237K from 198K.  A spokesman for Moody’s Analytics said that construction employment gains paused as the rebuilding surge in the Northeast after Superstorm Sandy ended.  With our corporate office near the storm ravaged areas, we can attest that a lot of construction is still on the way.

Fannie Mae posted net annual income of $17.2 billion for 2012 and a quarterly profit of $7.6 billion for the fourth quarter, setting new earnings records in both categories. The government-sponsored enterprise credits ‘improved credit results’ and a falling delinquency rate for pushing profits higher.

Sources: CNBC, Housingwire, Bloomberg, Kiplinger, MMG, Fox Business

With the Cyprus headlines easing and Mortgage Bonds at the upper end of the current trading range, we will continue to recommend a short term locking bias.  The 3% coupon closed just near unchanged at 103.12.

Remember Mortgage Rates move in the opposite direction of Mortgage Bond Prices.

Stocks were slightly higher at midday with the big news being that the closely watched S&P 500 is trading at its all-time closing high, now at 1,565. The capital markets will be closed tomorrow in observance of Good Friday.

Housing News

S & P Case-Shiller Home Prices Jump the Most Since 2006

Home prices during the 12-month period ending January 2013 jumped closer to 10%, recording the largest annual leaps in both S&P Case-Shiller Home Price Indices in the past seven years.  S&P’s 10-city composite index shows home prices increasing 7.3% year-over-year during the 12-month period, while the 20-city composite index soared 8.1%.  The same indices edged up 0.2% and 0.1%, respectively, month-over-month.

The recovering market of Phoenix alone saw price gains of 23.2% for the 12-month period, while 19 U.S. cities experienced significant acceleration in home price growth.

“Economic data continues to support the housing recovery,” said David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. “Single-family home building permits and housing starts posted double-digit year-over-year increases in February 2013. Despite a slight uptick in foreclosure filings, numbers are still down 25% year-over-year. Steady employment and low borrowing rates pushed inventories down to their lowest post-recession levels.”

Detroit, one of the hardest hit markets, continued to see price deceleration, while New York finally experienced price appreciation after 28 months in negative annual price growth.

The latest update to the indices follow the upward trend set in 2012. In January, home prices rose in 19 of the 20 U.S. cities, falling only in New York, for the 12-month period ending in November.

The Next Housing Bubble is Coming

According to Forbes, this rapid increase in the number of buyers and their purchasing power will likely drive home prices into a bubble. Likely not as large as 2005, but it’s not out of the question that the bubble could be even larger.

Read the full story

Economic News

Weekly Jobless Claims rose by 16K to 357K and above the 338K that was expected.

The final reading for Gross Domestic Product (GDP) for the 4th quarter of was raised to 0.4% from 0.1%, but still an anemic number.  The 0.4% was the slowest growth since the 1st quarter of 2011.

Source: MMG ,CNBC, Housingwire, Bloomberg

We will continue to recommend a short term locking into Mortgage Rates headed into the holiday shortened week. Mortgage Bonds traded in a tight range today and
finished marginally higher, which kept Mortgage Rates steady. The benchmark 3% coupon settled at 102.84 up 6bp in quiet trading. Stocks rose on
news that Cyprus will most likely reach a bailout from the European Union. The Dow gained 90.54 points to 14,512.03, the Nasdaq rose by 11.09 points to 3,245.00 while the closely watched S&P was up 11.09 points to end at 1,556.89. Oil was last seen at $93.80/barrel up $1.35.

Timing is Everything.  Many try to time locking into a Mortgage Rate only to find out how frustrating it can be.  We have many resources in the financial markets that keep us informed and give us ample warning as to movements in Mortgage Rates.  This helps us to know when rates are moving higher or lower, before lender’s re price.  This information has been critical in helping our clients obtain a low interest rate.

The chart below shows Bond Prices remain in a stubborn longer term down trend.  Hence, Mortgage Rates are in a stubborn longer term up trend.  As Bond Prices pull back from the ceiling, you need to consider short term locking into Mortgage Rates.  If support is breached at the $102 level for the benchmark 3% coupon,Bond Prices could continue to move lower and Mortgage Rates higher.

Bernanke: Fed Worries About Tight Lending Standards

The Federal Reserve worries the tightening of mortgage credit has gone too far and is now working on policies to ease lending fears, Fed Chairman Ben Bernanke said Wednesday.  After the Federal Open Market Committee verified its continued commitment to aquiring mortgage-backed securities and Treasuries at the same pace, Bernanke told reporters the Fed is seeing “much higher credit-quality requirements” from potential borrowers.

Yet, he worries any concerns over “put-backs that banks may have — and uncertainties about regulation — have tightened the mortgage credit box more than desirable.”  Still, the Fed Chair said one of the key tools in combating tight lending is the lowering of mortgage rates by keeping the Fed’s federal funds rate near zero.  “I would say one thing is that as the housing industry has strengthened and home prices have gone up, that has brought some people into the credit box,” Bernanke said.  As people build more equity or pull themselves above water, they become more creditworthy and increase their options, Bernanke suggested.

MBA CEO Predicts 4% Mortgage Rates by Year-End

David Stevens, President and CEO of Mortgage Bankers Association, said the purchase market could easily withstand a 4% mortgage rate, which is expected to hit by the end of the year.  Stevens was interviewed for CNBC Squawk Box Friday morning to discuss the upcoming spring housing market.  “As we head into the spring home buying and selling season, the housing comeback is showing signs of accelerating more rapidly than most anybody had thought at this point,” Stevens said.  He added, “The peak housing era of 2005 through 2007, those couple years produced some very dangerous characteristics we can’t allow to ever come back. But the market is clearly improving [now] and could weather rising interest rates should the Federal Reserve start tightening at some point.”

Housing News

The National Association of Home Builders Housing Market Index comes in at 44, below the 47 expected and the lowest since October.

JPMorgan Chase expects home prices to rise 7% in 2013 as investors continue to take interest in nonperforming loans and distressed properties. The forecast for 2013 is more optimistic than initially expected.  Although most investors still believe home prices will increase by less than 5%, some investors expect home price growth to increase as much as 15%, according to JPMorgan’s  February investor survey.  “As we pointed out in our 2013 outlook, the distressed sale discount should continue to decline. Indeed, the quantitative easing program has not done much for mortgage rates, but the resulting reach for yield is now firmly grounded in the housing market,” the company said.

Housing Starts rose slightly in February to 917K, above the 911K expected and are up 28% since last year this time.  Single family starts rose to 618K units, the highest level since June of 2008 while Building permits, a sign of future construction, jumped 4.6% to 946K, also the highest level since June of 2008.  Housing continues to improve.

Existing Home Sales rose by 0.8% in February from January to 4.98 million units, just below the 5 million expected.

Economic News

So far in 2013, the Fed has bought up more U.S. government debt than the U.S. Treasury has issued.

Sources: CNBC, Bloomberg, MMG, Housingwire

Mortgage Rates finally got some releif Wednesday through Friday as Bond Prices bounced of levels of support. I recommend cautiously floating, not locking into rates for the long term.  Positive economic reports helped Bonds reverse direction.  Consumer inflation for February was higher than consensus estimates and consumer sentiment was lower than analysts expected. Mortgage Bonds moved higher from the start and ended near the best levels of the day on Friday. The 3% coupon finished at $102.72, up 31bp. Remember, Mortgage Rates move in the opposite direction of Bond Prices.

The Dow’s ten day winning streak ended as the average lost 25.03 points to close at 14514.11. The S&P 500 was lower by 2.53 points, to end at 1560.70, while the Nasdaq dropped 9.86 points, to finish the session at 3249.07. Oil was last seen at $93.51/barrel up 48 cents. There are no major economic reports due out Monday.

Freddie Mac’s Primary Mortgage Market Survey showed the 30-year, fixed-rate mortgage for the week ending March 14 rose to 3.63%, up from 3.52% a week earlier, but down from 3.92% last year.  The 15-year, FRM averaged 2.79%, up from 2.76% last week, but down from 3.16% a year ago.  The survey’s rates factor in a cost of 1.50 points.  Meanwhile, the 5-year Treasury-indexed adjustable-rate mortgage averaged 2.61% this week, down from 2.63% last week and down from 2.83% a year earlier.  Additionally, the 1-year Treasury-indexed ARM averaged 2.64%, up from 2.63% a week ago and a drop from 2.79% last year.

“Fixed mortgage rates rose this week  (March 4th) on stronger signs of jobs growth and consumer spending. The economy added 236,000 new workers in February which helped push down the unemployment rate to 7.7%,” said Frank Nothaft, vice president and chief economist of Freddie Mac.

The Average Mortgage in 2012

While we’re on the subject of credit, take a look at real estate blog Keeping Matters Current’s use of stats (from mortgage automation company Ellie Mae) to describe the average mortgage loan in 2012:

• Time to close — 48 days.
• Down payment — 21%.
• Credit score — 748 (37% of 200 million Americans have scores of 748 or higher.)
• Debt to income — Monthly house payment, 23%; total household debt, 34%.
• Interest rate — 3.90%.

Housing News

The Time & Place to Buy

By LISA PREVOST Published: March 7, 2013, New York Times

As both mortgage rates and housing prices head higher, home buyers may be wondering whether they ought to settle for whatever property they can get now, rather than risk paying more later.  The answer depends on where you’re buying. Interest rates aren’t expected to rise much this year, but the same cannot be said for prices.  Economists in recent interviews agreed that the rate for a 30-year fixed mortgage was unlikely to rise much above 4 percent this year. House prices, however, are rising nearly everywhere, and nowhere as rapidly as in the Sunbelt states. Read more

Economic News

First-time Jobless claims Fell by 10,000 to 332,000 in the week ended March 9, the fewest since mid January, according to data today from the Labor Department in Washington. The median forecast of 49 economists surveyed by Bloomberg called for an increase to 350,000. The four-week average declined to a five- year low.  “The rate of job destruction is pretty low,” said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Florida, who projected the number of claims would drop to 338,000. “The labor market is in continued-recovery mode, though there is still a lot of ground to make up.”

Retail sales increased 1.1% in February, up from 0.2% in January. This marked the biggest gain in the retail sales number in 5 months.
The retail sales report is a measure of the total receipts of retail stores from samples representing all sizes and kinds of business in retail trade throughout the nation. It is the most timely indicator of broad consumer spending patterns and is adjusted for normal seasonal variation, holidays, and trading-day differences.

Consumer Sentiment falls to 71.8 vs the 77.6 expected and down from 77.6 February.

CPI a bit hotter than expected at 0.7% vs the 0.5% expected. Core inline at
0.2%. Empire Manufacturing better than expected at 9.2 vs 6.5.

Sources: CNBC, Bloomber, MMG, Housingwire, NY Times