We continue to recommend short term locking mortgage rates, measured in a few days to a few weeks.
Mortgage Rates remained relatively stable as Bonds finished the week down 12 basis points after revisiting October’s highs. The good news is rates have improved quite a bit since December.
Stocks saw meager gains – the Dow closed at 16,583.34 up 32.37 points, the Nasdaq gained 20.37 points to 4,071.86, while the S&P 500 closed at 1,878.48 up 2.85 points. Both the Nasdaq and the S&P closed with weekly losses. Oil was last seen at $100.08/barrel near unchanged.
Housing News
Half of people living in Connecticut and Illinois want to get the hell out
New data is out on the states people want to leave, and it’s tailor-made to troll all your Facebook friends from Illinois and the northeastern Amtrak corridor.
Gallup asked people around the country whether they would move away from their states, given the chance. As it turns out, half of Illinois residents and 49 percent of all Connecticutians (Connecticutese? Connecticuters?) want to change states. In addition, it looks like a good chunk of the northeastern seaboard is just itching to pack up a U-Haul. Read more
CoreLogic reported on Tuesday that home prices, including distressed sales, rose by 11.13% year-over-year in March, while prices were up 1.4% from February to March. The 11.13% year-over-year increase is down from the 11.81% registered in the year ended in February. The big gains seen in 2014 will most likely not be sustained and hopefully prices will continue to decrease a bit to get back down to more affordable levels.
Cash is King
Cash sales of residential home properties made up nearly 43% of total sales in the first quarter of 2014 due in part to wealthy individuals, empty nesters downsizing and institutional investors. That is up from 19% in the first quarter of 2013.
Financing
Weekly Survey of Rates from the Mortgage Bankers Association
For the week of May 7, 2014
“It is official: we are in a majority purchase market for the first time since 2009,” said Mike Fratantoni, MBA’s Chief Economist. “A sizeable increase in purchase applications last week likely reflected the impact of somewhat lower mortgage rates as well as continued growth in the job market, as confirmed by Friday’s employment report from the BLS. Despite the strong increase in the purchase market last week, volume continues to run 16 percent behind last year’s pace.”
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.43 percent, the lowest rates since November 2013, from 4.49 percent, with points decreasing to 0.21 from 0.38 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 4.29 percent, the lowest rate since June 2013, from 4.37 percent, with points remaining unchanged at 0.14 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.52 percent from 3.53 percent, with points decreasing to 0.22 from 0.31 (including the origination fee) for 80 percent LTV loans.
Commercial Real Estate Lending
Commercial Mortgage backed Securities (CMBS)– The 10 Yr Swap rate moved lower to finish the week at 2.659%, down from last weeks 2.766.
Economic News
The Organization for Economic Cooperation and Development reports that economic activity is projected to pick up once the effects of severe winter weather dissipate. Economic activity is projected to pick up in 2014 once the effects of severe winter weather dissipate. Given ample corporate cash flow and an improved demand outlook, business investment should accelerate significantly. Sizable gains in asset prices have boosted household wealth, which, combined with steady progress on the labour market, should provide support to private consumption and residential investment.
Fiscal contraction is creating less of a drag on economic growth, although further consolidation at a slower pace will be needed to ensure fiscal sustainability. Monetary policy appropriately remains very accommodative, with slack remaining in the labour market and inflation remaining weak. The Federal Reserve began the process of reducing the pace of its asset purchases, which should continue through most of 2014. It will be appropriate to keep policy rates low for some time, but they are expected to begin to rise by mid-2015. Read more
Yellen: Economy remains on track but keep an eye on housing
The economy is “on track for solid growth this quarter,” Federal Reserve Chair Janet Yellen said on Wednesday, but warned that a deterioration in housing or financial markets could alter that scenario.
After recent weakness that was mostly weather-related, Yellen said many recent indicators suggest a rebound in spending and production. However, the Fed chief told a joint Congressional committee that housing remains a risk to the recovery, even as the Fed expects that sector to pick up eventually.
The newly-appointed top central banker walked a fine line between preparing markets for normalizing monetary policy from its crisis era levels, and assuring the public that the Fed would continue to safeguard a still fragile recovery. A brutally cold winter triggered a run of weak activity that caused economic growth to flatline in the first three months of the year. Read more
First-time claims for state unemployment benefits came in at 319,000 for the most recent week. Economists had expected initial claims to dip by 19,000 to 325,000.
Economists in a consensus survey expected the ISM non-manufacturing index to rise to 54.1 in April, up from 53.1 in the previous month.
The U.S. international trade deficit came in at -$40.4 billion in March. Economists had expected the trade gap to narrow to -$40.6 billion, from the previous month’s reading of -$42.3 billion.
U.S. productivity fell by 1.7 percent in the first quarter. Economists in a consensus survey expected productivity to fall by 1.1 percent in the first quarter.
The European Central Bank left its main interest rate unchanged at a record low of 0.25 percent. The euro hit a two-month high vs. the dollar following the news.
The Bank of England left interest rates unchanged at a record low of 0.5 percent and also kept its £375 billion in asset purchases unchanged
Sources: CNBC, Bloomberg, Reuters, Housingwire, KCM, MMG, The Economist, VOX, Realtytrac