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