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What’s Ahead For Mortgage Rates This Week – July 14, 2014

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What's Ahead For Mortgage Rates This Week July 14 2014Last week brought news from the Fed as two Federal Reserve Bank Presidents made speeches and the Federal Open Market Committee (FOMC) of the Fed released the minutes of its last meeting. The minutes reveal the Fed’s intention to wrap up its bond-buying program in October with a final purchase of $15 billion in mortgage-backed securities (MBS) and Treasury bonds. No economic news was issued Monday following of the 4th of July holiday.

Further indications of a strengthening labor market were seen. May job openings reached their highest level since June 2007, and quits and layoffs fell from April’s reading of 4.55 million to 4.50 million. Weekly jobless claims fell to 304,000 against expectations of 320,000 new jobless claims and the prior week’s reading of 315,000 new jobless claims.

Fed Speeches Address Inflation, Banks Too Big to Fail

Tuesday’s speech by Minneapolis Fed Bank president Narayana Kocherlakota calmed concerns over inflation; Mr. Kocherlakota said that the Fed expects inflation to remain below its target rate of two percent for several more years. He tied low inflation to the unemployment rate and said that the nation’s workforce is not fully utilized in times of low inflation, and cautioned that June’s national unemployment rate of 6.10 percent “could well overstate the degree of improvement of the U.S. labor market.”

Stanley Fischer, the Fed’s new vice-chairman, spoke before the National Bureau of Economic Research last Thursday. Mr. Fischer addressed the issue of breaking up the nation’s largest banks to eliminate the government’s exposure to banks too big to fail. He said that it wasn’t clear that breaking up the largest banks would end federal bailouts of banks considered too big to fail. Mr. Fisher also said that breaking up the biggest banks would be “a complex task with an uncertain payoff.”

Mr. Fischer also said that any efforts to prevent a housing bubble should focus on the supply side and cautioned that “measures aimed at reducing the demand for housing are likely to be politically sensitive.”

FOMC Minutes Reveal End Date for Bond Purchases

The minutes of the Fed’s last FOMC meeting indicate that the Fed plans to continue bond purchases at the rate of $10 billion per month with a final purchase of $15 billion in October. FOMC members re-asserted their oft-stated position that the Fed’s target interest rate of 0.00 to 0.25 percent will not change for a considerable time after the bond purchase program ends.

Mortgage Rates Rise

Average mortgage rates rose across the board last week. The average rate for a 30-year fixed rate mortgage increased by three basis points to 4.15 percent; discount points were also higher at 0.70 percent. The average rate for a 15-year fixed rate mortgage rose by two basis points to 3.24 percent with discount points higher at 0.60 percent. The average rate for a 5/1 adjustable rate mortgage rose by one basis point to 2.99 percent with discount points unchanged at 0.40 percent.

What’s Ahead

This week’s scheduled economic news includes retail sales and retail sales without the auto sector, Fed Chair Janet Yellen’s testimony, the Fed’s Beige Book report and the NAHB Homebuilder’s Market Index. Housing Starts, Consumer Sentiment and Leading Economic Indicators round out the week’s economic reports.

What’s Ahead For Mortgage Rates This Week – July 7, 2014

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What's Ahead For Mortgage Rates This Week July 7 2014

Last week’s economic news was mixed, but economic reports for Non-Farm Payrolls and the National Unemployment rate suggest a strengthening labor sector. Pending Home Sales surpassed expectations in May and conversely, construction spending was lower than expected. Here are the details.

Pending Home Sales Reach Highest Level in Eight Months

The National Association of REALTORS® reported that pending home sales in May rose by 6.10 percent over April’s reading. May’s reading was 5.20 percent lower than for May 2013. The index reading for May reached 103.9 as compared to April’s index reading of 97.9. Results for all regions were positive for May:

- Northeast: 8.80%

- West 7.60%

- Midwest 6.30%

- South 4.40%

An index reading of 100 for pending home sales is equal to average contract activity in 2001; pending home sales are a gauge of upcoming closings and mortgage activity.

CoreLogic Home Price Index Reflects Slower Price Gains

National home prices rose by 1.40 percent in May and 10 states posted new month-to-month highs, while year-over-year reading slipped from 10.00 percent in April to 8.80 percent in May. Home prices remain about 13.50 percent lower than their 2006 peak.

The overall rate of construction spending slowed in May to an increase of 0.10 percent from April’s reading of 0.80 percent and against expectations of 0.70 percent. Residential construction spending dropped by 1.50 percent in May.

Freddie Mac’s weekly survey of average mortgage rates brought good news as the rate for a 30-year fixed rate mortgage dropped by two basis points to 4.12 percent. The average rate for a 15-year fixed rate mortgage was unchanged at 3.22 percent, as was the average rate for a 5/1 adjustable rate mortgage at 2.98 percent. Discount points were unchanged at 0.50 percent for a 30-year fixed rate mortgage and 15-year fixed rate mortgages. Discount rates rose from 0.30 to 0.40 percent for 5/1 adjustable rate mortgages.

Jobs Up, Unemployment Rate Lower

ADP payrolls, which measures private-sector job growth, reported 281,000 new jobs in June as compared to a reading of 179,000 new private-sector jobs in May. The Bureau of Labor Statistics’ Non-Farm Payrolls report for June surpassed expectations of 215,000 jobs added with an increase of 288,000 jobs against May’s reading of 224,000 jobs added.

The national unemployment rate fell to 6.10 percent against predictions of 6.30 percent and May’s reading of 6.30 percent. 

No news was released on Friday, which was a national holiday.

What’s Ahead

This week’s scheduled economic is lean with no events set for Monday. Job Openings, the minutes from the most recent FOMC meeting, along with regularly scheduled weekly reports on mortgage rates and new jobless claims round out the week’s economic news.

What’s Ahead For Mortgage Rates This Week – June 30, 2014

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What's Ahead For Mortgage Rates This Week June 30 2014Last week brought several economic and housing sector reports including Existing Home Sales, Case-Shiller and FHFA home prices for April, as well as New Home Sales. Freddie Mac’s weekly mortgage rates survey and the weekly report on new jobless claims were released on Thursday, and Consumer Sentiment for June rounded out the week on Friday.

Existing Home Sales Stronger than Expected! 

Good news came from the National Association of REALTORS® Existing Home Sales report for May, which reported 4.89 million previously owned homes sold on a seasonally-adjusted annual basis. Analysts had projected a seasonally-adjusted annual figure of 4.75 million existing homes sold based on April’s reading of 4.65 million existing homes sold; April’s reading was later adjusted to 4.66 million. May’s reading represented a monthly increase of 4.90 percent over April’s reading and was the second consecutive monthly increase in previously owned home sales.

The median sales price for existing homes sold in May was $213,400, which represented a 5.10 percent increase year-over-year.

May’s reading for existing home sales was the highest in seven months, and mortgage rates trended down during May, but strict lending standards were cited as a significant obstacle to first-time homebuyers.

Federal Reserve Chair Janet Yellen recently said in a press conference that mortgage lenders “need more clarity” as to their potential liability for failed mortgages. Mortgage lenders and loan servicing companies can be required to repurchase defaulted loans or to reimburse Fannie Mae and Freddie Mac for losses associated with mortgage defaults and foreclosures.

Case-Shiller, FHFA Report Slower Pace for Home Price Growth

The S&P Case-Shiller Home Price Index and FHFA’s House Price Index for April documented slowing rates of home price growth. Case-Shiller reported a 10.80 percent year-over-year growth in home prices for April, and FHFA reported a year-over-year gain of 5.90 percent rate of appreciation for home sales associated with mortgages owned by Fannie Mae and Freddie Mac.

Analysts noted that home price growth is leveling out after last year’s steep appreciation in home prices. While homeowners may disagree, economists say that a slower rate of home price growth can actually bode well for housing markets. More buyers can afford a home, which adds stability to housing markets. First-time buyers provide a foundation for home sales; if they cannot buy homes, then homeowners can’t sell existing homes and buy new homes. A slower but consistent rate of home price growth allows homeowners to build home equity, but won’t likely lead to housing “bubble.”

New Home Sales Blast Past Expectations, Mortgage Rates Fall

The U.S. Department of Commerce reported that new home sales for May reached a six-year high with a reading of 504,000 new homes sold on an annual basis. April’s reading exceeded expectations of 440,000 new homes sold as well as April’s adjusted reading of 425,000 new homes sold. The month-to-month increase in new home sales from April to May was the largest monthly increase in home sales in 22 years.

Although analysts caution that month-to-month seasonally-adjusted sales reports are volatile, this uptick in new home sales may help bolster builder confidence in housing markets. May prices for new homes also rose with the median home price at $282,000. This reading represents a year-over-year increase of 6.0 percent for new home prices.

The Northeast led regional results for new home sales with its reading of 54.50 percent; The West reported an increase of 34.00 percent. New home prices in the Southeast rose at an annual rate of 14.20 percent, and the Midwest region reported a 1.40 percent increase in new home prices. While analysts characterized the Northeast region’s May reading as exaggerated, overall results for new home prices indicate a comeback for new home prices.

Freddie Mac put some icing on the good news cake with its weekly mortgage rates report. Average rates for a 30-year fixed rate mortgage dropped to 4.14 percent with discount points lowered to 0.50 percent. The average rate for a 15-year fixed rate mortgage fell by eight basis points to 3.22 percent with discount points unchanged at 0.50 percent. The average rate for a 5/1 adjustable rate mortgage fell by two basis points to 2.98 percent with discount points lower at 0.40 percent.

Thursday’s Weekly Jobless Claims Report reading fell by 2000 new claims to a seasonally adjusted reading of 312,000 new claims filed. Analysts had expected a reading of 310,000 new jobless claims. 214,000 per month have been added to the economy from January to May 2014.

Positive economic developments were not lost on consumers. The Consumer Sentiment Index for June posted a reading of 82.5 against an expected reading of 81.9 and May’s reading of 81.2.

This Week’s News

Scheduled economic news includes Pending Home Sales, Construction Spending, the ADP Employment report, and the Non-farm Payrolls Report. The National Unemployment Rate report along with Freddie Mac’s PMMS and Weekly Jobless Claims round out the week. No news is scheduled for Friday’s Independence Day holiday.

What’s Ahead For Mortgage Rates This Week – June 23, 2014

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What’s Ahead For Mortgage Rates This Week June 23 2014Last week’s scheduled economic news included the National Association of Home Builders /Wells Fargo Housing Market Index, Housing Starts and Building Permits. The Fed’s Federal Open Market Committee (FOMC) issued its usual statement at the conclusion of its meeting, and Fed Chair Janet Yellen also gave a press conference.

Home Builder Confidence Improves, But Housing Starts Slow

NAHB released its Housing Market Index report, which reached its highest reading in five months. The index moved up from 45 to 49; a reading of 50 indicates that more builders are confident about housing market conditions than those who are not. David Crowe, NAHB chief economist, said that builder confidence is in line with consumer confidence; he noted that consumers are waiting for a stronger economic recovery before buying homes and that builders didn’t want to build more homes than markets would bear.

According to the latest figures from the Department of Commerce, May housing starts fell to 1.00 million from April’s reading of 1.07 million on a seasonally adjusted annual basis, and missed the consensus reading of 1.02 million. Building permits issued in May fell by 6.40 percent to 991,000 permits issued for single and multi-family construction. In recent months, permits for single family homes have fallen, while permits for multi-family units are increasing. This concerns economists as single-family homes generate sales of retail goods including furniture and home improvement supplies, while multi-family housing is often occupied by renters and yields fewer home related purchases.

Warmer weather was expected to add to the pace of housing starts, but this did not occur during May.

Fed Reduces Asset Purchases, Mortgage Rates 

FOMC members reduced the Fed’s monthly asset purchases by $10 billion, for a monthly volume of $35 billion in Treasury securities and MBS. The meeting minutes noted FOMC concerns that inflation has not yet reached the committee’s benchmark of 2.00 percent inflation as a benchmark of economic recovery.

The minutes reflected FOMC’s position that it will maintain the target federal funds rate at between 0.00 and 0.25 percent for a considerable period after the asset purchases under the current quantitative easing program have ended. While analysts previously associated “considerable period” with a time frame of six months, Fed Chair Yellen stated during her press conference that there was no formula for determining the Fed’s actions; she emphasized that the Fed and FOMC would monitor a wide range of economic indicators, economic reports and developments in support of any decisions to change current monetary policy. 

In response to a question about tight credit, Chair Yellen cited banks’ reluctance to lend to all but those with “pristine” credit scores as a factor contributing to slower recovery in the housing sector.

Mortgage Rates, Jobless Claims

Freddie Mac reported lower mortgage rates on Thursday. The reading for a 30-year fixed rate mortgage was 4.17 percent, a decline of three basis points. Discount points were also lower at 0.50 percent. The average rate for a 15-year fixed rate mortgage was lower by one basis point at 3.30 percent; discount points were unchanged at 0.50 percent. The average rate for a 5/1 adjustable rate mortgage fell to 3.00 percent from last week’s reading of 3.05 percent. Discount points were unchanged at 0.40 percent.

New jobless claims were higher than expected at 312,000; analysts had predicted a reading of 310,000 against the prior week’s reading of 318,000 new jobless claims.

No economic reports were released Friday.

What’s Ahead

This week’s economic calendar includes several housing-related reports. Existing home sales, the Case-Shiller Housing Market Index and New Home Sales will be released along with multiple consumer-related reports and weekly updates for mortgage rates and new jobless claims.

What’s Ahead For Mortgage Rates This Week – June 16, 2014

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What’s Ahead For Mortgage Rates This Week June 16 2014Last week’s economic news was quiet in the housing sector, but retail sales and employment-related reports provided indications of less consumer spending and reduced consumer confidence.

On Monday, James Bullard, St. Louis Fed President, commented that inflation appears to be rising. Although not a voting member of the Fed’s Open Market Committee (FOMC), inflation has been a topic of concern to the FOMC in recent years. Mr. Bullard had previously noted that inflation was stable.

His remarks set the stage for this week’s FOMC meeting and press conference by Fed Chair Janet Yellen. Analysts expect the Fed to continue tapering its asset purchases as it winds down its quantitative easing program.

Labor related reports were mixed last week. Job openings in April rose to 4.46 million in April; this was the highest reading since September 2007 and exceeded the March reading of 4.17 million job openings in March.

More good news came from the U.S. Labor Department, which 4.71 million hires in April. This was the highest rate of hiring since June 2008 and represented a year-over-year increase of 6.00 percent. At the start of the recession at the end of 2007, about 5 million job openings were reported.

Mortgage Rates, New Jobless Claims Rise

Weekly jobless claims were reported at 317,000 as compared to expectations of 310,000 new jobless claims and the prior week’s reading of 312,000 new jobless claims. The four-week rolling average of new jobless claims rose by 4,750 new claims for a total of 315,250 new jobless claims. The four-week gauge of jobless claims evens out weekly volatility and is viewed by analysts as a better indicator of labor market trends.

Mortgage rates were higher according to Freddie Mac. The average rate for a 30-year fixed rate mortgage rose by six basis points to 4.20 percent; discount points rose from 0.50 to 0.60 percent.

The average rate for a 15-year mortgage rose by eight basis points to 3.32 percent with discount points unchanged at 0.50 percent. The average rate for a 5/1 adjustable rate mortgage rose from last week’s reading of 2.93 percent to 3.05 percent. Discount points were unchanged at 0.40 percent.

The Fed’s quantitative easing program was implemented to control long-term interest rates, including mortgage rates. Gradual tapering of this program is allowing mortgage rates to rise. Other influences include investor concerns over recent decisions made by the European Central Bank.

Consumer sentiment slipped slightly for June according to the University of Michigan Consumer Sentiment Index. June’s reading was 81.20 as compared to an expected reading of 82.80 and May’s reading of 81.50.

What’s Ahead

Next week’s scheduled economic news includes the NAHB Housing Market Index for June and Housing Starts for May. These readings are important indicators for housing supplies, as a lack of builder confidence can translate to fewer housing starts. Housing markets were impacted by high demand for homes against low inventories of available homes during 2013 and into 2014.

Also noteworthy is the FOMC post-meeting statement and Fed Chair Janet Yellen’s press conference. The FOMC sets the Federal Reserve’s monetary policy and is expected to announce further tapering of the Fed’s quantitative easing program. It will be interesting to learn the Fed’s perspective on inflation, which has been stuck below the Fed’s target level of two percent.

Friday’s release of Leading Economic Indicators for May round out this week’s economic reports.

What’s Ahead For Mortgage Rates This Week – June 9, 2014

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Whats Ahead For Mortgage Rates This Week June 9 2014

Last week’s economic news was mixed. Construction spending grew, but fell below the expected level. CoreLogic reported that April home prices continued to rise, but did so at their slowest growth rate in more than a year. Employment reports for private sector and government jobs indicated fewer jobs, but the national unemployment rate was steady. Here are the details:

Construction Spending, Home Price Growth Slows

Construction spending reported by the Department of Commerce reached $953.5 billion annually, and increased by 0.20 percent month-to-month against expectations of an 0.80 percent increase and the March reading of 0.60 percent growth.

According to CoreLogic, the rate of home price growth slowed to 10.50 percent year-over-year in April as compared to the 11.10 year-over-year rate of increase in April 2013. Home prices increased by 2.10 percent over March; these gains in home prices were the slowest posted in more than a year, but there was good news.

No states posted a drop in home prices, and eight states posted new record highs for home prices.

CoreLogic said that although a short supply of available homes has driven home prices up, price gains lost momentum due to affordability; CoreLogic expects home prices to increase at a slower pace and projects that home price growth will reach a pace of 6.30 percent by April 2015.

Mortgage Rates Mixed

Freddie Mac reported that mortgage rates for fixed rate mortgages rose while the average rate for a 5/1 adjustable rate mortgage fell. The average rate for a 30-year fixed rate mortgage increased by two basis points to 4.14 percent; discount points fell to an average of 0.50 percent. The average rate for a 15-year fixed rate mortgage also increased by two basis points to 3.23 percent; discount points were unchanged at 0.50 percent. Rates for a 5/1 adjustable rate mortgage averaged 2.93 percent, a drop of three basis points. Average discount points rose from 0.30 to 0.40 percent.

Jobs, Unemployment Data Suggest Economic Strength

Labor markets impact consumer decisions to buy homes; several labor-related reports released last week indicated that the economy continued to gain strength as more jobs were added and fewer workers filed jobless claims.

ADP reported that 179,000 private-sector jobs were added in May as compared to 215,000 jobs added in April. The Bureau of Labor Statistics released its Non-farm Payrolls report for May; 217,000 jobs were added as compared to projections of 210,000 jobs added and 288,000 jobs added in April.

New weekly jobless claims were reported at 312,000 as compared to expectations of 311,000 new jobless claims and the previous week’s 304,000 new claims. The four-week rolling average of weekly jobless claims fell by 2250 new claims to 310,250; this was the lowest reading since June 2007, and was 10 percent lower than the reading for the same week in April 2013 and was 17 percent lower than for the same week in 2012.

Another sign of economic growth was reported last week. Continuing jobless claims dropped to a seasonally-adjusted annual rate of 2.60 million for the week ended May 24; this was the lowest reading reported since October 2007.

The national unemployment rate for May matched April’s reading of 6.30 percent, and was lower than projections of 6.40 percent for May. The Federal Open Market Committee of the Federal Reserve (FOMC) has repeatedly cited an unemployment rate of 6.50 percent as a benchmark indication of economic recovery; it appears likely that the Fed may continue its tapering of asset purchases as it winds down its quantitative easing program.

What’s Ahead

This week’s scheduled economic news includes Retail Sales, Retail Sales without vehicle sales, and the Producer Price Index. Freddie Mac mortgage rates and Weekly Jobless Claims will be released Thursday, and the University of Michigan will release its Consumer Sentiment Index on Friday.

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