Entries from May 2010 ↓
May 25th, 2010 — Real Estate Information
Sales of existing homes rose in April, buoyed by an expiring home buyer tax credit and exceptionally low mortgage rates.
As compared to March, April’s Existing Home Sales rose by 410,000 units nationwide — the second straight month of large gains. An “existing home” is a home resold by a prior owner (i.e. not new construction).
It’s a solid report for housing overall, with rising sales suggesting that the real estate market’s recovery is ongoing. However, the data presented a mixed message.
According to the National Association of Realtors®, although the number of homes sold ticked higher in April, so did the supply of existing homes for sale, too.
Sellers are now listing homes faster than buyers can buy them.
After adding another 0.3 months of supply in April, resale home supply is nearly two full months larger than at November 2009’s low-point. This put downward pressure on home prices.
Furthermore, because 49% of April’s buyers were first-time buyers and the tax credit has since ended, we can expect that sellers will continue to outweigh buyers in the months ahead.
It presents an interesting opportunity for June’s home buyers. Mortgage rates are still at their lowest levels of the year — despite expert predictions to the contrary — and homes remain affordable.
Plus, in a lot of markets, home values have started to creep higher.
There are good values and good rates but neither should last long. For the next few weeks, real estate may be in its 2010 sweet spot.
If you were thinking of moving in September of this year or later, consider moving up your timeframe
May 24th, 2010 — Mortgage Industry News
Mortgage markets improved again last week on worsening news out of Greece and the Eurozone. Then, as contagion mentality set in, U.S. mortgage bonds gained and mortgage rates fell.
It’s the 4th straight week in which conforming mortgage rates improved and, against the expectations of experts everywhere, it’s now late-May and mortgage rates are as low as they’ve been all year.
The European market concerns are likely overblown and the U.S. economy continues to expand at a measured pace.
This week, housing and inflation data takes center stage.
• Monday : Existing Home Sales data
• Tuesday : Case-Shiller Index; Home Price Index
• Wednesday : New Home Sales data
• Thursday : GDP
• Friday : Personal Consumption Expenditures
Each of these data points has the power to move mortgage rates — especially because trading volume is expected to thin as the 3-day weekend nears. As volume drops on Wall Street, it will be harder to match buyers and sellers and, as a result, mortgage pricing will get (more) erratic.
Rates should be most stable at the start of the week. It may be the best time to lock a rate
May 20th, 2010 — Mortgage Industry News
After starting the day in the red, mortgage rates rebounded Wednesday afternoon after the Federal Reserve released its April 27-28, 2010 meeting minutes.
It’s good news for home buyers and would-be refinancers. Mortgage rates continue to troll along multi-year lows.
“Fed Minutes” are lengthy, detailed recaps of Federal Open Market Committee meetings, not unlike the minutes you’d see after a corporate conference, or condo association gathering. The Federal Reserve publishes Fed Minutes 3 weeks after each respective FOMC get-together.
The Fed meets 8 times annually.
Because of the minutes’ content and density, it’s of tremendous value to Wall Street and investors. Fed Minutes provide a glimpse into the conversations and debates that shape the country’s monetary policy.
The broad scope of the published meeting minutes are in sharp contrast to the more well-known, post-meeting press release which reads more like a policy summary.
And the extra words matter.
Here’s some of what the Fed discussed last month:
• On Greece : A crisis in Greece could slow U.S. domestic growth
• On housing : Despite government support, growth appears to have stalled
• On its mortgage buyback program : There’s little reason to sell mortgage bonds right now
When the markets saw the Fed Minutes, what had been a down day for bond markets turned positive. The less-than-sunny outlook for the near-term U.S. economy sparked bond sales, pushing prices higher.
Mortgage rates move opposite mortgage bond prices.
Wall Street is always in search of clues from inside the Fed about what’s next for the economy and post-FOMC minutes usually give good fodder. April’s meeting was no different.
For now, mortgage rates remain near all-time lows but once the Eurozone issues are settled, rates are likely to rise. If you haven’t locked a mortgage rate, your window may be closing. Once the economy is turning around for certain, mortgage bonds will be among the first of the casualties.
May 19th, 2010 — Real Estate Information
Single-family Housing Starts rose by 55,000 last month, suggesting ample housing stock from which buyers can choose this summer.
The report is a slightly larger read than what economists had expected.
Furthermore, for the first time since June 2009, Housing Starts appear to have broken away from its half-million unit plateau. 593,000 new homes were started in April.
Ordinarily, both Wall Street and Main Street would celebrate a strong housing sector report like this, but the Department of Commerce’s press release also held two cautionary notes.
The first point of caution is a mathematical one. Although single-family starts increased by 10.2 percent, the survey had a Margin of Error of 10.7 percent. This means that Housing Starts may have fallen by 0.5 percent and the report is statistically worthless.
The second point of caution is tied to Building Permits, a complementary data point in the same Department of Commerce report. In April, Building Permits fell by almost 11 percent with a tiny Margin of Error of less than 2%. This tells us that builders are pulling back — a sign of low housing market confidence
According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance. Housing Starts, therefore, should ease though June and July.
Home prices are based on housing’s supply and demand. For the next few months, supply should elevate, helping prices remain suppressed, after which, supply should dwindle.
The best time to buy a home, therefore, may be now. As the summer months come to close, we may find that buyers vastly outweigh sellers.
May 17th, 2010 — Mortgage Industry News
Mortgage markets improved last week — but barely — as ongoing doubt surrounding the health of Greece and the Euro pushed additional investors into safe assets, including mortgage bonds.
Mortgage rates were wildly volatile between Monday and Friday before closing the week slightly better than their best levels of the year.
It’s the 3rd straight week in which mortgage rates improved but that doesn’t necessarily mean the trend for lower rates will continue. The last two times mortgage rates teased these levels, they immediately spiked higher.
It happened once in February 2010, and again, 4 weeks later in March.
This week, the same could happen. After a week-and-a-half without much data of consequence, the newswires will be on overtime.
The first release to watch is Monday’s National Association of Home Builder’s Housing Market Index. It’s not a “mainstream” release, per se, but the index gives some insight into how homebuilders are feeling about the economy and homebuilders are on the frontlines of the housing market. The stronger the report, the worse it should be for mortgage rates going forward.
The same goes for Tuesday’s Housing Starts and Building Permits numbers.
Also on Tuesday, the government releases the Producer Price Index. The Producer Price Index is like a “cost of living” report for U.S. businesses — it measures the change in operating cost from month-to-month and from year-to-year.
PPI is viewed as a precursor to inflation and inflation is bad for mortgage rates. Therefore, if the Producer Price Index reads higher-than-expected, mortgage rates will rise. If PPI is in-line, rates in Texas should hold steady.
Then, on Wednesday, the Consumer Price Index is released. Again, if costs are rising, mortgage rates will likely follow.
The week closes with the release of the Federal Reserve’s minutes from its last meeting in April and the jobs figures. All in all, a busy week of data and mortgage rates could change by a lot.
If you’re still shopping for the market bottom, luck’s been on your side but there’s a point when it’s best to just lock in. This week may be that point.
Rates have never stayed this low, for this long, and this week doesn’t figure to be much different.
May 10th, 2010 — Mortgage Industry News
Mortgage markets improved to their best levels of 2010 last week, aided by events half a world away and ongoing safe haven buying. Greece’s debt problems continue to help mortgage rate shoppers in around the country.
Conventional mortgage rates dropped last week, ARMs falling more than fixed. FHA mortgage rates also improved.
Global concern for the Greece Situation are so strong that markets even shrugged off April’s blowout job report. On most other days, mortgage rates would soar on better-than-expected jobs data — especially coming out of a recession.
The Department of Labor’s April Non-Farm Payrolls reports:
• Payrolls have been net positive for 4 straight months
• Nearly 600,000 jobs have been created thus far in 2010
• Monthly job growth posted its biggest gain in 4 years in April
Additionally, more than 800,000 Americans re-entered the workforce in April in search of work. As a result, the Unemployment Rate jumped by 0.2 percent — another positive sign (in a roundabout way).
But again, Wall Street wasn’t watching jobs — Wall Street was watching Greece. And Greece was in riot.
This week, without much new data due on the economy, mortgage markets should continue to take cues from Greece, the IMF and the Eurozone. If a bailout agreement can be reached that investors feel is effective, the safe haven buying that’s led rates lower will recede and mortgage rates should rise.
Conversely, if an agreement is reached that investors deem ineffective, or no agreement is reached at all, mortgage rates should drop.
Each week for the last four weeks, we’ve talked about Greece and its pending bailout and how it might impact rates because each week the bailout appears imminent. Even this week, the market opens with the news that the IMF has approved a $40 billion lifeline to Greece. Maybe this will be the news that finally turns the mortgage market around.
Mortgage rates are unnaturally low right now and should change direction quickly. The problem is nobody knows when that will happen so be careful when rate shopping and keep an eye on the market.
Mortgage rates may fall further, but when they turn higher, they’re going to turn quickly.
May 7th, 2010 — Mortgage Industry News
On the first Friday of every month, the U.S. government releases its Non-Farm Payrolls report.
More commonly called “the jobs report”, Non-Farm Payrolls is a major market mover. The number of working Americans is directly tied to the health of the economy which, in turn, drives the stock and bond markets.
In general, when jobs numbers improve, it’s good for stocks and bad for mortgage bonds. It follows, therefore, that conforming mortgage rates rise because rates always move opposite of mortgage bond prices.
Conversely, when jobs numbers worsen, it tends to be bad for stocks and good for mortgage bonds. Mortgage rates fall.
Today, markets are behaving a bit differently.
Despite 290,000 jobs created in April 2010 — nearly twice the expected amount — and a 40 percent upward revision of March’s numbers, mortgage rates are essentially unchanged.
In a normal environment, rates would be higher. Today is not normal.
Today is a departure because, for all of the jobs report’s import to Wall Street, it’s less important to markets than what’s happening in Greece right now.
Greece is struggling to meet its debt obligations and its citizens are rioting.
Until a debt solution for Greece is made that sticks, unrest in the region will drive safe haven buying both domestically and abroad. U.S. mortgage bonds will gain on that movement because mortgage bonds are “safe”, and mortgage rates will fall.
Indeed, this is exactly what’s been happening since the start of April. Mortgage markets have been rallying for 5 weeks.
So, today’s jobs news is terrific for the economy and mortgage rates should be rising because of it. But, they’re not. Consider taking advantage — lock in a rate.
May 5th, 2010 — Real Estate Information
The Pending Home Sales Index moved higher in March as home sales were spurred by low mortgage rates and an expiring tax credit.
A “pending home” is a property that is under contract to sell, but not yet closed.
March marks the second straight month in which the Pending Home Sales Index improved after a series of weak showings this past winter.
March showed a 5 percent increase over the month, but the Pending Home Sales Index is still off its October 2009’s peak. October 2009 is a comparable period to March 2010 in that it marked the 1-month deadline before the home buyer tax credit’s initial expiration date. The credit was later extended to April 2010, of course.
That said, March’s surge in sales is being felt on the street.
Home buyers no doubt noticed the change in activity. Around the country, anecdotally, multiple offer situations were more common last month and “right-priced” homes tended to go under contract quickly.
The increase in March’s Pending Home Sales is diminishing the nation’s home supply which, in turn, should cause prices to rise in most markets.
Today’s buyers should consider making an offer sooner rather than later. Looking at the data, it appears the best time to have found a “deal” on a home may have been in February.
May 4th, 2010 — Mortgage Industry News
For the first time this year, Fannie Mae announced significant updates to its mortgage underwriting guidelines.
The changes include newer, harsher ARM qualification standards, the elimination of a once-popular loan product, and tighter rules for interest only mortgages.
Fannie Mae made its official announcement April 30, 2010. The changes will roll out to home buyers and homeowners everywhere over the next 12 weeks.
The first guideline change is tied to ARMs of 5 years or less.
Mortgage applicants must now qualify based on a mortgage rate 2% higher than their note rate. For example, if your mortgage rate is 5 percent, for qualification purposes, your rate would be 7 percent.
The elevated qualification payment will disqualify borrowers whose debt-to-income levels are borderline.
The second change is Fannie Mae’s elimination of the standard 7-year balloon mortgage. Balloon mortgages were popular early last decade. Lately, few borrowers have chosen them, though. Mostly because rates have been relative high as compared to a comparable 7-year ARM.
And, lastly, Fannie Mae is changing its interest only mortgages guidelines.
Effective June 19, 2010, Fannie Mae interest only mortgages must meet the following criteria:
- The home must be a 1-unit property
- The home must be a primary residence, or vacation home
- The borrower’s FICO must be 720 or higher
- The mortgage must be a purchase, or rate-and-term refinance. No “cash out” allowed.
Furthermore, borrowers using interest only mortgages must show two full years of mortgage payments “in the bank” at the time of closing.
Earlier this year, Fannie Mae-sister Freddie Mac announced that as of September 2010, it will stop offering interest only loans altogether.
Between Fannie Mae, Freddie Mac, the FHA, and other government-supported entities, the U.S. government now backs 96.5% of the U.S. mortgage market. So long as mortgage default rates are high, expect approvals for all borrower types to continue to toughen.
May 3rd, 2010 — Mortgage Industry News
Mortgage markets improved last week on tame inflation data, a benign statement from the Federal Reserve, and ongoing credit problems in Greece.
The factors combined to drop conforming mortgage rates to their lowest levels in 6 weeks.
It’s an unexpected development considering that mortgage rates were supposed to rise post March 31, 2010. That was the day the Fed’s support for mortgage markets ended.
Since then, however, a month-long string of devastating economic and meteorological events within the Eurozone sparked a global flight-to-quality that benefited “safe” assets such as mortgage bonds.
May 2010 may not be so kind.
The week starts with news that Greece reached a $147 billion bailout agreement with the IMF Sunday. This is a plus for the Eurozone and mortgage market negative. Rates should rise on the bailout.
Also on Monday, the government releases Personal Consumptions and Expenditures data.
PCE is the Fed’s preferred inflation gauge and it’s expected to show an annual read of 1.3 percent. Anything higher and rates should rise.
Then, for the rest of the week, employment data takes center stage.
- Wednesday : ADP releases its private sector employment data
- Thursday : The government releases initial jobless claims
- Friday : The government releases April’s job report
Jobs are key to the U.S. economic recovery, tied to consumer spending, consumer confidence, and mortgage delinquencies. If job growth is better than expected, mortgage rates should rise. If job growth is worse, rates should fall.
There’s no “best day” to lock this week so keep an eye on the market. However, if rates rise as quickly in May as they fell in April, you won’t have much time to act.
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