Borrowers may have missed an opportunity to get the last of the low rates, as it now appears interest rates are moving decidedly higher.

Mortgage application volume fell 2.7 percent last week, according to the Mortgage Bankers Association's seasonally adjusted report. Volume was 4.5 percent lower than a year ago.  The weakness was most pronounced in applications to refinance a home loan. That volume fell 4 percent to its lowest level since August 2008. Refinance volume is off nearly 17 percent from a year ago, when interest rates were lower. Most borrowers today have little incentive to refinance after a boom a few years ago, when interest rates hit record lows. Rates fell slightly last week, but that was temporary.  Mortgage applications to purchase a home, which are less rate-sensitive week to week, also fell, down 2 percent for the week. Volume was just 4 percent higher than one year ago. Volume should be considerably higher, given the strong demand for housing in an improving economy, but low supply and high competition is holding buyers back. Cash is currently ruling the market, as more investors come back, looking to cash in on fast-rising prices.

Interest rates then moved to a seven-year high yesterday, after a major sell-off in the bond market. Mortgage rates loosely follow the yield on the 10-year Treasury. The sell-off came after a stronger-than-expected retail sales report, but the real momentum began when interest rates broke through a recent high, resulting in one of the heaviest selling days of the year to date.

Skin Edge

Fairway Independent Mortgage Corp.

770-316-4162 (phone)

877-631-3294 (fax)

skine@fairwaymc.com

Mortgage rates climbed higher during the first half of last week and then reversed direction during the second half to end nearly unchanged. The movement didn't correlate with any specific economic news.

The first reading for first quarter gross domestic product (GDP) growth, the broadest measure of economic activity, was 2.3%, above the consensus of 2.0%. This was down from a level of 2.9% in the fourth quarter of 2017. During the first three months of 2018, relatively weak consumer spending was offset by strong business investment. Economists noted that the recent tax cuts may distort the typical distribution of activity between quarters for a while, making it necessary to look at longer-term time periods to discover the underlying trend in economic activity. Early estimates for second quarter GDP growth are for an increase of about 3.2%.

Last week’s data on home sales in March was encouraging. Sales of previously owned homes rose 1% from February and were close to the level seen a year ago. Sales of newly built homes increased 4% from February and were 9% higher than a year ago. Both readings were stronger than expected. The difference in performance likely was due to the supply of homes on the market. The inventory of previously owned homes was at just a 3.6-month supply and was 7% lower than a year ago. The inventory of new homes was at a much healthier 5.2-month supply and was 13% higher than a year ago. Home builders clearly are responding to the shortage of supply. 

Looking ahead, the important monthly Employment report will be released on Friday. As usual, this data on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. The ISM national services index on Thursday. The next Fed meeting will take place on Wednesday, and no change in policy is expected.

Skin Edge

Fairway Independent Mortgage Corp.

770-316-4162 (phone)

877-631-3294 (fax)

skine@fairwaymc.com

Strangely, mortgage rates moved higher during the second half of last week without a clear cause. The economic data released produced little reaction, and there was not much change in the stock market. Still, mortgage rates finished near the highest levels in several years. 

There are several big picture factors which are viewed as negative for mortgage rates, but investors have been aware of them for months. First, the supply of bonds issued by the Treasury is increasing due to larger government deficits resulting from policy changes. Yields generally need to rise to entice investors to purchase additional bonds. Second, the Fed has been very clear in stating that it is tightening monetary policy by raising the federal funds rate and reducing its enormous holdings of Treasuries and mortgage-backed securities. This also adds to the supply of bonds. Finally, global economic growth in recent months has been the strongest since the financial crisis, which could increase inflationary pressures. The only potential factor that was new last week was that oil prices reached the highest level since 2014, which also could increase the outlook for future inflation. 

Since consumer spending accounts for roughly 70% of economic activity, investors keep a close eye on the retail sales data. Following strong readings during the fall, retail sales posted unexpected declines for three straight months. However, the data for March released on Monday showed that they increased a healthy 0.6% from February, breaking the unwelcome trend.

Last week's report on housing starts was not as encouraging as the retail sales data. On the surface, overall home construction in March looked good with a stronger than expected increase from February, but this was completely due to strength in the multi-family segment. Single-family housing starts fell 4% from February, and permits to build single-family homes dropped even more to the lowest level since September 2017. This data tends to be volatile from month to month, however. 

Looking ahead, Durable Orders will come out on Thursday. The first reading for first quarter gross domestic product (GDP), the broadest measure of economic activity, will be released on Friday. In addition, the next European Central Bank (ECB) meeting will take place on Thursday, and it could influence U.S. mortgage rates.

Copyright @ 2018 MBSQuoteline

Skin Edge

Fairway Independent Mortgage Corp.

770-316-4162 (phone)

877-631-3294 (fax)

skine@fairwaymc.com

The stock market performed well last week, causing investors to shift some assets from bonds to stocks, which was negative for mortgage rates. The economic data produced little reaction, and mortgage rates finished the week a bit higher. 

Last Wednesday, the Fed released the detailed minutes from their last meeting on March 21. Of note, officials expect that U.S. economic growth will be stronger than average for the next few years. In addition, they are more confident that inflation, which has remained below their desired level for years, will rise to their target of a 2.0% annual rate. At the meeting, officials also discussed changing the language used to describe their stance on monetary policy to give investors a clearer sense of their goals. Since the financial crisis, it has been "accommodative" to help boost economic growth. At some point, officials expect that this should be changed to "neutral," meaning that it neither supports nor restrains growth.

The two most widely followed inflation indicators are the Consumer Price Index (CPI) and the PCE Price Index. To determine trends, investors generally prefer to look at the core readings, which exclude the volatile food and energy components. The most recent data for core CPI showed that it was 2.1% higher than a year ago, up from an annual rate of 1.8% last month. The expected large increase occurred because a very weak month dropped out of the 12-month period used in the calculation. This was the highest level since May 2017. However, Fed officials favor the core PCE price index to measure inflation, and it tends to be about 0.3% to 0.5% lower than core CPI each month, so inflation remains below the desired level in the view of most Fed officials. The next release of the PCE price index will take place on April 30.

Copyright @ 2018 MBSQuoteline

Skin Edge

Fairway Independent Mortgage Corp.

770-316-4162 (phone)

877-631-3294 (fax)

skine@fairwaymc.com

Investors were focused on the recent Employment report and the policy on tariffs last week. Despite unexpected results on both fronts, however, there was little reaction in mortgage rates, and they finished the week nearly unchanged. 

Against a consensus forecast of 175,000, the economy added just 104,000 jobs in March. In addition, downward revisions subtracted 50,000 jobs from the results for prior months. Even with the shortfall, however, the economy has added an average of 202,000 jobs per month during the first three months of 2018. The unemployment rate was flat at 4.1%. Average hourly earnings, an indicator of wage growth, slightly exceeded expectations. They were 2.7% higher than a year ago, up from an annual rate of 2.6% last month.

Last Thursday, President Trump threatened to add an additional $100 billion in tariffs on Chinese goods on top of the previously announced $50 billion. Chinese officials quickly said that they would respond with proportional measures. Some people think that both sides are just attempting to gain leverage in trade negotiations and that the tariffs will never be imposed. If these actions result in a trade war, though, it likely would have multiple effects. One would be reduced global economic activity, which would be good for mortgage rates, as it would reduce the outlook for future inflation. However, tariffs also raise the price of imported goods, which would increase inflationary pressures. These offsetting factors make the overall impact on mortgage rates difficult to predict. 

Looking ahead, the minutes from the March 21 Fed meeting will come out today. These detailed minutes provide additional insight into the debate between Fed officials about future monetary policy. The Consumer Price Index (CPI) also will come out today. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. 

Copyright @ 2018 MBSQuoteline

Skin Edge

Fairway Independent Mortgage Corp.

770-316-4162 (phone)

877-631-3294 (fax)

skine@fairwaymc.com

As of yesterday, it looked like mortgage rates would be more interested in staying in a narrow, sideways range for the holiday-shortened Spring Break/Good Friday trading week.  However, financial markets gave us a reminder about how much reality can differ from apparently probable outcomes.  Fortunately, the surprises work in the favor of the mortgage market today as rates are as low a they have been in 2 weeks.

Bonds (which underlie rates) drew motivation from a combination of factors yesterday.  These included compulsory trades that had to be made by the end of the month, automatic trades made in response to certain lines in the sand, and safe-haven trades resulting from the massive losses in the stock market.  The net effect for the average mortgage borrower is a noticeable improvement in upfront costs at the very least.  Bond yields bounced lower yesterday, finally cracking the previously impenetrable 2.8% barrier.  While the rally is "just one day" in a short trading week, it progressed throughout the day, which is encouraging.

Applications for both refinancing and home purchases gained ground during the week ended March 23.   The result was the largest week-over-week gains for overall loan volume since mid-January.  The Mortgage Bankers Association's (MBA's) Market Composite Index a measure of application volume, jumped 4.8 percent on a seasonally adjusted basis compared to the week ended March 16.  On an unadjusted basis the index was up 5 percent.

The Refinancing Index posted its largest positive change since the first week of 2018, rising 7.0 percent compared to the previous week. The refinance share of applications for the week rose to 39.4 percent compared to 38.4 percent a week earlier, reversing a slide that began in early February.

As of yesterday, it looked like mortgage rates would be more interested in staying in a narrow, sideways range for the holiday-shortened Spring Break/Good Friday trading week.  However, financial markets gave us a reminder about how much reality can differ from apparently probable outcomes.  Fortunately, the surprises work in the favor of the mortgage market today as rates are as low a they have been in 2 weeks.

Bonds (which underlie rates) drew motivation from a combination of factors yesterday.  These included compulsory trades that had to be made by the end of the month, automatic trades made in response to certain lines in the sand, and safe-haven trades resulting from the massive losses in the stock market.  The net effect for the average mortgage borrower is a noticeable improvement in upfront costs at the very least.  Bond yields bounced lower yesterday, finally cracking the previously impenetrable 2.8% barrier.  While the rally is "just one day" in a short trading week, it progressed throughout the day, which is encouraging.

Applications for both refinancing and home purchases gained ground during the week ended March 23.   The result was the largest week-over-week gains for overall loan volume since mid-January.  The Mortgage Bankers Association's (MBA's) Market Composite Index a measure of application volume, jumped 4.8 percent on a seasonally adjusted basis compared to the week ended March 16.  On an unadjusted basis the index was up 5 percent.

The Refinancing Index posted its largest positive change since the first week of 2018, rising 7.0 percent compared to the previous week. The refinance share of applications for the week rose to 39.4 percent compared to 38.4 percent a week earlier, reversing a slide that began in early February.

Mortgage Update Provided by: Skin Edge

A wide range of events influenced mortgage rates last week, including comments from the new Fed Chair, government policy changes, and surprises in the economic data. In the end, however, these were offsetting, and mortgage rates finished the week with little change. 

Last Tuesday, Jerome Powell gave his first testimony to Congress as Fed Chair. His comments caused investors to raise their expectations for the pace of rate hikes, which was negative for mortgage rates. He said that "my personal outlook for the economy has strengthened since December." He also predicted that inflation would rise to the Fed's target level of 2% "over the medium term" and that "wages should increase at a faster pace as well." Investors expect a 25 basis point rate hike at the next Fed meeting on March 21.

The biggest surprise in last week's economic data came from the manufacturing sector. The ISM national manufacturing index unexpectedly climbed to 60.8, which matched the highest level since 2004. Readings above 50 indicate an expansion in the sector. Since faster economic growth raises the outlook for future inflation, this data was unfavorable for mortgage rates. 

Last Thursday, President Trump announced that he would impose global tariffs on steel and aluminum imported into the U.S. Concerned that other countries might retaliate and a trade war might develop, investors sold stocks and shifted assets into bonds, including mortgage-backed securities (MBS). The added demand for MBS was good for mortgage rates. 

Looking ahead, the important monthly Employment report will be released on Friday. As usual, this data on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. In addition, the next European Central Bank meeting will take place on Thursday and could influence U.S. mortgage rates.

Copyright @ 2018 MBSQuoteline

Market Update Provided by: Skin Edge

Fairway Independent Mortgage Corp.

770-316-4162 (phone)

877-631-3294 (fax)

skine@fairwaymc.com

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www.skinedgefairway.com

People are particularly busy between Thanksgiving and Christmas. Most families are preoccupied with buying and wrapping gifts, cooking for family, and hosting parties. If that isn't enough to overwhelm you, you're welcome to throw in an Open House event in the middle of it all. And if you do, are there gonna be people who will come view your home?

Do People Buy Homes Post-Thanksgiving?

This is an age-old question that sellers consistently ask their agents during this time of the year. Realtors, like myself, would likely tell people that they should keep their homes in the market. But whenever I advise for or against something, I make sure that there is a sound basis for that advice. So, what could be considered a sound basis to keep your home in the market despite the busiest month of the year?

There ARE buyers during the holidays!

I'm sure you'd be skeptical. But statistics form the US Census Bureau and US Department of Housing and Urban Development announced that in November 2017 alone, 733,00 new houses were sold to home buyers. And while the graphs show a downtrend towards the end of the year compared to Spring and summer home sales, the fact remains that there are buyers who are looking for homes during the holidays.

These are the people who are looking to start a new career in a different city by January or people who have recently sold their homes and need to find a new home to move into. December is also a prime month to move because most movers, brokers, and home inspectors are quite often available to attend to the limited number of buyers. Also, a great deal of buyers intently pursues buying this time so they could inspect the house for problems that are associated with the chillier parts of the year (i.e. problematic central heating system)

There are many reasons to motivate sellers to keep their homes listed and for buyers to look for homes during the holidays. Ultimately, it depends on the reasons why they are looking for or selling their home and whether it can be put off for another month or two to wait for Spring which is prime time for selling real estate properties.

Sources:

November 2017 Data on Houses Sold - https://www.census.gov/construction/nrs/pdf/newressales.pdf

Real Properties Investing

Many people are slowly regaining their trust on the stability of the US real estate market. It had a shaky start 

Curious about local real estate? So are we! Every month we review trends in our real estate market and consider the supply and demand, number of days in the market, neighborhood trends, median price, square footage and more. We’d love to invite you to do the same, given that interest rates are at an all-time low. Those who are looking forward to getting their home loans are surely going to enjoy lower monthly payments. Investors are particularly going to like the fact that they can maximize profits in this condition.

Banks are (once again) lenient with lending

Most, if not all, banks tightened their lending process after the house price crash in 2007 and 2008. Fixed rate loans are once again possible for loan applicants who meet the minimum requirements which include, but are not limited to, being employed and keeping a good credit standing. When the market picks up again during Spring, banks are expecting to receive a growing number of mortgage loan applications . With the supply and demand scale being tipped towards the buyers, selling prices are also expected to increase which is good news for home owners looking to sell homes. As for home buyers, it is best to beat the competition by scouring listings before the influx of buyers come during Spring and Summer.

Foreclosures take front and center

With the over 191,000 foreclosures filed in the third quarter of 2017, real estate websites are full of foreclosed listings at the moment. Great news about foreclosed properties is that they're much more affordable than brand new houses. Some real estate investors find it profitable to buy foreclosed homes, then flip and sell it at a profit. As for first-time home buyers, buying foreclosed homes may lead to much lighter mortgage payments. However, they need to make sure that the repair expenses are within their buffer or your supposed mortgage savings will get drained by repair and maintenance contractors. 

Conclusion

Like any other investing product, profiting from real estate involves an intimate understanding of how the real estate industry works. Consider you risk appetite, too, before taking the plunge. Overall, fortune still favors the bold but it is best to tread with caution especially when dealing for big-ticket expenses and investments.