Home Buyers say rates are not their biggest concern

Home Buyers say rates are not their biggest concern:

A recent Harris Poll on behalf of Trulia showed that of all the concerns that potential homebuyers have, a mortgage rate is third on the list.

Their biggest concern is the ability to just get a mortgage at all (regardless of rate), the next biggest concern is the ability to find a home that they like (this is certainly reflected in the very low inventory numbers) and then rounding out the top three is the interest rate.

While no one wants a monthly mortgage payment that is higher than what they were quoted a month ago, the fluctuations of rates have meant only small differences in their mortgage payments.

Forty-two percent said they expect mortgage rates to increase over the next six months, while 20 percent think rates will stay the same. Of their biggest worry, 26 percent named ability to qualify for a home loan compared with 24 percent who pointed to rising rates. Millennials, ages 18-34, are even more concerned about their access to credit than about their rate. Thirty-six percent of millennials polled said access was their primary concern versus 26 percent indicating rising rates.

Nearly two-thirds of the consumers polled said the maximum price they would pay for their first or next home was $250,000. With 20 percent down, the rate increase could mean some buyers would qualify for less on a mortgage, but it would not turn those buyers away.

What Happened to Rates Last Week?

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Mortgage backed securities (FNMA 3.50 MBS) gained +81 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move lower from the prior week.

Last week was all about the jobs data and its potential impact on the Fed’s timing for their first rate hike. The jobs data was much weaker than the market expected and caused MBS to have a huge rally which lead to our lowest mortgage rates in months.

Jobs, Jobs, Jobs? Here is the tale of the tape:

Non-Farm Payroll: The bond market plays close attention to the current reading, but we know and understand that the prior months are significantly revised two more times after they are originally released. So, those revisions also get a lot of attention.
September: 142K vs est of 205K, this is a big disappointment and we said that it would take a reading below 150K to get a rally.
August: Revised lower from 173K down to 136K. This was maybe more important than the September reading. The September reading will be revised two more times. But historically the August data is revised upward an average of 40K. So, the bond market was expecting that August reading of 173K to be upgraded to over 200K and we didn’t get that. This was very positive for our pricing as now we have both August and September below 150K after trending for over a year at over 200K per month.
July was revised lower from 245K down to 223K.

Average Hourly Wages: Were flat at 0.0% on a month over month basis vs. expectations of a gain of 0.2%. And we can see why when the Average Hourly Work Week (which hardly ever moves) dropped from 34.6 hours per week down to 34.5 hours per week. So, less time working means no upward pressure on wages. Still, the year-over-year reading remained at 2.2% which is strong. Regardless, the MOM reading is positive for pricing.

Unemployment Rate: Remained at 5.1% which is what the market expected. The participation rate currently has more impact on the outcome of the Unemployment Rate formula than people going back to work does. The Participation Rate was at 62.4%, a drop from August’s 62.6%. The Unemployment Rate of 5.1% is still an attractive number (if you can believe its validity) for the Federal Reserve and is the lone bright spot of today’s data.

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The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

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