2016 Best Year for Housing in a Decade:

Existing-home sales closed out 2016 as the best year in a decade, even as sales declined in December as the result of ongoing affordability tensions and historically low supply levels, according to the National Association of Realtors® (NAR).

The January 24th report from the NAR says that total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, finished 2016 at 5.45 million sales and surpassed 2015 (5.25 million) as the highest since 2006 (6.48 million).

Lawrence Yun, NAR chief economist, says the housing market’s best year since the Great Recession ended on a healthy but somewhat softer note. “Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market,” he said. “However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December.”

Added Yun, “While a lack of listings and fast rising home prices was a headwind all year, the surge in rates since early November ultimately caught some prospective buyers off guard and dimmed their appetite or ability to buy a home as 2016 came to an end.”

The median existing-home price for all housing types in December was $232,200, up 4.0 percent from December 2015 ($223,200). December’s price increase marks the 58th consecutive month of year-over-year gains.

Total housing inventory at the end of December dropped 10.8 percent to 1.65 million existing homes available for sale, which is the lowest level since NAR began tracking the supply of all housing types in 1999. Inventory is 6.3 percent lower than a year ago (1.76 million), and has fallen year-over-year for 19 straight months and is at a 3.6-month supply at the current sales pace (3.9 months in December 2015).

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained just +2 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.  While just a 2 BPS move seems very tame, we actually had a very choppy week that saw large swings in rates and pricing.  MBS had an intra-week swing of -96 BPS from our highs (lowest rates) to our lows (highest rates).

As far as economic data, it had very little impact on rates.  The most important data of the week didn’t hit until Friday with the 4th QTR GDP and Durable Goods Orders.  We did have 2,5 and 7 year Treasury note auctions that were luke-warm in terms of demand compared to 2016 levels and had no impact on long bond prices.  The biggest shifts in intra-day pricing levels was the bond markets reaction to President Trump’s Executive Orders which included freezing government hires and salaries, ending TPP, tightening immigration policies and funding the building of the “the wall”.  He had some strife with the Mexican President but had a great meeting with the British Prime Minister.

Domestic Flavor:
GDP: We got our first look at the 4th QTR GDP data.  It was a bit of a miss as it came in at 1.9% vs est of 2.1%.  However, this will be revised three more times and statistically, GDP is usually revised upward.  The only real bright spot was a pick up in business spending.  The purchase price index saw an increase of 2.1% from the 3rd to 4th QTRs, so we have yet another data point that shows inflation over 2.0% (CPI being the other).

Durable Goods Orders:  The headline reading was a huge miss to the downside (-0.4% vs est of +2.6%).  But we have seen a lot volatility in the headline reading as just a few airplane orders can skew it dramatically.  So, when we look at the Ex-Transportation reading, it matched expectations of modest growth with at 0.5% reading.  Those are month-over-month(MOM) readings.  The YOY (year-over-year) Ex-Transport reading is now 3.5% which is a good trend line.

Consumer Sentiment: The January University of Michigan’s Survey was revised upward from the previously released 98.1 to 98.5.  A solid reading and is the best we have seen in 13 years.

What to Watch Out For This Week:

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.

Brought to you by:

Taff Weinstein

Broker/Owner

Office: 832-794-2136
Cell: 832-794-2136
taff@firstimperialmortgage.com

First Imperial Mortgage
3409 Morrison St
Houston, TX 77009
NMLS 225846

www.firstimperialmortgage.com

Copyright © 2016 Powered by www.MBSauthority.com

How the GOP’s tax plan could affect the real-estate market:

Until recently, the mortgage interest deduction was right up there with Social Security as a sacrosanct institution on Capitol Hill, protected by lawmakers on both sides of the aisle.

Backed by the powerful National Association of Realtors and supported broadly by middle-class homeowners, previous efforts to dismantle the mortgage deduction have gone nowhere.

However, the Better Way tax-reform “blueprint” from Republican House Speaker Paul Ryan would essentially get rid of the mortgage interest deduction, without policymakers having to vote to eliminate it.

The plan would make the standard deduction far more valuable — increasing it from $12,600 to $24,000 for a married couple. This would result in far fewer people itemizing their taxes, which is necessary in order to claim the mortgage tax deduction. (President-elect Donald Trump’s tax plan calls for raising the deduction even higher, to $30,000 for joint filers.)

Under the House Republicans’ plan, an estimated 38 million of the 45 million filers (or 84 percent) who currently itemize would opt instead for the standard deduction, according to an analysis by the Tax Policy Center. The GOP proposal states that “far fewer taxpayers will choose to itemize deductions, with the vast majority of taxpayers finding they are better off by taking advantage of the larger, simpler standard deduction instead.”

Under current rules, taxpayers can itemize and deduct the interest paid on up to $1 million on a mortgage, and home equity debt of up to $100,000. The mortgage interest deduction is the third-most expensive subsidy in the tax code, costing the federal government about $70 billion per year, according to the Tax Foundation.

Even with Republican control of the House, Senate and the White House, the Republican tax plan is nowhere near a done deal. Nearly three-quarters of Americans recently polled by the National Association of Home Builders say that they support the government providing tax incentives that encourage homeownership, and lobbyists for the real estate and construction industries are already gearing up to fight the provision.

If the blueprint were to become law, it would have ramifications for millions of taxpayers, homeowners and sellers, but the overall impact on the housing market (and your wallet) may be smaller than you think. Here’s what you need to know:

1. Home values could fall in the short-term.

The total elimination of the mortgage interest deduction might push prices down around 7 percent, according a recent paper from the Federal Reserve. The impact might be smaller if the deduction is not fully repealed. That’s a relatively small decrease compared to the double-digit decline seen after the housing bubble burst in 2006, but it would mean a paper loss of nearly $17,000 on the average $240,000 home. Still, the impact of increasing the standard deduction, rather than eliminating the mortgage-interest deduction, would likely have a smaller impact.

2. But only a small portion of taxpayers uses the mortgage-interest deduction.

While it enjoys broad support, the vast majority of homeowners don’t benefit from the mortgage interest deduction as it currently stands. The benefit is only available to those who have a mortgage on their home and who itemize their taxes.

Only about 20 percent of taxpayers currently claim the deduction, and it has an average benefit of just over $2,000, according to the Tax Policy Center. “You go to [mid-tier markets] like Texas, Florida, and Arizona, and no one talks about buying a home to save on taxes,” says John Burns of John Burns Real Estate Consulting, which provides data and advice to real estate investor. “It’s not even part of the equation anymore.”

3. Most consumers would still be better off buying.

It’s cheaper to buy than to rent a home in most parts of the country, and that wouldn’t change with the elimination of the mortgage deduction. “This doesn’t fundamentally affect the rent-versus-buy decision,” says Trulia Chief Economist Ralph McLoughlin. “It makes it less of a better deal to buy than to rent, but buying still remains a good financial option if a household can stay in their home for seven years.”

calculation by Politico finds that a homeowner with a $65,000 annual salary would see the tax benefits of buying a $263,000 condo plummet from $3,325 a year to $166. Tying up your assets and losing the ability to easily relocate may not be worth that much, although there are other benefits of homeownership, such as growing equity and protection from rising rents, and there are many emotional incentives that compel people to become home owners.

4. Middle-income homeowners would feel the biggest bite.

Any impact on home prices would likely be concentrated on more moderately priced homes, where the owners aren’t paying enough in interest to outweigh taking the new deduction but aren’t in a high enough tax bracket to get a huge break. The Tax Policy Center estimates that middle-income taxpayers would see an average tax cut of only $260 per year under the Republican plan. That’s hardly enough to offset even a modest loss in home equity, although long-term demand would likely see prices bounce back over time.

5. High-income homeowners would benefit.

The wealthiest homeowners would benefit from both the tax cut and continued access to the mortgage-interest deduction, since they’d likely continue to itemize. Those making more than $1 million a year typically save nearly $9,000 thanks to the deduction. Under the Republic tax plan, the top quintile of taxpayers would also receive an average tax cut of $11,000 a year.

Due to larger mortgages and a higher tax rate, wealthy borrowers already benefit disproportionately from the mortgage interest deductions, which wouldn’t change. Wealthy taxpayers often choose to finance the purchase of a home even though they could pay cash, as part of a broader tax planning strategy.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -79 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher from the prior week.

We had another holiday-shortened week that saw MBS under pressure Wednesday and Thursday in response to the bond market interpreting the Fed’s Beige Book as leaning towards more growth and wage/price inflation than originally thought.

Domestic Flavor:
Housing: As usual, a mixed bag with these readings.  New Housing Starts were a smidge better than expected (1.226M vs est of 1.200M) and Building Permits were a smidge lower than expected (1.210M vs est of 1.225M).  Regardless both are basically at around 1.2M which is an ok level but well below longer term historical norms.
Weekly Mortgage Applications increased by 0.8%, led by Refinances which jumped 7.0%.  Purchases fell -5.0%.
The NAHB Index hit 67 which was 2 points lower than November’s downwardly revised 69.  Any reading above 50 is positive and a reading in the upper 60s is very robust.

Jobs, Jobs, Jobs: Initial Weekly Jobless Claims were much lower than expected (234K vs est of 254K) plus, the more closely watched 4 week moving average dropped to 246,750 which is extremely low.  Continuing Claims fell to 2.046M which was also better (lower) than the market expectations of 2.073M.

Manufacturing:  The Philly Fed Business Outlook Survey was hot, hitting 23.6 which far out paced the consensus estimates of 15.3 and was the highest (best) reading since December 2014.
Industrial Production was twice as strong as expected (0.8% vs est of 0.4%).  But not so fast.  Most of that beat is due to comparing the December data to November’s downwardly revised -0.7%, so it is skewed higher.  Regardless, it was still a nice reversal from November.  Capacity Utilization edged out estimates (75.5 vs est of 75.3

The Talking Fed:
The Beige book Read the official report here  showed continued growth in our economy with 10 out of the 12 Federal Districts reporting that they are seeing “moderate or modest” growth.  Labor market conditions remained tight in the majority of the districts with several noting problems with finding workers with the skill sets to match the job openings.  They also noted wage pressure in many districts and even wage pressure in a couple of districts that were due to new minimum wage laws going into effect in 2017.
Inflation was a concern as 8 out of the 12 districts reported costs moving upward on final goods and agricultural items.  Atlanta saw costs as flat.

Yellen is Yelling:  She spoke at 3:00EST in S.F. you can read her prepared remarks here . Essentially, she outlined what the job of the Federal Reserve is and what its dual mandate is.  She said that the Fed basically views 4.75% as full/maximum employment (currently we are at 4.7%) what is interesting is that she said their is still room for the labor market to improve.

Inflation?:  The December Consumer Price Index matched expectations across the board.  The key is that both the headline YOY (2.1%) and core YOY (2.2%) are both over 2.0%.  So trending upward.

What to Watch Out For This Week:

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.

Brought to you by:

Taff Weinstein

Broker/Owner

Office: 832-794-2136
Cell: 832-794-2136
taff@firstimperialmortgage.com

First Imperial Mortgage
3409 Morrison St
Houston, TX 77009
NMLS 225846

www.firstimperialmortgage.com

Copyright © 2016 Powered by www.MBSauthority.com

President Trump’s Housing Agenda?

President-elect Trump’s housing agenda is likely to involve changes to the new rules and policies on mortgages imposed following the 2008 financial crisis, details that emerged during Dr. Ben Carson’s confirmation hearing to lead the Department of Housing and Urban Development.

Trump’s views on housing remained mostly a mystery throughout the campaign. Only once did he refer to any of the concerns facing home buyers, renters, builders, real estate agents and lenders. In an appearance at a homebuilders’ trade group meeting in August, the Republican said that new Obama administration rules made it “impossible for your people to go get mortgages.”

In his appearance before the Senate Banking Committee, Carson lent a little more context to that industry-friendly but vague statement.

In his prepared testimony, Carson wrote that banks are “loath” to lend to homebuyers through programs that involve insurance through the Federal Housing Administration, part of HUD, because of the “fear of getting sued if the borrowers default.”

Carson expressed the view that lenders have pleaded to the federal government over the past half-decade-plus because the regulatory and legal actions taken in response to the crisis have left banks and other lenders scared to extend credit for fear of being penalized or sued by the government later.

“His comments there were helpful,” said David Stevens, head of the Mortgage Bankers Association.

Most significant are the major settlements that the government has reached with big banks over bubble-era mortgages that were sold to the FHA, along with other agencies. For example, in April the Department of Justice announced a $1.2 billion settlement with Wells Fargo for claiming that home loans met the terms for FHA insurance, when they did not.

While populist critics have said that the Obama Justice Department should have gone further in prosecuting big banks for potential mortgage fraud, the industry has its own complaints about the way that the lawsuits have been handled. Because the suits turn on specific terms in long loan contracts, they say, it is difficult to be certain that they won’t be on the hook for inevitable defaults in the future.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -7 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.

We had very strong 3 year and 10 year Treasury note auctions but just a luke-warm 30 year Treasury bond auction.  Overall, the data from overseas (China, Japan and Germany) showed inflation and growth.  Domestically, we had another round of reports that showed growth at a slow pace, but growth nonetheless.

Retail Sales:  The Headline December reading showed a nice monthly growth of 0.6% which was just a tick off of forecasts calling for 0.7%.  But November was revised upward from 0.1% to 0.2%. When you strip out Autos, Retail Sales gained 0.2% but that was less than expectations of 0.5%.  But partially offsetting that was November being revised upward to 0.3%

Inflation?:  The Producer Price Index MOM showed and increase of 0.3% which matched estimates.  The more closely watched Core (ex food and energy) YOY reading grew to 1.6% vs est of 1.5%.

Consumer Sentiment: The UofM Index (preliminary) for January came in close to estimates of 98.5 with a 98.1 reading.  This will be re-released at the end of January.

What to Watch Out For This Week:

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.

Brought to you by:

Taff Weinstein

Broker/Owner

Office: 832-794-2136
Cell: 832-794-2136
taff@firstimperialmortgage.com

First Imperial Mortgage
3409 Morrison St
Houston, TX 77009
NMLS 225846

www.firstimperialmortgage.com

Copyright © 2016 Powered by www.MBSauthority.com

Smart Homes Starting to Gain Ground:

Full home automation is not high on the average house hunter’s priority list. That may be about to change. The trouble so far has been the technology itself: Consumers aren’t sure how to integrate it into existing home systems. Plain and simple, they don’t know how to use it.

In 2016, 80 million smart home devices were delivered worldwide, a 64 percent increase from 2015, according to IHS Markit. That includes Nest thermostats and smoke detectors, August smart locks, Ring video doorbells. A big chunk of it was personal home assistants like Google Home, Bosch’s Mykie and Amazon’s Alexa. Analysts say despite the growth last year, 2017 will be the year of the smart home because the companies behind the technology will be smarter about educating their consumers.

CNET, a consumer technology news and review website, is launching its Smart Home Matrix at the Consumer Electronics Show (CES) last week. It is a new feature on the site designed to walk consumers through the latest smart home technology.

“We’ve seen smart home technology increasingly take prominence at CES with more products announced each year,” said Mark Larkin, SVP and GM at CNET. “From our own testing in the CNET Smart Home, we understand one of the largest hurdles in adopting smart home technology is getting multiple devices to work together. Our Smart Home Matrix helps consumers do just that by letting them know what devices are compatible with each other.”

The year ahead will likely bring more innovations, but the focus, according to analysts at IHS Markit, will be lowering prices, educating consumers and enhancing security, so that no one can hack your fridge. Voice assist will become much more commonplace, and the smart home will integrate with the smart car — so as you drive away, your home will know to turn the heat down. They predict at least 130 million smart home devices will be shipped worldwide this year.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +12 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.

We had another holiday-shortened week (Monday was closed for New Years) and a choppy session that saw bid/ask levels that were unrealistic and not based upon any market fundamentals.  Actually, under a “normal” market, MBS would have been under more pressure (higher rates) as we had very strong ISM data, a more “hawkish” tone from the Fed minutes, and Wage data that jumped up to 2.9% gains.

Domestic Flavor:
Jobs, Jobs, Jobs: 
Big Jobs Friday: The much anticipated last employment report from 2016 is here.  Here is the Tale of the Tape:

Non-Farm Payrolls: The December number (which will be revised two more times) came in lighter than market expectations (156K vs est of 178K).  Before we jump on the band wagon and say this is a weak report, the fed (and bond market) looks at the average/trend since since theses number often see very large revisions.  November was revised upward significantly from 178K up to 204K (+26K).  While October was revised lower by a smidge from 142K to 135K (-7K).
The most closely watched NFP data point is not the headline 156K.  It is actually the 3 month rolling average which (after December’s release and revisions to prior months) is now 165K.  In November, the rolling 3 month average was 176K which is only an 11K change.
Wages: The most important piece of data.  The Average Hourly Wages for the Month increased by 0.4% which was higher than estimates of 0.3% and a large turnaround from November’s -0.1%.  But, more importantly, Average Hourly Wages increased by 2.9% on a yearly basis which is the hottest level that we have seen in 8 years.
Unemployment Rate: Matched market expectations of 4.7% and was a slight uptick from November’s 4.6% due to the Participation Rate increasing from 62.6% to 62.7%.

ISM Non-Manufacturing (Services): The services sector accounts for over 2/3 of our economic output.  And it came in higher than expectations (57.2 vs 56.6).  Any reading above 50 is expansionary and any reading above 55 is very hot indeed.

The Talking Fed:  We got the minutes from the December Fed Meeting where they raised rates and increased expectations of 3 to 4 rate hikes in 2017.  You can read their official release here: https://www.federalreserve.gov/monetarypolicy/fomcminutes20111213.htm
The Minutes showed a more “hawkish” Fed concerned about future inflation that what was perceived by the markets after their original policy statement.

  • Almost all also indicated that the upside risks to their forecasts for economic growth had increased.
  • About half of the participants incorporated an assumption of more expansionary fiscal policy in their forecasts.
  • Many participants judged that the risk of a sizable undershooting of the longer-run normal unemployment rate had increased somewhat and that the Committee might need to raise the federal funds rate more quickly.
  • Almost all Federal Reserve policymakers thought the economy could grow more quickly because of fiscal stimulus under the Trump administration and many were eyeing faster interest rate increase.

What to Watch Out For This Week:

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.

Will 2017 be a Good Year to Sell?

With inventory of existing homes at historic lows and a rise in interest rates thanks to the Federal Reserve, housing inventory for 2017 is almost certain to rise. For prospective sellers that means that if you were planning to sell your home this year, it’s time to get cracking.

Housing inventory has been below normal for more than two years now. That’s been true of new homes and existing homes, and the forecast for the new year is not a whole lot better.

According to data from the National Association of Realtors (NAR), the inventory of existing homes for sale had dropped more than 9% year over year from November 2015 to November 2016, to a total of 1.85 million, the lowest total since 2000.

New home building has picked up since reaching a trough of about 350,000 seasonally adjusted single-family home starts in early 2009. But the number of starts has yet to reach 1 million a month, a level it held reasonably steadily from the early 1990s until about 2008.

Housing prices rose nationally by around 6% in 2016, but the expected increase in 2017 ranges from 3% to 5%.

Real-estate website Trulia, prepared a list of six reasons to get your house on the market now, rather than waiting for the spring selling season to arrive.

Low inventory
We’ve already discussed this one in general, but if you live in an area where buyers are thick on the ground getting listed now could result in a quick sale.

Buyer urgency
Generally speaking, buyers looking to purchase a home in the dead of winter are doing so because they have to, and the sooner the better.

Spring begins early in warm markets
Warm weather brings out buyers and spring starts early in a wide swath of the country. Don’t miss it.

Lower-priced houses move first
According to Trulia this is due to first-time buyers who have been saving for a down payment will add a tax refund to the pile and go shopping early for that first home.

A new administration in Washington
Possible political changes as a result of a Trump administration could have an impact on both buyers and sellers. If you think the effect on you personally is going to be negative, get the house listed soon.

More interest rate hikes
The Fed has all but promised more interest rate increases in 2017. Buyers who are stretching to meet debt-to-income ratios won’t be able to wait.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +91 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move slightly lower from the prior week.

It was our second consecutive week with a skeleton crew of bond traders and with very thin volumes that skewed upward momentum in the MBS market.  While rates did decline slightly, a large portion of the gains in MBS pricing were not passed on to originators as the gains were not reflective of normal market.

We had another holiday shortened session with really only three days of trading.  We saw strong demand for our 5 year and 7 year Treasury note auctions as traders booked some profits in the stock market and parked their funds in shorter term notes ahead of the long weekend and new year.

Domestic Flavor:
Consumer Confidence:  The trend upward in Consumer Confidence that started after the election continues.  The December reading jumped to 113.7 which beat our forecasts calling for 105.5.  November was revised upward from 107.1 to 109.4

Manufacturing: The bell-weather Chicago PMI was lighter than expected (54.6 vs est of 57.0).  But really any reading above 50 is positive for the economic outlook.  Its the fourth strongest reading that we have seen in 2016.

What to Watch Out For This Week:

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.

Brought to you by:

Taff Weinstein
Broker/Owner

Office: 832-794-2136
Cell: 832-794-2136
taff@firstimperialmortgage.com

First Imperial Mortgage
3409 Morrison St
Houston, TX 77009
NMLS 225846

www.firstimperialmortgage.com

Copyright © 2016 Powered by www.MBSauthority.com