The Housing Market Update

Waiting to Write an Offer Could Cost You:

Homebuyers across the country continue to struggle with a historic shortage in homes available to purchase which has led to rising prices, multiple offers and reduced time on the market.

Highly selective buyers (particularly first time home buyers with unreasonable expectations) are seeing homes vanish while they weigh the options over several properties that they are interested in.

Nationally, the number of homes on the market dropped for the eighth consecutive quarter in Q1, falling 5.1% from Q1 of 2016. And the inventory shortage continues to be most dire for more affordable homes.

Starter-home inventory fell by 8.7% year over year, while trade-up home inventory fell by 7.9%. Meanwhile, the stock of premium homes fell just 1.7% year over year.

“Recovering home values have proven to be a double-edge sword,” said Ralph McLaughlin, Trulia’s chief economist. “While homeowners across the country are thrilled to regain equity in their homes, many have not been in a hurry to trade up. This has added to the inventory gridlock that ties up would-be starter-home inventory from ever coming on to the market, further constraining supply and decreasing affordability.”

That disproportionate drop in starter-home inventory is making homeownership less and less affordable for first-time buyers. Right now, a typical starter-home buyer would have to dedicate 38.3% of his or her monthly income to buy a home, Trulia found. That’s a 2.9% increase from last year.

The bottom line is that homebuyers need to have their mortgage ready and be able to put in an offer quickly.  Chasing a home with more features or for a lower price may very well result in losing out in the market altogether.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +41 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move lower from the prior week.

We had a very light week for domestic economic data.  The bond market (which controls mortgage rates) focused on the slew of speeches by Federal Reserve President’s and board members.  MBS drifted upward as President Trump could not get any changes to the Health Care law through the House last week.  This has traders concerned that he may face the same resistance with corporate and personal tax reform.  Both are considered very stimulative for our economy.

Domestic Flavor:
Durable Goods Orders: The headline reading rose by 1.7% in February which beat out forecasts  of 1.2%.  Plus, January was revised upward to 2.3%.  When you strip out the very volatile Transportation sector, Durable Goods rose by 0.5% vs of 0.6% and January was revised upward from -0.2% to 0.2%.  Overall a pretty good report. The only real weakness was with core capital goods that missed the mark (-0.1 vs est of 0.5) but January was revised upward from -0.4 to +0.1…so that makes up the difference there.

The Talking Fed:
Fed Chair Janet Yellen spoke in Washington at a conference this morning.  She did not address the pace of future rate hikes or even our economic trajectory but remained on topic for the conference which was “The Economic Future of Kids and Communities”.
Chicago Fed President Charles Evans (voting member) did the same thing as Yellen yesterday and did not address rates or the economy in his address to a child education conference.
S.F. Fed President John Williams (non-voting member) said  “Three or even four increases as your total makes sense,” indicating the economy is growing at a strong enough pace to support at least three rate increases this year.
St. Louis Fed President James Bullard (non-voting member) said that the Fed should keep its policy rates low but should instead trim their balance sheet (which would mean less MBS purchases and therefore cause mortgage rates to rise without the Fed having to raise their Fed fund rate).
New York Fed President William Dudley (voting member) said that the economy is “at a pretty good pace right now”.  He said the Unemployment Rate could drop lower but then that brings up concern over wage inflation.
Cleveland Fed President Loretta Mester (non voting member) said that she sees MORE than three rate hikes this year. “I actually built into my forecast more than three as I have the economy a bit stronger than the median forecast,”  This is no surprise as she voted three times in 2016 to raise rates (rates were only actually raised once in December)
Chicago Fed President Charles Evans (voting member) said that the Fed is now going to wait until June before it considers its next rate hike.

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

Home Builders’ Confidence Hits 12 Year High

U.S. homebuilders are feeling more optimistic about their sales prospects than they have been since the high-flying days of the housing boom.

The National Association of Home Builders/Wells Fargo builder sentiment index released Wednesday jumped to 71 this month. That’s up six points from 65 in February and the highest reading since June 2005.

Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has been above 60 since September.

The March number exceeded analyst predictions. They expected the index to hold steady at 65, according to FactSet.

Builders’ view of sales now and over the next six months also surged, as did a gauge of traffic by prospective buyers.

The increased confidence reflects heightened expectations as the spring home-selling season, which typically sets the pattern for residential hiring and building construction in the ensuing months, gets underway.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +50 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move lower from the prior week.

Mortgage backed securities (which control mortgage rates) continued to shift risk going into Wednesday’s Fed meeting which caused mortgage rates to continue the two week trend of moving higher.  But after the markets received a very “dovish” rate hike, MBS moved off of their lowest levels and regained a small portion of their losses which caused mortgage rates to level off.

The Talking Fed: The biggest event of the week was the FOMC (Federal Open Market Committee) decision to raise their key interest rate but at same time, moved to dampen market expectations over the frequency and timing of future rate hikes via Fed Chair Janet Yellen’s “dovish” stance.
Read the FOMC statement here
Read their Economic Projections and Rate Hike Chart here
The Federal Reserve Open Market Committee decided to raise their Fed Funds rate by 25 basis points which was widely expected.
Here are some key points from their policy statement:
– Minneapolis Fed President Kashkari (new voting member in 2017) voted AGAINST the rate hike but he was the only one.
– Deleted the word “only” from expectation that U.S. economy to evolve in way that warrants “only gradual increases” in rates.
– Keeps reference to fed funds rates as likely to remain below long-run levels “for some time”
– Monetary policy will support “some further strengthening” in labor market, inflation’s return to 2%
– Now says that inflation will “stabilize around” 2 percent over medium term vs prior description that it would rise to 2%, now says inflation’s moving close to 2% objective.
– Fed continues to say economic activity expanded at “moderate pace,”
– U.S. labor market has continued to strengthen, and job gains are “solid”
– FOMC keeps previous assessment that near-term risks to outlook appear “roughly balanced”; continues to say it’s “closely” monitoring inflation indicators and global economic/financial developments
– Fed continues to say it will keep existing reinvestment policy in place until normalization of fed funds rate “is well under way”;
– FOMC’s holdings of longer-term securities to stay “at sizable levels”

What did the “dot plot chart” say?
– Median target for end-2017 is 1.375%, unchanged
– Median target for end-2018 is 2.125%, unchanged
– Median target for end-2019 is 3% vs 2.875% in December
– Long-run target is 3%, unchanged

During her live Press Conference, Fed Chair Janet Yellen said:
– Three rate hikes in 2017 is what she calls “gradual”
– Says the simple message is “that the economy is doing well”
– She said in her opening remarks that this “is not a reassessment” of their stance in policy or trajectory of the economy.  This is perceived as a very “dovish” statement by her.

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

Consumer Confidence in Housing Hits All Time High

Consumer Confidence in Housing Hits All Time High:

Consumer confidence in housing is at an all-time high, with millennials posting strong increases in confidence, according to new data from Fannie Mae.

The Fannie Mae Home Purchase Sentiment Index (HSPI) spiked by 5.6 percentage points last month to 88.3, the highest it’s been since Fannie started keeping records. Five of the HPSI’s six components were up, with three hitting all-time highs.

The net share of Americans who believe that now is a good time to buy a home spiked by 11 percentage points, while the share who believe it’s a good time to sell rose seven percentage points. The share of Americans who report a significant increase in their household income rose by four percentage points. Consumers were also more confident about keeping their jobs, according to Fannie Mae.

More Americans also expect their homes’ prices to go up, with the net share rising three percentage points. The percentage of people who think mortgage rates will go down, however, held steady for the third consecutive month.

“The latest post-election surge in optimism puts the HPSI at its highest level since its starting point in 2011. Millennials showed especially strong increases in job confidence and income gains, a necessary precursor for increased housing demand from first-time homebuyers,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Preliminary research results from our team find that millennials are accelerating the rate at which they move out of their parents’ homes and form new households. However, continued slow supply growth implies continued strong price appreciation and affordability constraints facing millennials and first-time buyers in many markets.”

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -71 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher from the prior week.  Over the past two weeks, MBS have lost -161 basis points which have driven mortgage rates to their highest levels in four years.

The bond market (which controls mortgage rates) continued to shift risk from a 50% probability of a rate hike by the Federal Reserve in March three weeks ago, to a 75% probability two weeks ago, to almost 100% last week.  That shift in sentiment among long bond traders is the primary factor in rates right now.

Last week, the focus of the markets were on two major events.  The European Central Bank (ECB) and our Jobs data.
Jobs, Jobs, Jobs: Friday’s jobs data was strong enough to solidify market bias towards a March rate hike.
The following is the Tale of the Tape:
February Non-Farm Payrolls (NFP) 235K vs est of 190K.
January NFP revised upward from 227K to 238K.
December NFP revised lower from 157K to 155K.
Three month rolling average increased to 209K.
Average Hourly Wages increased on MOM basis by 0.2% vs est of 0.3%.  However January was revised upward from 0.1% to 0.2%, so the baseline changed which means Average Hourly Wages matched expectations.  On a YOY basis, wages jumped from January’s reading of 2.5% to 2.8% this reading.
The Unemployment Rate dropped from 4.8% to 4.7% which matched expectations.  But it did so with the Participation Rate Rising (which is usually not the case).  It rose from 62.9% to 63.0%.

European Central Bank:  Left their key interest rate unchanged and did not change the level of their bond purchasing program. ECB President Draghi said the “balance of risks to growth has improved” and noted that The ECB had “removed reference to signal a sense of urgency.” This combined with the removal of references to the use of all instruments has sparked EUR strength and Bund weakness.

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

Homes Once again a Piggy Bank

Homeowners are opening their favorite piggy bank again — their homes.

As home values rise faster than expected, that increased homeowner wealth suddenly seems more enticing.

Home equity lines of credit, known as HELOCs and often serving as second loans, allow homeowners to pull cash out of their homes when they need it. HELOC volume is now up 21 percent in the past two years, to the highest level since 2008, according to Moody’s. It is still nowhere near its housing boom level, when many people treated their homes like ATMs, but the trajectory is definitely pointing higher.

Borrowers are also putting smaller down payments on home loans now, starting with less home equity either to save cash or because they can’t afford anything more. To put it in perspective, before the last housing boom, the median down payment was just over 7 percent. It then dropped to 3 percent during the height of the boom, as lenders offered all kinds of “creative” loan products that required little to no down payment.

Homeowners are clearly leaning toward more leverage, but they are doing so in a far different environment than in 2006. Mortgage underwriting is far stricter, especially for home equity loans, and borrowers must prove their ability to repay loans, including all financial documentation. Home equity continues to rise steadily, according to the Federal Reserve Board, and it is still rising faster than borrowers are withdrawing it.

Cash out refinances are also making a big comeback as homeowners are able to take advantage of rising home values to refinance their current mortgage and taking equity out. These are mortgages that are in the first lien position.  In these cases, the borrow is often also removing their monthly private mortgage insurance.  Even with slightly higher mortgage rates than a year ago, their monthly mortgage payments are often times much lower given the absence of the monthly PMI component.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -90 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher from the prior week.

We had extremely strong domestic economic data and another week of the Fed pounding the airways trying to turn the markets around to pricing in a March rate hike.  The difference being that after three weeks, it finally worked as the market moved from a 50% probability of a rate hike 2 weeks ago, to a 90% probability of a rate hike last week.  The effect was a sell off in long bonds that are very rate sensitive which caused mortgage rates to rise.

Housing:  The Case-Shiller Home Price Index (20 metro city) was a little higher than expected (5.6% vs est of 5.3%) but this data from December and is a small sample size.  More weight is put on the Existing Home Sales median price than this report.

Consumer Confidence: The February reading was very strong (almost a 15 year high) with a 114.8 reading which was much stronger than January’s reading of 111.6 and the consensus estimates of 110.9.

Manufacturing: February’s Chicago PMI blew the doors off of estimates (57.4 vs est of 53.0).  Any reading above 50 is good and this was a very hot reading.
January’s Richmond Fed Manufacturing Index also showed strength as the regional report was stronger than estimates (17 vs 10).
The national ISM Manufacturing Index for February was very hot.  It came in at 57.7 which was much higher than the market forecasts of 55.7.

ISM Services: Yet another red-hot economic data point.  ISM Non Manufacturing represents more than 2/3 of our economic engine and it was very high, coming in at 57.6 vs est of 56.5.  Any reading above 50 is expansionary and a reading near 58 is fantastic.

The Talking Fed:
Philly Fed President Patrick Harker (voting member) said “I see three hikes as appropriate for 2017, assuming things stay on track.”

S.F. Fed President John Williams (non voting member) said “In my view, a rate increase is very much on the table for serious consideration at our March meeting,” and “We need to gradually ease our foot off the gas in order to avoid a ‘too hot’ economy that in the end isn’t sustainable.”

The Beige Book showed that the economy continues to expand at “a modest to moderate pace from early January through mid-February.” And was overall up-beat but noted that while Business Optimism continued to rise, it was at a lesser pace than the prior period.  Overall, nothing in this report really shocked the market.  It was not weak enough to reverse the rapidly building market sentiment that a March rate hike is in the cards….nor strong enough to “seal the deal.”

Federal Reserve Janet Yellen spoke in Chicago. You can read her prepared statement here
Overall, her them matched the recent bevy of “hawkish’ comments from Federal Reserve members.  Here are some key highlights:
– Fed will raise rates this month if the economy holds up.
– Rates are likely to rise faster this year for the first time since she took the helm of the Fed.
– She sees no evidence the Fed has fallen behind the curve.
– Gradual removal of accommodation is likely to be appropriate.

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

Number of Young Americans Sharing Homes Hits 115 Year High

The proportion of American millennials sharing their home has hit its highest level in 115 years.

A recent study published in a blog by Trulia shows that 60 percent of young Americans live with parents, other relatives, friends or roommates as high rents and high home prices make solo living unaffordable.

Trulia’s Mark Uh, writes that in Miami a typical renter would need to spend almost half of their income on renting a one-bedroom apartment but for a millennial this rises higher, to 54 percent.

Millennial renters also pay more than typical renters in Boston and Los Angeles but less in San Francisco and New York.

The article highlights the savings that are achievable by renting a two-bedroom home with a roommate rather than living alone in a one-bedroom home.

Double-digit savings can be achieved in eleven of the top 25 rental markets but Miami is a unique case. Despite the saving being the largest among the top rental markets, the 19.2 percent saving from renting with a roomie would still leave the rent unaffordable by US government metrics.

Of course, with many low down payment options available and mortgage rates still near historic lows, this may be a market segment that needs to be educated on the value of purchasing instead of renting.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +53 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move lower from the prior week.

We had a holiday-shortened week (President’s day the bond market was closed) and a very light week for economic data.  The stock market continued to rally and so did long term bonds at the same time.  We had another round of Federal Reserve members making very hawkish statements in an attempt to get the market to price in the potential for a March rate hike, but it simply didn’t work.  MBS received the most momentum due to a spike in uncertainty over the future of the Eurozone.

Across the Pond: Euro systematic risk (France, Italy, Spain and to a lesser extent Germany) have caused German bund yields to contract (lower rates) as investors seek a safe haven as risk over elections weigh on their positions as polling data show strong support in those countries for candidates that support some sort of Eurozone reform.

The Talking Fed:
Dallas Fed President Robert Kaplan (voting member) said that the Fed needs to “normalize” rates “sooner rather than later”.  This is nothing new for him as he was very hawkish for most of 2016 but he wasn’t a voting member then.
Fed Board member Jerome Powell (voting member) was asked whether a rate hike is “on the table” for a March 14-15 policy meeting, Powell told reporters: “Yes,” adding: “It will be appropriate to gradually raise interest rates, including fairly soon,” if the economy carries on roughly as it is currently.

We got the Minutes from the last FOMC meeting on Wednesday you can read them here and as expected, they were a little “hawkish”.  But there was really nothing too new from the original balance sheet.  It was a mixed bag with most participants seeing a rate hike “fairly soon” if the economy keeps on track but warned that the expected boost (by the stock market) in the economy due to lower tax rates or new fiscal stimulus may never materialize as these programs are unknown and may not happen in the near term.

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