Home Sales Hit 10 Year High

The March Existing Home Sales data was much stronger than expected, rising 4.4% vs est of 2.5% and came in at 5.71M units vs est of 5.60M.

The median existing-home price for all housing types in March was $236,400, up 6.8 percent from March 2016 ($221,400). March’s price increase marks the 61st consecutive month of year-over-year gains.

Total housing inventory at the end of March increased 5.8 percent to 1.83 million existing homes available for sale, but is still 6.6 percent lower than a year ago (1.96 million) and has fallen year-over-year for 22 straight months. Unsold inventory is at a 3.8-month supply at the current sales pace (unchanged from February).

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -25 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move slightly higher from the prior week.

We had a very light week for domestic economic data and the data that was released had no impact on mortgage rates as the bond market continued to focus on geo-political events overseas, most notably the French elections and trouble with North Korea.  Both events caused MBS pricing to remain at elevated levels but we simply plateaued on Tuesday (lowest rates of the week) and then began to “normalize” from those lofty levels.

The Talking Fed:
Last week, the Federal Reserve continued to remind the market place that there is another two rate hikes this year on tap and that they would begin to purchase less MBS and Treasuries by the end of the year.  Both are very negative for rates.   However, the bond market quite simply isn’t buying into their sentiment yet with less than a 50% chance of even one more rate hike this year currently priced in.

We got their Beige Book on Wednesday.  This is prepared so that all the committee members can get a good understanding on how the 12 districts are doing and is to be used in their discussions for their May 2-3 policy meeting.

You can read the official release here

The Beige Book showed that economic activity increased in ALL 12 districts and was fairly positive as the economy expanded at a modest-to-moderate pace between mid-February and the end of March, but inflation pressures remained in check.

Boston Fed President Eric Rosengren said the Fed should begin shedding its bond holdings soon but do so in a very gradual way that has little effect on its planned interest rate hikes.  He also said that using the balance sheet will become a more used tool by the Fed during the next recession.

Kansas City Fed President Esther George (non voting member now but in 2016 voted twice to raise rates) said that she supports the prompt and gradual process of paring some of the central bank’s $4.5 trillion in assets. She added that it should be done “on autopilot,” and not adjusted in reaction to short-term economic data, and that there may be “some tradeoff” with the Fed’s parallel plan to raise rates about three times per year.

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 Optimistic this Spring

A survey of confidence among American home builders fell in April but remains optimistic headed into the spring, new data showed today.

The National Association of Home Builders said its housing-market index fell by three points to 68 in April. The index reached 71 in March, its strongest reading since June 2005.

In today’s report, the trade group’s chief economist, Robert Dietz, said “there is continued demand for new construction,” but “builders are facing several challenges” including “hefty regulatory costs and ongoing increases in building material prices.”

“Even with this month’s modest drop, builder confidence is on very firm ground, and builders are reporting strong interest among potential home buyers,” NAHB Chairman Granger MacDonald added in a statement.

All three of the index’s components reported losses in April but are maintaining healthy levels. The components gauging current sales conditions fell three points to 74, while the index charting sales expectations over the next six months dropped three points to 75. Lastly, the component measuring buyer traffic fell one point to 52.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +56 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 with really only three full trading sessions as the bond market closed early on Thursday.  The name of the game last week was Fear.

Geo-political events and concern drove cash into the safety of U.S. bonds last week and that swell of demand was the primary driver for pushing mortgage rates down.

France:  Presidential debates and polling data continue to show three front runners.  The problem is that two of those are very vocal about France leaving the European Union.  In short, investors overseas are unsure how the election will pan out and if there will be a “Frexit” similar to the “Brexit” which is ongoing with Great Brittan.  This would obviously cause a great deal of instability to the European union.

Russia: Tensions have been rising for months for a variety of reasons but the recent air strike by the U.S. on a Syrian air base has Russia sending more defensive missiles and ships to the region.

North Korea:  This impacts bonds on many fronts.  Certainly, the escalating “saber ratting” by the North Koreans and the seemingly endless missile tests are of concern but more so is the relationship between the U.S. and China as we try to press them to handle North Korea while at the same time, hammer out important trade agreements.

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

Homeowners Gained a Collective $570 billion in 2016

Over 39.5 million homeowners now have over half-a-trillion dollars in home equity that they can access and have at least 20% equity in their property.

Rising home values are a big reason for the increase in equity and as it turns out, the number one reason homeowners are tapping into their home’s equity is for home improvement/remodeling which will in turn, cause a further increase in their home’s value.

But access to that equity has switched from the simple cash-out refinance (that often accompanied getting rid of private mortgage insurance at the same time) to a Home Equity Line of Credit (HELOC) which is a form of a second lien mortgage.

“The last time interest rates rose as much as they have over the past few months, we saw cash-out refinances decline by 50 percent,” said Ben Graboske, executive vice president at Black Knight. He expects to see more HELOCs instead.

And more millennials are using HELOCs than Gen-Xers or baby boomers, according to a survey by TD Bank. In fact, more than a third of millennials said they are considering applying for a HELOC in the next 18 months, which is more than twice the rate as Gen-Xers and nine times that of baby boomers.

“We were a little surprised about that,” admitted Mike Kinane, general manager of home equity products at TD Bank. “I think millennials are taking a more conservative approach, but they recognize that HELOCs have a good purpose, especially for remodeling.”

Home remodeling was the No. 1 reason for taking out a HELOC last year, according to TD Bank, with debt consolidation coming in second. The home remodeling industry has seen a huge boost in the last year, as home prices rise and the supply of homes for sale shrinks. Homeowners are finding it harder to find and afford a suitable move-up home, so they’re increasingly choosing to stay and remodel.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +29 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move lower from the prior week.

Overall, our domestic economic data was fairly strong and showed both growth and inflation, both of which are generally negative for bonds and interest rates.  However, offsetting that was the fact that Great Brittan officially evoked “Article 50” which officially starts the break up process from the European trade union (they were never a part of the Euro currency).  The unknown impact of this event on the future of the European Union and the global economy has provided support for our long bonds as global investors pour their funds into low yield (but high safety) U.S. bonds which helps keep our rates low.

Domestic Flavor:
Inflation?: It’s heeeere.  Headline Personal Consumption Expenditures (PCE) Year-over-Year (YOY) is finally back above 2.0% for the first time since April 2012.  It came in at 2.1% which matched market expectations.  When you strip out food and energy and look at the Core PCE YOY it moved up to 1.8% which was higher than the market forecasts of 1.7%.

Income and Spending:  Personal Income Continues to make gains as it rose 0.4% in Feb, plus January was revised upward from 0.4% to 0.5%.  Spending increased by 0.1% which was shy of market forecasts of 0.2%.

Chicago PMI: Hit its highest level since January 2015 with a block-buster reading of 57.7 in  March.  This is stronger than the forecasts of 56.5.  Any reading above 50 is expansionary and reading above 55 is very hot.

Consumer Sentiment: The University of Michigan’s final reading for March was revised from the initial release of 97.6 down to 96.9.  It remains the fourth highest reading in 10 years though.

Gross Domestic Product: We received the third and final revision to the 4th QTR GDP.  It was revised upward from 1.9% to 2.1%.  This was driven by an increase in Consumer Spending which jumped 3.5% in the 4th QTR and follows a 3rd QTR gain of 3.0%, so spending is showing good strength.

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