The Housing Market Update

Demand up for New Homes:

According to the Mortgage Banker’s Association, mortgage applications for New Homes (homes not previously occupied) are on the move upward.

Purchase apps were up 15% year over year. Month over month, applications went up by 4%.
On a seasonally adjusted basis, last month saw an increase of 8.6% from April’s 557,000 units; on an unadjusted basis, new home sales increased by 5.6% to 57,000 new units from 54,000 in April.

“Following a decline in April, applications for new homes slightly rebounded month-over-month in May, setting up a 15% year over year increase relative to May of 2016,” said Lynn Fisher, MBA vice president of research and economics. “While March has signaled the peak in applications for new homes for the last two years, we may see more sustained activity throughout the balance of this year as demand for new homes continues to increase and strong house price growth continues to motivate homebuilding.”

Conventional loans made up 69.2% of loan applications; FHA loans, 17.5%; RHS/USDA loans, 1.1%; and VA loans, 12.2%. The average loan size of new homes decreased to $324,844 last month from $329,244 in April.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS)  gained +13 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.  The market saw its lowest rates on Wednesday and its highest rates on Tuesday.

We had a very busy week with some very important and heady economic reports (Retail Sales, PPI, CPI) as well as some strong Treasury auctions (10Y note, 30Y Bond).  But it was the Federal Reserve that drove bond prices last week.

If we viewed and interpreted the Federal Reserve actions, outlook and comments last week in a vacuum, they would be considered very “hawkish” as they raised rates, laid out a plan to reduce their monthly purchases of Treasuries and Mortgage Backed Securities and 12 out of 16 members told the markets to expect at least one more hike this year.   But we don’t live in a vacuum and currently the market simply doesn’t believe that the Fed will follow through with their plans and/or the economic data moving forward will be to weak to justify further tightening this year.

Here are the details of the Federal Reserve action last week:  You can read the official Fed statement here.
We also got their economic projections: You can read their projections here.
Here are some key highlights of their announcement:
1) Increased their fed fund rate by 25 basis points to the 1.00% to 1.25% range.
2) Only one dissenting vote – Neel Kashkari
3) Said that recent lower inflation needs to be “monitored” but expects the 12 month period to stabilize around 2%.
4) Keeps their reference to “gradual rate hikes” moving forward.
5) Upgraded their economic outlook.  Says economic activity has been rising moderately vs prior assessment that it has slowed.
6) Says risks appear “roughly balanced” in the near-term.

In addition, they gave detailed information about winding down their massive balance sheet:
1) Says expects to begin the process of balance sheet normalization ‘this year” which the market is interpreting as 4th QTR.
2) The size of the “caps” for Treasuries will start at $6B and for MBS it will be $4B.  That will gradually move to a max cap of $30B for Treasuries and $20B for MBS.

Dot Plot Chart:

 

As you can see by the Fed’s own Dot Plot Chart, that 12 out of 16 Feds are still projecting at least one more hike this year and as many as another 4 by in 2018.

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

You are currently signed up to receive my newsletters to Unsubscribe, please click on the following link: taff@firstimperialmortgage.com

 

The Housing Market Update

First Time Home Buyers up 11%:

The June 2017 First Time Home Buyer Market Report released by private mortgage insurance provider, Genworth  Mortgage Insurance shows a steady increase in housing demand by first time home buyers in the 1st QTR of 2017. You can read the full report here.

Last year was the strongest period for the first-time homebuyer market in 11 years, according to Genworth’s First-Time Homebuyer Market Report. 2016 saw two million first-time homebuyers – 15% more than 2015.

They also contributed to 37% of all single-family home purchases, up from 34% in 2015, and the most purchases since 2005.

For the first quarter of 2017, 424,000 single-family homes were bought by first-time homebuyers – an 11% year-over-year increase.

First-time home buyers have led the housing recovery, contributing over 60 percent of the sales growth in the housing market over the past five years and 85 percent of the growth in the past two years.  The resurgence of the first-time home buyer market has contributed to very tight housing supplies and accelerating home prices, especially at the “low” end of the housing market.

Unlike repeat home buyers, first-time home buyers do not bring another housing unit to the market at the time they are seeking to buy.  They represent a shift in housing demand from rental to owner occupancy.  Therefore, rising first-time home buyers in the housing market drain housing inventory and the supply of homes for sale much faster than a similar increase in repeat home buyers.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -20 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move slightly higher from the prior week.  The market saw its lowest rates on Tuesday and its highest rates on Friday.

We had a very light week of economic data with only one major economic release (ISM Services).  The bond market was dominated by geo-political news and events.

ISM Non-Manufacturing:  The Services sector represents more than 2/3 of our economic engine and it grew at a monthly pace of 56.9 which basically matched market expectations of 57.0.  Anything above 50.0 is expansionary and anything above 55.0 is red hot.

President Trump: All eyes were on Former FBI Directory James Comey’s testimony.  The bond market was waiting to see if there was anything like a “smoking gun” or other testimony that would cause traders to view the risks of further escalation on the legal front.  While there was plenty of drama during the testimony, there simply was nothing that would cause traders to be more concerned which is why MBS retreated from their highs (less risk).

Across the Pond:
Great Brittan:  Theresa May won (sort of).  It was a political gamble that backfired on her. The end result is that she narrowly won but her party lost its majority.  So, inorder to remain the Prime Minister, her party must partner up with other parties to have the block of votes to keep her in power and to move any legislation through, she will have to make many compromises that she wouldn’t have needed otherwise.  This has market participants speculating that Brexit negotiations will be more difficult (which start in 10 days).

ECB: Left both rates unchanged (Interest rate 0.00% and savings rate -0.40%).  The markets focused on a slight but important change in forward guidance as the ECB policy statement said “The Governing Council expects the key ECB interest rates to remain at their present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.” which is a more “hawkish” tone than their prior policy statement by removing the term “or lower”.

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

You are currently signed up to receive my newsletters to Unsubscribe, please click on the following link: taff@firstimperialmortgage.com

 

The Housing Market Update

Not all Housing Reports are the Same but all are Trending up:

There are several housing reports released each month, the following shows you which reports carry the most weight in the market place and how they are different.

The following are the housing data releases listed in order of importance over the past two weeks:

1) Existing Home Sales.  This report is published by the National Association of Realtors.  It is the most valuable as it contains sales information for both cash and mortgage transactions as well as Agency (Conventional and Government financing) and Non-Agency (Jumbo loans, etc).  It covers the entire U.S. and is not based upon a small sample size.  The most recent release contains data from April and it showed the following:

  • Median number of days a home was on the market dropped to a new low of only 29 days.
  • Median home price increased by 6% from last April and was $244,800 and marks the 62nd straight month of year-over-year gains.
  • Unsold inventory dropped to only 4.2 months ( 6 to 8 months is considered optimal)
  • First Time Homebuyers were 34%
  • All cash sales were 21%
  • Distressed, short sales, foreclosures were only 5%

2) FHFA. This report is from the Federal Housing and Finance Agency which controls Fannie Mae, Freddie Mac, FHA and the VA, is all the purchases that had an agency (Fannie Mae or Freddie Mac) conventional mortgage.   So, it does not include cash sales, jumbo loans or government loans.  The most recent release covers March and was released in May.  It showed the following:

  • Median Home Prices increased by 6.0% from the 1st QTR of 2016 to the 1st QTR of 2017.
  • Home Prices in their 9 districts increased by 1.4% over the 1st QTR of 2017 and 0.6% from Feb to March.

3) Case-Shiller.  This report covers a 20 metro city area to come up with an index.  They have several indexes but the markets focus on the 20 city.  The most recent release was from March and it showed home prices in that sample size increased by 5.9% from that same period last year.

So there you have it, three different housing reports by 3 different companies but all show that home prices are averaging a 6% increase in value/price over the past 12 months.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +38 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move lower from the prior week.  The market saw its lowest rates on Thursday and its highest rates on Wednesday.

After two weeks of no gains, mortgage backed securities finally saw a small improvement over the holiday-shortened week.  The most significant domestic events were Wednesday’s Beige Book and Friday’s Jobs report.  MBS enjoyed their best levels of the week (lowest rats) on Friday as the bond market pushed back on expectations that the Fed would raise rates two more times this year.

Jobs, Jobs, Jobs:
Big Jobs Friday!
Here is the Tale of the Tape:
May Non Farm Payrolls (NFP) 138K vs est of 185K (this will be revised 2 more times).
April NFP revised from 211K down to 174K.
March NFP revised from 79K to 50K.
Average Hourly Wages matched market expectations for a MOM gain of +0.2%.
Average Hourly Wages YOY also matched expectations with a 2.5% rate.
Average Weekly Hours remained at 34.4.
The Unemployment Rate fell to a 15 year low of 4.3% which was lower than expectations of 4.4%.
The Participation Rate is still awful and fell down to 62.7% from 62.9% the prior month.

There are certainly pluses and minuses in this round of jobs data.  It is certainly weaker than expectations but that could also mean that expectations were wrong.  Regardless, the number of jobs added is lower than recent trends.  But there are more jobs being added.  The debate among long bond traders is if the macro economy is at a level where there is reduced supply of qualified workers or a reduced level of demand from employers?  Part of that answer can be found in the previously released JOLTS report which has over 5M unfilled jobs.  That means the jobs are there and there can be more job growth but the labor force is not there.  That question has been answered.  But that brings up a bigger question – if that is the case (which it is) then why aren’t we seeing a more accelerated pace of wage pressure?  And there is not an answer for that one yet.

The Unemployment Rate is at a 15 year low and yes part of the reason for that is that more people are working each and every month and the total work force is always increasing.  But the main reason that the Unemployment Rate fell to such a low level is simple math.  Its that the Participation Rate fell.  That means more people responded to the survey that they do not have a job….but they are also not looking for work

The Fed’s Beige Book was released on Wednesday. You can read the transcript HERE.
Here are some key highlights:
– as usual, all districts expressed “moderate” to “modest” growth (there is no rule as to which phrase to use apparently)
– Inflation is interesting as we are seeing large increases in lumber, steel and other commodities that are pushing up input costs for manufacturers.  But they are seeing falling prices in apparel, groceries and autos.
– Labor market conditions continue to tighten but still only modest signs of wage growth but employers are already offering larger benefit packages.  But there is frustration among employers in being able to fill even the most lowest end jobs.  The following example came from the S. F. District: “Leisure and hospitality contacts said they have not been able to fill many entry-level and seasonal positions due to a lower number and inferior quality of applicants compared with past years… Attracting qualified applicants for low-skilled manufacturing jobs is difficult, and many newly hired workers prove to be unreliable… Several contacts observed that applicants for some low-skilled positions did not meet the minimum job requirements or were unable to pass pre-employment screenings such as drug tests.
– But are wage increases coming soon?  It would appear so which these quotes: “competition for low-skilled workers is strong and is driving up starting wages…. one firm increased driver pay by 3 cents per mile, equating to a 7.5 percent wage increase” also  “a manufacturing firm that was expanding raised wages for unskilled workers 10% and noted a significant improvement in retention and the quality of applicants”

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.

Copyright © 2016 Powered by www.MBSauthority.com

You are currently signed up to receive my newsletters to Unsubscribe, please click on the following link: taff@firstimperialmortgage.com

 

NAR: Best Real Estate Market In 10 Years

More homes are predicted to be sold this year than in more than a decade. In 2017, the number of existing-home sales is expected to increase about 3.5 percent to 5.64 million. By 2018, existing-home sales will likely rise another 2.8 percent to 5.8 million, according to forecasts by the National Association of REALTORS®.

You can read the original report on the NAR website here.

The rise in new jobs, pent-up household formation, and increasing consumer confidence are helping to propel the housing market forward, says Lawrence Yun, NAR’s chief economist.

Lawrence Yun, chief economist for the NAR, recently presented his 2017 midyear forecast. According to Yun, the first quarter saw the best quarterly existing-home sales pace in 10 years with 5.62 million. Yun said he expected that pace to stay on track and finish around 5.64 million, 3.5% above 2016 and the best rate since 2006. The national median existing-home price is also expected to rise around 5% this year, according to the NAR.

“The housing market has exceeded expectations ever since the election, despite depressed inventory and higher mortgage rates,” Yun said. “The combination of the stock market being at record highs, 16 million new jobs created since 2010, pent-up household formation and rising consumer confidence are giving more households the assurance and ability to purchase a home.”

The new-home sector is also expected to see a surge over the next year. New-home sales are expected to rise 10.7 percent this year to 620,000. The sector is also expected to tick up another 8 percent in 2018 to 670,000 sales, NAR predicts.

Buyers are likely to face higher prices on homes. Prices are expected to increase 5 percent in 2017 and another 3.5 percent in 2018, NAR predicts. “As a result, buyers are compromising on the number of rooms, length of a commute, or other home qualities,” says Joseph Kirchner, senior economist of realtor.com®. “Meanwhile, builders are mostly building for the mid- to upper price range. This mismatch in supply and demand is making affordability more acute for those with modest incomes.”

To still get in, buyers are devoting higher percentage of their incomes toward homeownership or compromising on smaller homes or a home farther from the city center where they work.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +42 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move lower from the prior week.  The market saw its lowest rates on Wednesay and its highest rates on Monday.

We had a very light week for economic data that had only a limited impact on pricing and rates.  The biggest factor in rates last week was not domestic or global economics or inflation but instead it was an unscheduled bit of geo-political shock that sent MBS soaring.

Wednesday was a very volatile day as our benchmark MBS gained +50 basis points in one session (lower rates).   This was due to the barrage of media coverage over a few liberal democrats calling for the impeachment process to start and a special investigation over the firing of former FBI Director Comey.  MBS rallied not in reaction to the politics of this but rather due to the view among long bond traders that this would mean important stimulative measures would be put on the back burner for some time.  This includes tax reform, a stimulus package and regulatory reforms.   These were widely believed to have a higher probability of moving forward just after the election and now are viewed as being stuck in yet another Congress that is deeply divided.  Since the likelihood of those measures (which would have directly caused economic growth) has decreased (at least in traders’ minds) MBS rallied.  MBS and other long bonds do best when expectations for low growth are low inflation 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.

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 Builder’s Sentiment Highest Since 2005

The National Association of Home Builders just released their Builder Confidence report:

In a further sign that the housing market continues to strengthen, builder confidence in the market for newly-built single-family homes rose two points in May to a level of 70 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the second highest HMI reading since the downturn.

“This report shows that builders’ optimism in the housing market is solidifying, even as they deal with higher building material costs and shortages of lots and labor,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas.

“The HMI measure of future sales conditions reached its highest level since June 2005, a sign of growing consumer confidence in the new home market,” said NAHB Chief Economist Robert Dietz. “Especially as existing home inventory remains tight, we can expect increased demand for new construction moving forward.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Two of the three HMI components registered gains in May. The index charting sales expectations in the next six months jumped four points to 79 while the index gauging current sales conditions increased two points to 76. Meanwhile, the component measuring buyer traffic edged one point down to 51.

The three-month moving averages for HMI scores posted gains in three out of the four regions. The Northeast and South each registered three-point gains to 49 and 71, respectively, while the West rose one point to 78. The Midwest was unchanged at 68.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost just -4 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.  The market saw its lowest rates on Monday and its highest rates on Thursday.

It was the 4th straight week where the end result was a very narrow change, but we did have some volatility during the week as there was a net difference of -67 BPS from our intra-day highs of the week and our intra-day lows of the week.

The two biggest movements were Wednesday and Friday.  Wednesday sold off (higher rates) due to comments from a Fed official and Friday rallied (better rates) due to weaker inflationary data.

The Talking Fed:
Boston Fed President Eric Rosengren said the Fed needs to hike at least 3 more times this year, note the 2 times that the market is expecting.  He said “Along with a gradual reduction in the level of the balance sheet, it would still be reasonable to have three rate increases over the remainder of this year.”  This was much more “hawkish” than what the markets have priced in which is basically only one more hike this year and not seeing an adjustment to the pace of MBS purchases until 2018.

Inflation?  The front-end (PPI) showed some inflationary pressure, but it is clear that for now that is being absorbed by companies and not being passed on to consumers as PPI showed a little weakness.  Of note is the fact that Core CPI YOY dropped back below the 2.00% target inflation rate which is why MBS rallied on Friday.

The April Producer Price Index (PPI) was much higher than expected. The Headline MOM reading was more than double market expectations (0.5% vs est of 0.2%) and is now at 2.5% on a YOY basis which is much higher than the consensus estimates of 2.2%.  When you look at the Core (ex food and energy) the MOM reading came in at 0.4% vs est of 0.2% and YOY it ws 1.9% vs est of 1.7%.  The YOY reading is the highest since January 2015!

The April Consumer Price Index (CPI) did not show the gains from Thursday’s PPI, which means that companies for the time being are not passing through the increased costs to consumers.  The Headline CPI MOM reading matched expectations (0.2% vs est of 0.2%) but the Core (Ex food and energy) MOM reading was a little light (0.1% vs est of 0.2%).  But the Fed looks at the YOY data and the Core CPI YOY fell back below 2.0% (1.9% vs est of 2.0%).

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

Too Few Listings

The March Pending Home Sales (homes with contracts on them but have not closed) were much better than market forecasts but have hit a road block.

Homes are selling at close to the fastest rate in recorded history, and 42 percent of homes sold at or above list price in March (the second highest amount since NAR began tracking in December 2012).

Lawrence Yun, NAR chief economist, says sparse inventory levels caused a pullback in pending sales in March, but activity was still strong enough to be the third best in the past year. “Home shoppers are coming out in droves this spring and competing with each other for the meager amount of listings in the affordable price range,” he said. “In most areas, the lower the price of a home for sale, the more competition there is for it. That’s the reason why first-time buyers have yet to make up a larger share of the market this year, despite there being more sales overall.”

Pointing to revealing data from the March Realtors® Confidence Index, Yun worries that the painfully low supply levels this spring could heighten price growth — at 6.8 percent last month — even more in the months ahead. Homes in March came off the market at a near-record pace, and indicating an increase in the likelihood of listings receiving multiple offers, 42 percent of homes sold at or above list price (the second highest amount since NAR began tracking in December 2012).

“Sellers are in the driver’s seat this spring as the intense competition for the few homes for sale is forcing many buyers to be aggressive in their offers,” said Yun. “Buyers are showing resiliency given the challenging conditions. However, at some point — and the sooner the better — price growth must ease to a healthier rate. Otherwise sales could slow if affordability conditions worsen.”

Yun forecasts for existing-home sales to be around 5.64 million this year, an increase of 3.5 percent from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 5 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost just -2 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.  The market saw its lowest rates on Monday and its highest rates on Tuesday.

With just a two basis point change for an entire week, MBS were trapped in a fairly narrow range.  We had a mixed bag of economic data with a weaker than expected 1st QTR GDP report but had very strong manufacturing and consumer sentiment readings.  The Trump administration avoided a government shut down and released some “core principals” in the form of a tax plan outline but the markets are awaiting more granular details that we wont see until June.

Domestic Flavor:
GDP: We got the first glimpse at the the first quarter Gross Domestic Product and it was a very mixed bag.  If you look at the headline GDP reading it fell short of expectations (0.7% vs est of 1.1%).  But the Prices Paid PPI jumped to 2.2% vs est of 2.0%, the Employment Cost Index was also higher than expected (0.8% vs est of 0.6%) and PCE (QoQ) was 2.4% vs est of 2.3%).  So, by every metric other than the headline reading, this was stronger than expected as far as inflation/wages.  Historically, the final reading is always higher than the preliminary reading so its very probable that when the smoke clears that this reading is back closer to 1.0%.  Still fairly tame though.

Chicago PMI: The April reading was much higher than expected (58.3 vs est of 56.4) and was the highest reading since January 2015.

Consumer Sentiment:  The final reading for April (mid month reading was 98) came in at 97 vs est of 97.9.  This is the second best reading of the year and very solid.

Pending Sales: Were a little better than expected for March, falling -0.8% vs a larger pull backed expected of -1.0%.

Durable Goods:  This report has been all over the place and we get another mixed reading.  The March headline reading missed expectations (0.7% vs est of 1.2%), but more than offsetting that is the upward revision to Feb from 1.7% to 2.3%.  Same story when you strip out Transportation.  It missed with a reading of -0.2% vs est of 0.4%, but Feb was revised upward from 0.4% to 0.7%.

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 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

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