The Housing Market Update

Pending Home Sales Increase Despite Inventory Shortages:

After declining for three straight months, pending home sales reversed course in June as all major regions, except for the Midwest, saw an increase in contract activity, according to the National Association of Realtors®.

The Pending Home Sales Index*, www.nar.realtor/topics/pending-home-sales, a forward-looking indicator based on contract signings, climbed 1.5 percent to 110.2 in June from an upwardly revised 108.6 in May. At 0.5 percent, the index last month increased annually for the first time since March.

Lawrence Yun, NAR chief economist, says the bounce back in pending sales in most of the country in June is a welcoming sign. “The first half of 2017 ended with a nearly identical number of contract signings as one year ago, even as the economy added 2.2 million net new jobs,” he said. “Market conditions in many areas continue to be fast paced, with few properties to choose from, which is forcing buyers to act almost immediately on an available home that fits their criteria.”

Added Yun, “Low supply is an ongoing issue holding back activity. Housing inventory declined last month and is a staggering 7.1 percent lower than a year ago.”

Yun does note that there could potentially be a sliver of increased hope in the months ahead for prospective first-time buyers, who continue to struggle reaching the market1. Sales to investors last month were the lowest of the year (13 percent), which helped push all cash transactions to 18 percent – the smallest share since June 2009 (13 percent).

“It appears the ongoing run-up in price growth in many areas and less homes for sale at bargain prices are forcing some investors to step away from the market,” said Yun. “Fewer investors paying in cash is good news as it could mean a little less competition for the homes first-time buyers can afford. However, the home search will still likely be a strenuous undertaking in coming months because supply shortages in most areas are most severe at the lower end of the market.”

Heading into the second half of the year, Yun expects existing-home sales to finish around 5.56 million, which is an increase of 2.6 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.

The PHSI in the Northeast inched forward 0.7 percent to 98.0 in June, and is now 2.9 percent above a year ago. In the Midwest the index decreased 0.5 percent to 104.0 in June, and is now 3.4 percent lower than June 2016.

Pending home sales in the South rose 2.1 percent to an index of 126.0 in June and are now 2.6 percent above last June. The index in the West grew 2.9 percent in June to 101.5, but is still 1.1 percent below a year ago.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -10 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 Monday and its highest rates on Tuesday.

The bond market focused on the Federal Reserve as they hoped to learn more about the timing of their taper for MBS and Treasury purchases as well as any potential rate hike.  But really, the Fed gave very little (if any) guidance that the markets could trust.  While the lack of direction from the Fed was good for mortgage rates, the combination of rising Oil prices and strong domestic economic data (Durable Goods and GDP) were negative for mortgage rates.

The Talking Fed:  We got a mixed bag from the FOMC, it was actually fairly balanced and gave some dovish and hawkish commentary. You can read their official policy statement here
Here are the key highlights:
– They left their key inflation rate unchanged
– Unlike the last meeting, this was a unanimous vote
On the Balance Sheet (taper):
– reinvesting to continue “for the time being” but the normalization plan (taper) will being “relatively soon”.  The bond market interprets that to mean an announcement in September and the beginning of the taper in December.
On Inflation:
– Tweaked their language from their last statement to show that inflation is no longer “somewhat below” their target rate as they also dropped “recently” when describing headline and core inflation dropping.  This is telling the markets that the Fed has shifted from pushing the “transitory” theme when in addressing inflation running below 2% and that it will remain below 2% for longer, but still sees inflation hitting 2%.
General Comments:
– risks to economic outlook appear roughly balanced
– Labor Market strengthened and activity rose moderately. Job gains have been “solid”.
– Household spending and fixed investment have continued to expand

Durable Goods:  The Headline reading which contains the very volatile transportation and defense sectors jumped 6.5% vs. est of 3.00%.  This was a big beat considering that the prior month (May) was revised upward significantly from -1.1% to -0.1%.  Ex Transportation Durable Goods Missed with a 0.2% gain vs of 0.4%.  However, the main culprit was a large upward revision to May from 0.1% to 0.6%.

Gross Domestic Product: We got our first glimpse at the 2nd QTR GDP (it will be revised several time).  The market was expecting a strong growth rate of 2.6% and that is exactly what we got.  But the final revision to the 1st QTR dropped from 1.4% to 1.2%.  Some bright spots include Consumer Spending growing at a very strong 2.8% rate and Business Investment up 5.2%.  But inflation was very low with Core PCE dropping to 0.9%.

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.

Americans Upbeat on Housing

A recent survey by Digital Risk showed that over half of homeowners believe the housing market in their region and nationwide has improved. It also found that the majority of homeowners (91%) and renters (83%) view home ownership as a good investment. The survey of 1,057 U.S. homeowners and 509 renters was conducted between May 26 and June 2.

Confidence in the housing sector is being driven by a noticeable increase in home values. Eighty-seven percent of homeowners have seen their appraisal values holding or increasing, while just 12% saw a decrease. Sixteen percent saw gains of more than 20% in value.

Barriers to the housing market remain, however. Forty percent of renters said they could not afford the down payment. Insufficient income was cited by 37% of respondents, while 33% said they preferred renting to ownership. When asked what would make the decision easier to purchase a home, 40% percent cited debt forgiveness, 36% said a life event such as marriage or children and 31% percent said lower credit requirements would push them into the market.

While homebuyers are upbeat on the housing market, 70% of homeowners and two thirds of renters indicated they would not be comfortable managing the entire process via a smartphone application. And while two-thirds of homeowners and 59% of renters said they would be willing to complete an application on-line, about half of all respondents said they would prefer to speak to a representative in person during the process.

What Happened to Rates Last Week?

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

We had a very volatile week with a swing of 55 basis points from our best to worst pricing of the week.  MBS improved (lower rates) in reaction to Fed Chair Janet Yellen’s testimony as well as very tame inflationary data and Retail Sales data. But MBS had a large reversal on Friday after testing a very important technical resistance level.

The Talking Fed:
Yellen is Yelling:  The Fed Chair gave her Semiannual Monetary Policy Report to Congress last week.
Here are some of the key points of her testimony:
– Sees roughly balanced odds that economy will be stronger or somewhat stronger than we project
– Expects the job market to strengthen somewhat further and inflation rising to 2%.
– Uncertain about pace of inflation
– Fed funds rate will not have to rise much further to get to a “neutral” rate
– Says that the balance sheet run off will begin this year.
– But the Fed does not to use the reduction in the balance sheet as an “active tool”

Yellen also responded to several questions from the House and Senate committee members. Overall, she stuck to her script but did say that the Fed is not on a “preset” course (to raise rates), that the level of national debt is not sustainable, that she is opposed to a mathematical formula that dictates Fed policy and that she would definitely stay on and serve her full term but refused to comment on her being Fed Chair after that point as she has not been ask to as of yet.

Fed Beige BookYou can read the official release here.
Overall, it was a positive report but not by enough to change how the markets are pricing in risk of a rate hike this year which is currently below 50%.  All 12 districts claimed economic expansion of varying degrees with 11 at “modest to moderate” and 1 at “slight”.  Consumer Spending seemed on the rise and employers are able to add new hires without significant upward pressure on wages but its getting harder to add employees as there is a shortage of qualified works for many of the advanced fields.

Retail Sales:  The June data was weaker than the market expected.  The headline reading came in at -0.2% vs est of +0.1%.  However, that miss was more mathematical as May was revised upward from -0.3% to -0.1%…without the upward revision (improvement), Retail Sales would have matched estimates.  Still, it was weak as the low unemployment rate and high sentiment levels are not translating to more spending.  Ex-Autos, Retail Sales were -0.2% vs est of +0.2% which is dismal.

Inflation?:  Not in this data set.  The Headline YOY Consumer Price Index came in short of expectations with a 1.6% reading vs est of 1.7% and a large falloff from the 1.9% pace in May.  The Core CPI YOY reading matched estimates and May’s pace with a steady 1.7% reading.  Drops in airfares, fuel prices and apparel led the decline.  We did see inflation/price increases in medical and rents.

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

Two Important Changes Will Help Home Buyers:

There have been very few changes to the conventional mortgage guidelines over the past several years.  But two important changes take effect this month that may help home buyers to qualify for a mortgage easier.

The first change has to do to how much house payment a borrower can be approved for and the second important change will help with the borrower’s credit profile.

First up is an important announcement from Fannie Mae that will now allow for a debt-to-income (DTI) ratio up to 50% from the previous maximum allowed of 45%.  A DTI is the ratio of your gross salary vs. all of your current monthly debts like installment loan and credit card payments along with the newly proposed mortgage payment on the house that they are purchasing.

“In this case, we’re changing the underwriting criteria, and we think the additional increment of risk for making that change is very small,” said Doug Duncan, Fannie Mae’s chief economist. “Given how pristine credit has been post-crisis, we don’t feel that is an unreasonable risk to take.”

But not ALL borrowers will be allowed to go as high as 50% on their DTI.  Doug Duncan said “We look at all the other criteria that are information rich, in terms of assessing that individual’s risk profile, and they have to look good in all those other areas.”

Credit Profile Changes:  This change comes directly from the three main credit reporting bureaus.  They announced that they will will drop tax liens and civil judgments from some consumers’ profiles if the information isn’t complete. Specifically, the data must include the person’s name, address, and either date of birth or Social Security number. A sizeable number of liens and judgments do not include this information and have subsequently caused some misrepresentations and mistakes.

This change, in some cases, may significantly increase a borrower’s main credit score.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS)  lost -26 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher from the prior week.  The market saw its lowest rates on Monday and its highest rates on Thursday.

We had a holiday-shortened week but it was packed with strong economic data as our national manufacturing and services reports were very strong and Friday’s Jobs data showed wage growth and more new hires than expected.  Strong economic data is something that causes mortgage rates to rise.

Overall, wage growth was good and is outpacing inflation which as measured by PCE is under 2% YOY (year-over-year) while wages are gaining 2.5% YOY.  When wages outpace inflation it always leads to more inflation.  While we are only seeing modest growth in wages, it is consistent and the market is expecting wages to begin to spike in the 4th QTR.

The NFP (Non Farm Payrolls) data, which got all of the headlines, was very strong with a 3 month trend of 194K.

The U3 Unemployment Rate ticked up (4.3% to 4.4%) but that is obviously not due to more people not working.  Its due to an uptick in the Participation Rate which basically means that more people are now answering the survey by saying that they don’t have a job AND they are NOW looking for work. Those some people had responded last month that they don’t have a job AND they are NOT looking for work.  This is actually a positive piece of data.

Overall, this is a solid report and gives our Federal Reserve enough support to continue on their path of moving from rates that are still at emergency low levels (below zero when adj for inflation) towards more neutral rates.

The June ISM Services Index hit 57.4 vs est of 56.5. The Services sector accounts for more than 2/3 of our economic output, any reading above 50.0 is expansionary. This is a HOT reading and negative for mortgage rates

The June national ISM Manufacturing Index was a block buster, hitting 57.8 vs est of 55.1.  Anything above 50 is positive for the economy and a reading above 55.0 is very strong and very rare.  This was the highest reading since November 2014.
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

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