In yet another sign of the seemingly ever-strengthening housing market, homeowners are keeping current on their mortgage payments as mortgage delinquencies fall to a 12 month low. This is key because delinquencies can turn in to foreclosures which can disrupt the housing market with "zombie" inventories or below market-price liquidations.
According to a recently published report by Black Knight, the total US loan delinquency rate, which represents loans 30 or more days past due, but not in foreclosure, was at? 3.73% in March, marking a year-over-year change of 3.09%. The delinquency rate declined 13.24% compared to February.
March data also revealed a continuous improvement in the active foreclosure inventory. The total dropped another 10,000 loans in March to its lowest level since late 2006. Additionally, Black Knight found that prepayment activity during the month rose by 22% from February’s 4-year low. The improvement came despite interest rates remaining above 4.4%.
Mortgage backed securities (FNMA 4.00 MBS) gained just +3 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week.
Overview: Just a net three basis point move for the entire week seems really tame on the surface but in reality, we had a very volatile week with mortgage rates increasing Monday through Wednesday. We had a swing -57BPS from our best pricing of the week (lower rates) to our worst pricing of the week (higher rates). Overall, it was another week with stronger than expected domestic economic data with strong GDP and Durable Goods data as well as very high Consumer Sentiment and Consumer Confidence levels which did combine to pressure pricing but a more "dovish" than expected European Central Bank and Bank of Japan helped MBS to climb off of their worst levels of the week.
Jobs, Jobs, Jobs: The Employment Cost Index for the 1st QTR showed an increase of 0.8% vs est of 0.7% with Wages and Salaries up 0.9% and benefits up 0.7%.
GDP: The Preliminary 1st QTR GDP was hotter than expected with at 2.3% vs 2.0% estimated growth rate due to a sharp rise in service spending (2.3%) while consumer spending increased modestly (1.1%). The QTR over QTR PCE increased by 2.7% vs est of 2.6%.
Durable Goods: The Preliminary March reading (will be revised) saw a much stronger than expected reading on the headline number with a 2.6% MOM gain vs expectations for a 1.6% gain. Plus, February was revised upward from 3.1% to 3.5%. But when you strip out the volatile Transportation sector, the Core Durable Goods reading was flat at 0.0% which was lower than market expectations calling for a small gain of 0.5%.
Consumer Sentiment: The Final April University of Michigan's Consumer Sentiment Index rose to 98.8 vs est of 98.0.
Consumer Confidence: The April MOM reading hit 128.7 vs est of 126.1 with is a block-buster type reading and reflective of consumers seeking larger net paychecks due to the tax cuts.
Taking it to the House: The March Existing Home Sales data was stronger than expected, rising 1.1% vs est of 0.2%. Key takeaways: Median Sales Price increased to $250,400 and marks the the 73rd straight month of year-over-year gains. Inventories fell to 3.6 months of supply and the average time on market dropped from 37 days in Feb to 30 days in March with just over 50% of all inventory selling in 15 days or less.
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.