Home Builders’ Confidence Hits 12 Year High

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

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

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

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

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

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

What Happened to Rates Last Week?

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

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

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

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

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

What to Watch Out For This Week:

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Brought to you by:

Taff Weinstein
Broker/Owner

Office: 832-794-2136
Cell: 832-794-2136
taff@firstimperialmortgage.com

First Imperial Mortgage
3409 Morrison St
Houston, TX 77009
NMLS 225846

Consumer Confidence in Housing Hits All Time High

Consumer Confidence in Housing Hits All Time High:

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

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

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

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

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

What Happened to Rates Last Week?

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

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

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

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

What to Watch Out For This Week:

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Brought to you by:

Taff Weinstein
Broker/Owner

Office: 832-794-2136
Cell: 832-794-2136
taff@firstimperialmortgage.com

First Imperial Mortgage
3409 Morrison St
Houston, TX 77009
NMLS 225846

Homes Once again a Piggy Bank

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

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

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

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

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

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

What Happened to Rates Last Week?

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

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

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

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

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

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

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

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

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

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

What to Watch Out For This Week:

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Brought to you by:

Taff Weinstein
Broker/Owner

Office: 832-794-2136
Cell: 832-794-2136
taff@firstimperialmortgage.com

First Imperial Mortgage
3409 Morrison St
Houston, TX 77009
NMLS 225846

www.firstimperialmortgage.com

Copyright © 2016 Powered by www.MBSauthority.com

Number of Young Americans Sharing Homes Hits 115 Year High

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

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

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

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

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

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

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

What Happened to Rates Last Week?

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

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

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

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

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

What to Watch Out For This Week:

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Brought to you by:
Taff Weinstein
Broker/Owner

Office: 832-794-2136
Cell: 832-794-2136
taff@firstimperialmortgage.com

First Imperial Mortgage
3409 Morrison St
Houston, TX 77009
NMLS 225846

www.firstimperialmortgage.com

Copyright © 2016 Powered by www.MBSauthority.com

Housing Affordability Worsens:

Home affordability fell to the lowest level in seven years at the end of 2016, and the ingredients for a reversal are not there anytime soon.

It now takes 22.2 percent of median income to make the monthly principal and interest payment on the median priced home, according to a new report from Black Knight Financial Services, which based the measure on borrowers using a 30-year fixed mortgage. That monthly payment on the median-priced home increased 10 percent in the fourth quarter alone, thanks to a sharp jump in mortgage rates following the presidential election.

During the 2005-2006 housing bubble, it took nearly 36 percent of the median income to afford a home, as home prices and mortgage rates were higher.

But there is a stark difference between those days and today. Back then, most homebuyers were not using 30-year fixed loans. They were using all kinds of “creative” loan products with no money down and extremely low teaser rates. They also used negative amortization loans, which put payments off, adding to the balance of the loan. These loans caused the extreme bubble and the ensuing crash in the financial markets — precisely why many of these loans are illegal today.

“That’s why we always use a 30-year fixed rate for comparison. It lets you know if something in the mortgage market itself (other than rates) is causing a change in the affordability equilibrium,” noted Ben Graboske, executive vice president of Black Knight Data & Analytics. “Mortgage lending led to affordability getting out of whack back in 2006 due to mortgage programs increasing buying power and thus driving up home price when in reality, without those products, the affordability ratio (between home prices, incomes and interest rates) were nowhere near sustainable.”

Home prices rose steadily throughout last year with the annual gains increasing each month. In December, prices were 7.2 percent higher nationally compared from December 2015, according to a new report from CoreLogic.

“As of the end of 2016, the CoreLogic national index was 3.9 percent below the peak reached in April 2006,” said Frank Nothaft, chief economist for CoreLogic. “We expect our national index to rise 4.7 percent during 2017, which would put homes prices at a new nominal peak before the end of this year.”

While we are far from “bubble” territory, we can expect the trend of housing becoming a larger portion of wages.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -12 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.

MBS  traded in a very tight range and were under steady pressure.  We would have seen even worse pricing for the week but traders were temporarily “parking” their cash in bonds over the long holiday weekend.  We had fairly strong economic data and the Fed attempted to get the markets to price in a March rate hike.

Inflation?: We got another round of data that shows that inflation is showing up.  The Core YOY (year over year) Consumer Price Index increased to 2.3% well above the Fed’s target rate of 2.0%.  Eventhough the Fed is generally referring to the Core PCE for its inflation target, this is still a comprehensive report that is above 2.0%.  The Headline CPI MOM (month over month) was double the market expectations (0.6% vs est of 0.3%) and the Core CPI MOM came in at 0.3% vs est of 0.2%.
The Atlanta Federal Reserve District Business Inflation Expectations came in at 2.0% also supporting inflation hitting the Feds’ target rate soon.

Retail Sales: The biggest report of the week was very robust.  Retail Sales Ex-Autos jumped 0.8% which was double the market expectations of 0.4%.  Plus December was revised upward significantly from 0.2% to 0.4%.  When you look at the headline reading which includes Autos, Retail Sales came in four times higher than expectations (0.4% vs est of 0.1%), plus December was revised  upward from 0.6% to 1.0%.

Jobs, Jobs, Jobs:  Initial Weekly Jobless Claims were lower than expected (239K vs est of 245K) and last week’s 234K reading was not a fluke but stood.  The more closely watched 4 week moving average hit another historic low…hitting the lowest reading since this data has been tracked starting in 1973.  It fell to 244,250.

Philly Fed:  Their General Business Conditions Index Survey shot up dramatically, hitting 43.3 vs est of 17.5. Its the strongest reading since 1983 (when I was a Jr. in High School)…this is Reganesc.

The Talking Fed:
Federal Reserve Chair Janet Yellen you can read her testimony here gave her semi-annual testimony in front of the Senate Banking Committee and the House Financial Services Committee. She said that waiting too long to raise interest rates would be “unwise” as economic growth continues and inflation rises.  Basically she put the markets on notice that the March meeting is indeed live.
The Fed’s number 2, Vice Chair Stanley Fischer said that they are nearing its dual goals and seems to be headed for its anticipated monetary policy path, which officials’ December projections (dot plot chart) put at three increases this year.  He said “I don’t want to give you numbers on two or three, but this is consistent with what we had thought should be happening around now — that is that we’d be moving closer to the 2 percent inflation rate, and that the labor market would continue to strengthen.”
Boston Fed President Eric Rosengren said that while the Fed does track market expectations, they do not dictate what and when the Fed acts.  He said “market skeptimism” about a rate hike in March is not warranted and should treat this as a live meeting.

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

How Will the Housing Market Handle Rising Rates?

Ever since the November election, when the Trump victory sent bond yields flying and mortgage rates following closely behind, analysts have been preoccupied with that question. From overly cautious lending standards to extremely tight inventory, the housing market has plenty of challenges, and any additional constraint won’t help.

While mortgage rates have not made a significant move upward yet, most analysts project stronger economic growth in the U.S. for later this year which always causes fixed rates to rise.  But everything is relative as a stronger economy also means higher wages and more jobs….two key factors in housing demand.

With Inventory levels at 17 month lows and more consumers joining the work force and earning more, it actually more than offsets any uptick in mortgage rates.

The real key is going to be the regulatory path for changes in the Dodd-Frank Act.  The Trump Administration has already signed one executive order for departments to review and change their regulatory rules based upon looser interpretations, but they have made it clear that they will be proposing changes in Congress to lighten up the impact of Dodd-Frank which would make lending easier for financial institutions and potentially add more home buyers to the market place than their otherwise would be and that would add more demand to a housing market that is already very tight.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +22 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.  We had another “choppy” week as we had a -83BPS move from our best pricing levels of the week (lowest rates) to our worst pricing levels of the week (highest rates).  Compare that to a -74BPS swing the prior week and -96BPS the week before that and you see that the bond market has been very volatile.

We had a very light week for economic data.  We did important 10 year and 30 year Treasury auctions but neither had any significant influence over MBS pricing.

Domestic Flavor:

Inflation?: Maybe.  Import Prices jumped 0.4% in December which was double the market expectations of 0.2%.  Year-over-year (YOY) Import Prices jumped 3.7% which was a huge uptick from November’s YOY reading of 1.8%.

Consumer Sentiment: The preliminary February reading came in at 95.7 which is a good reading but it was certainly lower than market expectations of 97.9 and a large drop from January’s uber-high 98.5.

Geo-Political: President Trump said that he can now support a “one China” policy which is causing long bond traders to ease up a bit on concerns over a major trade war.  The bond market also focused on his statement that we can expect a major announcement (finally) regarding tax reform/rates in “2 to 3 weeks” during a meeting with airline executives.

The Talking Fed: Federal Reserve Governor Daniel Tarullo resigned effective in April. This was unexpected and he was a leader in the regulatory side.  However, this is welcome news as he was one of the “enablers” on the Board of Governors and bond traders see it as a potential positive towards the administrations movement of lower regulations.
St. Louis Fed President James Bullard (not a voting member): Said that he thinks that the Fed can keep rates relatively low for some time.  He said they could leave the rates alone and instead focus on their asset reinvestment purchases as a tool to raise rates instead.
Chicago Fed President Charles Evans (voting member this year) said that he supports gradual interest rate hikes and expects an economic boost from U.S. President Donald Trump’s planned fiscal policies.

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

2016 Best Year for Housing in a Decade:

Existing-home sales closed out 2016 as the best year in a decade, even as sales declined in December as the result of ongoing affordability tensions and historically low supply levels, according to the National Association of Realtors® (NAR).

The January 24th report from the NAR says that total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, finished 2016 at 5.45 million sales and surpassed 2015 (5.25 million) as the highest since 2006 (6.48 million).

Lawrence Yun, NAR chief economist, says the housing market’s best year since the Great Recession ended on a healthy but somewhat softer note. “Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market,” he said. “However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December.”

Added Yun, “While a lack of listings and fast rising home prices was a headwind all year, the surge in rates since early November ultimately caught some prospective buyers off guard and dimmed their appetite or ability to buy a home as 2016 came to an end.”

The median existing-home price for all housing types in December was $232,200, up 4.0 percent from December 2015 ($223,200). December’s price increase marks the 58th consecutive month of year-over-year gains.

Total housing inventory at the end of December dropped 10.8 percent to 1.65 million existing homes available for sale, which is the lowest level since NAR began tracking the supply of all housing types in 1999. Inventory is 6.3 percent lower than a year ago (1.76 million), and has fallen year-over-year for 19 straight months and is at a 3.6-month supply at the current sales pace (3.9 months in December 2015).

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained just +2 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.  While just a 2 BPS move seems very tame, we actually had a very choppy week that saw large swings in rates and pricing.  MBS had an intra-week swing of -96 BPS from our highs (lowest rates) to our lows (highest rates).

As far as economic data, it had very little impact on rates.  The most important data of the week didn’t hit until Friday with the 4th QTR GDP and Durable Goods Orders.  We did have 2,5 and 7 year Treasury note auctions that were luke-warm in terms of demand compared to 2016 levels and had no impact on long bond prices.  The biggest shifts in intra-day pricing levels was the bond markets reaction to President Trump’s Executive Orders which included freezing government hires and salaries, ending TPP, tightening immigration policies and funding the building of the “the wall”.  He had some strife with the Mexican President but had a great meeting with the British Prime Minister.

Domestic Flavor:
GDP: We got our first look at the 4th QTR GDP data.  It was a bit of a miss as it came in at 1.9% vs est of 2.1%.  However, this will be revised three more times and statistically, GDP is usually revised upward.  The only real bright spot was a pick up in business spending.  The purchase price index saw an increase of 2.1% from the 3rd to 4th QTRs, so we have yet another data point that shows inflation over 2.0% (CPI being the other).

Durable Goods Orders:  The headline reading was a huge miss to the downside (-0.4% vs est of +2.6%).  But we have seen a lot volatility in the headline reading as just a few airplane orders can skew it dramatically.  So, when we look at the Ex-Transportation reading, it matched expectations of modest growth with at 0.5% reading.  Those are month-over-month(MOM) readings.  The YOY (year-over-year) Ex-Transport reading is now 3.5% which is a good trend line.

Consumer Sentiment: The January University of Michigan’s Survey was revised upward from the previously released 98.1 to 98.5.  A solid reading and is the best we have seen in 13 years.

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

How the GOP’s tax plan could affect the real-estate market:

Until recently, the mortgage interest deduction was right up there with Social Security as a sacrosanct institution on Capitol Hill, protected by lawmakers on both sides of the aisle.

Backed by the powerful National Association of Realtors and supported broadly by middle-class homeowners, previous efforts to dismantle the mortgage deduction have gone nowhere.

However, the Better Way tax-reform “blueprint” from Republican House Speaker Paul Ryan would essentially get rid of the mortgage interest deduction, without policymakers having to vote to eliminate it.

The plan would make the standard deduction far more valuable — increasing it from $12,600 to $24,000 for a married couple. This would result in far fewer people itemizing their taxes, which is necessary in order to claim the mortgage tax deduction. (President-elect Donald Trump’s tax plan calls for raising the deduction even higher, to $30,000 for joint filers.)

Under the House Republicans’ plan, an estimated 38 million of the 45 million filers (or 84 percent) who currently itemize would opt instead for the standard deduction, according to an analysis by the Tax Policy Center. The GOP proposal states that “far fewer taxpayers will choose to itemize deductions, with the vast majority of taxpayers finding they are better off by taking advantage of the larger, simpler standard deduction instead.”

Under current rules, taxpayers can itemize and deduct the interest paid on up to $1 million on a mortgage, and home equity debt of up to $100,000. The mortgage interest deduction is the third-most expensive subsidy in the tax code, costing the federal government about $70 billion per year, according to the Tax Foundation.

Even with Republican control of the House, Senate and the White House, the Republican tax plan is nowhere near a done deal. Nearly three-quarters of Americans recently polled by the National Association of Home Builders say that they support the government providing tax incentives that encourage homeownership, and lobbyists for the real estate and construction industries are already gearing up to fight the provision.

If the blueprint were to become law, it would have ramifications for millions of taxpayers, homeowners and sellers, but the overall impact on the housing market (and your wallet) may be smaller than you think. Here’s what you need to know:

1. Home values could fall in the short-term.

The total elimination of the mortgage interest deduction might push prices down around 7 percent, according a recent paper from the Federal Reserve. The impact might be smaller if the deduction is not fully repealed. That’s a relatively small decrease compared to the double-digit decline seen after the housing bubble burst in 2006, but it would mean a paper loss of nearly $17,000 on the average $240,000 home. Still, the impact of increasing the standard deduction, rather than eliminating the mortgage-interest deduction, would likely have a smaller impact.

2. But only a small portion of taxpayers uses the mortgage-interest deduction.

While it enjoys broad support, the vast majority of homeowners don’t benefit from the mortgage interest deduction as it currently stands. The benefit is only available to those who have a mortgage on their home and who itemize their taxes.

Only about 20 percent of taxpayers currently claim the deduction, and it has an average benefit of just over $2,000, according to the Tax Policy Center. “You go to [mid-tier markets] like Texas, Florida, and Arizona, and no one talks about buying a home to save on taxes,” says John Burns of John Burns Real Estate Consulting, which provides data and advice to real estate investor. “It’s not even part of the equation anymore.”

3. Most consumers would still be better off buying.

It’s cheaper to buy than to rent a home in most parts of the country, and that wouldn’t change with the elimination of the mortgage deduction. “This doesn’t fundamentally affect the rent-versus-buy decision,” says Trulia Chief Economist Ralph McLoughlin. “It makes it less of a better deal to buy than to rent, but buying still remains a good financial option if a household can stay in their home for seven years.”

calculation by Politico finds that a homeowner with a $65,000 annual salary would see the tax benefits of buying a $263,000 condo plummet from $3,325 a year to $166. Tying up your assets and losing the ability to easily relocate may not be worth that much, although there are other benefits of homeownership, such as growing equity and protection from rising rents, and there are many emotional incentives that compel people to become home owners.

4. Middle-income homeowners would feel the biggest bite.

Any impact on home prices would likely be concentrated on more moderately priced homes, where the owners aren’t paying enough in interest to outweigh taking the new deduction but aren’t in a high enough tax bracket to get a huge break. The Tax Policy Center estimates that middle-income taxpayers would see an average tax cut of only $260 per year under the Republican plan. That’s hardly enough to offset even a modest loss in home equity, although long-term demand would likely see prices bounce back over time.

5. High-income homeowners would benefit.

The wealthiest homeowners would benefit from both the tax cut and continued access to the mortgage-interest deduction, since they’d likely continue to itemize. Those making more than $1 million a year typically save nearly $9,000 thanks to the deduction. Under the Republic tax plan, the top quintile of taxpayers would also receive an average tax cut of $11,000 a year.

Due to larger mortgages and a higher tax rate, wealthy borrowers already benefit disproportionately from the mortgage interest deductions, which wouldn’t change. Wealthy taxpayers often choose to finance the purchase of a home even though they could pay cash, as part of a broader tax planning strategy.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -79 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher from the prior week.

We had another holiday-shortened week that saw MBS under pressure Wednesday and Thursday in response to the bond market interpreting the Fed’s Beige Book as leaning towards more growth and wage/price inflation than originally thought.

Domestic Flavor:
Housing: As usual, a mixed bag with these readings.  New Housing Starts were a smidge better than expected (1.226M vs est of 1.200M) and Building Permits were a smidge lower than expected (1.210M vs est of 1.225M).  Regardless both are basically at around 1.2M which is an ok level but well below longer term historical norms.
Weekly Mortgage Applications increased by 0.8%, led by Refinances which jumped 7.0%.  Purchases fell -5.0%.
The NAHB Index hit 67 which was 2 points lower than November’s downwardly revised 69.  Any reading above 50 is positive and a reading in the upper 60s is very robust.

Jobs, Jobs, Jobs: Initial Weekly Jobless Claims were much lower than expected (234K vs est of 254K) plus, the more closely watched 4 week moving average dropped to 246,750 which is extremely low.  Continuing Claims fell to 2.046M which was also better (lower) than the market expectations of 2.073M.

Manufacturing:  The Philly Fed Business Outlook Survey was hot, hitting 23.6 which far out paced the consensus estimates of 15.3 and was the highest (best) reading since December 2014.
Industrial Production was twice as strong as expected (0.8% vs est of 0.4%).  But not so fast.  Most of that beat is due to comparing the December data to November’s downwardly revised -0.7%, so it is skewed higher.  Regardless, it was still a nice reversal from November.  Capacity Utilization edged out estimates (75.5 vs est of 75.3

The Talking Fed:
The Beige book Read the official report here  showed continued growth in our economy with 10 out of the 12 Federal Districts reporting that they are seeing “moderate or modest” growth.  Labor market conditions remained tight in the majority of the districts with several noting problems with finding workers with the skill sets to match the job openings.  They also noted wage pressure in many districts and even wage pressure in a couple of districts that were due to new minimum wage laws going into effect in 2017.
Inflation was a concern as 8 out of the 12 districts reported costs moving upward on final goods and agricultural items.  Atlanta saw costs as flat.

Yellen is Yelling:  She spoke at 3:00EST in S.F. you can read her prepared remarks here . Essentially, she outlined what the job of the Federal Reserve is and what its dual mandate is.  She said that the Fed basically views 4.75% as full/maximum employment (currently we are at 4.7%) what is interesting is that she said their is still room for the labor market to improve.

Inflation?:  The December Consumer Price Index matched expectations across the board.  The key is that both the headline YOY (2.1%) and core YOY (2.2%) are both over 2.0%.  So trending upward.

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

President Trump’s Housing Agenda?

President-elect Trump’s housing agenda is likely to involve changes to the new rules and policies on mortgages imposed following the 2008 financial crisis, details that emerged during Dr. Ben Carson’s confirmation hearing to lead the Department of Housing and Urban Development.

Trump’s views on housing remained mostly a mystery throughout the campaign. Only once did he refer to any of the concerns facing home buyers, renters, builders, real estate agents and lenders. In an appearance at a homebuilders’ trade group meeting in August, the Republican said that new Obama administration rules made it “impossible for your people to go get mortgages.”

In his appearance before the Senate Banking Committee, Carson lent a little more context to that industry-friendly but vague statement.

In his prepared testimony, Carson wrote that banks are “loath” to lend to homebuyers through programs that involve insurance through the Federal Housing Administration, part of HUD, because of the “fear of getting sued if the borrowers default.”

Carson expressed the view that lenders have pleaded to the federal government over the past half-decade-plus because the regulatory and legal actions taken in response to the crisis have left banks and other lenders scared to extend credit for fear of being penalized or sued by the government later.

“His comments there were helpful,” said David Stevens, head of the Mortgage Bankers Association.

Most significant are the major settlements that the government has reached with big banks over bubble-era mortgages that were sold to the FHA, along with other agencies. For example, in April the Department of Justice announced a $1.2 billion settlement with Wells Fargo for claiming that home loans met the terms for FHA insurance, when they did not.

While populist critics have said that the Obama Justice Department should have gone further in prosecuting big banks for potential mortgage fraud, the industry has its own complaints about the way that the lawsuits have been handled. Because the suits turn on specific terms in long loan contracts, they say, it is difficult to be certain that they won’t be on the hook for inevitable defaults in the future.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -7 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.

We had very strong 3 year and 10 year Treasury note auctions but just a luke-warm 30 year Treasury bond auction.  Overall, the data from overseas (China, Japan and Germany) showed inflation and growth.  Domestically, we had another round of reports that showed growth at a slow pace, but growth nonetheless.

Retail Sales:  The Headline December reading showed a nice monthly growth of 0.6% which was just a tick off of forecasts calling for 0.7%.  But November was revised upward from 0.1% to 0.2%. When you strip out Autos, Retail Sales gained 0.2% but that was less than expectations of 0.5%.  But partially offsetting that was November being revised upward to 0.3%

Inflation?:  The Producer Price Index MOM showed and increase of 0.3% which matched estimates.  The more closely watched Core (ex food and energy) YOY reading grew to 1.6% vs est of 1.5%.

Consumer Sentiment: The UofM Index (preliminary) for January came in close to estimates of 98.5 with a 98.1 reading.  This will be re-released at the end of January.

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

Smart Homes Starting to Gain Ground:

Full home automation is not high on the average house hunter’s priority list. That may be about to change. The trouble so far has been the technology itself: Consumers aren’t sure how to integrate it into existing home systems. Plain and simple, they don’t know how to use it.

In 2016, 80 million smart home devices were delivered worldwide, a 64 percent increase from 2015, according to IHS Markit. That includes Nest thermostats and smoke detectors, August smart locks, Ring video doorbells. A big chunk of it was personal home assistants like Google Home, Bosch’s Mykie and Amazon’s Alexa. Analysts say despite the growth last year, 2017 will be the year of the smart home because the companies behind the technology will be smarter about educating their consumers.

CNET, a consumer technology news and review website, is launching its Smart Home Matrix at the Consumer Electronics Show (CES) last week. It is a new feature on the site designed to walk consumers through the latest smart home technology.

“We’ve seen smart home technology increasingly take prominence at CES with more products announced each year,” said Mark Larkin, SVP and GM at CNET. “From our own testing in the CNET Smart Home, we understand one of the largest hurdles in adopting smart home technology is getting multiple devices to work together. Our Smart Home Matrix helps consumers do just that by letting them know what devices are compatible with each other.”

The year ahead will likely bring more innovations, but the focus, according to analysts at IHS Markit, will be lowering prices, educating consumers and enhancing security, so that no one can hack your fridge. Voice assist will become much more commonplace, and the smart home will integrate with the smart car — so as you drive away, your home will know to turn the heat down. They predict at least 130 million smart home devices will be shipped worldwide this year.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +12 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.

We had another holiday-shortened week (Monday was closed for New Years) and a choppy session that saw bid/ask levels that were unrealistic and not based upon any market fundamentals.  Actually, under a “normal” market, MBS would have been under more pressure (higher rates) as we had very strong ISM data, a more “hawkish” tone from the Fed minutes, and Wage data that jumped up to 2.9% gains.

Domestic Flavor:
Jobs, Jobs, Jobs: 
Big Jobs Friday: The much anticipated last employment report from 2016 is here.  Here is the Tale of the Tape:

Non-Farm Payrolls: The December number (which will be revised two more times) came in lighter than market expectations (156K vs est of 178K).  Before we jump on the band wagon and say this is a weak report, the fed (and bond market) looks at the average/trend since since theses number often see very large revisions.  November was revised upward significantly from 178K up to 204K (+26K).  While October was revised lower by a smidge from 142K to 135K (-7K).
The most closely watched NFP data point is not the headline 156K.  It is actually the 3 month rolling average which (after December’s release and revisions to prior months) is now 165K.  In November, the rolling 3 month average was 176K which is only an 11K change.
Wages: The most important piece of data.  The Average Hourly Wages for the Month increased by 0.4% which was higher than estimates of 0.3% and a large turnaround from November’s -0.1%.  But, more importantly, Average Hourly Wages increased by 2.9% on a yearly basis which is the hottest level that we have seen in 8 years.
Unemployment Rate: Matched market expectations of 4.7% and was a slight uptick from November’s 4.6% due to the Participation Rate increasing from 62.6% to 62.7%.

ISM Non-Manufacturing (Services): The services sector accounts for over 2/3 of our economic output.  And it came in higher than expectations (57.2 vs 56.6).  Any reading above 50 is expansionary and any reading above 55 is very hot indeed.

The Talking Fed:  We got the minutes from the December Fed Meeting where they raised rates and increased expectations of 3 to 4 rate hikes in 2017.  You can read their official release here: https://www.federalreserve.gov/monetarypolicy/fomcminutes20111213.htm
The Minutes showed a more “hawkish” Fed concerned about future inflation that what was perceived by the markets after their original policy statement.

  • Almost all also indicated that the upside risks to their forecasts for economic growth had increased.
  • About half of the participants incorporated an assumption of more expansionary fiscal policy in their forecasts.
  • Many participants judged that the risk of a sizable undershooting of the longer-run normal unemployment rate had increased somewhat and that the Committee might need to raise the federal funds rate more quickly.
  • Almost all Federal Reserve policymakers thought the economy could grow more quickly because of fiscal stimulus under the Trump administration and many were eyeing faster interest rate 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.