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By Taff Weinstein at

Housing Market Update

What Happened to Rates Last Week?

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Mortgage backed securities (FNMA 2.500 MBS) gained +333 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move downward to their lowest levels in history.

Overview:  Fed to the Rescue!  Mortgage rates dropped to their lowest levels on record as the Federal Reserve directly purchased massive amounts of mortgage backed securities, creating demand where there was essentially none.  Each trading session they purchased $50 billion dollars worth.

 

Domestic Flavor:

Inflation Nation:  The February Headline PCE YOY matched market expectations (1.8% vs est of 1.8%).  Core (ex food and energy) YOY increased 1.8% vs est of 1.7%.  Personal Income MOM 0.6% vs est of 0.4% and Personal Spending 0.2% vs est of 0.2% Consumer Sentiment:  The preliminary March reading was revised lower from 95.9 down to 89.1

Central Bank Palooza:  The Bank of Canada cut their key interest rate by 1/2 point and will purchase 500B each week which includes corporate debt.  The Bank of England kept its key interest rate at 0.1%.  They had previously cut that from 0.75% at an emergency meeting.  They took no action at this regularly scheduled meeting.  The European Central Bank started purchasing bonds under its new emergency QE facility and so far it is helping both Spanish and Italian bond yields.

Stimulus?  The House finally passed the $2T Bill that passed the Senate by a vote of 96-0. 

The Talking Fed:  The Federal Reserve Bank of New York purchased $50B of mortgage backed securities each day

By Taff Weinstein at

Tips on setting up your home gym

With nearly 1/3 of all American's told to stay home during the virus preventative measures and more than half of the country's gyms closed for the same reason, its time to look into getting your home gym going (finally). Here are some tips for setting up the perfect space:

Find a place that you can designate for workouts. It may be a spare bedroom, basement, garage, porch, or even just a corner of your living room. Make sure that it fits the equipment you will be using and that it is free from distractions that will try to pull you away from the task at hand. If it has a window – great! But, a door that closes is even better. Shutting off the outside world for a little while will help you stay focused on getting the best from your workout. If you have a separate room, you can paint the walls a happy color and hang motivational posters. However, not everyone  has this option – and that's alright! You don't need a huge area as long as it's large enough for you to perform the types of exercise you have chosen. After all, it's not very comfortable (or safe) to use a stationary bike that has been wedged between the bed and the dresser.
Light is very important. Darkness makes you sleepy, less motivated, and triggers your body to shut down. Natural light is best, but again, that isn't always possible. So, bring in some lamps or lights to make your space bright.

Make sure that the area is free of clutter. Use shelves, bins, or cupboards to store equipment so that the space is clear for working out. If your fitness room also doubles as your living room, bedroom, or dining room, then choose decorative furniture such as lidded ottomans, trunks, or cabinets.  If you can't install a full-length mirror, you may want to purchase a light, portable one. Making sure that you are performing movements correctly can improve results and decrease your risk of injury.

Set a Budget. Write down your goals and decide what equipment you will need to meet them. Determine what you able and/or willing to invest and what will work best in the space you have. Check out second hand shops, classified ads, or wait for sales. Doing a little homework can save a lot of money.

Choose Your Equipment. First, make sure the equipment you choose fits your space and gives you enough room to move around. If you have lots of space and want big machines, then go for it! But, remember, you don't need fancy equipment to get into shape. In fact, body weight exercises can deliver amazing results and you need nothing but....well...YOU. Let's be honest, many people buy expensive equipment and end up not using it. How many weight machines and treadmills have been transformed into clothes hangers and dust collectors? Simple things like resistance bands, dumbbells, kettle bells, stability balls, balance discs, and jump ropes can help you meet your goals without costing a lot of money or taking up a lot of space. And, you don't need everything all at once. Start with the basics – buy a few key items – and build up from there. Add a few new things whenever the funds become available or you find a great sale. It will also give you time to see what you really need – or will actually use – so you aren't wasting money on unnecessary equipment. 

Make A Plan And Stay Committed. A home fitness room is only effective if it's used, right? Whether you hang a chalkboard/whiteboard on the wall or use a notebook, having a plan will always help you get the most out of your workouts. Make your area appealing enough that you want to use it and then plan out each workout to help you meet your daily, monthly, and long-term fitness goals.

By Taff Weinstein at

NAR: Covid-19 Starting to Impact Home Showings, But Lower Rates Offset

NAR: Covid-19 Starting to Impact Home Showings, But Lower Rates Offset

Nearly one in four homesellers are changing how their home is viewed due to the COVID-19 outbreak, according to a new report from the National Association of Realtors. That percentage jumps to 44% and 34%, respectively, in Washington State and California, two of the states most severely affected by the outbreak.

The changes introduced by sellers include halting open houses, requiring potential buyers to wash their hands or use hand sanitizer, and asking buyers to remove shoes or wear footies, NAR reported.

NAR’s Economic Pulse Flash Survey asked members about how the outbreak – along with associated drops in stock market values and mortgage rates – has affected homebuyer and seller interest and behavior. Other key findings of the survey include:

  • 37% said lower mortgage rates excited homebuyers much more than the stock market drop
  • 78% said there had been no change in buyer interest due to the COVID-19 outbreak
  • 16% said buyer interest was down due to the outbreak.
  • Members in California and Washington State reported sharper decreases in buyer interest – 21% and 19%, respectively
  • 87% said that COVID-19 has not affected the number of homes on the market
  • In Washington State and California, 5% and 4% of members, respectively, reported that homes had been removed from the market. The figure is 3% nationally


What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.000 MBS) lost -149 basis points (BPS) from last Friday's close which caused fixed mortgage rates shoot higher compared to the prior week.

Overview:  Once again, it was all CoronaVirus, all the time as the global economic slowdown becomes more and more prevalent.  This forced a series of government and central bank action that was designed to stimulate the markets but actually had the opposite effect as the markets signaled it was too little in advance of a major global economic recession that is coming due to the virus.

Domestic Flavor:

Central Bank Palooza:  The Peoples Bank of China announced a targeted RRR cut of 50bp-100bp for banks qualified in "inclusive finance" tests, effective March 16, which will release liquidity of RMB 400bn. An additional 100bp cut will be granted for qualified joint-stock commercial banks, unleashing liquidity of RMB 150bn to the market.  The Bank of Canada announced an emergency 50 BPS rate cut plus a $10B support program. announced an emergency 50 BPS rate cut plus a $10B support program. The European Central Bank (ECB) kept their main interest rate at 0.0% and their deposit rate at -0.5% but announced more liquidity (asset purchases) to their schedule.  The Federal Reserve stepped in with emergency measures of $1.5T (that "T" is for trillion) “across a range of maturities” to include bills, notes, Treasury Inflation-Protected Securities and other instruments. The Bank of England has an emergency -50BPS rate cut, and slashed capital buffer requirements

Inflation Nation:  The February Headline Producer Price Index (PPI) YOY increased by 1.3% vs est of 1.8%. The Core PPI (ex food and energy) YOY increased by 1.4% vs est of 1.7%. (PPI) YOY increased by 1.3% vs est of 1.8%. The February Headline Consumer Price Index (CPI) YOY increased by 2.3% vs est of 2.2%. The Core CPI (ex food and energy) YOY increased by 2.4% vs est of 2.3% as Services inflation continues to accelerate to its highest since August 2016 as goods inflation languishes.

President Trump: Officially declared a National Emergency which activates approx $50B in funds available to FEMA and others and allows suspension of laws an regulations to move quickly for approving testing and treatment options.

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.

By Taff Weinstein at

By Taff Weinstein at

By Taff Weinstein at

Existing Home Sales up 9.6% from last Year, Home Prices Increase

Mortgage backed securities (FNMA 3.000 MBS) gained +33 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move lower compared to the prior week.

Overview:  It was all Coronavirus, all the time last week as economists and long bond traders are concerned that 1) this it is not and will not be contained in China and 2) it will disrupt manufacturing in that region for many, many months.  This weakened view of global growth is positive for bonds which perform well in low growth environments.

 

 

Domestic Flavor:

Coronavirus: While numbers to continue to grow in China (and widely believed to be understated), spikes in cases in South Korea, Japan, Italy and Iran as well as other areas have the market concerned that simply locking down the public in a draconian fashion in China is not sufficient to contain this outbreak and the economic headwinds could significantly impact not only China's output but the world's number 3 economy (Japan) as well as other regional manufacturing centers that would serve as a severe supply chain disruption to the United States.

Inflation Nation: January Producer Price Index (PPI), YOY hit 2.1% vs est of 1.6%, Core PPI 1.7% vs est of 1.3%.

 

The Talking Fed:  We will got the Minutes from the last FOMC meeting on Wednesday. You can read their official release here.
Here are some key takeaways from the Minutes:

  • Federal Reserve officials viewed their current monetary policy as appropriate “for a time” while they remained on guard against domestic and global risks that could slow the longest U.S. expansion on record.
  • Economic growth expected to continue at a “moderate pace”
  • Easing of trade tensions, receding Brexit risks and stabilizing global growth as reducing downside risks but also generally expected trade uncertainty to remain somewhat elevated
  • Participants agree coronavirus warranted close watching
  • Participants expected payroll employment to expand at health pace this year; consumption spending would likely remain on a firm footing
  • Once reserves reach ample levels, regular open market operations would be required over time to accommodate trend growth in Fed’s liabilities and maintain ample reserves
  • Committee should resume before long its discussion of the role that repo operations might play in an ample-reserves regime, including the possible creation of a standing repo facility
  • Expressed concern that introducing a symmetric inflation range could be misperceived
Manufacturing:  The February Philly Fed Manufacturing Survey shot up to one of the highest readings in 10 years with a 36.7 reading vs estimates of 12.0. The regional NY Empire Manufacturing Index was much stronger than expected in February (12.9 vs est of 5.0)

By Taff Weinstein at

Foreclosures and Delinquency Rates Drop

Nothing is worse for a local neighborhood than "zombie" homes. These are homes that are usually foreclosures or homes that are way behind in their mortgage payments.  If these owners can't afford to pay their mortgage, then they cant afford to keep the house looking nice either which creates a "blight" or stigma in that local neighborhood.

So, it is great news that the Mortgage Bankers Association is reporting that mortgage delinquencies are at their lowest levels since 1979, no...not 1997....1979!

MBA’s National Delinquency Survey showed that the delinquency rate for mortgage loans on one- to four-unit residential properties fell to a seasonally adjusted rate of 3.77% of all closed loans. The rate was down 20 basis points from Q3 2019 and 29 basis points from Q4 2018. The share of loans in the process of foreclosure in the fourth quarter was only 0.21%.

Marina Walsh, vice president of industry analysis at MBA, said "Mortgage delinquencies track closely to the US unemployment rate, and with unemployment at historic lows, it's no surprise to see so many households paying their mortgage on time,” and that “Signs of healthy conditions were seen in other parts of the survey. The foreclosure inventory rate (the percentage of loans in the foreclosure process) was at its lowest level since 1985. Furthermore, states with lengthier judicial processes continued to chip away at their foreclosure inventories, and it also appears that with home-price appreciation and equity accumulation, distressed borrowers have had alternative options to foreclosure."

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.000 MBS) lost -33 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move higher compared to the prior week.

Overview: Rising inflation (CPI up 2.5%, Import Prices up 0.7%), solid Retail Sales and very high Small Business Optimism and Consumer Sentiment combined with some very strong technical resistance levels, pushed long bond prices lower which pushed up mortgage rates.

Domestic Flavor:

Retail Sales:The January was basically inline with expectations with the Headline number hitting 0.3% vs est of 0..3%. When strip out Autos, it was also 0.3% vs est of 0.3%.

Genco Olive Oil: The Import/Export business is good with prices rising. Export Prices MOM climbed by 0.7% vs est of a decrease of -0.1%. Import Prices MOM increased by 0.3% but that was a lower than market forecasts of 2.5%.

Production: Industrial Production for January contracted by -0.3% vs est of -0.2%. Capacity Utilization mated expectations with a reading of 76.8%

Consumer Sentiment: The preliminary UofM Consumer Sentiment Index was quite strong at 100.9 vs est of 99.5%.

Inflation Nation: The January Consumer Price Index was a little hotter than expected with the Headline CPI YOY at 2.5% vs est of 2.4% an the Core (ex food and energy) YOY at 2.3% vs est of 2.2%.

Small Business Optimism: The January NFIB Small Business Optimism Index was much higher than expected (104.3 vs est of 103.2) and a nice surge over December's level of 102.7

The Talking Fed: Fed Chair Jerome Powell had two days of testimony with the Committee on Financial Services in the House and the Senate Banking Committee. You can read his prepared testimony here. The statement was basically the same as what he turned in on last Friday so the bond market had no real reaction to the written statement and during his live Q&A, there were no bombshells at all.

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.

By Taff Weinstein at

The Right Fence Can Enhance your Property

A fence can serve a number of purposes for your home and its surrounding property. Privacy, safety and landscape enhancement are all factors that should weigh into your fencing choice. A fence can do double duty as an attractive feature while also keeping trespassers at bay and children and pets safely enclosed. Fences come in many different sizes, colors and materials, so finding the right fence to fit your home and lifestyle can easily be done on a wide range of budgets.

CURRENT TRENDS

Good neighbor fence. Allow an unobstructed view of the yard and home with a good neighbor fence. Although not meant for security, a waist-high fence, such as a picket fence, is the perfect decorative addition to your home's exterior. This type of fence has become popular again in recent years because it clearly defines property boundaries, attracts the eye through additional landscaping and updates the look and feel of the home's exterior.


Live fence. A live fence is not made of wood, but instead features trees, shrubs and touches of additional landscaping. Leyland Cyprus and White Pine are trees typically associated with a live fence because they grow tall at a fast rate, about a foot a year. Live fences are easy to maintain, more so than a normal fence, and the color, texture and privacy offered by a live fence can be quite eye-catching to a potential home buyer.

EXPERT TIPS

On a Budget: Chain link fencing is an old standby and by far the most popular fencing choice because of its low cost and ease of construction. Although some might find chain link fences to lack in aesthetics, landscaping can really play up a chain link fence and aid in privacy as well.

Mid-Range: The wooden fence is extremely popular and a good choice if you want a variety of style options to choose from without blowing your budget. Wood fences are also very durable and blend in seamlessly with the natural surroundings.


High-End: Vinyl fencing, although more expensive than other options, is extremely durable and will stand the test of time. Unlike other types of fences, vinyl is virtually maintenance free and does not need yearly upkeep. What a vinyl fence costs up front, it makes up for in its long-lasting and worry-free durability.

Source: HGTV.com

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.000 MBS) lost just -2 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways compared to the prior week.

Overview: The U.S. had a very strong week for economic data with better than expected readings  across the board in Manufacturing, Services and Labor.  This would normally be very negative for mortgage rates but the growing concern over the Coronavirus and the potential hit to the Chinese and global economies more than offset the positive economic data out of the U.S.

Domestic Flavor: 

Jobs, Jobs, Jobs: We had our Big Jobs Friday! And the numbers were hot.  You can read the official BLS report here. Tale of the Tape:

Jobs:
Non Farm Payrolls January 225K vs est of 160K
Non Farm Payrolls December revised upward from 145K to 147K
Non Farm Payrolls November revised upward from 256K to 261K
The rolling three month average is now a robust 211K!
Wages:
The average hourly rate rose by 7 cents to $28.44
The Average Hourly Rate MOM increased by 0.2% vs December's pace of 0.1%
YOY, wages increased by 3.1% vs December's pace of 3.0% (upwardly revised from 2.9%).
Unemployment:
The headline Unemployment Rate rose from 3.5% to 3.6%
The U6 Underemployment Rate is 6.9%
The Participation Rate moved higher from 63.2% in December to 63.4% in January.

The Talking Fed: The Federal Reserve gave its semi-annual monetary policy report to Congress Friday.You can read the official release here. The corona virus was featured as the Fed board warning that the coronavirus outbreak "presented a new risk" to the economic outlook for the U.S. and warned of disruptions in global markets. The Fed also pointed out that "in recent weeks, equity and bond markets gave up some of their gains as uncertainty about the economic effects of the coronavirus weighed on investors’ sentiment."

Services: The January ISM Non Manufacturing Report (2/3 of our economic output) was stronger than expected with a 55.5 vs 55.0 estimate.

Manufacturing: Unlike last week's regional Chicago PMI which showed manufacturing contraction, the national ISM Manufacturing Index for January showed expansion and was stronger than market expectations (50.9 vs est of 48.5).  The lower-tier Markit Manufacturing Index also showed expansion (51.9 vs est of 51.7).

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.

By Taff Weinstein at

Walkability Significantly Improves Real Estate Values

Higher walkability equals higher profit margins when it comes to home sales, according to a new report from Redfin. The report found that homes within walking distance of schools, shopping, parks and other amenities sell for an average of 23.5%, or $77,668, more than properties that are car-dependent.

To determine how much walkability affected home prices, Redfin examined sale prices and Walk Score rankings for almost 1 million homes sold in 2019 in 16 major US metropolitan areas and two Canadian cities. About a quarter of active Redfin listings are considered walkable, with a Walk Score ranking of 50 to 100. Only about 4% are considered a “walker’s paradise,” with a Walk Score of 90 or above.

While homebuyers will pay more for walkability, that premium has dropped 2.3% since the last time Redfin conducted the study in 2015.

“The premium drop is tied to affordability,” said Daryl Fairweather, Redfin’s chief economist. “Properties that are more affordable are seeing the most demand and price growth right now, and homes in less walkable neighborhoods often fall into this category. There just aren’t as many people who can afford walkable neighborhoods. Many house-hunters are also willing to move to less walkable neighborhoods in order to get single-family homes.”

Source: Redfin and MPAMAG

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.000 MBS) gained +25 basis point (BPS) from last Friday's close which caused fixed mortgage rates to move lower compared to the prior week.

Overview: It was all Coronavirus, all the time last week.  Even Fed Chair Powell addressed it in  his live press conference.  Last Monday, the number of cases ere 2,839 and 82 deaths, and this Monday, its  17,388 confirmed cases and 362 deaths.  The potential global economic impact is severe and long bonds perform very well (lower rates) when economic outlooks dim.

The Talking Fed: The FOMC kept their key interest rate at 1.75% but did increase their rate on reserves by 5 BPS. You can read their official statement here.

Some key takeaways from the statement and Powell's live press conference:

 

  •     There were only TWO words that changed from the last FOMC statement to this one.
  •     The vote was unanimous
  •     Fed Chair Powell said that they are looking to push inflation higher “We wanted to underscore our commitment to 2% not being a ceiling, to inflation running symmetrically around 2% and we’re not satisfied with inflation running below 2%.”
  •     Powell addressed the CoronaVirus: “We are very carefully monitoring the situation,”and “There will clearly be implications at least in the near term for Chinese output.” Powell said the outbreak of the coronavirus will likely hit the Chinese economy and could spill wider, but it was too early to judge what impact it would have on the U.S.

GDP: We got our first look at the 4th QTR GDP which came in at a 2.1% growth rate and match the market consensus.

Inflation Nation: The Fed's key measure of inflation came in as expected as the YOY PCE Core (ex food and energy) hit 1.6%.  The Headline number missed on the YOY reading (1.6% vs est of 1.7%) but beat on the MOM reading (0.3% vs est of 0.1%).  Personal Income rose by 0.2% on a MOM basis vs est of 0.3%.  Personal Spending rose by 0.3% which matched expectations.

Manufacturing: The January Chicago PMI was dismal at 42.9 vs est of 48.8.

 

By Taff Weinstein at

2019, A Very Profitable Year for Home Sellers

Home sellers made more profit in 2019 than they did a year earlier, with profits hitting the highest levels since 2006, according to ATTOM Data Solution’s US Home Sales Report.

Nationwide, home sellers saw a 34% spike in their return on investment (ROI) with a home price gain of $65,500 on the typical sale. The profit figure grew from $58,100 (+31.4%) in 2018 and up from $50,027 (+27.4%) in 2017.

"The nation's housing boom kept roaring along in 2019 as prices hit a new record, returning ever-higher profits to home sellers and posing ever-greater challenges for buyers seeking bargains. In short, it was a great year to be a seller," said Todd Teta, chief product officer at ATTOM Data Solutions.

Homeowners who sold in Q4 2019 had owned their homes for 8.21 years on average, up from 8.08 years in the previous quarter and up from 7.95 years in Q4 2018.

The US median home price also reached an all-time high of $258,000 in 2019. Around 78% of 134 metros reported hitting new peaks in home prices, including Los Angeles, Dallas-Fort Worth, Houston, Washington, D.C., and Philadelphia.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.000 MBS) gained +30 basis point (BPS) from last Friday's close which caused fixed mortgage rates to move lower compared to the prior week.

Mortgage backed securities (FNMA 3.000 MBS) gained +30 basis point (BPS) from last Friday's close which caused fixed mortgage rates to move lower compared to the prior week.

Overview: We had a holiday-shortened week that didn't have any meaningful economic releases and the Central Banks across the board kept their interest rates the same.  The big push up in pricing (lower rates) occurred Thursday and Friday due to escalating concern over the Coronavirus spread and its longer term impact on China's economy as well as other economies.

Central Bank Palooza: The European Central Bank kept their key interest rate at 0.0% and their deposit rate at -0.5% and have announced that for the first time since 2003 they will begin a complete review of their economic policies. kept their key interest rate at 0.0% and their deposit rate at -0.5% and have announced that for the first time since 2003 they will begin a complete review of their economic policies. The Bank of Canada kept their key interest rate at 1.75%. kept their key interest rate at 1.75%. The Bank of Japan (3rd largest economy) kept their key interest rate at -0.1%.  On Monday (bond market was closed), the People's Bank of China (2nd largest economy) kept their key interest rate at 4.15%.

Taking it to the House: After surging over 30% two weeks ago, Weekly Mortgage Applications fell by -1.2% last week. Both Purchase and Refinance Applications fell by -2.0%.  The November FHFA Home Price Index showed a MOM gain 0.2% of vs est of 0.2%.  December Existing Home Sales hit 5.54M vs est of 5.43M.

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.

By Taff Weinstein at

New Housing Starts Jump in December

Up 16.9% from November and up 40% from December 2018.

According to the newly released report by the U.S.Census Bureau and the U.S.Department of Housing and Urban Development jointly, U.S. home building surged to a 13-year high in December as activity increased across the board, suggesting the housing market recovery continues amid low mortgage rates, and could help support the longest economic expansion on record.

Housing starts jumped 16.9% to a seasonally adjusted annual rate of 1.608 million units last month, the highest level since December 2006. The percentage gain was the largest since October 2016. Data for November was revised higher to show home building rising to a pace of 1.375 million units, instead of advancing to a rate of 1.365 million units as previously reported.

Housing starts soared 40.8% on a year-on-year basis in December. An estimated 1.290 million housing units were started in 2019, up 3.2% compared to 2018.

Single-family home building, which accounts for the largest share of the housing market, jumped 11.2% to a rate of 1.055 units in December, the highest level since June 2007. Single-family housing starts rose in the Midwest and the populous South. They, however, fell in the Northeast and West.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.000 MBS) lost just -5 basis point (BPS) from last Friday's close which caused fixed mortgage rates to remain at the same levels compared to the prior week.

Overview: Two big trade deals were resolved (China and Mexico/Canada) that locks down deals with our three largest trading partners.  We had very tame inflationary data and solid housing data.  We also had a few bright spots in some regional manufacturing reports as well as a benign Fed Beige Book.

Taking it to the House: The January NAHB Housing Market Index matched market expectations of 75 which is very strong considering any reading above 50.0 is positive. matched market expectations of 75 which is very strong considering any reading above 50.0 is positive.The December New Housing Starts was fantastic, rising 16.9% to an annualized basis of 1.608M units vs est of 1.375M.  Building Permits were 1.416M vs est of 1.468M.

Trade War: The USMCA trade deal (U.S./Mexico/Canada) passed the Senate and is now finally put to rest. trade deal (U.S./Mexico/Canada) passed the Senate and is now finally put to rest. The U.S./China Phase One Trade deal was signed on Wednesday. You can read the official full text here.

Retail Nation: Retail Sales were much stronger than expected with the key Ex-Autos figure showing a MOM gain of 0.7% vs est of 0.5%.  The headline Retail Sales data matched market expectations with a gain of 0.3%, but its really a small beat due to the upward revision in November.

Inflation Nation: The December Consumer Price Index (CPI) YOY headline reading matched market expectations with a gain of 2.3%, which was an increase over November's YOY pace of 2.1%. The Core (Ex food and Energy) YOY reading also matched expectations of 2.3%.

Manufacturing: The January Philly Fed Manufacturing Index blew the doors off of estimates with a 17.0 reading vs. an expected 3.8.

Jobs, Jobs, Jobs: The November Job Openings and Labor Turnover Survey (JOLTS) was much lighter than expected (6.800M vs est of 7.233M) and was the first time below 7M unfilled jobs since November 2018.

Consumer Sentiment: The Preliminary January reading was fairly strong at 99.1, the market was expecting 99.3.  The one year inflation outlook rose from 2.3% to 2.5%.

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.

By Taff Weinstein at

Buying a Home is more Affordable than Renting in most of the U.S

In the newly released ATTOM Data Solutions 2020 Rental Affordability Report, it shows that owning a median-priced, three-bedroom home is more affordable than renting a three-bedroom property in 455, or 53 percent, of the 855 U.S. counties analyzed for the report.

However, the analysis shows a split between different-sized markets, with ownership more affordable mainly in lightly populated counties and renting more affordable in more populous suburban or urban areas.

“Home ownership is a better deal than renting for the average wage earner in a slim majority of U.S. housing markets. However, there are distinct differences between different places, depending on the size and location from core metro areas,” said Todd Teta, chief product officer with ATTOM Data Solutions. “For sure, either buying or renting is a financial stretch or out of reach for individual wage earners throughout most of the country in the current climate. But with interest rates falling, owning a home can still be the more affordable option, even as prices keep rising.”

Counties with a population of at least 1 million, where buying a home is more affordable than renting, were Miami-Dade County, FL; Broward County, FL; Wayne County (Detroit), MI; Philadelphia County, PA; Hillsborough County (Tampa), FL; Cuyahoga County (Cleveland), OH and Allegheny County (Pittsburgh), PA.

What Happened to Rates Last Week?

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Mortgage backed securities (FNMA 3.000 MBS) gained just +5 basis point (BPS) from last Friday's close which caused fixed mortgage rates to remain at the same levels compared to the prior week.

Overview: Overall, we had another week of very solid economic data with strong readings in the Services and Labor sectors which would normally be negative for mortgage rates. But, more that offsetting the strong economic data was geo-political concern which drove up demand for U.S. long bonds and helped to keep mortgage rates low for yet another week.

Jobs, Jobs, Jobs: We had Big Job's Friday! You can read the official BLS report here.

Tale of the Tape:
Jobs:
December Non Farm Payrolls increased by 145K which was below estimates of 164K.
November NFP revised lower from 266K down to 256K.
October NFP revised lower from 156K down to 152K.
The rolling 3 month average is now a respectable 184K.

Wages:
The average hourly rate increased by 3 cents to $28.32
Average Hourly Earnings MOM increased by 0.1% vs est of 0.3%
Average Hourly Earnings YOY increased by 2.9% vs of 3.1%
Employment:
The Unemployment Rate remained at 3.5%
The Participation Rate remained at 63.2%
The U6 Unemployment Rate dropped from 6.9% down to 6.7%

Geo-Political: On the U.S./Iran/Iraq front, we had a few developments that "spooked" bonds. First, is the fact that Iran once again attacked U.S. military installations just North of Baghdad with rocket(s).  Secondly, it was confirmed that the Ukrainian 737/800 jet was downed by an Iranian missile.  The vast majority of the passengers were Canadian (there were no U.S. passengers).  It very well may have been struck down in error by Iran but none-the-less it is an issue.

Services: ISM Non Manufacturing PMI for December hit 55.0 vs est of 54.5.  This represents more that 2/3 of our economic output, any reading above 50.0 is expansionary, its the best reading since August

Factory Orders: November orders shrank by -0.7% but that was actually better than market

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.

By Taff Weinstein at

Freddie Mac's Housing Forecast Rosy for 2020

The housing market will hold steady this year, according to the Freddie Mac December Forecast. You can read their official report here.

Freddie Mac expects home sales to jump from 6 million in 2019 to 6.2 million in 2020 and to 6.3 million in 2021. Price growth will likely continue to decelerate through 2021, with projected annual growth rates of 2.8%, and 2.1% in 2020 and 2021, respectively.

Modest gains in home sales and house prices will spur purchase mortgage originations, according to the forecast. Purchase originations will climb to $1,333 billion in 2020, and finally edging up to $1,377 billion in 2021.

Meanwhile, Freddie anticipated refinance originations, estimated at $846 billion in 2019, to slow to $650 billion in 2020 and $475 billion in 2021

The average rate of the 30-year fixed-rate mortgage will hover at 3.8% in 2020 and 2021.

“A more accommodative monetary policy stance and robust labor market helped the US housing market regain its footing in 2019,” said Freddie Mac Chief Economist Sam Khater. “Improved sentiment, lower financial market volatility, and trade headwinds are setting up a favorable economic environment for continued real estate market growth in 2020.”

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.000 MBS) gained +33 basis point (BPS) from last Friday's close which caused fixed mortgage rates to move slightly lower compared to the prior week.


Overview: We had another holiday-shortened week.  The economic data was a mixed bag with very strong consumer and construction data but continued weakness in manufacturing.  The biggest movement was on Friday as long bonds rallied which pushed mortgage rates lower.  This was due entirely to investors putting money in the safe-haven of U.S. long bonds due to military escalation with Iran.

Manufacturing: The December ISM Manufacturing PMI was weaker than expected (47.2 vs est of 49.0) but the Prices Paid (a key measure of inflation) shot up to 51.7 vs est of 47.5. The December Chicago PMI improved from November's pace of 46.3 to 48.9 and just edged out estimates calling for a level of 48.0. But this marks the 4th month in a row with a reading below 50.0.

Construction Spending: The November data showed a MOM big pickup of 0.6% vs est of 0.3%, plus we see a huge revision to October from -0.8% to +0.1%

Jobs, Jobs, Jobs: The Challenger-Grey Job Cut Report showed a big drop in announced corporate layoffs from 44,569 in November down to 32,843 in December. Initial Weekly Jobless Claims came in at 222K vs est of 225K.  The more closely watched 4 week moving average increased to 233,250.

Consumer Confidence: The Conference Board's December survey came in at 126.5 vs est of 128.0 which is a nice gain from November's reading of 125.5
The Talking Fed: We got the Minutes from the last FOMC meeting at 2:00. You can read the official release here
There were no surprises or details that had not been expected.

The Talking Fed: We got the Minutes from the last FOMC meeting at 2:00. You can read the official release here. There were no surprises or details that had not been expected.

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.

By Taff Weinstein at

Pending Home Sales Jump

The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, rose 1.2% to 108.5 in November. Year-over-year contract signings jumped 7.4%. An index of 100 is equal to the level of contract activity in 2001.

“Despite the insufficient level of inventory, pending home contracts still increased in November,” said Lawrence Yun, NAR’s chief economist, noting that housing inventory has been in decline for six straight months dating back to June 2019. “The favorable conditions are expected throughout 2020 as well, but supply is not yet meeting the healthy demand.”

“Sale prices continue to rise, but I am hopeful that we will see price appreciation slow in 2020,” said Yun. “Builder confidence levels are high, so we just need housing supply to match and more home construction to take place in the coming year.”

The regional indices had mixed results in November. The Northeast PHSI slid 0.1% to 96.3 in November, 2.6% higher than a year ago. In the Midwest, the index rose 1.0% to 102.5 last month, 5.0% higher than in November 2018.

Pending home sales in the South decreased 0.2% to an index of 125.0 in November, a 7.7% increase from last November. The index in the West grew 5.5% in November 2019 to 98.4, an increase of 14.0% from a year ago.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.500 MBS) gained +18 basis point (BPS) from last Friday's close which caused fixed mortgage rates to move slightly lower compared to the prior week.

Overview: We had a holiday-shortened week with very little economic data to absorb and very few traders to absorb it.  As usual, we saw a very small improvement in rates due to a compressed trading calendar as many traders simply "parked" some cash into the safe-haven of long bonds while they checked out for the week. 

Taking it to the House: Weekly Mortgage Applications fell by -5.3%.  Both Purchase Applications and Refinance Applications dropped by 5.0%.  November New Home Sales showed an annual gain of 17% from this time last year (719K vs 615K).  On a MOM basis it was up 1.3%.

Jobs, Jobs, Jobs: Initial Weekly Jobless Claims were lower than expected, 222K vs est of 224K.  The more closely watched 4 week moving average is now 228K.

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.

By Taff Weinstein at

New Home Sales Improve

Sales of newly built homes rose in November according to the U.S. Census Bureau and Department of Housing and Urban Development (HUD).

New home sales increased by 1.3% from October for an seasonally adjusted annual rate of 719,000.  Last year, this was much lower at 615,000, so this is a large annual gain.

The median sales price of new houses sold in November increased to $330,800.  The average sales price increased to $388,200.

Supply is still tight though with only a 5.4 month supply of newly constructed  homes on the market.

What Happened to Rates Last Week?

 

Mortgage backed securities (FNMA 3.500 MBS) lost -17 basis point (BPS) from last Friday's close which caused fixed mortgage rates to move upward compared to the prior week.

Overview: We had a very solid week for economic data with real strength in labor and housing which pressured rates higher.  Across the board, the major Central Banks (China, Japan, England) all left their key interest rates alone and did not announce any new policy.

GDP: The 3rd Quarter Gross Domestic Product was released (yet again) and it remained at its previously revised rate of growth of 2.1%.

Inflation Nation: The Fed's key measure of inflation, the Personal Consumption Expenditures ex-Food and Energy on a YOY basis, came in at 1.6% vs est of 1.6%.  But the headline PCE YOY was higher than expected - 1.5% vs est of 1.3%.  Personal Income MOM was 0.5% vs est of 0.3% and Personal Spending came in at 0.4% vs est of 0.4%

Consumer Sentiment: The final reading for December's UofM Consumer Sentiment Index was revised to 99.3 vs est of 99.2.

Taking it to the House: November Existing Home Sales set a couple of November records.  The median home price was $271,300 which is the highest price on record and months of available inventory hit 3.7 months which is the lowest on record.  The total unit sales hit 5.35M which was lighter than expectations of 5.44M, but there was simply not enough inventory to support further sales gains. Weekly Mortgage Applications pulled back by -5.0%.  Refinances fell by -7.0% and Purchase Applications weakened by -2.0%. pulled back by -5.0%.  Refinances fell by -7.0% and Purchase Applications weakened by -2.0%. November Building Permits were much better than expected (1.482M vs est of 1.410M).  When you look at the SFR permits, they were up 0.8% to a rate of 918K units. New Housing Starts increased by 1.365M vs est of 1.345M. Again, SFR are looking better by gaining 2.4% for a rate of 938K units. increased by 1.365M vs est of 1.345M. Again, SFR are looking better by gaining 2.4% for a rate of 938K units. The December NAHB Sentiment Index reached a 20 year high with a reading of 76.

Jobs, Jobs, Jobs: Yet another very strong labor report.  The October Job Openings and Labor Turnover Survey (JOLTS) once again showed well over 7M unfilled jobs and beat out market expectations (7.267M vs est of 7.018M).

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.

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