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  1. Mortgage Rates: More Jobs = Higher Mortgage Pricing

    By on February 3, 2012

    A blowout Non-Farm Payrolls (NFP) report this morning has mortgage rates heading higher.  After a week filled with data that was roughly in-line with expectations the NFP report blew away forecasts.  The expectations were for 150,000 new jobs to be created in January, yet when the counting was done 243,000 new jobs were documented.  This is certainly confirmation that the US economy has strengthened dramatically, yet the naysayers have already begun to spin why the jobs uptick may be limited.

    Two additional economic reports have the potential to accelerate the upward move in mortgage pricing today or to moderate it.  At 10 AM the ISM Services Index and Factory Orders report will be released.  The ISM Services Index is forecasted to increase from last month, which seems like a good bet given the number of service-sector jobs that were created according to the NFP report.  The Factory Orders report is forecasted to drop slightly which also seems likely given the weakness in the ISM Manufacturing Index earlier in the week.  If these reports come in as expected, I suspect that it will cause further losses in MBS and more upward momentum for mortgage pricing.

    On Monday Euro-Zone financial ministers are meeting and there is hope that approval of the second round of bailout funding will be approved at that time.  However, there is much still to be agreed to.  After reaching a deal with private creditors to cut their payouts from existing Greek debt by 70%, the burden is now on the Greek government to come up with additional savings from labor market and other reforms that will drop the country’s debt/GDP ratio to 120%.  This is a tall task as Greek politicians who must approve these reforms don’t want to be associated with these very unpopular reforms.  I would not be surprised to see Monday come and go with no deal and no bailout funds for Greece.

    After a week in which the attention was primarily on the state of the US economy, next week will see a return to the Euro-centric focus that has been so pervasive for over a year.

    Have a great weekend!

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  2. Mortgage Rates: Change in Trend “Or Not”

    By on February 2, 2012

    As I discussed at the outset of this week, it was destined to be a very important week for mortgage rates.  With more data of significance announced this week as compared to almost any other week during the year, we could see a major change in the mortgage trend.  What has been a very favorable, downward trend for mortgage rates could continue with weak economic news. Or strong economic news could cause a reversal in the trend and send mortgage rates higher.  We could have seen this type of movement…or not.  What I did not count on, based on my experience with economic forecasts, was for the data this week to come in almost exactly as forecasted.

    Thus the result so far this week has been virtually no change in mortgage pricing at all since last Friday.  However—it’s only Thursday and the biggest economic report of all is still to come tomorrow.  The Non-Farm Payrolls Report still has the power to establish a trend for mortgage rates for the foreseeable future.  This time though, I will include the possibility that a result, “in-line with expectations”, could reinforce the current level of mortgage pricing.

    Today’s economic data that is moving mortgage pricing nowhere was Productivity and Weekly Jobless Claims.  Productivity was forecasted to increase by .8%–the actual result was an increase of .7%.  Weekly Jobless Claims were forecasted at 370,000—the actual result was 367,000.  Despite these reports offering no positive or negative surprise, I do see signs of improvement.  The drop in productivity signals that businesses are getting less from efficiency or technology changes and will soon need to increase labor in order to boost production.  Also, the slow drop in jobless claims signals a slow (painfully slow) improvement in the labor market.  These measures are connected and the drop in the first should lead to an accelerating drop in the second.

    Related to the European debt crisis, the biggest news of the day is a meeting between German Chancellor Angela Merkel and China’s Premier Wen Jiabao.  The Chinese leader did provide some positive news as he stated that China may “get more involved” with efforts to resolve the crisis.  With almost $4 trillion in reserves, China certainly has the ability to help.  This should provide another calming bit of news for world markets today.

    Today mortgage rates are likely to stay very close to current levels.  Tomorrow the Non-Farm Payrolls report could lead to a change in the mortgage rate trend…or not!

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  3. Mortgage Rates: Obama to “Friend” Millions?

    By on February 1, 2012

    Today is the day that Facebook will file its initial public offering.  There are also rumors that today is the day that President Obama will announce his plan to enable millions of homeowners to refinance at current historically low interest rates.  In some ways, it’s as if he is sending a huge “friend request” to American homeowners.  Is this good economic policy or simply politics as usual and what effect will it have on mortgage rates?

    It appears from early trading in mortgage-backed securities (MBS) today that the markets are focused on the Facebook IPO and stocks are set to rise.  This will put pressure on MBS pricing today and could keep rates from falling any further.  Unless the stock market surges more than appears likely, mortgage rates will likely remain close to current levels throughout the day.

    Several economic reports are also in the mix today.  The ADP Employment Change report came in about at the point of expectations though newly created jobs were down significantly from December.  Analysts were encouraged however by the surge in new service sector jobs, explaining that a broad-based improvement in employment across all sectors is necessary for sustainable economic growth.

    At 10 AM both the Construction Spending report and the ISM Manufacturing Index will be released.  The ISM Index is a gauge of manufacturing industry activity and is a very important report.  If this report is at or above expected levels, mortgage pricing may feel more upward pressure.  If, however, we see a surprise to the downside, then mortgage pricing may improve.

    Let’s get back to the President’s refinance plan.  According to reports the plan will call for a tax on large banks to pay for the cost of allowing homeowners to refinance into Federal Housing Administration loans.  Having failed to get the conservator of the other two government-sponsored housing agencies to go along with a similar plan, the president has turned to the one agency he has direct control over.  That being said, the plan has virtually no chance to pass Congress as it has failed to even be acted on twice before.

    As to its public policy and economic implications my belief is that it is poor policy to allow refinancing into government (taxpayer) backed mortgages by homeowners that would not otherwise qualify for the loans.  Economically, it would provide substantial stimulus initially but it might also have the unintended consequence of causing mortgage rates to rise.  Banks unable to handle the onslaught of borrowers, and fearing repurchase risks from loans that go bad, may raise their interest rates to discourage borrowers.

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  4. Mortgage Rates: Record Lows Daily?

    By on January 30, 2012

    Mortgage rates look to fall even lower today as a busy week for economic data gets underway.  On-going drama in Greece combine with the busy economic calendar to make this a crucial week for establishing the rate trend for 2012. So far, anyway, it looks like a positive trend for rates.

    The first big report of the week, the Personal Consumption and Expenditures report indicated that consumers pulled back on spending in December despite an increase in their income.  Most analysts are interpreting this as a sign of a slow-down ahead for early 2012. Once again I would urge caution in this interpretation.

    Annual consumer spending rose for 2011 by 4.7%, the largest margin in four years. A dip of .1% in the December expenditures portion of the PCE report, while breaking the string of three consecutive positive months, does not signal a trend reversal all by itself.  Particularly when you remember that the PCE report is adjusted for inflation.  According to the PCE’s own inflation component, prices increased by 2.0% rather than the 1.0% forecasted.  This largely accounts for the so-called “drop” in consumer spending.

    The never-ending Greek drama continues to play out.  Last week it was negotiations with private bond holders that dominated the scene.  After reaching an agreement with private bond holders to cut their payouts by 70% the attention now turns to how the remaining budget shortfall will be made up.  Will Greece be forced to cut spending further or will additional loans come from European nations and the ECB?

    Over the weekend the idea of installing a Eurozone budget overseer who would have the power to veto budget measures from Greece.  As you might imagine, that idea did not go over very well in Greece.  One official stated that such a measure would force Greece to choose between “financial assistance” and “national dignity”.

    The rest of the week will provide a great deal of additional economic data on the strength or lack thereof in the US economy. Chicago PMI (a gauge of manufacturing in the Chicago region) and consumer confidence reports will be released on Tuesday.  Wednesday provides the ADP Employment Change report along with construction spending and the ISM index (manufacturing).  Thursday’s key reports include the weekly jobless claims report and productivity report.  Finally, on Friday we will see the Non-Farm Payrolls report , Factory Orders and ISM Services.

    Current low mortgage rates are not justified by the economic data available to date.  Perhaps this week’s data will show developing weakness in the US economy and support the recent moves downward. Nevertheless, for the time-being consumers needing a mortgage for a refinance or purchase transaction can be comforted in knowing that rates have never been lower.

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  5. Mortgage Rates: GDP Pushes Rates to Record Lows?

    By on January 27, 2012

    The first look at the US Gross Domestic Product for the 4th quarter of 2004 was the strongest in 1 ½ years.  And while news of economic strength usually sends mortgage rates higher today it appears to be sending them lower.  Why?  Because the expectations of economists prior to the report’s release was for even stronger growth.   Perhaps traders of stocks and mortgage-backed securities will realize that this data is hardly worth relying on for guiding their positions since this early look at GDP each quarter is often revised significantly before being finalized.  This report will be revised on February 29 and won’t be finalized until March 29.  According to the US Bureau of Economic Analysis, the group that produces the GDP reports the average change between the “Advance Estimate” and the “Final” is greater than 1.0%!  So despite the early improvement in mortgage rates this morning, consumers needing a mortgage for a refinance or purchase should not expect further moves down today.

    Reports out of Europe suggest that a deal between Greece and its private bond holders to reduce their payout is “very close”.  While I know we have heard this before—I actually believe it because these bond holders really have no viable alternatives.  Should they allow Greece to default in a disorderly manner it would put all their other European debt holdings at much greater risk as global investors would likely devalue all things European.

    At 10 AM ET today the January Consumer Sentiment report will be released.  Expectations for this report are for it to be flat—but flat at a very strong level.  Should this report surprise significantly it could move mortgage rates.  I do expect this report to come in close to expectations—or if there is a surprise for it to be to the high side.  If I am correct than the greater risk later today is for a slight uptick in mortgage costs rather further improvement.

    Have a great weekend!

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  6. Mortgage Rates Go Whitewater Rafting, August, 12, 2011

    By on August 12, 2011

    Mortgage rates have been on a whitewater rafting trip this week, bouncing off of rocks daily, yet steadily heading lower.  But basic physics teaches us that whitewater can’t flow uphill.  Yesterday and today the roaring torrent of downward pressure for current mortgage rates has run into a barrier—reality.  As I have been warning throughout the recent stock market correction and mortgage rate swoon, the fear of an impending recession in the US, was not supported by the facts.  The facts indicate slow but actual growth in the US economy.  Therefore, whatever portion of the mortgage rate drop attributable to fear of recession is may be subject to be given up.

    But I don’t expect mortgage rates to paddle back up the river that led to the current low rates.  The crisis in Europe is real—perhaps not an imminent disaster either—but real.  Moreover, the Federal Reserve’s statement that it intends to keep the Fed Funds rate at 0% until mid-2013 has real implications for bonds and therefore mortgage rates.

    In Europe overnight France and Italy passed a ban on short-selling for the next 15 days.  The expectation is that this will calm the markets until the Tuesday summit between French President Nicholas Sarkozy and German Chancellor Angela Merkel.  Expectations are that the two leaders will propose policies to stabilize the trading in European sovereign bonds and supportive of key banks.  Some analysts have suggested that Europe is in need of their version of the US TARP program that was crucial to keeping our economy from crashing into depression.

    Continue Reading…

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates

  7. Mortgage Applications Down Despite Lowest Rates Since Last Fall

    By on June 1, 2011

    As with every Wednesday, let’s check out the Mortgage Bankers Association’s Weekly Mortgage Applications Survey.  The Market Composite Index, which tracks all applications, was down 4.0 percent from the week before.  The refinance index was down 5.7 percent, while the purchase index stayed at the same level from the week earlier.  This drop in activity comes despite rates that are at 2011 lows.  Said Michael Fratantoni, the MBA’s Vice President of Research and Economics:

    “Interest rates fell last week as incoming economic data was weaker than anticipated.  Despite this drop in rates, the number of refinance applications fell.  In fact, the last time mortgage rates were this low, refinance volume was more than twenty percent higher.  It is likely that many borrowers still cannot qualify to refinance given the lack of equity in their homes.”

    According to the MBA’s figures, the average rate on a 30-year fixed rate mortgage fell to 4.58 percent, down from 4.69 percent.  This is the lowest rates have been since November 2010.  Not only this, but home prices are now at post-recession lows, but all signs point to further decreases.  This (as well as difficulty qualifying for a mortgage coupled with unemployment) is likely keeping potential buyers on the sidelines as they wait for the market to bottom out.

    It is worth noting that application numbers don’t tell the whole story with regard to home sales, because cash sales (which obviously require no mortgage application) are not included.  Cash sales hit a record high of 35 percent of the market in March, a number which declined to 31 percent in April.  That this number is declining could be indicative that investors (who comprise most cash buyers) are now holding off on buying due to further price declines.  The takeaway here is that home sales are unlikely to turn around in the near future.

    Category: Mortgage Rates

  8. Refinance Applications Continue to Rise as Mortgage Rates Hover Near 2011 Lows

    By on May 25, 2011

    According to the MBA’s Weekly Mortgage Applications Survey, mortgage applications were up slightly last week, rising 1.1 percent from the week prior.  From the report:

    “The Market Composite Index, a measure of mortgage loan application volume, increased 1.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 0.9 percent compared with the previous week. The Refinance Index increased 0.9 percent to its highest level since December 10, 2010. The seasonally adjusted Purchase Index increased 1.5 percent from one week earlier. The unadjusted Purchase Index increased 0.8 percent compared with the previous week and was 3.1 percent higher than the same week one year ago.”

    The four week moving average for overall applications is up 5.2 percent.  The four week moving average for refinances is up 7.1 percent, while the four week moving average for purchases is up 1.2 percent.  Typically purchase activity picks up around this time of year, so such a minimal increase in purchase activity does not presage a strong summer selling season.  It is worth noting that there are record numbers of cash home buyers right now, which accounts somewhat for the weak number of purchase applications.

    These relatively weak application numbers come despite mortgage rates that are hovering near 2011 lows.  The MBA saw mortgage rates increase slightly, as the 30-year fixed rate mortgage rose from 4.60 percent to 4.69 percent, while the average rate on a 15-year fixed mortgage rose from 3.75 percent to 3.78 percent.

    Category: Mortgage Rates

  9. Lowest Rates This Year Prompt Refinancing Surge

    By on May 11, 2011

    Mortgage applications jumped last week as market forces caused mortgage rates to hit their lowest point of 2011.  Total mortgage applications were up 8.2 percent on a seasonally adjusted basis from the week prior, according to the Mortgage Bankers Assocation’s Weekly Applications Survey.  The refinance applications index was up 9.0 percent from last week, while the purchase index increased 6.7 percent from the week before.  Despite the increase, the purchase index is almost 26 percent lower than at the same time last year.  Michael Fratantoni, the MBA’s Vice President of Research noted:

    “Rates dropped again last week as the Federal Reserve continued its QE2 asset purchase program.   The 30-year fixed mortgage rate is now 46 basis points below its 2011 peak, and has decreased for four straight weeks by a total of 31 basis points.  Over this four week span, the refinance index has increased by about 18 percent. Despite the recent increases however, refinance application volumes remain more than 50 percent below levels seen last fall.”

    According to the MBA’s numbers, the average rate on a 30-year fixed rate mortgage fell from 4.76 percent to 4.67 percent, while the 15-year fixed rate fell from 3.96 percent to 3.81 percent.  These rates are the lowest the MBA has seen since last December.  Despite the excellent rates, demand for homes remains tepid.  It is worth noting that cash buyers make up an increasingly large percentage of home buyers (28% of all home sales in 2010), and these people are not factored into this survey as they are not applying for mortgages.

    Many potential homebuyers remain on the sidelines for a variety of reasons.  It is increasingly difficult to qualify for a mortgage, as underwriting standards have tightened.  Further, home prices have continued to fall, recently hitting post-crash lows, or close to it, depending upon which housing survey you like.  Yesterday Zillow downgraded their market outlook, now predicting a housing bottom in 2012.  I would surmise that many potential buyers are biding their time until they are more confident that prices have ceased falling.

    Category: Mortgage Rates

  10. FHA Fee Hike Cause Mortgage Applications to Fall

    By on April 27, 2011

    Mortgage applications declined 5.6 percent last week, according to the Mortgage Bankers Association’s Weekly Applications Survey.  This follows on the heels of a 5.3 percent increase the week prior.  The swings were fueled by buyers rushing to beat an increase in FHA mortgage insurance premiums.  Says Michael Fratantoni, VP of Research and Economics for the MBA:

    “Purchase applications fell last week, driven primarily by a sharp decrease in government purchase applications as new, higher FHA premiums went into effect.  This decrease reverse a 20 percent increase in government purchase applications over a four week period, which was likely driven by borrowers attempting to beat this deadline.”

    Total mortgage application volume was down 5.6 percent (seasonally adjusted).  Refinance applications were down 0.6 percent, while purchase applications dropped 13.6 percent.  This is the lowest level since late February.  Refinance activity rose to 61.6 percent of mortgage applications, up from 58.5 percent the week before.  According to the survey, mortgage rates decreased slightly, with the average 30-year fixed rate mortgage falling from 4.83% to 4.80%.  15-year fixed rate mortgages fell to 4.03% from 4.07%.

    There’s not a lot of new information to be garnered from this report.  Applications have been trending sideways for the better part of a year now.

    Category: Mortgage Rates

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