As expected, at its meeting on Tuesday, March 16 the Federal Reserve Board held the fed funds rate steady, and the accompanying statement contained few changes.
The Fed continued to signal that the $1.25 trillion mortgage-backed securities (MBS) purchase program will conclude at the end of March. With less than two weeks of Fed MBS purchases remaining, investors will be watching closely to see if the Fed's exit has an impact on mortgage rates.
If you are planning to refinance, don't wait. Many experts expect rates to rise once the MBS buyout ends.
Thursday, March 25, 2010
Wednesday, March 24, 2010
5 Reasons Why A Real Estate Agent is a Home Buying Asset
A real estate agent is one of the best assets you can have when it comes to buying a home. With the Home Buyer Tax Credit wrapping up on April 30, 2010 (where first-time buyers can receive up to $8,000; current homeowners up to $6,500), the housing market seems to be more spirited than ever. There is no doubt that now is an advantageous time to buy, but before you consider doing things on your own, take into consideration these five reasons on why you should get yourself a real estate agent.
Get Help in a Competitive Market
The home buyer tax credit has stimulated a very proactive buying market. With interest rates at historic lows and homes competitively priced, a real estate agent can provide you with insight on how to take advantage of the current market.
Let Someone Do the Search for You
Available property is not always being actively advertised in the market; therefore, your real estate agent may be able to find you more homes for sale than you could have originally found on your own.
Get Acquainted with Neighborhood Information
Agents have access to plenty of informational resources. Not only can they provide insight on the neighborhood, but they can give information on schools, employment, mass transit, etc.
Have Some Assistance with Negotiations
When buying a home, there are numerous negotiating factors including financing, purchase contract terms and repairs. Your agent can help you determine which type of home inspections are recommended for your purchase. Once you've found what assessments are needed, your agent should be able to help find you qualified professionals to give you written reports on their findings.
Allow Someone to Facilitate the Sale of Your Current Home
If you're not a first-time home buyer, your realtor can help you advertise and sell your property. They can help you objectively evaluate a buyer's proposal while helping you close on the sale of the home.
Get Help in a Competitive Market
The home buyer tax credit has stimulated a very proactive buying market. With interest rates at historic lows and homes competitively priced, a real estate agent can provide you with insight on how to take advantage of the current market.
Let Someone Do the Search for You
Available property is not always being actively advertised in the market; therefore, your real estate agent may be able to find you more homes for sale than you could have originally found on your own.
Get Acquainted with Neighborhood Information
Agents have access to plenty of informational resources. Not only can they provide insight on the neighborhood, but they can give information on schools, employment, mass transit, etc.
Have Some Assistance with Negotiations
When buying a home, there are numerous negotiating factors including financing, purchase contract terms and repairs. Your agent can help you determine which type of home inspections are recommended for your purchase. Once you've found what assessments are needed, your agent should be able to help find you qualified professionals to give you written reports on their findings.
Allow Someone to Facilitate the Sale of Your Current Home
If you're not a first-time home buyer, your realtor can help you advertise and sell your property. They can help you objectively evaluate a buyer's proposal while helping you close on the sale of the home.
Thursday, March 18, 2010
Purchase or Refinance...now is the time!
The gov't has announced that they will stop buying mortgage backed securities in the coming months and mortgage interest rates will begin to rise. The first time homebuyer tax credit also expires April 30th. The combination of these two make purchasing or refinancing very attractive right now, but time is running out!!!
Wednesday, March 17, 2010
Speeding up short sales
Short sales are a valuable tool for struggling homeowners, but they've been notoriously difficult to complete, with buyers and sellers often playing a long waiting game before hearing back from lenders.
Now, however, a new government program plus some lender initiatives may make for shorter wait times and a smoother process.
"Any structure is better than what we've had," said Kathryn Bovard, a broker/manager for Prudential Americana Group in the Las Vegas area.
Short sales are useful for borrowers who are underwater on their mortgage, owing more on the home than it's currently worth. In a short sale, the homeowner's lender accepts less than what the borrower owes on the mortgage in order to complete the sale. Both parties thus avoid the foreclosure process.
Foreclosure alternatives
The government's Home Affordable Foreclosure Alternatives (HAFA) program goes into effect April 5. Read more about HAFA.
"It's an extension of [the Home Affordable Modification Program] to provide a default solution before it gets to the worst," said Arvin Wijay, chief executive of Retreat Capital, a provider of products and services that facilitate short-sale management and loan modifications. If the borrower doesn't qualify for a modification, loan servicers will then assess the possibility of a short sale through the HAFA program.
Here are some ways HAFA is expected improve the traditional short-sale process:
•Borrowers will receive pre-approved short-sale terms before listing the property, including either a list price approved by the servicer or the acceptable sale proceeds, according to the U.S. Treasury Department. That way, sellers know what lenders will accept before listing the property.
•There's a set timeline, with deadlines for lenders and sellers to keep the short-sale process moving.
•At the completion of a sale, borrowers may get up to $1,500 for relocation expenses and servicers may receive compensation of up to $1,000. Up to $3,000 of proceeds are available to distribute to subordinate lien holders, making it possible to compensate the lenders of second mortgages.
Still, some in the industry are skeptical that the new program will be a great help to people.
"The homeowner should be encouraged that the government is doing something," but people should not expect it "to change the world overnight," said Fred Weaver, co-owner of Group 46:10, a team of agents who focus on short sales as part of Keller Williams Arizona Realty, in Tempe, Ariz.
Successful implementation also depends on servicers' staff. "Some servicers are good at finding the right people, and have the right technology," Wijay said. Some, he said, are not.
Looking at the lenders
In the past, it was common for one mortgage-servicer employee to be responsible for managing hundreds of short-sale applications, Weaver said. But the method with which short sales are approved is starting to improve with some firms, and some banks have made staffing adjustments to better handle the volume.
"Banks are trying to put programs in place to facilitate more short sales in a shorter period of time," Weaver said.
Some of the most recent efforts include allowing borrowers and real-estate agents to use an Internet portal to help improve communication, so they can submit paperwork electronically instead of faxing it, a practice that's under way at GMAC Mortgage and Bank of America, according to Weaver. And lenders including Wells Fargo have committed to increasing their staff to deal with short sales, Bovard said.
Lenders "have finally gotten on board with the fact that short sales will be a large part of the market over the next 24 to 36 months," said Bovard.
While the popularity of short sales differs by market, in the Las Vegas brokerage that Bovard runs, 70% of pending sales are now short sales, she said.
According to the latest Campbell/Inside Mortgage Finance survey of real-estate market conditions, short sales were the most popular category of sales for distressed properties. In January, short sales accounted for 15.9% of home-purchase transactions, compared with 13.4% of sales that were damaged bank-owned properties and 13.8% of sales that were move-in-ready bank-owned properties.
Short sales typically sell for 91% of their listing price, according to the survey results. Move-in-ready bank-owned properties typically sell for 99% of their listing price.
Words of advice
For homeowners considering a short sale, Bovard said it's important they speak to their trusted advisers, including their attorney and tax accountant, as well as a real-estate agent who has a short-sale designation.
When looking for a real-estate agent, homeowners should ask about the agent's track record with short sales, said Kevin Kauffman, co-owner of Group 46:10. "How many have you closed? The follow-up question: How many did you fail on -- how many went into foreclosure?"
Also, ask questions about the agent's strategy in getting the job done, he said.
For buyers, a lot of patience is required to finish one of these deals, said Bovard. "It's a long, involved process. But the payoff is getting a tremendous value
Now, however, a new government program plus some lender initiatives may make for shorter wait times and a smoother process.
"Any structure is better than what we've had," said Kathryn Bovard, a broker/manager for Prudential Americana Group in the Las Vegas area.
Short sales are useful for borrowers who are underwater on their mortgage, owing more on the home than it's currently worth. In a short sale, the homeowner's lender accepts less than what the borrower owes on the mortgage in order to complete the sale. Both parties thus avoid the foreclosure process.
Foreclosure alternatives
The government's Home Affordable Foreclosure Alternatives (HAFA) program goes into effect April 5. Read more about HAFA.
"It's an extension of [the Home Affordable Modification Program] to provide a default solution before it gets to the worst," said Arvin Wijay, chief executive of Retreat Capital, a provider of products and services that facilitate short-sale management and loan modifications. If the borrower doesn't qualify for a modification, loan servicers will then assess the possibility of a short sale through the HAFA program.
Here are some ways HAFA is expected improve the traditional short-sale process:
•Borrowers will receive pre-approved short-sale terms before listing the property, including either a list price approved by the servicer or the acceptable sale proceeds, according to the U.S. Treasury Department. That way, sellers know what lenders will accept before listing the property.
•There's a set timeline, with deadlines for lenders and sellers to keep the short-sale process moving.
•At the completion of a sale, borrowers may get up to $1,500 for relocation expenses and servicers may receive compensation of up to $1,000. Up to $3,000 of proceeds are available to distribute to subordinate lien holders, making it possible to compensate the lenders of second mortgages.
Still, some in the industry are skeptical that the new program will be a great help to people.
"The homeowner should be encouraged that the government is doing something," but people should not expect it "to change the world overnight," said Fred Weaver, co-owner of Group 46:10, a team of agents who focus on short sales as part of Keller Williams Arizona Realty, in Tempe, Ariz.
Successful implementation also depends on servicers' staff. "Some servicers are good at finding the right people, and have the right technology," Wijay said. Some, he said, are not.
Looking at the lenders
In the past, it was common for one mortgage-servicer employee to be responsible for managing hundreds of short-sale applications, Weaver said. But the method with which short sales are approved is starting to improve with some firms, and some banks have made staffing adjustments to better handle the volume.
"Banks are trying to put programs in place to facilitate more short sales in a shorter period of time," Weaver said.
Some of the most recent efforts include allowing borrowers and real-estate agents to use an Internet portal to help improve communication, so they can submit paperwork electronically instead of faxing it, a practice that's under way at GMAC Mortgage and Bank of America, according to Weaver. And lenders including Wells Fargo have committed to increasing their staff to deal with short sales, Bovard said.
Lenders "have finally gotten on board with the fact that short sales will be a large part of the market over the next 24 to 36 months," said Bovard.
While the popularity of short sales differs by market, in the Las Vegas brokerage that Bovard runs, 70% of pending sales are now short sales, she said.
According to the latest Campbell/Inside Mortgage Finance survey of real-estate market conditions, short sales were the most popular category of sales for distressed properties. In January, short sales accounted for 15.9% of home-purchase transactions, compared with 13.4% of sales that were damaged bank-owned properties and 13.8% of sales that were move-in-ready bank-owned properties.
Short sales typically sell for 91% of their listing price, according to the survey results. Move-in-ready bank-owned properties typically sell for 99% of their listing price.
Words of advice
For homeowners considering a short sale, Bovard said it's important they speak to their trusted advisers, including their attorney and tax accountant, as well as a real-estate agent who has a short-sale designation.
When looking for a real-estate agent, homeowners should ask about the agent's track record with short sales, said Kevin Kauffman, co-owner of Group 46:10. "How many have you closed? The follow-up question: How many did you fail on -- how many went into foreclosure?"
Also, ask questions about the agent's strategy in getting the job done, he said.
For buyers, a lot of patience is required to finish one of these deals, said Bovard. "It's a long, involved process. But the payoff is getting a tremendous value
Tuesday, March 16, 2010
The Day Ahead: Housing Starts, Building Permits, FOMC Statement
The dollar is weaker and equities look to open higher as investors await the afternoon policy statement from the Federal Reserve Board.
Two hours before the opening bell, Dow futures are up 16 points to 10,592 and S&P 500 futures are 2.00 points higher at 1,147.75.
Commodities are also on the rise, with WTI crude oil up 18 cents to $79.98 per barrel and Spot Gold up $6.35 to $1,114.80.
8:30 ― Snow storms and poor weather are expected to push Housing Starts down in February, following a 2.8% gain in January. Demand remains weak overall, though new construction on residential homes is up 21% from last year. Expectations among economists are diverse, ranging from 530k to 591k, and the consensus is 565k.
“Although it is highly unlikely we will revisit the record lows seen last spring (479,000), the housing sector clearly continues to struggle, with the latest piece of evidence coming in the form of the unexpected deterioration in homebuilder sentiment,” said economists from BMO Capital Markets.
“Severe winter weather is likely to deliver another blow to the already-wobbly construction sector,” added economists from Nomura. “We forecast housing starts fell by about 5% to an annualized rate of just 560,000 in February, the lowest since October 2009.”
Building permits ― contracts that have been signed but not finalized ― are also expected to fall by around 3%, pushing the annualized pace to 605,000 units.
2:15 ― The FOMC is expected to maintain the target interest rate in the band of zero to 0.25% for many more months, so attention will be on the statement itself rather than the meeting’s decision.
“The factors justifying the extremely low level of rates ― ‘low rates of resource utilization, subdued inflation trends, and stable inflation expectations’ ― have not meaningfully changed,” said economists at Nomura. “We therefore expect the post-meeting statement to retain the ‘exceptionally low... for an extended period’ pledge.”
More generally, economists from IHS Global Insight said the statement should mention “further strengthening in the economic recovery, but continuing constraints on household spending due to tight credit, modest income growth and lower housing wealth.”
Two hours before the opening bell, Dow futures are up 16 points to 10,592 and S&P 500 futures are 2.00 points higher at 1,147.75.
Commodities are also on the rise, with WTI crude oil up 18 cents to $79.98 per barrel and Spot Gold up $6.35 to $1,114.80.
8:30 ― Snow storms and poor weather are expected to push Housing Starts down in February, following a 2.8% gain in January. Demand remains weak overall, though new construction on residential homes is up 21% from last year. Expectations among economists are diverse, ranging from 530k to 591k, and the consensus is 565k.
“Although it is highly unlikely we will revisit the record lows seen last spring (479,000), the housing sector clearly continues to struggle, with the latest piece of evidence coming in the form of the unexpected deterioration in homebuilder sentiment,” said economists from BMO Capital Markets.
“Severe winter weather is likely to deliver another blow to the already-wobbly construction sector,” added economists from Nomura. “We forecast housing starts fell by about 5% to an annualized rate of just 560,000 in February, the lowest since October 2009.”
Building permits ― contracts that have been signed but not finalized ― are also expected to fall by around 3%, pushing the annualized pace to 605,000 units.
2:15 ― The FOMC is expected to maintain the target interest rate in the band of zero to 0.25% for many more months, so attention will be on the statement itself rather than the meeting’s decision.
“The factors justifying the extremely low level of rates ― ‘low rates of resource utilization, subdued inflation trends, and stable inflation expectations’ ― have not meaningfully changed,” said economists at Nomura. “We therefore expect the post-meeting statement to retain the ‘exceptionally low... for an extended period’ pledge.”
More generally, economists from IHS Global Insight said the statement should mention “further strengthening in the economic recovery, but continuing constraints on household spending due to tight credit, modest income growth and lower housing wealth.”
Thursday, March 11, 2010
Mortgage Rates Rise Ahead of Treasury Auction. Fail to Recover Afterward
Much like Monday, yesterday was a data-less day in the marketplace, leaving me at a loss for words and new guidance. Mortgage-backed securities prices did managed to move higher following a very strong 3 year Treasury debt auction, unfortunately MBS price appreciations were not strong enough to warrant reprices for the better and lenders left mortgage rates unchanged on the day.
The economic calendar picked up today, but not much.
This morning the Mortgage Bankers Association released their Weekly Loan Applications Index. The MBA survey covers over 50 percent of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. A rising trend of mortgage applications indicates an increase in home buying interest, a positive for the housing industry and economy as a whole. Furthermore, in a low mortgage rate environment, such a trend implies consumers are seeking out lower monthly payments which can result in increased disposable income and therefore more money to spend on discretionary items or to pay down other debt.
Following several disappointing reports, the most recent report (prior to today's release) indicated an increase in demand for both purchase and refinance mortgage loans. Purchase applications rose 9% while refinance applications jumped over 17%.
Today's report offered mixed results. Purchase applications rose 5.7% while refinance activity fell 1.5%, in the week ending March 5th. With last week’s huge 17.2% increase in refinance activity, it isn’t surprising to see a modest pull back.
Yesterday I informed you that the most significant threat to mortgage rates was today's 10 year Treasury note auction and the 30 year bond auction scheduled to happen tomorrow. Well, benchmark yields started rising before the auction even occurred! This forced MBS prices lower and resulted in lenders raising mortgage rates early in the day. Higher rates did not reverse course after the auction either, regardless of strong demand. READ MORE ABOUT WHY RATES ROSE TODAY
Reports from fellow mortgage professionals indicate lender rate sheets to be worse than yesterday. The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers, but those quotes will cost about .125% more (as a percentage of your loan amount) at closing. To secure a par rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.
I still favor locking loans over floating with the same exception as yesterday. If you can float overnight and lock on a shorter lock term tomorrow, I would float. Otherwise, locking now is the wise call. Lenders continue to offer the best rates of 2010, but do not show much willingness by to drive mortgage rates lower. If you plan to float, AQ shared some insight on acceptable time frames in THIS POST.
The economic calendar picked up today, but not much.
This morning the Mortgage Bankers Association released their Weekly Loan Applications Index. The MBA survey covers over 50 percent of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. A rising trend of mortgage applications indicates an increase in home buying interest, a positive for the housing industry and economy as a whole. Furthermore, in a low mortgage rate environment, such a trend implies consumers are seeking out lower monthly payments which can result in increased disposable income and therefore more money to spend on discretionary items or to pay down other debt.
Following several disappointing reports, the most recent report (prior to today's release) indicated an increase in demand for both purchase and refinance mortgage loans. Purchase applications rose 9% while refinance applications jumped over 17%.
Today's report offered mixed results. Purchase applications rose 5.7% while refinance activity fell 1.5%, in the week ending March 5th. With last week’s huge 17.2% increase in refinance activity, it isn’t surprising to see a modest pull back.
Yesterday I informed you that the most significant threat to mortgage rates was today's 10 year Treasury note auction and the 30 year bond auction scheduled to happen tomorrow. Well, benchmark yields started rising before the auction even occurred! This forced MBS prices lower and resulted in lenders raising mortgage rates early in the day. Higher rates did not reverse course after the auction either, regardless of strong demand. READ MORE ABOUT WHY RATES ROSE TODAY
Reports from fellow mortgage professionals indicate lender rate sheets to be worse than yesterday. The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers, but those quotes will cost about .125% more (as a percentage of your loan amount) at closing. To secure a par rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.
I still favor locking loans over floating with the same exception as yesterday. If you can float overnight and lock on a shorter lock term tomorrow, I would float. Otherwise, locking now is the wise call. Lenders continue to offer the best rates of 2010, but do not show much willingness by to drive mortgage rates lower. If you plan to float, AQ shared some insight on acceptable time frames in THIS POST.
Wednesday, March 10, 2010
The boy who cried housing recovery!
Lowe's reported a better-than-expected profit for the fourth quarter on Monday, and the nation's second-largest home-improvement retailer indicated that 2010 would be a better year for the housing market.
It's tempting to dismiss more good news about the housing market as simply another head fake -- "The boy who cried housing recovery!"
An ETF tracking homebuilders and other housing stocks solidly outperformed the broader market's rally last year -- and the trend has continued in 2010.
But it might be finally time to say the market is slowly but surely getting better.
Just don't get too excited about the news. Lowe's said it now expects sales to be up 4% to 6% this year. Wall Street had been expecting a 3% jump. In a statement, Lowe's (LOW, Fortune 500) CEO Robert Niblock added that "the worst of the economic cycle is likely behind us."
Lowe's top rival Home Depot (HD, Fortune 500) reports its fourth-quarter results on Tuesday morning. So analysts will be eager to hear if Home Depot CEO Frank Blake shares Niblock's optimism.
Still, even before we find out about Home Depot's outlook, it's worth noting that other companies with ties to the housing market are also starting to show signs of a turnaround.
Several top homebuilders, including Lennar (LEN), D.R. Horton (DHI, Fortune 500) and KB Home (KBH), reported surprise fourth-quarter profits after years of red ink.
To be sure, much of the profits were a result of a change in tax law that benefited the builders. But several of the builders also said that new-home orders were improving. That's a good sign.
With that in mind, The SPDR S&P Homebuilders (XHB) exchange-traded fund, which tracks 26 companies in the housing sector, is up more than 6% this year. By way of comparison, the S&P 500 is flat.
Despite its name, the ETF does much more than track homebuilders. Home Depot and Lowe's are both in the fund, as are retailers Bed Bath & Beyond (BBBY, Fortune 500) and Wiliams-Sonoma (WSM), and fiberglass maker Owens Corning (OC, Fortune 500).
So is the worst for this group finally past? Probably. But that doesn't mean a robust recovery for housing is in the cards just yet. That may also mean that housing stocks could be ahead of themselves.
Stephen Carl, head equity trader with The Williams Capital Group, an investment bank in New York, points out that the better results for many housing companies is simply a reflection of them "pulling out of a morass."
"Housing numbers are going to get incrementally better but the recovery is going to be a slow mountain to climb. It will take some time and extend over quarters or years," Carl said.
Ted Parrish, co-manager of the Henssler Equity fund, also said it may be too soon to bet on a big, rapid rebound in housing.
The government will report new-home sales figures for January on Wednesday. Economists are expecting a 4% increase in the month to 355,000 new sales. But that would follow a nearly 8% drop in December.
"New-home sales are pretty anemic still. I'm not expecting robust growth for a couple of years," Parrish said.
He worries that new home sales will remain soft, especially after the first-time homebuyer tax credit expires in April. What's more, mortgage rates may begin to steadily rise later this year as the Federal Reserve begins to unwind its portfolio of mortgage-backed securities and consider interest rate hikes.
Parrish owns Lowe's in his fund but said that the reason he likes it is because it is less dependent on builders than Home Depot. He also said Lowe's could do better in a sluggish housing market because people are more apt to make repairs to the home they're in than look to buy a new one.
Along those lines, Lowe's Niblock also pointed out Monday that "consumers are gaining the confidence to take on more discretionary projects." That's not the same thing as consumers gaining confidence to buy a house.
Experts think it's also important to note that even when sales are improving, it may not necessarily be a sign of strength in the housing market. Alan Rosenbaum, CEO of GuardHill Financial, a mortgage bank based in New York, said rising sales may be simply a reflection of the glut of existing homes on the market.
"Reports about housing sales are conflicting right now, but the numbers are skewed because of foreclosures on the market. There are transactions taking place at fire sale prices," Rosenbaum said.
And housing prices will remain the biggest factor that determines whether the recovery is legitimate or not. According to the National Association for Business Economics, there is good news and bad news on that front.
The economists surveyed by NABE for its most recent outlook, released Monday, indicated that "the housing market rebound is considered ongoing and sustainable," and estimated that home prices would rise 1.6% this year and another 2.6% in 2011.
NABE called the price rebound "an important watershed for the economy" but pointed out that "such increases would barely keep up with inflation."
Of course, any improvement in the housing market should be cheered. Just don't mistake recovery for a renaissance.
It's tempting to dismiss more good news about the housing market as simply another head fake -- "The boy who cried housing recovery!"
An ETF tracking homebuilders and other housing stocks solidly outperformed the broader market's rally last year -- and the trend has continued in 2010.
But it might be finally time to say the market is slowly but surely getting better.
Just don't get too excited about the news. Lowe's said it now expects sales to be up 4% to 6% this year. Wall Street had been expecting a 3% jump. In a statement, Lowe's (LOW, Fortune 500) CEO Robert Niblock added that "the worst of the economic cycle is likely behind us."
Lowe's top rival Home Depot (HD, Fortune 500) reports its fourth-quarter results on Tuesday morning. So analysts will be eager to hear if Home Depot CEO Frank Blake shares Niblock's optimism.
Still, even before we find out about Home Depot's outlook, it's worth noting that other companies with ties to the housing market are also starting to show signs of a turnaround.
Several top homebuilders, including Lennar (LEN), D.R. Horton (DHI, Fortune 500) and KB Home (KBH), reported surprise fourth-quarter profits after years of red ink.
To be sure, much of the profits were a result of a change in tax law that benefited the builders. But several of the builders also said that new-home orders were improving. That's a good sign.
With that in mind, The SPDR S&P Homebuilders (XHB) exchange-traded fund, which tracks 26 companies in the housing sector, is up more than 6% this year. By way of comparison, the S&P 500 is flat.
Despite its name, the ETF does much more than track homebuilders. Home Depot and Lowe's are both in the fund, as are retailers Bed Bath & Beyond (BBBY, Fortune 500) and Wiliams-Sonoma (WSM), and fiberglass maker Owens Corning (OC, Fortune 500).
So is the worst for this group finally past? Probably. But that doesn't mean a robust recovery for housing is in the cards just yet. That may also mean that housing stocks could be ahead of themselves.
Stephen Carl, head equity trader with The Williams Capital Group, an investment bank in New York, points out that the better results for many housing companies is simply a reflection of them "pulling out of a morass."
"Housing numbers are going to get incrementally better but the recovery is going to be a slow mountain to climb. It will take some time and extend over quarters or years," Carl said.
Ted Parrish, co-manager of the Henssler Equity fund, also said it may be too soon to bet on a big, rapid rebound in housing.
The government will report new-home sales figures for January on Wednesday. Economists are expecting a 4% increase in the month to 355,000 new sales. But that would follow a nearly 8% drop in December.
"New-home sales are pretty anemic still. I'm not expecting robust growth for a couple of years," Parrish said.
He worries that new home sales will remain soft, especially after the first-time homebuyer tax credit expires in April. What's more, mortgage rates may begin to steadily rise later this year as the Federal Reserve begins to unwind its portfolio of mortgage-backed securities and consider interest rate hikes.
Parrish owns Lowe's in his fund but said that the reason he likes it is because it is less dependent on builders than Home Depot. He also said Lowe's could do better in a sluggish housing market because people are more apt to make repairs to the home they're in than look to buy a new one.
Along those lines, Lowe's Niblock also pointed out Monday that "consumers are gaining the confidence to take on more discretionary projects." That's not the same thing as consumers gaining confidence to buy a house.
Experts think it's also important to note that even when sales are improving, it may not necessarily be a sign of strength in the housing market. Alan Rosenbaum, CEO of GuardHill Financial, a mortgage bank based in New York, said rising sales may be simply a reflection of the glut of existing homes on the market.
"Reports about housing sales are conflicting right now, but the numbers are skewed because of foreclosures on the market. There are transactions taking place at fire sale prices," Rosenbaum said.
And housing prices will remain the biggest factor that determines whether the recovery is legitimate or not. According to the National Association for Business Economics, there is good news and bad news on that front.
The economists surveyed by NABE for its most recent outlook, released Monday, indicated that "the housing market rebound is considered ongoing and sustainable," and estimated that home prices would rise 1.6% this year and another 2.6% in 2011.
NABE called the price rebound "an important watershed for the economy" but pointed out that "such increases would barely keep up with inflation."
Of course, any improvement in the housing market should be cheered. Just don't mistake recovery for a renaissance.
Tuesday, March 9, 2010
Mortgage Rates Hold Near Best Levels of 2010 as Benchmark Yields Rise
I described last week as a roller coaster ride for mortgage rates. A busy schedule of economic data provided much of the motivation for movement in the rates marketplace with the release of the Employment Situation Report on Friday capping off the volatile action. The jobs report indicated fewer jobs were lost than economists had forecast. This better than expected read on the health of the labor market pushed benchmark Treasury yields higher and mortgage-backed security prices lower. While most lenders repriced for the worse after the data was released, several ended up repricing for the better before the week came to a close as of MBS prices rebounded late in the day. This brought mortgage rates right back to the lows of 2010, basically unchanged on the week. To remind readers, as the price of MBS move higher, lenders can offer lower mortgage rates.
If you missed my recap of the Employment Situation Report and the accompanying chart of reprices for the worse and reprices for the better: HERE IT IS
There are no major economic data releases scheduled for release today. As for the week ahead, there isn’t much to discuss either. The highest impacting events and releases will be Treasury supply coming to auction block and Retail Sales on Friday.
Tuesday
$40 billion 3 year Treasury notes will be auctioned (medium impact)
Wednesday
Mortgage Bankers Association's Weekly Applications Index (low impact)
$21 billion 10 year Treasury notes will be auctioned. Since the average life of a mortgage loan is much closer to 10 years than 3 years, this auction will be of higher importance for mortgage rate watchers.
January Wholesale Business Inventories (medium impact with poential to be high impact because of slow economic calendar)
Thursday
January International Trade (medium impact) The Trade Balance report measures the monthly difference between what our nation imports and what our nation exports.
Weekly Jobless Claims (more than medium impact less than high impact)
$13 billion 30 year Treasury bonds will be auctioned. Treasuries with terms of less than 2 years are known as bills, terms of 2 years to 10 years are known as notes, and terms of more than 10 years are referred to as bonds. The last auction of the week usually carries the greatest potential to disturb the interest rate market.
Reports from fellow mortgage professionals indicate lender rate sheets to be marginally worse when compared to Friday afternoon pricing. However the best par 30 year fixed conventional mortgage rate does remain in the 4.75% to 5.00% range for well qualified consumers. Mortgage rates are more or less holding steady near the lowest levels of 2010 even as benchmark Treasury yields have risen. READ MORE. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. Rates for 15 year fixed rate mortgages’ remain in the 4.25% to 4.50% range with similar costs.
If you have been sitting on the sidelines waiting to refinance, now is the time. The Fed is about to end its MBS purchase program at the end of the month, while we do not expect mortgage rates to skyrocket, we do anticipate they will move steadily higher. I have been saying all year that the only way mortgage rates will move back to the best levels of 2009 is a fundamental shift in economic outlooks or a surprise announcement from the Fed regarding the extension of the MBS purchase program. At the moment, both events seem highly unlikely. Still locking.
If you missed my recap of the Employment Situation Report and the accompanying chart of reprices for the worse and reprices for the better: HERE IT IS
There are no major economic data releases scheduled for release today. As for the week ahead, there isn’t much to discuss either. The highest impacting events and releases will be Treasury supply coming to auction block and Retail Sales on Friday.
Tuesday
$40 billion 3 year Treasury notes will be auctioned (medium impact)
Wednesday
Mortgage Bankers Association's Weekly Applications Index (low impact)
$21 billion 10 year Treasury notes will be auctioned. Since the average life of a mortgage loan is much closer to 10 years than 3 years, this auction will be of higher importance for mortgage rate watchers.
January Wholesale Business Inventories (medium impact with poential to be high impact because of slow economic calendar)
Thursday
January International Trade (medium impact) The Trade Balance report measures the monthly difference between what our nation imports and what our nation exports.
Weekly Jobless Claims (more than medium impact less than high impact)
$13 billion 30 year Treasury bonds will be auctioned. Treasuries with terms of less than 2 years are known as bills, terms of 2 years to 10 years are known as notes, and terms of more than 10 years are referred to as bonds. The last auction of the week usually carries the greatest potential to disturb the interest rate market.
Reports from fellow mortgage professionals indicate lender rate sheets to be marginally worse when compared to Friday afternoon pricing. However the best par 30 year fixed conventional mortgage rate does remain in the 4.75% to 5.00% range for well qualified consumers. Mortgage rates are more or less holding steady near the lowest levels of 2010 even as benchmark Treasury yields have risen. READ MORE. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. Rates for 15 year fixed rate mortgages’ remain in the 4.25% to 4.50% range with similar costs.
If you have been sitting on the sidelines waiting to refinance, now is the time. The Fed is about to end its MBS purchase program at the end of the month, while we do not expect mortgage rates to skyrocket, we do anticipate they will move steadily higher. I have been saying all year that the only way mortgage rates will move back to the best levels of 2009 is a fundamental shift in economic outlooks or a surprise announcement from the Fed regarding the extension of the MBS purchase program. At the moment, both events seem highly unlikely. Still locking.
Monday, March 8, 2010
Frank Agrees US Should Back Fannie, Freddie Debt
House Financial Services Chairman Barney Frank on Friday said he agrees with the Obama administration's decision to fully back Fannie Mae and Freddie Mac bondholders to provide stability to the housing market and broader financial system.
At the same time, the powerful committee chairman said it would be a mistake to give Fannie and Freddie bondholders the same legal status as holders of US government debt by putting their obligations on the federal books.
"It's still not the same as a binding legal obligation of the federal government, and I don't think we should confuse that," Frank told CNBC in a live interview.
The comments come just hours after Frank said bondholders of major mortgage finance sources Fannie Mae and Freddie Mac should not assume the federal government will guarantee the debt of these government-sponsored enterprises at 100 cents on the dollar and they could theoretically suffer losses.
"It is also the case in going forward, as we restructure housing finance, we will make sure that there are no implicit guarantees, hints, suggestions, or winks and nods," Frank said in a prepared statement.
"I would hope that fairly promptly we can come up with a new set of rules," he told CNBC.
Frank's statement followed a statement from the Treasury Department that it was standing behind Fannie and Freddie.
Margaret Kerins of RBS Securities said any suggestion that so-called agency debt is not fully backed by the government is incorrect.
"Regardless of the ultimate outcome for the GSEs, we expect all agency debt outstanding and issued under GSE status to remain related to the government.
Reducing support is contrary to all of the actions takes by the administration and Treasury," Kerins said in a research note.
Asked about Frank's comments, Treasury Department spokeswoman Meg Reilly repeated the administration's position of backing the companies.
"As we said in December, there should be no uncertainty about Treasury's commitment to support Fannie Mae and Freddie Mac as they continue to play a vital role in the housing market during this current crisis," the Treasury statement said.
The comments come as Republicans on Frank's committee are pushing the Obama administration to put the trillions of dollars in debt obligations on to the federal budget.
Some Agreement on Financial Reform
In his interview with CNBC, Frank discussed financial reform legislation. One of the biggest issues holding up progress on reform is the question of where the consumer protection agency should be housed, and what its powers should hold.
"Can it be overridden by a bank regulator? I think that would be a terrible mistake because the bank regulators have a different set of priorities," he said. "Does it have the full scope over not just banks?"
The House bill also imposes a fiduciary responsibility over broker-dealers, and Frank has heard the Senate is thinking of taking this away. Still, after looking at Sen. Chris Dodd's original proposal, Frank said the two are "very close in a lot of ways" — he just doesn't know what type of compromises Dodd will have to make.
At the same time, the powerful committee chairman said it would be a mistake to give Fannie and Freddie bondholders the same legal status as holders of US government debt by putting their obligations on the federal books.
"It's still not the same as a binding legal obligation of the federal government, and I don't think we should confuse that," Frank told CNBC in a live interview.
The comments come just hours after Frank said bondholders of major mortgage finance sources Fannie Mae and Freddie Mac should not assume the federal government will guarantee the debt of these government-sponsored enterprises at 100 cents on the dollar and they could theoretically suffer losses.
"It is also the case in going forward, as we restructure housing finance, we will make sure that there are no implicit guarantees, hints, suggestions, or winks and nods," Frank said in a prepared statement.
"I would hope that fairly promptly we can come up with a new set of rules," he told CNBC.
Frank's statement followed a statement from the Treasury Department that it was standing behind Fannie and Freddie.
Margaret Kerins of RBS Securities said any suggestion that so-called agency debt is not fully backed by the government is incorrect.
"Regardless of the ultimate outcome for the GSEs, we expect all agency debt outstanding and issued under GSE status to remain related to the government.
Reducing support is contrary to all of the actions takes by the administration and Treasury," Kerins said in a research note.
Asked about Frank's comments, Treasury Department spokeswoman Meg Reilly repeated the administration's position of backing the companies.
"As we said in December, there should be no uncertainty about Treasury's commitment to support Fannie Mae and Freddie Mac as they continue to play a vital role in the housing market during this current crisis," the Treasury statement said.
The comments come as Republicans on Frank's committee are pushing the Obama administration to put the trillions of dollars in debt obligations on to the federal budget.
Some Agreement on Financial Reform
In his interview with CNBC, Frank discussed financial reform legislation. One of the biggest issues holding up progress on reform is the question of where the consumer protection agency should be housed, and what its powers should hold.
"Can it be overridden by a bank regulator? I think that would be a terrible mistake because the bank regulators have a different set of priorities," he said. "Does it have the full scope over not just banks?"
The House bill also imposes a fiduciary responsibility over broker-dealers, and Frank has heard the Senate is thinking of taking this away. Still, after looking at Sen. Chris Dodd's original proposal, Frank said the two are "very close in a lot of ways" — he just doesn't know what type of compromises Dodd will have to make.
Friday, March 5, 2010
Nab a real estate deal - while you still can
If you've been holding off on a real estate purchase, glimmers of a turnaround in the housing market may have you wondering if it's finally time to make your move.
While home prices remain low, they're no longer free-falling in most markets. Mortgages are historically cheap. And the sweet tax credit that was offered to new buyers last year has been extended to April 30 and expanded to include current homeowners too.
Can you really nab that tax credit?
Current homeowners who sign a contract to buy a home on or before April 30 get a dollar-for-dollar reduction on their taxes of 10% of the purchase price of the home, up to a maximum of $6,500 (first-time buyers can get up to $8,000).
But according to the National Association of Realtors, buyers spend about 12 weeks home shopping before making an offer, so if you haven't already started looking, you may be pressed to meet the deadline.
Plus, to qualify for the full credit, your household income must be under $225,000 if you're married and less than $125,000 if you're single; repeat buyers must have lived in the home they are selling for five of the past eight years. The good news: Once you've signed the contract, you have until June 30 to close the deal.
How much could you lose by waiting?
Besides the loss of the tax credit, the biggest game-changer facing buyers is a potential jump in mortgage rates. If the Fed moves ahead with its plan to stop buying mortgage-backed securities at the end of March, the rate on a 30-year fixed mortgage is expected to increase nearly a percentage point from today's 5.18% to 6.1% by the end of 2010, according to the Mortgage Bankers Association. On a $300,000 fixed-rate mortgage, that's an extra $174 per month.
But if home values are falling in your area, you don't have much to lose by waiting. If the house you want costs $375,000 today and you put down 20%, you'd pay $1,644 a month for a fixed-rate mortgage at 5.18%. Buy that same home for 5% less later on with rates at 6% and you'd only pay an extra $65 a month. If prices plunge 10% or more this year (as they are expected to in 12% of markets, according to Fiserv), you'll come out even or ahead.
To get a handle on the direction of your market, check trulia.com to see whether inventory levels are increasing, and visit realtytrac.com to find out whether foreclosure filings are still rising. A glut of properties and bank-owned homes means a recovery may not be in sight.
How quickly can you sell the home you now own?
Even in markets that are recovering, sellers must price aggressively to make a fast deal.
"Everybody thinks their house is worth more than it is," says Dallas realtor Bruce Lynn. Before you sign a contract for a new place, ask a few agents to give you a realistic figure that will generate a quick sale. Can't bear to part with your home at that price? Waiting may be your only option.
Also keep in mind that, with the credit crunch not far in the past, lenders may not approve your purchase until you've sold your home. A delay in sale could also stick you with two mortgages, far outstripping any savings from the tax credit.
See if the sellers will let you put a contingency in the contract that negates the sale if you don't find a buyer -- it's a long shot but worth a try. If they won't, propose adding a kick-out clause that allows the sellers to keep their home on the market, but lets you either pull out or quickly move ahead with the deal if they get another offer.
While extra contract negotiations may be a hassle, the past few years have proved that a purchase decision shouldn't be taken lightly. "This may be the best time in history to buy a home," says Denver realtor Jeff Fogler, "but only if you can really afford it."
While home prices remain low, they're no longer free-falling in most markets. Mortgages are historically cheap. And the sweet tax credit that was offered to new buyers last year has been extended to April 30 and expanded to include current homeowners too.
Can you really nab that tax credit?
Current homeowners who sign a contract to buy a home on or before April 30 get a dollar-for-dollar reduction on their taxes of 10% of the purchase price of the home, up to a maximum of $6,500 (first-time buyers can get up to $8,000).
But according to the National Association of Realtors, buyers spend about 12 weeks home shopping before making an offer, so if you haven't already started looking, you may be pressed to meet the deadline.
Plus, to qualify for the full credit, your household income must be under $225,000 if you're married and less than $125,000 if you're single; repeat buyers must have lived in the home they are selling for five of the past eight years. The good news: Once you've signed the contract, you have until June 30 to close the deal.
How much could you lose by waiting?
Besides the loss of the tax credit, the biggest game-changer facing buyers is a potential jump in mortgage rates. If the Fed moves ahead with its plan to stop buying mortgage-backed securities at the end of March, the rate on a 30-year fixed mortgage is expected to increase nearly a percentage point from today's 5.18% to 6.1% by the end of 2010, according to the Mortgage Bankers Association. On a $300,000 fixed-rate mortgage, that's an extra $174 per month.
But if home values are falling in your area, you don't have much to lose by waiting. If the house you want costs $375,000 today and you put down 20%, you'd pay $1,644 a month for a fixed-rate mortgage at 5.18%. Buy that same home for 5% less later on with rates at 6% and you'd only pay an extra $65 a month. If prices plunge 10% or more this year (as they are expected to in 12% of markets, according to Fiserv), you'll come out even or ahead.
To get a handle on the direction of your market, check trulia.com to see whether inventory levels are increasing, and visit realtytrac.com to find out whether foreclosure filings are still rising. A glut of properties and bank-owned homes means a recovery may not be in sight.
How quickly can you sell the home you now own?
Even in markets that are recovering, sellers must price aggressively to make a fast deal.
"Everybody thinks their house is worth more than it is," says Dallas realtor Bruce Lynn. Before you sign a contract for a new place, ask a few agents to give you a realistic figure that will generate a quick sale. Can't bear to part with your home at that price? Waiting may be your only option.
Also keep in mind that, with the credit crunch not far in the past, lenders may not approve your purchase until you've sold your home. A delay in sale could also stick you with two mortgages, far outstripping any savings from the tax credit.
See if the sellers will let you put a contingency in the contract that negates the sale if you don't find a buyer -- it's a long shot but worth a try. If they won't, propose adding a kick-out clause that allows the sellers to keep their home on the market, but lets you either pull out or quickly move ahead with the deal if they get another offer.
While extra contract negotiations may be a hassle, the past few years have proved that a purchase decision shouldn't be taken lightly. "This may be the best time in history to buy a home," says Denver realtor Jeff Fogler, "but only if you can really afford it."
Thursday, March 4, 2010
A Sign of Spring in Housing?
I know one week does not a trend make, but the surge in mortgage purchase applications (up 9 percent last week according to the Mortgage Bankers Association), is the first bright sign I've seen in a while.
Couple that with the fact that temperatures in the Northeast may approach 50 degrees this weekend, and I'm thinking, dare I say it, Spring!
I've been talking to a lot of Realtors this week, who tell me that there are definitely folks out there kicking the tires, but it's all about price point. The latest report from the National Association of Realtors showed the share of home sales in the $0 to $100,000 range went from 23.6 percent in December to 26.7 percent in January. The low end is selling, and inventories on the low end are way down, especially in California.
"You have low interest rates, you have low prices, I mean we are several years behind now on our pricing, and that's good news for buyers. You've got a market where the buyers can negotiate, and you've got the government giving you a tax credits; those are four really good reasons to be a buyer now and into the Spring market because next year, who knows?" says Maryland Realtor Jane Fairweather.
What does not bode well, however, is that those same Realtors report that the number of first time home buyers in the market is shrinking.
40 percent of January's buyers were first timers, down from 43 percent in December and 51 percent in November.
First time buyers have taken advantage of about $12.5 billion worth of government cash in the form of the tax credit, according to the Treasury Department, and I just wonder how many more first timers there are left to sign a contract on a home in the next eight weeks (credit expires on contracts dated April 30).
One area to watch this Spring, I think, is the investor share of the housing market.
The Realtors reported that 26 percent of buyers in January were all-cash. Compare that to the historical norm of less than 10 percent. Not all cash buyers are investors, but the bulk of them are. In the hardest hit markets, like Las Vegas and Phoenix, banks are only taking cash, and that's pushing your organic buyers to the sidelines, tax credit and all.
There's no question the next few months will be rocky and uncertain in home sales and prices. There are far too many uncertainties right now, especially when it comes to government support of the market, to make predictions, but there are rumblings of something out there, something, perhaps, coming up for air.
Couple that with the fact that temperatures in the Northeast may approach 50 degrees this weekend, and I'm thinking, dare I say it, Spring!
I've been talking to a lot of Realtors this week, who tell me that there are definitely folks out there kicking the tires, but it's all about price point. The latest report from the National Association of Realtors showed the share of home sales in the $0 to $100,000 range went from 23.6 percent in December to 26.7 percent in January. The low end is selling, and inventories on the low end are way down, especially in California.
"You have low interest rates, you have low prices, I mean we are several years behind now on our pricing, and that's good news for buyers. You've got a market where the buyers can negotiate, and you've got the government giving you a tax credits; those are four really good reasons to be a buyer now and into the Spring market because next year, who knows?" says Maryland Realtor Jane Fairweather.
What does not bode well, however, is that those same Realtors report that the number of first time home buyers in the market is shrinking.
40 percent of January's buyers were first timers, down from 43 percent in December and 51 percent in November.
First time buyers have taken advantage of about $12.5 billion worth of government cash in the form of the tax credit, according to the Treasury Department, and I just wonder how many more first timers there are left to sign a contract on a home in the next eight weeks (credit expires on contracts dated April 30).
One area to watch this Spring, I think, is the investor share of the housing market.
The Realtors reported that 26 percent of buyers in January were all-cash. Compare that to the historical norm of less than 10 percent. Not all cash buyers are investors, but the bulk of them are. In the hardest hit markets, like Las Vegas and Phoenix, banks are only taking cash, and that's pushing your organic buyers to the sidelines, tax credit and all.
There's no question the next few months will be rocky and uncertain in home sales and prices. There are far too many uncertainties right now, especially when it comes to government support of the market, to make predictions, but there are rumblings of something out there, something, perhaps, coming up for air.
Wednesday, March 3, 2010
FHA Announces Policy Changes to Address Risk
FHA Upcoming Policy Changes
1. Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge. The initial up-front increase is included in Mortgagee Letter 10-02 and will go into effect with FHA Case Assignments dated on and after April 5, 2010.
The second step will be to shift some of the premium increase from the up-front MIP to the annual MIP; date yet to be determined. This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing.
New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA's 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.
3. Reduce allowable seller concessions from 6% to 3%
The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
This change will be posted in the Federal Register in February, and after a notice and comment period, will go into effect in the early summer.
1. Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge. The initial up-front increase is included in Mortgagee Letter 10-02 and will go into effect with FHA Case Assignments dated on and after April 5, 2010.
The second step will be to shift some of the premium increase from the up-front MIP to the annual MIP; date yet to be determined. This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing.
New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA's 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.
3. Reduce allowable seller concessions from 6% to 3%
The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
This change will be posted in the Federal Register in February, and after a notice and comment period, will go into effect in the early summer.
Tuesday, March 2, 2010
What’s Ahead For Mortgage Rates This Week : March 2, 2010
Mortgage markets improved last week as economic reports painted a less-than-stellar portrait of the U.S. economy and concerns of a looming monetary policy change eased. Mortgage pricing improved dramatically, despite a late-Friday retreat.
Mortgage rates are now at their lowest levels since early-February.
Last week was heavy on negative data:
•Consumer Confidence posted 16% short of expectations
•New Home Sales posted 13% short of expectations
•Initial Jobless Claims were higher than expected
In addition, both the Case-Shiller and Home Price Indices showed a slight pullback in the housing sector.
The impact of these statistics was muted, however. This is because Fed Chairman Ben Bernanke gave his semi-annual outlook to Congress and markets focused more on the chairman verbiage than hard data, looking for clues about the future of Fed policy.
Bernanke stayed on message — the Fed Funds Rate will stay low for an extended period of time.
Mortgage rates were also helped by a strengthening U.S. dollar and demand for U.S.-denominated bonds. When demand for mortgage-backed bonds is strong, mortgage rates fall.
This week, mortgage rates will jockey around Friday’s Non-Farm Payrolls report.
Jobs are playing a large role in mortgage bond trading and markets expect that 30,000 jobs were lost in February. If the actual figure is better than 30,000 jobs lost, mortgage rates will rise. If it’s worse, rates will rise.
Other important data this week include Personal Consumption Expenditures — the Fed’s preferred inflation gauge — plus the Fed’s Beige Book release. Mortgage rates remain in flux so float with caution.
Mortgage rates look good today, but by Friday, they could be much, much worse.
Mortgage rates are now at their lowest levels since early-February.
Last week was heavy on negative data:
•Consumer Confidence posted 16% short of expectations
•New Home Sales posted 13% short of expectations
•Initial Jobless Claims were higher than expected
In addition, both the Case-Shiller and Home Price Indices showed a slight pullback in the housing sector.
The impact of these statistics was muted, however. This is because Fed Chairman Ben Bernanke gave his semi-annual outlook to Congress and markets focused more on the chairman verbiage than hard data, looking for clues about the future of Fed policy.
Bernanke stayed on message — the Fed Funds Rate will stay low for an extended period of time.
Mortgage rates were also helped by a strengthening U.S. dollar and demand for U.S.-denominated bonds. When demand for mortgage-backed bonds is strong, mortgage rates fall.
This week, mortgage rates will jockey around Friday’s Non-Farm Payrolls report.
Jobs are playing a large role in mortgage bond trading and markets expect that 30,000 jobs were lost in February. If the actual figure is better than 30,000 jobs lost, mortgage rates will rise. If it’s worse, rates will rise.
Other important data this week include Personal Consumption Expenditures — the Fed’s preferred inflation gauge — plus the Fed’s Beige Book release. Mortgage rates remain in flux so float with caution.
Mortgage rates look good today, but by Friday, they could be much, much worse.
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