May 20th, 2013 - Building Permits Hit 5 Year High

The Commerce Department said Thursday that applications for building permits rose 14.3 percent to a rate of 1.02 million, the most since June 2008. Builders are benefiting from a sustained rebound in housing that began a year ago. Steady job growth, rock bottom mortgage rates and rising home values have boosted demand.

Housing starts came in at a seasonally adjusted rate of 853,000 which was a decline from last month. However, the majority of that decline was in apartment and multi-family and not in single family residences.

Confidence among builders is rising. The National Association of Home Builders says its builder confidence index rebounded in May to a reading of 44, up from 41 in April. The outlook for sales reached its highest point in more than six years.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) lost -65 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move upward for the third straight week. We had our highest mortgage rates on Friday and our lowest rates on Thursday.

We had a very volatile week with large swings in MBS pricing. We traded in a very large range with a -86 BPS range between our highs and lows. Bonds (which include MBS) sold off on much better than expected Retail Sales and Consumer Sentiment. But bonds rallied on very tame inflationary data as measured by CPI and PPI, and higher than expected Initial Jobless Claims. In the end, the economic data was responsible for some daily spikes in pricing but the real momentum in the market place was something else.

And that momentum was not good for rates. Bonds were hammered as traders started to join in on the belief that the Federal Reserve would begin to scale back on the amount of monthly MBS purchases sooner rather than later. There is no exact time frame and no “offical” announcement has been made on the timing, but market participants are betting that it is sometime around September. Since the Fed is the single largest purchaser of MBS, having even a small decrease in their monthly bond purchase would pressure mortgage rates.

What to Watch Out For This Week:

The following 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 on.

May 13th, 2013 - Fannie Mae Profit Points to Growing Housing Market

Remember Fannie Mae?  They and Freddie Mac were both placed into receivership because they were loosing so much money but had to remain open because if they shut down there would be no mechanism to make and securitize mortgages to the vast majority of Americans.

Well, Fannie Mae is baaaaaack, posting it largest profit ever.  Yes that’s right, they posted a bigger profit than even at the height of the housing boom. Mortgage giant Fannie Mae has now been turning a profit for more than a year. In fact, it has turned record a profit: $8.1 billion in its latest quarter.

With Fannie Mae and its smaller cohort, Freddie Mac, turning so much profit, the push to dismantle them becomes far more complicated. Unlike several years ago, they are now making the government money at the same time that the feds considered  winding them down.

The chief beneficiary of Fannie’s newly discovered riches is none other than the federal government—the same entity that bailed it out at the height of the financial panic nearly five years ago. Fannie Mae will pay the Treasury $59 billion by the end of this quarter, bringing its total tally of dividend payments to $95 billion—close to the $117 billion it originally drew.

Now that Fannie and Freddie are on solid footing again, they can begin to loosen up underwriting standards.  But this time it will be small and responsible adjustments.  Still, relaxing the guidelines even just a little could open the door for many potential new homebuyers that have been kept of out of the market.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -89 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move upward for the second straight week. We had our highest mortgage rates on Friday and our lowest rates on Thursday morning.

We traded in a very thin range for the majority of the week as MBS were trapped in a narrow trading channel that saw very small daily movements (+1 to -7BPS) from Monday through Thursday.  There were very few economic releases.  The biggest report to hit the wires was Thursday’s weekly Initial Jobless Claims which were lighter than expected.  This was good news for the economy and pressured bonds slightly.  We had a 10 year Treasury auction which saw a pull back in demand but it really didn’t impact MBS pricing by the end of the day.

MBS really sold off on Friday, in the absence of any economic data.  When MBS sell off, mortgage rates rise.

Why did they sell off?  There were several reasons but lets focus on the two largest factors:  First, the Treasury Secretary stated that we would not hit our debt ceiling again until later than the market had projected.  Remember, MBS are trading higher than normal (better rates for you) due to fear and uncertainty about our debt.  The fact that our deficit is doing better than expected is a negative for our bonds because it means that Congress will put off solving our larger issues longer.

Secondly, the Yen has absolutely tanked and that has made investment in other foreign markets more attractive than in the U.S.

What to Watch Out For This Week:

The following 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.

April 29th, 2013 - Housing Starts Top 1 million for first time in 5 years-Continued

U.S. home builders broke the 1 million mark in March for the first time since June 2008. The gain signals continued strength for the housing recovery at the start of the spring buying season.As we have been reporting for over a year, home prices are rising.  That is the good news.  The bad news is that wages are not.

The overall pace of homes started rose 7 percent from February to March to a seasonally adjusted annual rate of 1.04 million, the Commerce Department said Tuesday.

Apartment construction, which tends to fluctuate sharply from month to month, led the surge: It jumped nearly 31 percent to an annual rate of 417,000, the fastest pace since January 2006.

A scarcity in ready-to-build land has many builders working to get local governments to approve new land for construction, he said. The process can take 12 to 18 months. A survey of homebuilders released Monday noted similar concerns.

The jump in home building is expected to contribute to economic growth in 2013 for a second straight year — a reversal from 2006 through 2011, when it held back the economy. Steady job growth, near record-low mortgage rates and rising home values have encouraged more people to buy homes. In response to higher demand and a low supply of available homes for sale, builders have stepped up construction.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained+39 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move sideways. We had our highest mortgage rates on Thursday and our lowest rates on Friday morning.

MBS were trapped in a very narrow trading channel for the past nine trading sessions which caused pricing to move sideways.  But that certainly changed on Friday with the release of the GDP data.  The first release (it will be revised two more times) of the first quarter GDP missed the mark and came in much weaker than expected (2.5% vs 3.0%).

Historically speaking, a national growth rate of 2.5% is very desirable.  It shows growth without any major inflationary pressure.  The market expectations for growth of 3.0% would have been inflationary and bonds hate inflation, so when this number came in lower than expected – bonds rallied as a result.

What to Watch Out For This Week:

The following 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.

April 23rd, 2013 - Housing Starts Top 1 million for first time in 5 years

U.S. homebuilders broke the 1 million mark in March for the first time since June 2008. The gain signals continued strength for the housing recovery at the start of the spring buying season.As we have been reporting for over a year, home prices are rising.  That is the good news.  The bad news is that wages are not.

The overall pace of homes started rose 7 percent from February to March to a seasonally adjusted annual rate of 1.04 million, the Commerce Department said Tuesday. Apartment construction, which tends to fluctuate sharply from month to month, led the surge: It jumped nearly 31 percent to an annual rate of 417,000, the fastest pace since January 2006.

A scarcity in ready-to-build land has many builders working to get local governments to approve new land for construction, he said. The process can take 12 to 18 months. A survey of homebuilders released Monday noted similar concerns.

The jump in home building is expected to contribute to economic growth in 2013 for a second straight year — a reversal from 2006 through 2011, when it held back the economy. Steady job growth, near record-low mortgage rates and rising home values have encouraged more people to buy homes. In response to higher demand and a low supply of available homes for sale, builders have stepped up construction.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) gained+5 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move sideways. We had our highest mortgage rates on Friday and our lowest rates on Monday morning.

MBS were trapped in a very narrow trading channel which caused pricing to move sideways. The majority of the economic data was generally favorable for MBS pricing and therefore rates.  Both the Empire Manufacturing index and the Philly Fed showed much weaker than expected regional manufacturing levels.  The Consumer Price Index was very tame which showed a reduced threat of inflation in the near term and Initial Jobless Claims ticked up.  All of these reports were favorable for bonds and therefore rates too.

But the rally with MBS prices was slowed due to a much better than expected Housing Starts and comments by a member of the Federal Reserve that he favored ending QE3 earlier than the rest of the board.

What to Watch Out For This Week:

The following 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.

April 15th, 2013 - Homes Appreciating Faster than Wages

As we have been reporting for over a year, home prices are rising.  That is the good news.  The bad news is that wages are not. While historically low mortgage rates are translating into big savings for homeowners, those same low monthly payments are masking a troubling trend. While home values have been on the rise for the past year — in some areas appreciating by 15 percent or more annually — median wages haven’t kept pace. As a result, home price-to-income ratios in many areas are climbing.

By looking at two metrics — an affordability index and a price-to-income ratio — Zillow researchers have determined that low mortgage rates that make homes appear incredibly affordable are overshadowing a bigger overall trend in which the overall prices of homes are actually significantly more expensive than historic norms relative to annual incomes.

Homeowners in 24 of the 30 largest metros covered by Zillow were paying more for homes in the fourth quarter of 2012 relative to their region’s median income than they were from 1985 through 1999. Metros with the largest difference between their pre-bubble and fourth quarter 2012 price-to-income ratios included San Jose (52.1 percent more),Los Angeles (48.8 percent more), Portland, (45.4 percent more), San Diego (44.6 percent more) and Denver (40.8 percent more).

What Happened To Rates Last Week?

Mortgage backed securities (MBS) lost -24 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move higher. We had our highest mortgage rates on Wednesday and our lowest rates on Monday morning.

MBS sold off -86 basis points from Monday through Wednesday which drove mortgage rates upward.  Much of the reason for this was the early release of the FOMC Minutes which showed that a few of the members were in favor of considering a pull-back in the monthly bond purchases by the Fed earlier than expected.  One of the primary reason for our ultra-low mortgage rates is the artificial demand that is created by the Federal Reserve purchasing $85 billion in Treasuries and mortgage backed securities each and every month.  So, a decrease in the amount of monthly purchases would certainly negatively impact rates.

MBS rebounded on some very tame inflationary data as Import Prices and the Producer Price Index were both very tame.  Then, MBS rallied on Friday on the much weaker than expected Retail Sales and Consumer Sentiment Index which helped mortgage rates move lower from their highs earlier in the week.

What To Watch Out For This Week:

The following 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.