After some big labor market reports were released on July 2 and the fireworks of July 4, last week was relatively quiet on the economic report front.
Weekly initial jobless claims were once again released on Thursday, and though they beat expectations, they remain in the millions. Another 1.314 million people filed for unemployment benefits for the first time during the week ending July 4. A positive sign in the report is that continuing claims, which measure people continuing to receive benefits, did improve pretty significantly after being persistent for many weeks.
CoreLogic also released home appreciation figures for May, showing that prices rose 0.7% from April to May and 4.8% when compared to May of last year. However, CoreLogic has revised their annual forecast for the year moving forward, as detailed below.
Lastly, inflation continues to remain tame. At the wholesale level, the Producer Price Index was down 0.2% in June after rebounding in May, coming in much lower than expectations. The lack of wholesale inflation will certainly not lead to consumer inflation – and it’s one of the reasons Mortgage Bonds have moved higher and home loan rates have moved lower of late.
Initial Jobless Claims Beat Expectations
The latest weekly initial jobless claims showed that another 1.314 million people filed for unemployment benefits for the first time during the week ending July 4. This was slightly better than expectations of 1.4 million claims. California (+267K), Texas (+117K) and Georgia (+103K) reported the largest gains.
Continuing claims finally saw a big improvement, falling from 18.76 million to 18.06 million, which is the first meaningful improvement we have seen since in quite some time.
If we factor in the amount of new and continuing claims and the number of people in the labor force, we estimate that the real-time unemployment rate is around 14%. This rate would be about 3% higher, or 17%, without the estimated number of temporary new jobs created by the Paycheck Protection Program.
The Latest Home Appreciation Forecasts
CoreLogic’s Home Price Index Appreciation report for May showed that home prices rose 0.7% from April to May. Home prices were also up 4.8% when compared to May of last year. This is a decline from the year-over-year reading of 5.4% appreciation in April’s report. Washington (5.0%), San Diego (4.9%) and Las Vegas (4.8%) led the gains.
CoreLogic forecasts that home prices will drop 0.1% from May to June, and they expect prices to fall 6.6% from May 2020 to May 2021. Their annual forecast dropped significantly from their previous prediction of a 1.3% decline.
Dr. Frank Nothaft, Chief Economist for CoreLogic, said, “Pending sales and home-purchase loan applications are higher than in June of last year and reflect the buying activity of millennials. By the end of summer, buying will slacken and we expect home prices will show declines in metro areas that have been especially hard hit by the recession.”
CoreLogic also noted that a lot of the demand was pent up from spring to summer with elevated unemployment, and that purchase activity and home prices could fall off once summer ends.
It remains to be seen if this latest forecast will prove true, or if the surge in sales and appreciation levels off less steeply, which could still allow for home price gains over the next year.
Wholesale Inflation Lower Than Expected
The Producer Price Index, which measures inflation on the wholesale level, was down 0.2% in June after rebounding in May. The reading was much lower than expectations of a 0.4% rise. PPI also declined 0.8% on an annual basis, which was unchanged from May’s annual reading.
The core rate, which strips out volatile food and energy prices, was down 0.3% from May to June, which was also much lower than expectations of a 0.2% gain. Year over year, core PPI was up 0.1%.
The bottom line is that the ongoing pandemic continues to depress demand. There is no wholesale inflation, which will certainly not result in consumer inflation. This is one of the reasons we have seen Mortgage Bonds on such a nice move higher.
Remember, inflation reduces the value of fixed investments like Mortgage Bonds. And since home loan rates are tied to Mortgage Bonds, when Bonds improve, home loan rates can as well.
Family Hack of the Week
July is National Ice Cream month. Making homemade ice cream is an activity that’s fun for the whole family, and it’s easy to do even if you don’t have an ice cream maker. Just follow these simple steps from our friends at Taste of Home.
First, freeze any freezer-safe shallow pan or bowl. A 13×9 inch Pyrex pan or stainless steel pan are great options. Then mix 2 cups heavy whipping cream, 2 cups half-and-half, 1 cup sugar and 2 teaspoons of pure vanilla extract, making sure the sugar is well dissolved.
Next, add your mixture to the cold pan and freeze it for about 20 to 30 minutes. Once the edges start to freeze, take out the mixture and beat it using a hand mixer to keep the ice cream smooth. Repeat this process several times until the ice cream is firmly frozen.
For an added bonus, mix in chocolate chips, candy chunks or drizzles of melted chocolate before freezing the ice cream. Or have a family sundae night and serve with everyone’s favorite toppings.
What to Look for This Week
There’s a full slate of economic reports ahead this week across a wide range of sectors. Tuesday brings the National Federation of Independent Business Small Business Optimism Index for June and more inflation news, this time on the consumer front with June’s Consumer Price Index.
There will be an update from the manufacturing sector with July’s Empire State Index (which focuses on the New York region) on Wednesday, followed by July’s Philadelphia Fed Index on Thursday.
Thursday also brings the latest weekly jobless claims numbers, an update on Retail Sales for June and the National Association of Home Builders Housing Market Index for July, which will give us a real-time read on builder confidence.
More housing news ends the week on Friday, with June’s Housing Starts and Building Permits report. Plus, we’ll get the latest read on how consumers are feeling with July’s Consumer Sentiment Index.
The Fed continues to stabilize the markets with its ongoing purchases of Mortgage Backed Securities. Mortgage Bonds rallied more than 70bp since July 1st, but are now backing off a strong ceiling of resistance at 104.625.
After sitting out 2010 with two knee surgeries, both on the same knee, I had my “coming out party” on Saturday, November 19, 2011 at the 29th El Tour de Tucson – one of the largest one day cycling events in the US. People come from all over the world to enjoy a fabulous day of riding in sunny Tucson, Arizona. Attendence at this years’ event was the 2nd largest in it’s history!
My goal was simple – finish the 42 mile race without a crash (with the “rubber side down”) and feeling good. The fact is that I felt so good I pushed it to a 40th place finish among the 1,000 or so starters! Talk about surprised – you know I was!!! 🙂
My personal thanks go to Richard DeBernardis the founder and race promoter of the PBAA events which includes El Tour de Tucson. Richard does so much for the Tucson community and without him Tucson would not be the cycling community it has become. Also a big thanks to all the volunteers, police and to all the drivers in Tucson that put up with the traffic & intersection wait times to let us ride. Nice to see the community come together for this fabulous event!
What’s Ahead For Mortgage Rates This Week : December 6, 2010
Only Friday’s Non-Farm Payrolls report kept mortgage rates from really soaring.
According to the government, 39,000 net new jobs were created in November, and September’s and October’s data was revised higher by a combined 38,000. The sum of these figures fell well short of Wall Street expectations — investors has expected 146,000 net new jobs in November.
As a result, mortgage rates made their largest, intra-day improvement of the year Friday morning, although they slid higher through the afternoon. Rates fell 1/8 percent Friday as compared to Thursday and rate shoppers may see that momentum carry forward into this week.
Fed Chairman Ben Bernanke gave a televised interview Sunday evening in which he said, among other things:
“The fear of inflation is way overstated.”
Additional bond market support is “certainly possible”.
Both comments should help to allay inflation concerns, and may lead mortgage rates lower this week. If you’re floating a mortgage rate, keep a watchful eye on markets and be especially wary if mortgage rates start to rise again. November was rough on mortgage bonds.
If December follows suit, expect mortgage rates to approach 6 percent.
Call Todd Abelson and Tyler Ford at Sunstreet Mortgage (520)-331-LEND for all your mortgage needs!
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We have all lived through MANY changes in 2009, not all good. However, we are at a critical point in the real estate and credit markets where it is the best time we may EVER see in which to buy a home or refinance an existing loan. Why? Rates are within ¼% of all-time lows, inventory is high, and the Federal Government is offering HUGE tax credits to first-time and move-up buyers.
BUT THIS IS ABOUT TO CHANGE AND YOU REALLY NEED TO BE AWARE!
FACT – the sole reason mortgage rates have remained low is because the Government committed to buying $1.25 TRILLION in “Mortgage Backed Securities” from Fannie Mae and Freddie Mac. This Program officially ends March 31, 2010. I guarantee you rates will increase swiftly and dramatically at that time. I expect rates to be about 6% by springtime and about 6.5% by autumn – up from the “4.somethings” we’re seeing now.
FACT – to qualify for the Federal Tax Credit of up to $8,000 for first-time homebuyers and up to $6,500 for move-up homebuyers you MUST have a formal contract in Escrow before May 1st. Given the activity I saw last November (before the extension) there was a noticeable run-up in prices and reduction in Seller concessions.
FACT – credit guidelines for Conventional, FHA & VA loans continue to tighten, while costs to obtain these loans increase. Effective April 5th, FHA is increasing the cost of their Up-Front Mortgage Insurance by ½% so, for example, the cost to purchase or refinance a $150,000 loan will cost you $750 more! And they’re not done; effective “early summer” FHA is increasing the cost of the Monthly Mortgage Insurance (amount unknown).
There is no other way to get across the TRUE message out other than for me to say:
If you are considering buying a home, I STRONGLY SUGGEST that you get in contract and lock in your rate in the next 45 days.
If you are considering refinancing your mortgage, I STRONGLY SUGGEST you proceed NOW! Rates are drifting higher and will continue until March 31.
If you or someone you know is considering purchasing a home or refinancing their existing mortgage please pass along this information. I cherish your trust and appreciate the opportunity to be of service to you, your family, friends and co-workers!
Call Todd Abelson and Tyler Ford at Sunstreet Mortgage in Tucson, Arizona for all your Mortgage Needs!
Attached is an interesting article I found while researching something today. Evidently the credit score models DO included authorized user accounts again – they stopped for a while but then went back to the old rules… QUIETLY!
However, Underwriters are being required to either downgrade the loan to a “manual underwrite” OR ask for the borrower to be removed from those accounts as an authorized user and the reports to be rescored.
It’s official! FHA is increasing the up-front mortgage insurance premium to shore up it’s finances. Beginning with case numbers assigned on Apri 5th, 2010 the fee increases from 1.75% to 2.25%. Almost as importantly, the fee for Streamline refinances increases from 1.50% to 2.25%. This makes the FHA loan 1/2 point more expensive than before.
As I’ve said before, FHA is balancing their shortfalls from yesterday’s defaults with tomorrow’s borrower.
The Monthly Mortgage Insurance factors will be increasing “this summer” but nothing official released yet. The remain the same for the time being…
In an attempt to recoup past losses, reduce the potential for future losses and sure up FHA’s sagging reserves a staggering series of changes will be implemented “soon”. Click here for article
First, and most immediate, the Up-Front MIP for all FHA loans will be increased from 1.75% to 2.25%. The start date for this increase will be announced today but Ianticipate it will begin with case numbers assigned starting February 1st. Following this in “the spring” will be an increase in the monthly MI fee as well.
Second, down payment requirements will be increase for 3 1/2% to 10% for “low FICO score borrowers” (under 580). This change is expected to be implemented “early summer”.
Third, the level of allowable “Seller Concessions” will be cut in half from 6% to 3%; this also will be implemented “early summer”.
Fourth, increased monitoring and enforcement on FHA lenders effective immediately.
These changes are H-U-G-E and will affect the entire market. While just loosening the anti-flipping rules 48 hours ago, this changes tighten – good for taxpayers, bad for sellers, buyers and the real estate markets.
For these and other breaking stories, stay in touch and call Todd Abelson and Tyler Ford at Sunstreet Mortgage in Tucson Arizona.
Effective February 1, 2010 FHA is eliminating a rule that they FINALLY agree has been negatively affecting the Real Estate market given it’s current condition. Previously, a property was not eligible for FHA financing if it was being sold within 90-days of the last sale UNLESS it was a bona fide foreclosure from an institutional lender or non-profit agency (other limitations applied). The goal was to eliminate predatory “flipping” which did little more than jack up the price of housing.
However, there are MANY investors taking advantage of the current market by buying substandard homes acquired through foreclosure, then performing “floor to roof” remodels and selling to occupant buyers. Such ventures clearly helped homebuyers BUT these investors were prohibited from reselling for at least 91 days.
In the current ruling (click here for full excerpt), the 90-day seasoning requirement is being waived with the following new conditions:
All transactions must be arms length (no relationship between seller and buyer).
No “identity of interest” deals allowed (no parents-to-kids)
If the sales price is 20% or more over the last sales price the lender must either: a) provide supporting documentation and/or a 2nd appraisal, and b) order an independant inspection on the property and include it with the loan file.
We await the official FHA Mortgagee Letter, but this is clearly great news guaranteed to help both Buyers and Investors!
Call Todd Abelson and Tyler Ford at Sunstreet Mortgage in Tucson Arizona for all your Mortgage needs!