Tucson Mortgages Home Loan News 10-7-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of September 30, 2019
  • Economic Calendar – week of October 7, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes ended mostly lower but “mixed” for the week with the technology-laden NASDAQ Composite Index bucking the trend to record a modest gain.  Meanwhile, longer-date bonds and Treasuries saw their yields decline as the latest economic data pointed toward a slowdown in global economic activity.

Domestic economic data included the ISM Manufacturing Index, the ISM Non-Manufacturing Index, and the Employment Situation Report for September.  The ISM Manufacturing Index suffered its worst reading since June 2009 with a decline to 47.8% from 49.1% in August.  Economists had been expecting a reading of 50.2%.  Readings below 50% indicate economic contraction.  The ISM Non-Manufacturing Index (Service Sector) for September dropped to 52.6% from 56.4% in August with consensus expectations of 55.4%.  The September Employment Situation Report revealed  nonfarm payrolls increased by 136,000 versus a consensus estimate of 150,000.  However, there were healthy upward revisions in the August and July payrolls numbers.  The unemployment rate fell to 3.5%, which is the lowest since December 1969, but average hourly earnings came up flat when expectations called for a +0.3% increase.

This coming week a resumption of U.S. trade talks with China is scheduled to take place on October 10 and 11 with China’s chief trade negotiator, Vice Premier Liu He, leading the Chinese delegation.  These talks are taking place just ahead of U.S. preparations to hike tariffs on $250 billion in Chinese goods to 30% on October 15.  Speaking of tariffs, the World Trade Organization (WTO) ruled the U.S. can place tariffs on $7.5 billion of European Union (EU) imports in retaliation for government aid from certain EU countries to Boeing rival Airbus.  It was announced the U.S. will be placing 25% tariffs on a range of products imported from the EU, including cheese, olives, wine, single-malt whiskeys, and civil aircraft.  This is the largest award in WTO history, and U.S. officials have said the tariffs should be in place by October 18.  You might want to stock up on these EU products if in the market for them before the tariffs hit.

In housing news CoreLogic released its Home Price Index (HPI) and HPI Forecast for August 2019, showing home prices increased both year-over-year and month-over-month.  Home prices increased nationally by 3.6% from August 2018.  On a month-over-month basis, prices increased by 0.4% in August 2019.

 

Home prices continue to increase on an annual basis with the CoreLogic HPI Forecast projecting annual price growth will increase 5.8% by August 2020.  On a month-over-month basis, the forecast calls for home prices to increase by 0.3% from August 2019 to September 2019.

Dr. Frank Nothaft, chief economist at CoreLogic, remarked “The 3.6% increase in annual home price growth this August marked a big slowdown from a year earlier when the U.S. index was up 5.5%.  While the slowdown in appreciation occurred across the country at all price points, it was most pronounced at the lower end of the market.  Prices for the lowest-priced homes increased by 5.5%, compared with August 2018, when prices increased by 8.4%. This moderation in home-price growth should be welcome news to entry-level buyers.”

Frank Martell, CoreLogic president and CEO, added “The millennial cohort has now entered the housing market in force and is already driving major changes in buying and selling patterns.  Almost half of the millennials over 30 years old have bought a house in the last three years.  These folks are increasingly looking to move out of urban centers in favor of the suburbs, which offer more privacy and a greener environment.  Perhaps most significantly, almost 80% of all millennials are confident they will become homeowners in the future.”

Elsewhere, the latest mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications decreased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) increased 8.1% for the week ended September 27, 2019.  The seasonally adjusted Purchase Index increased 1% from a week prior while the Refinance Index increased 14%.  Overall, the refinance portion of mortgage activity increased to 58.0% from 54.9% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 5.5% from 5.1% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 3.99% from 4.02% with points unchanged at 0.38 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the UMBS 3.0% coupon bond finished 53.10 basis points higher to close at $101.922 while the 10-year Treasury yield decreased 15.80 basis points to end at 1.529%.  The Dow Jones Industrial Average declined 246.53 points to close at 26,573.72.  The NASDAQ Composite Index gained 42.84 points to close at 7,982.47.  The S&P 500 Index fell 9.78 points to close at 2,952.01.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 13.92%, the NASDAQ Composite Index has gained 20.30%, and the S&P 500 Index has advanced 17.76%.

This past week, the national average 30-year mortgage decreased to 3.62% from 3.75%; the 15-year mortgage rate decreased to 3.25% from 3.39%; the 5/1 ARM mortgage rate decreased to 3.36% from 3.40%; and the FHA 30-year rate decreased to 3.25% from 3.44%.  Jumbo 30-year rates decreased to 3.64% from 3.75%.

Economic Calendar – for the Week of October 7, 2019

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – UMBS 30-Year 3.0% Coupon Bond

The UMBS 30-year 3.0% coupon bond ($101.922; +53.10bp) traded within a wider71.9 basis point range between a weekly intraday low of $101.281 on Tuesday and a weekly intraday high of 102.00 on Friday before closing the week at $101.922 on Friday.

Mortgage bonds stair-stepped their way higher throughout the week to move above nearest technical resistance levels.  The move higher coincided with investors taking profits in stocks and moving into less risky bond investments.  As a result, the bond is about to enter “overbought” territory while butting up against technical resistance located at the 23.6% Fibonacci retracement level ($101.904).  If the bond can manage to continue higher toward secondary resistance located at the September 4 intraday high price ($102.25), we should see a slight improvement in mortgage rates.  However, a failure at resistance would likely result in a move back toward support at the 25-day moving average ($101.445) along with a slight worsening in rates.

 

Tucson Mortgages Home Loan News 9-30-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of September 23, 2019
  • Economic Calendar – week of September 30, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes recorded moderate losses while the bond and U.S. Treasuries markets notched minimal gains and slightly lower yields as investors wrestled with political and China trade uncertainty.  The stock market would have had a relatively “flat” trading week if it were not for two events, one political and one trade-related.  First, House Speaker Nancy Pelosi officially announced the launch of what appears to be a rather unconvincing impeachment inquiry on President Trump last Tuesday.  Wall Street investors reacted in “knee-jerk” fashion, but they are more concerned about the uncertainty and impact the political drama might have on trade negotiations with China.  One concern is impeachment pressure might encourage the White House to strike a weaker trade deal with China before the November 2020 election.

The second event occurred Friday when Bloomberg reported a possible “leak” that the White House was considering restricting U.S. investment in China and forcing U.S. stock exchanges to delist the shares (in the form of American Depositary Receipts) of Chinese companies.  This rumored “news” may be a negotiating ploy engineered by the White House to get China to more readily strike a trade deal.  However, this news could also complicate trade talks set to resume on October 7 through October 11.

In housing news, the S&P CoreLogic Case-Shiller U.S. National Home Price Index was released last Tuesday showing home prices rose 3.2% annually in July, unchanged from the gain reported in June.  The 10-City Composite Index increased 1.6% annually, down from 1.9% reported in June. The 20-City Composite Index recorded a 2% annual gain, down from 2.2% in June.

The hottest cities for home price appreciation were Phoenix, Las Vegas and Charlotte, North Carolina.  Home prices in Phoenix increased 5.8% year-over-year.  In Las Vegas, home prices were up 4.7%, and they were 4.6% higher in Charlotte.  Seven of the 20 cities reported greater price increases in the year ending July 2019 versus the year ending June 2019.

Overall, home price gains are strongest in the Southwest (Phoenix and Las Vegas) and the Southeast (Charlotte and Tampa).  Elsewhere, other cities recorded solid gains including Minneapolis, up 4.2% annually, and Detroit, up 4.1%.  Seattle was the only city to show an annual price decline, down 0.6%.

Meanwhile, U.S. house prices rose in July, up 0.4 percent from the previous month, according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI).  House prices rose 5.0 percent from July 2018 to July 2019.  The previously reported 0.2 percent increase for June 2019 remains unchanged.

For the nine census divisions, seasonally adjusted monthly house price changes from June 2019 to July 2019 ranged from +0.1 percent in the Middle Atlantic division to +1.2 percent in the Mountain division.

The 12-month changes were all positive, ranging from +3.6 percent in the Middle Atlantic division to +7.6 percent in the Mountain division.

Wednesday, the Commerce Department reported New Home Sales increased 7.1% to a seasonally adjusted annual rate of 713,000 units last month, boosted by a surge in activity in the South and West.  July’s sales pace was revised up to 666,000 units from the previously reported 635,000 units.  The consensus among economists had forecast New Home Sales increasing 3.5% to a rate of 660,000 units in August.

New home sales surged 7.1% month-over-month to a seasonally adjusted annual rate of 713,000 units from an upwardly revised 666,000 in July.

August trailed only June as the highest-paced sales month since October 2007.  Regionally, sales were down 5.9% in the Northeast; down 3.0% in the Midwest; up 6.0% in the South; and were up 16.5% in the West.  The median sales price increased 2.2% year-over-year to $328,400.  The average sales price increased 6.1% to $404,200. Based on the August sales rate, the inventory of new homes for sale stands at a 5.5-months’ supply versus 5.9 months in July.

Thursday, the National Association of Realtors (NAR) announced their Pending Home Sales Index increased more than expected in August by increasing 1.6% to 107.3, a 2.5% year-over-year increase.

Regionally, Pending Home Sales were led by the West Region with a monthly increase of 3.1% and an annual increase of 8.0%.

The Northeast increased 1.4% monthly and 0.7% higher than a year ago. The Midwest saw sales increase 0.6% monthly and 0.2% higher annually.  Sales in the South increased 1.4% monthly and 1.8% annually.

NAR’s chief economist Lawrence Yun remarked “It is very encouraging that buyers are responding to exceptionally low interest rates.  The notable sales slump in the West region over recent years appears to be over.  Rising demand will reaccelerate home price appreciation in the absence of more supply.  The NAR is forecasting home sales to increase 0.6% in 2019 and another 3.4% in 2020.  Housing starts are projected to increase by 2.0% in 2019 and soar an additional 10.6% in 2020, which in turn raises GDP to growth at 2.0% in 2020.

Elsewhere, the latest mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications decreased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) declined 10.1% for the week ended September 20, 2019.  The seasonally adjusted Purchase Index decreased 3% from a week prior while the Refinance Index decreased 15%.  Overall, the refinance portion of mortgage activity decreased to 54.9% from 57.9% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 5.1% from 5.0% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.02% from 4.01% with points decreasing to 0.26 from 0.29 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the UMBS 3.0% coupon bond finished 4.70 basis points higher to close at $101.391 while the 10-year Treasury yield decreased 3.40 basis points to end at 1.687%.  The Dow Jones Industrial Average declined 114.82 points to close at 26,820.25.  The NASDAQ Composite Index dropped 178.04 points to close at 7,939.63.  The S&P 500 Index fell 30.28 points to close at 2,961.79.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 14.97%, the NASDAQ Composite Index has gained 19.66%, and the S&P 500 Index has advanced 18.15%.

This past week, the national average 30-year mortgage decreased to 3.75% from 3.79%; the 15-year mortgage rate decreased to 3.39% from 3.45%; the 5/1 ARM mortgage rate decreased to 3.40% from 3.43%; and the FHA 30-year rate increased to 3.44% from 3.42%.  Jumbo 30-year rates decreased to 3.75% from 3.81%.

Economic Calendar – for the Week of September 30, 2019

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – UMBS 30-Year 3.0% Coupon Bond

The UMBS 30-year 3.0% coupon bond ($101.391; +4.70 bp) traded within a narrower 48.4 basis point range between a weekly intraday high of $101.578 on Tuesday and a weekly intraday low of 101.094 on Wednesday before closing the week at $101.391 on Friday.

Mortgage bonds moved slightly higher to challenge technical resistance every day last week except Thursday and were unable to make a break above to gain additional upward momentum.  The bond is now trading on a sell signal, but is neither “overbought” nor “oversold.”  The bond appears to be “marking time” ahead of any breaking significant political, geopolitical, or economic news that may surface this coming week– whether it is impeachment rhetoric, Middle East troubles, China trade rumors or Friday’s September Employment Situation Report.

Regardless of the news, if the bond fails to break above the band of resistance highlighted in the chart below, we could see a subsequent move toward support at the 100-day moving average ($100.755).  Should this occur mortgage rates would edge slightly higher.  However, a break above resistance would lead to an improvement in rates.  At the moment though, the path of least resistance is a move toward support unless a catalyst appears to push investors toward risk-off, safer-haven investments such as bonds and Treasuries.

 

Tucson Mortgages Home Loan News 9-23-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of September 16, 2019
  • Economic Calendar – week of September 23, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes experienced modest declines while the bond and U.S. Treasuries markets enjoyed price gains and lower yields as some investors moved into perceived safe-haven assets in response to an increase in geopolitical risk in the Middle East.

Geopolitical risk in the Middle East spiked following the Saturday, September 14 missile and drone attack on major oil facilities in Saudi Arabia by Iran that temporarily halted about 5% of global oil production.  The attack sparked a 13% price increase in West Texas Intermediate crude oil last Monday, the largest increase since 2016.  Oil prices remained volatile finishing the week 5.9% higher.  Although the overall broad stock market did not react strongly to the attack, stocks in the transportation industry, including airlines, trucking companies, railroads, and other companies sensitive to commodity price swings, suffered the greatest losses.  The Dow Jones Transportation Average finished the week over 3% lower.

The week’s economic news took a back seat to Wednesday’s September FOMC Statement from the Federal Reserve.  The Fed decided on a 25 basis point fed funds rate cut (as widely expected) and lowered the interest on excess reserves (IOER) by 30 basis points to 1.80% in an attempt to encourage more lending in the overnight market by large banks and financial institutions.  The FOMC voted 7-3 in favor of Wednesday’s decision, with Boston Fed President, Eric Rosengren, and Kansas City Fed President, Esther George, voting in favor of keeping the fed funds rate range unchanged while St. Louis Fed President, James Bullard, voted for a 50 basis point cut.  The Fed’s dot plot showed seven out of 17 Fed officials expect another rate cut will be made in 2019, but the median projection does not point to any more rate cuts in 2019 or 2020.

In housing news, the National Association of Home Builders (NAHB) released their latest Housing Market Index (HMI) measuring builder sentiment on the relative level of current and future single-family home sales.  For this diffusion index, a reading above 50 indicates a favorable outlook on home sales while a reading below 50 indicates a negative outlook.  Builder confidence in the market for newly-built single-family homes rose one point to 68 in September from an upwardly revised August reading of 67 to match the highest level since last October.

The HMI sub-index measuring current sales conditions increased two points to 75 and the component measuring traffic of prospective buyers held steady at 50.  The measure charting sales expectations in the next six months fell one point to 70. Looking at the three-month moving averages for regional HMI scores, the Northeast posted a two-point gain to 59, the West was also up two points to 75 and the South moved one point higher to 70.  The Midwest was unchanged at 57.

NAHB Chairman Greg Ugalde remarked “Low interest rates and solid demand continue to fuel builders’ sentiments even as they continue to grapple with ongoing supply-side challenges that hinder housing affordability, including a shortage of lots and labor.”

Last Wednesday, the Commerce Department reported a strong 12.3% month-over-month increase in total Housing Starts during August to a seasonally adjusted annual rate of 1.364 million units.  This exceeded the consensus forecast of 1.255 million units.  Also, total Building Permits jumped 7.7% to 1.419 million exceeding consensus expectations of 1.300 million.

Single-family Housing Starts increased 4.4% month-over-month and were 3.4% higher year-over-year.  Regionally, single-family Starts were 1.7% lower month-over-month in the Northeast; 8.7% higher in the Midwest; 3.6% higher in the South; and 5.3% higher in the West.

Single-family Permits increased 4.5% month-over-month and were up 4.5% year-over-year. Regionally, August single-family Permits were unchanged in the Northeast; 2.8% higher in the Midwest; 7.4% higher in the South; and unchanged in the West.

Thursday, the National Association of Realtors (NAR) announced Existing Home Sales edged 1.3% higher month-over-month in August to a seasonally-adjusted annual rate of 5.49 million.  This exceeded the consensus estimate of 5.36 million, and was higher than the 5.42 million reported for July.  Total sales were 2.6% higher than the year ago time period and at their strongest level since March 2018.

The median existing home price for all housing types increased 4.7% year-over-year to $278,200.  The median existing single-family home price was $280,700, up 4.7% year-over-year.

Regionally, Existing Home Sales were 7.6% higher in the Northeast; 3.1% higher in the Midwest; 0.9% higher in the South; and 3.4% lower in the West.  Median home prices were 0.3% lower in the Northeast ($303,500); 6.6% higher in the Midwest ($220,000); 5.4% higher in the South ($240,300); and 5.7% higher in the West ($415,900).

Single-family home sales increased 1.2% month-over-month to a seasonally adjusted annual rate of 4.90 million, and were up 2.9% year-over-year.  The inventory of homes for sale at the end of August fell to 1.86 million from 1.90 million in July, down 2.6% from a year ago.  Unsold inventory stood at 4.1-month supply at the current sales rate, down from 4.2 months in July.

The NAR’s chief economist, Lawrence Yun, commented “As expected, buyers are finding it hard to resist the current rates.  The desire to take advantage of these promising conditions is leading more buyers to the market.  Sales are up, but inventory numbers remain low and are thereby pushing up home prices.  Homebuilders need to ramp up new housing, as the failure to increase construction will put home prices in danger of increasing at a faster pace than income.”

Elsewhere, the latest mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications decreased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) declined 0.1% for the week ended September 13, 2019.  The seasonally adjusted Purchase Index increased 6% from a week prior while the Refinance Index decreased 4%.  Overall, the refinance portion of mortgage activity decreased to 57.9% from 60.0% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 5.0% from 5.6% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.01% from 3.84% with points decreasing to 0.29 from 0.34 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the UMBS 3.0% coupon bond finished 78.1 basis points higher to close at $101.344 while the 10-year Treasury yield decreased 18.0 basis points to end at 1.721%.  The Dow Jones Industrial Average declined 284.45 points to close at 26,935.07.  The NASDAQ Composite Index dropped 59.04 points to close at 8,117.67.  The S&P 500 Index fell 15.32 points to close at 2,992.07.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 15.47%, the NASDAQ Composite Index has gained 22.34%, and the S&P 500 Index has advanced 19.36%.

This past week, the national average 30-year mortgage decreased to 3.79% from 3.85%; the 15-year mortgage rate decreased to 3.45% from 3.52%; the 5/1 ARM mortgage rate decreased to 3.43% from 3.54%; and the FHA 30-year rate decreased to 3.42% from 3.50%.  Jumbo 30-year rates decreased to 3.81% from 3.89%.

Economic Calendar – for the Week of September 23, 2019

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – UMBS 30-Year 3.0% Coupon Bond

The UMBS 30-year 3.0% coupon bond ($101.344; +78.10 bp) traded within a narrower 62.5 basis point range between a weekly intraday high of $101.344 on Friday and a weekly intraday low of 100.719 on Monday before closing the week at $101.344 on Friday.

Mortgage bonds moved steadily higher during the week following a buy signal last Monday, bouncing higher from a deeply “oversold” position.  Friday, the bond closed above the 50-day moving average ($101.279) and remains far from “overbought,” so we should see a continuing advance to challenge resistance at the 25-day moving average ($101.536).  A break above the 25-day moving average could then lead to a test of resistance at the 23.6% Fibonacci retracement level ($101.904), and should this occur we should see slightly lower mortgage rates.

 

Tucson Mortgages Home Loan News 9-16-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of September 9, 2019
  • Economic Calendar – week of September 16, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes recorded a third consecutive week of solid returns as investor sentiment continued improve along with de-escalation in trade tensions between the U.S. and China.  China began last Wednesday when officials there publicized a small list of U.S. products that would be exempt from tariffs scheduled to take place on September 17.  President Trump promptly responded by announcing the U.S. would postpone a 5% increase on $250 billion worth of Chinese imports from October 1 to October 15.

China then took another step to defuse the trade war by announcing China’s customs bureau would exclude pork, soybeans, and other agricultural products from further tariffs while encouraging Chinese companies to buy U.S. agriculture products.  This gesture may be in response to sky-high pork prices in China as that country has battled a serious outbreak of African swine fever that has taken a serious toll on the country’s hog population.  Regardless, these first steps in defusing the trade war could lead toward improved trade relations between the world’s two largest economies.

The week’s economic news was generally favorable other than an uptick in inflation data.

Wednesday, the Core Producer (wholesale) Price Index (excluding food and energy) rose 0.3% vs. 0.2% expected, and Thursday’s Consumer Price Index (CPI) inflation number did the same with a 0.3% increase vs. 0.2% forecast.  Year-over-year, the CPI rose 2.4%, a bit more than expected and the most since mid-2018.  Friday, the Commerce Department reported Retail Sales increased by a greater than expected 0.4% in August while the University of Michigan’s preliminary Consumer Sentiment Index increased to 92.0 for September from 89.8 in August.  Overall, the week’s economic news favored investment in the stock market at the expense of the bond market.

In housing news, CoreLogic released their latest Loan Performance report for the month of June showing loans 30-days or more past due increased from 3.6% to 4.0%.

Seriously delinquent loans, defined as those loans which are 90-days or more in arrears, remained unchanged at 1.3%.  Seriously delinquent loans in foreclosure were unchanged at 0.4%.

Elsewhere, the latest mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications increased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 2.0% for the week ended September 6, 2019.  The seasonally adjusted Purchase Index increased 5% from a week prior while the Refinance Index increased 0.4%.  Overall, the refinance portion of mortgage activity decreased to 60.0% from 60.4% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 5.6% from 5.7% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 3.82% from 3.87% with points increasing to 0.44 from 0.34 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the UMBS 3.0% coupon bond finished 134.30 basis points lower to close at $100.563 while the 10-year Treasury yield increased 34.10 basis points to end at 1.901%.  The Dow Jones Industrial Average advanced 422.06 points to close at 27,219.52.  The NASDAQ Composite Index climbed 73.64 points to close at 8,176.71.  The S&P 500 Index gained 28.68 points to close at 3,007.39.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 16.68%, the NASDAQ Composite Index has gained 23.23%, and the S&P 500 Index has advanced 19.97%.

This past week, the national average 30-year mortgage increased to 3.85% from 3.55%; the 15-year mortgage rate increased to 3.52% from 3.25%; the 5/1 ARM mortgage rate increased to 3.54% from 3.38%; and the FHA 30-year rate increased to 3.50% from 3.25%.  Jumbo 30-year rates increased to 3.89% from 3.63%.

Economic Calendar – for the Week of September 16, 2019

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – UMBS 30-Year 3.0% Coupon Bond

The UMBS 30-year 3.0% coupon bond ($100.563; -134.30 bp) traded within a far wider 129.7 basis point range between a weekly intraday high of $101.844 on Monday and a weekly intraday low of 100.547 on Friday before closing the week at $100.563 on Friday.

Mortgage bonds moved decidedly lower throughout the week violating multiple support levels along the way.  There is a tight dual-band of support at the 100-day moving average (100.526) and the 38.2% Fibonacci retracement level (100.376).  Mortgage bonds are deeply “oversold” and primed for a bounce higher off of these support levels, but if they fail to hold, the next level of support is substantially lower at the 50% Fibonacci retracement level and 200-day moving average at $99.141.  The chart shows technical weakness with the bond trading on a sell signal – although extremely oversold.  If mortgage bonds can manage a bounce higher, we should see stable rates this coming week.  However, a continued move below current support levels would likely result in mortgage rates making a move higher.

 

Tucson Mortgages Home Loan News 9-9-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of September 2, 2019
  • Economic Calendar – week of September 9, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes notched a second consecutive week of solid returns as investor optimism was boosted by news of progress being made in the U.S. – China trade war.  Although investors reacted negatively to news that U.S. trade officials had rejected a request from China to delay tariffs on its goods that went into effect the prior weekend, negative sentiment was erased on reports U.S. and Chinese negotiators agreed to meet in Washington in early October to resume trade talks.

The week’s economic news was mostly favorable but “mixed” with U.S. Productivity increasing more than expected during the second quarter and Factory Orders soaring 1.4% in July, their best gain in nearly a year.  The Institute for Supply Management’s (ISM) Non-Manufacturing (Services) Index also increased more than forecast.  On the not so positive side of economic news, the ISM’s Manufacturing Index slid into negative territory in August for the first time since 2016 with a reading below “50” at 49.1.  The forecast had called for a reading of 51.3.  The August Jobs Report released Friday also disappointed.  Overall Nonfarm Payrolls increased by 130,000 versus consensus expectations for a gain of 171,000, while Nonfarm Private Payrolls increased by only 96,000 jobs vs. a consensus forecast of 145,000.  However, Average Hourly Earnings increased by a healthy 0.4% during August, double the consensus forecast of a 0.2% increase.

In housing news, CoreLogic reported last Tuesday that home prices increased 0.5% month-over-month in July and were 3.6% higher year-over-year.  The year-over-year increase surpassed last month’s reading of 3.4% and remains at a very sustainable and meaningful level for wealth creation.

Weekly Review

The major stock market indexes notched a second consecutive week of solid returns as investor optimism was boosted by news of progress being made in the U.S. – China trade war.  Although investors reacted negatively to news that U.S. trade officials had rejected a request from China to delay tariffs on its goods that went into effect the prior weekend, negative sentiment was erased on reports U.S. and Chinese negotiators agreed to meet in Washington in early October to resume trade talks.

The week’s economic news was mostly favorable but “mixed” with U.S. Productivity increasing more than expected during the second quarter and Factory Orders soaring 1.4% in July, their best gain in nearly a year.  The Institute for Supply Management’s (ISM) Non-Manufacturing (Services) Index also increased more than forecast.  On the not so positive side of economic news, the ISM’s Manufacturing Index slid into negative territory in August for the first time since 2016 with a reading below “50” at 49.1.  The forecast had called for a reading of 51.3.  The August Jobs Report released Friday also disappointed.  Overall Nonfarm Payrolls increased by 130,000 versus consensus expectations for a gain of 171,000, while Nonfarm Private Payrolls increased by only 96,000 jobs vs. a consensus forecast of 145,000.  However, Average Hourly Earnings increased by a healthy 0.4% during August, double the consensus forecast of a 0.2% increase.

In housing news, CoreLogic reported last Tuesday that home prices increased 0.5% month-over-month in July and were 3.6% higher year-over-year.  The year-over-year increase surpassed last month’s reading of 3.4% and remains at a very sustainable and meaningful level for wealth creation.

Mortgage Rate Forecast with Chart – UMBS 30-Year 3.0% Coupon Bond

The UMBS 30-year 3.0% coupon bond ($101.906; -7.80 bp) traded within a slightly wider 53.1 basis point range between a weekly intraday high of $102.250 on Wednesday and a weekly intraday low of 101.719 on Thursday before closing the week at $101.906 on Friday.

In a holiday shortened week, mortgage bonds moved higher on Tuesday and Wednesday above the 23.6% Fibonacci retracement level ($101.904) before reversing direction to close the week just above this level.  The bond is “overbought” currently and trading on a sell signal generated last Thursday so we will likely see a move toward the next support level at $101.681 before the bond entertains a bounce higher.  Therefore, we could see mortgage rates drift a few basis points higher this week but should not see any major movements in rates.

 

Tucson Mortgages Home Loan News 9-2-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of August 26, 2019
  • Economic Calendar – week of September 2, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes snapped a four-week losing streak to record their best performance in nearly three months as prospects improved for a U.S. – China trade deal.  Despite President Trump’s assertion that the Chinese “want to make a deal very badly,” a spokesman for China’s Ministry of Commerce told reporters China had no plans to respond to the White House’s latest tariff escalation and remarked “China has ample means for retaliation.”  At the same time, China’s Foreign Ministry stated the two sides remained in “effective communication.”  China is facing a tariff rate of 24.3% by December 15 covering 96.8% of all Chinese imports to the U.S. if a trade deal is not reached by then.  However, China may be willing to take a “wait and see” approach to a trade deal before the November 2020 U.S. presidential election in hope that a Democrat candidate soft on trade gets elected.

The week’s economic reports were “mixed.”  Durable Goods Orders fell unexpectedly, but the Chicago Purchasing Manager’s Index surprised to the upside.  Personal Income growth for July was lower than expected, but Personal Spending increased by 0.6% to exceed expectations.

However, the Consumer Sentiment Index for August fell to its lowest level since late 2016 as consumers become more concerned about the impact of tariffs on Chinese imports.

In housing last Tuesday, the Federal Housing Finance Agency (FHFA) reported U.S. house prices increased 1.0% in the second quarter of 2019.  Comparing the year ago second quarter, house prices rose 4.99% percent from the second quarter of 2018 to the second quarter of 2019.  The FHFA’s seasonally adjusted monthly index for June was up 0.2% from May.

Dr. William Doerner, FHFA Supervisory Economist, remarked “House prices rose again in all states and the top 100 metro areas, but the pace of growth has slackened.  The majority of states and cities are experiencing slower house price gains than they did a year ago, even with constrained housing supply and extremely attractive mortgage rates.”

The top five areas in annual appreciation were: 1) Idaho 11.4%; 2) Utah 7.7%; 3) Tennessee 7.2%; 4) Georgia 6.9%; and 5) Arizona 6.9%. The areas showing the smallest annual appreciation were: 1) Delaware 1.2%; 2) Maryland 1.5%; 3) District of Columbia 1.8%; 4) Iowa 2.2%; and 5) New Jersey 2.7%.  Of the nine census divisions, the Mountain division experienced the strongest four-quarter appreciation with a 6.6% gain between the second quarters of 2018 and 2019 and a 1.3% increase in the second quarter of 2019.  Annual house price appreciation was weakest in the Middle Atlantic division where prices rose by 4.0% between the second quarters of 2018 and 2019.

Thursday, the National Association of Realtors (NAR) reported Pending Home Sales for July 2019 slowed by 2.5% and fell slightly by 0.3% from the year ago period.  All regions showed lower sales data from June.

 

Pending Sales in the Northeast Region fell 1.6% in July; the Midwest showed a 2.5% decline; the South decreased 2.4%; and the West dropped 3.4%.

NAR chief economist Lawrence Yun commented “Super low mortgage rates have not yet consistently pulled buyers back into the market.  Economic uncertainty is no doubt holding back some potential demand, but what is desperately needed is more supply of moderately priced homes.”

Elsewhere, the latest mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications decreased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 6.2% for the week ended

August 23, 2019.  The seasonally adjusted Purchase Index decreased 4% from a week prior while the Refinance Index decreased 8%.  Overall, the refinance portion of mortgage activity decreased to 62.4% from 62.7% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 6.1% from 6.4% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 3.94% from 3.90% with points increasing to 0.38 from 0.35 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the UMBS 3.0% coupon bond finished 32.8 basis points higher to close at $101.984 while the 10-year Treasury yield decreased 2.76 basis points to end at 1.499%.  The Dow Jones Industrial Average climbed 774.38 points to close at 26,403.28.  The NASDAQ Composite Index rose 211.11 points to close at 7,962.88.  The S&P 500 Index gained 79.35 points to close at 2,926.46.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 13.19%, the NASDAQ Composite Index has gained 20.01%, and the S&P 500 Index has advanced 16.74%.

This past week, the national average 30-year mortgage declined to 3.55% from 3.63%; the 15-year mortgage rate decreased to 3.25% from 3.33%; the 5/1 ARM mortgage rate fell to 3.38% from 3.42%; and the FHA 30-year rate decreased to 3.25% from 3.30%.  Jumbo 30-year rates decreased to 3.68% from 3.75%.

Economic Calendar – for the Week of September 2, 2019

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – UMBS 30-Year 3.0% Coupon Bond

The UMBS 30-year 3.0% coupon bond ($101.984; +32.8 bp) traded within a wider 51.6 basis point range between a weekly intraday low of $101.484 on Monday and a weekly intraday high of 102.00 on Friday before closing the week at $101.984 on Friday.

After trading lower last Monday, mortgage bonds reversed direction and trended higher for the remainder of the week to challenge technical resistance at the 23.6% Fibonacci retracement level ($101.904) on Friday.  The bond is “overbought” but trading on a buy signal from last Tuesday.  If the price can continue to move higher above the 23.6% Fibonacci retracement level we could see a slight improvement in mortgage rates.  If the price falls back below the aforementioned resistance level, mortgage rates could edge slightly higher.  Overall, mortgage rates should remain relatively stable with no large interest rate moves in either direction.

 

 

Tucson Mortgages Home Loan News 8-26-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of August 19, 2019
  • Economic Calendar – week of August 26, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes recorded their fourth consecutive week of losses as the U.S.-China trade war continued to weigh on investor sentiment.  The stock market showed some early strength last week when the Trump administration announced on Monday it was temporarily halting a ban on U.S. firms doing business with Chinese telecommunications giant Huawei for 90 days.  Then on Wednesday, stocks continued higher after the Federal Reserve released the minutes from its July 30–31 monetary policy meeting showing policymakers wanted to remain flexible in responding to economic data.

However, the markets plunged on Friday after China announced they would impose new tariffs on $75 billion worth of U.S. imports, including a 25% levy on U.S. autos, 5% on auto parts, and 5% to 10% on 5,078 products, including soybeans, coffee, whiskey, seafood and crude oil.  The U.S. countered by announcing $250 billion of goods and products from China currently being taxed at 25% would be taxed at 30% and a remaining $300 billion of goods and products that were to be taxed at 10% will now be taxed at 15%.  President Trump also announced “We don’t need China and, frankly, would be far better off without them,” and “ordered” American companies “to immediately start looking for an alternative to China.”

The US Chamber of Commerce weighed in on the trade war by calling on the United States and China to “get back to the table” to discuss issues important to both sides, including intellectual property and market access.  The Chamber’s statement read in part “Today’s Chinese retaliation is unfortunate, but not unexpected.  The fact of the matter is that nobody wins a trade war, and the continued tit-for-tat escalation between the U.S. and China is putting significant strain on the U.S. economy, raising costs, undermining investment, and roiling markets.”

In housing last Wednesday, the National Association of Realtors reported Existing Home Sales increased 2.5% to a seasonally adjusted annual rate of 5.42 million units for July.  June’s sales rate was revised slightly higher to 5.29 million units from a previously reported 5.27 million units. Total sales were 0.6% higher than the same period a year ago.

The median existing home price for all housing types rose 4.3% year-over-year to $280,800 to reach the 89th consecutive month of year-over-year price gains.  The median existing single-family home price increased 4.5% year-over-year to $284,000.

Regionally, Existing Home Sales were 2.9% lower in the Northeast; 1.6% higher in the Midwest; 1.8% higher in the South; and 8.3% higher in the West.

Median home prices were 1.0% lower in the Northeast slipping to $305,800; 8.1% higher in the Midwest rising to $226,300; 5.2% higher in the South climbing to $245,100); and 3.7% higher in the West increasing to $408,000.  Single-family home sales increased 2.8% month-over-month to a seasonally adjusted annual rate of 4.84 million, and were 1.0% higher year-over-year.

The inventory of homes for sale at the end of July declined to 1.89 million from 1.92 million in June while inventory was 1.6% lower than a year ago.  Unsold inventory fell to a 4.2-months’ supply at the current sales rate versus 4.4 months’ for June.

Friday, the Census Bureau released their latest New Home Sales report showing sales declined 12.8% month-over-month to a seasonally adjusted annual rate of 635,000 in July.  This was below the consensus forecast of 645,000.  However, June’s New Home Sales report of 645,000 was revised significantly higher to 728,000.  Year-over-year, New Home Sales were 4.3% higher.

Regionally, New Home Sales were 50.0% higher in the Northeast; 11.1% lower in the Midwest; 16.1% lower in the South; and 14.2% lower in the West.

The median new home price fell 4.5% year-over-year to $312,800 while the average sales price declined 1.1% to $388,000.  The inventory of new homes for sale increased to 6.4 months at the July sales rate from 5.5 months in June.  Although there was a significant upward revision for June Sales, there was no follow-through sales momentum during July even with low mortgage rates and lower median home sales prices.  Sales were notably lower in three of the four national regions and the total number of new homes sold was below the 646,000 annual sales rate originally reported for June.

Elsewhere, the latest mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications decreased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 0.9% for the week ended August 16, 2019.  The seasonally adjusted Purchase Index decreased 4% from a week prior while the Refinance Index increased 0.4%.  Overall, the refinance portion of mortgage activity increased to 62.7% from 61.4% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 6.4% from 6.0% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 3.90% from 3.93% with points remaining unchanged at 0.35 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the UMBS 3.0% coupon bond finished 12.5 basis points lower to close at $101.656 while the 10-year Treasury yield decreased 3.54 basis points to end at 1.5266%.  The Dow Jones Industrial Average fell 257.11 points to close at 25,628.90.  The NASDAQ Composite Index dropped 144.22 points to close at 7,751.77.  The S&P 500 Index lost 41.57 points to close at 2,847.11.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 9.87%, the NASDAQ Composite Index has gained 16.83%, and the S&P 500 Index has advanced 13.57%.

This past week, the national average 30-year mortgage climbed to 3.63% from 3.58%; the 15-year mortgage rate increased to 3.33% from 3.25%; the 5/1 ARM mortgage rate rose to 3.42% from 3.40%; and the FHA 30-year rate increased to 3.30% from 3.25%.  Jumbo 30-year rates increased to 3.75% from 3.69%.

Economic Calendar – for the Week of August 26, 2019

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – UMBS 30-Year 3.0% Coupon Bond

The UMBS 30-year 3.0% coupon bond ($101.656; -12.5 bp) traded within a narrower 37.5 basis point range between a weekly intraday low of $101.422 on Thursday and a weekly intraday high of 101.797 on Friday before closing the week at $101.656 on Friday.

Mortgage bonds continued to trade in a “sideways,” range-bound direction this past week, trading down to touch technical support on Thursday before bouncing a little higher on Friday.  The bond is currently trading on a sell signal from a negative slow stochastic crossover occurring last Tuesday.  However, the bond is no longer “overbought” and is slightly less susceptible to a pullback.  The stock market has become more volatile of late and selling pressure may continue this week after last Friday’s sharp sell-off unless bargain-hunters step in to buy stocks.  Should the stock market continue to correct, we could see investors move money into perceived safer-haven assets like Treasuries, mortgage bonds, and precious metals.  This would improve bond prices and slightly reduce yields resulting in slightly lower interest rates.  Mortgage rates should remain stable.

 

 

 

Tucson Mortgages Home Loan News 8-19-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of August 12, 2019
  • Economic Calendar – week of August 19, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes recorded their third consecutive week of losses as trade and economic growth concerns negatively impacted investor sentiment.  Some investors may have also been demoralized by a short-lived Treasury yield inversion that took place last Wednesday when the yield of the 10-year Treasury note fell below that of the two-year note.

Historically, such inversions have preceded a number of past economic recessions that have taken as long as two years to show up after an inversion.  However, the inversion was very short-lived as Thursday saw the 10-year Treasury yield climb back above that of the two-year note resulting in a slightly positive yield curve.  Furthermore, other factors including the current bond market environment where large central banks around the globe are holding vast quantities of government debt will likely make yield curve inversions a far less reliable indicator of future recessions.

Typically, what has happened in past yield curve inversions is short-term rates rise faster than long-term rates resulting in higher borrowing costs that reduce loan demand, squeeze lending margins, and reduce the supply of credit.  Yet in the current environment, both the 2-year and 10-year yields have been falling, lowering borrowing costs and increasing loan demand.  Indeed, the latest mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications increased 21.7% from the prior week as homeowners rushed to refinance.  Year-on-year, total mortgage applications jumped 81%, driven by a 196% increase in refinances and a 12% rise in mortgage purchases.

The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 21.7% for the week ended August 9, 2019.  The seasonally adjusted Purchase Index increased 2% from a week prior while the Refinance Index increased 37.0% to the highest level since July 2016.  Overall, the refinance portion of mortgage activity increased to 61.4% from 53.9% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 6.0% from 4.7% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 3.93% (the lowest since November 2016) from 4.01% with points decreasing to 0.35 from 0.37 for 80 percent loan-to-value ratio (LTV) loans.

In housing last Tuesday, CoreLogic released its latest Loan Performance Insights Report showing the nation’s overall mortgage loan delinquency rate was 3.6% in May 2019, down from 4.2% in May 2018.  This delinquency rate includes all home loans 30 days or more past due, including those in foreclosure.  However, the foreclosure inventory rate was the lowest for a May in more than 20 years.

 

The serious delinquency rate, defined as 90 days or more past due including loans in foreclosure, was 1.3% in May 2019, down from 1.8% in May 2018.  The serious delinquency rate for May was below the average of 1.5% for the 2000 to 2006 pre-housing crisis period.  The foreclosure inventory rate was 0.4% in May 2019, down from 0.5% in May 2018.  Rising home prices have led to record amounts of home equity mitigating the risk of foreclosure.  The share of mortgages that were 30 to 59 days past due (early-stage delinquencies) was 1.7% in May 2019, down from 1.8% in May 2018.  The share of mortgages 60 to 89 days past due was 0.6% in May 2019, unchanged from May 2018.

Friday, the Census Bureau released housing data for the month of July indicating the housing market continues to struggle even with lower mortgage rates.  Total housing starts fell 4.0% month-over-month to a seasonally adjusted annual rate of 1.191 million units.  This was below the consensus forecast of 1.245 million.  Although single-family housing starts increased 1.3% month-over-month to 876,000, starts for the volatile multi-family housing segment plunged 9.2% to a rate of 406,000 units in July.  Housing completions increased 7.2% to 1.250 million units.  Realtors estimate housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month to fill the inventory gap.  Inventory of housing under construction fell 0.5% to 1.134 million units in July.

Meanwhile, total building permits increased 8.4% month-over-month to 1.336 million.  This was above the consensus forecast of 1.260 million and was primarily attributed to a 24.8% increase in permits for dwellings with five or more units.  Single-family permits rose 1.8% to 838,000.  Regionally, single-family starts were 22.9% higher in the Northeast, 1.6% higher in the Midwest, 3.9% lower in the South, and 8.1% higher in the West.  Single-family permits were 1.9% higher in the Northeast, 6.8% lower in the Midwest, 1.8% higher in the South, and 7.0% higher in the West.

The data from the report continues to show the supply of new single-family homes remains somewhat limited and will likely continue to curb overall housing sales due to supply and price constraints.  Thursday, a homebuilder confidence survey edged higher in August, but builders said they “continue to struggle with rising construction costs stemming from excessive regulations, a chronic shortage of workers and a lack of buildable lots.”

For the week, the UMBS 3.0% coupon bond finished 32.8 basis points higher to close at $101.781 while the 10-year Treasury yield decreased 17.20 basis points to end at 1.562%.  The Dow Jones Industrial Average fell 401.43 points to close at 25,886.01.  The NASDAQ Composite Index dropped 63.15 points to close at 7,895.99.  The S&P 500 Index lost 29.97 points to close at 2,888.68.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 10.97%, the NASDAQ Composite Index has gained 19.00%, and the S&P 500 Index has advanced 15.23%.

This past week, the national average 30-year mortgage declined to 3.58% from 3.64%; the 15-year mortgage rate decreased to 3.25% from 3.32%; the 5/1 ARM mortgage rate fell to 3.40% from 3.45%; and the FHA 30-year rate remained unchanged at  3.25%.  Jumbo 30-year rates decreased to 3.69% from 3.71%.

Economic Calendar – for the Week of August 19, 2019

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – UMBS 30-Year 3.0% Coupon Bond

The UMBS 30-year 3.0% coupon bond ($101.781; +32.8 bp) traded within a wider 71.9 basis point range between a weekly intraday low of $101.250 on Tuesday and a weekly intraday high of 101.969 on Thursday before closing the week at $101.781 on Friday.

Mortgage bonds were range-bound this past week, dipping down to touch technical support on Tuesday before rebounding to reach technical resistance on Thursday.  The bond is currently trading on a buy signal from a positive slow stochastic crossover, but is “overbought” and susceptible to a pullback.  The technical chart below suggests the bond will challenge resistance located at the 23.6% Fibonacci level at $101.904.  A successful break above this level may propel the bond’s price toward the next level of resistance at $102.231.  However, a more likely outcome would be a pull-back into the trading range seen the past two weeks between support at $101.359 and resistance at $101.904.  Either way, mortgage rates are not expected to make any significant moves in either direction and should remain relatively stable.

 

Tucson Mortgages Home Loan News 8-12-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of August 5, 2019
  • Economic Calendar – week of August 12, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes saw a sharp increase in volatility during the week enduring the worst trading day of the year on Monday.  The markets then spent the rest of the week trying to recover most of their losses with the Dow Jones Industrial Average only losing 0.8%, the Nasdaq Composite losing just 0.6%, and the S&P 500 only down 0.5%.

Last Monday’s sell-off was triggered by China’s devaluation of its currency the yuan, allowing it to weaken beyond seven yuan per dollar in an effort to counteract President Trump’s latest China tariff announcement.  Also weighing on stocks were plunging U.S. Treasury yields resulting in a further flattening of the yield curve along with an announcement by China they were suspending U.S. agricultural purchases.  China’s currency devaluation was the greatest in 10 years prompting the U.S. to label China as a currency manipulator.

The flattening yield curve narrowed the spread between the 2-year (1.63%) and 10-year (1.74%) treasury yields instilling a degree of fear among some investors.  The 2-year / 10-year yield spread narrowed to its lowest difference since 2007, and when this spread “inverts” with the 2-year yield greater than the 10-year yield it is widely viewed as an indicator for a pending economic recession.

However, interest rates are currently either zero or negative in many countries.  There are 21 countries with central banks having zero interest rates and the European Central Bank, Japan, Sweden, Denmark, Switzerland and a number of private German banks currently have negative interest rates.  Negative rates are about the only tool many central banks have left to use in an effort to stimulate their economies, so it is likely this low interest rate environment will persist globally.  Low or negative interest rates will likely lead to an increase or expansion in asset values of real estate and equities.

The week’s economic calendar was light.  Labor market indicators remained strong with June job openings exceeding expectations while weekly jobless claims were less than forecast.  Friday, the Labor Department reported core producer prices, which exclude food and energy prices, had dropped 0.1% July, marking the first decline since 2017.  This decline in wholesale inflation helps to support the view the Federal Reserve will continue to cut short-term interest rates.  Indeed, the Fed funds futures market is currently pricing in an 88% probability for at least two more quarter-point rate cuts by the end of this year.

In housing last Tuesday, CoreLogic released its Home Price Index (HPI) and HPI Forecast for June 2019 showing home prices rose both year-over-year and month-over-month.  From June 2018, home prices increased nationally by 3.4%.

On a month-over-month basis, prices in June increased by 0.4%.  Single-family home prices are at an all-time high and continue to increase on an annual basis with CoreLogic forecasting an annual price growth increase of 5.2% from June 2019 to June 2020.  On a month-over-month basis, CoreLogic is forecasting home prices to increase by 0.5% from June 2019 to July 2019.  CoreLogic’s chief economist, Dr. Frank Nothaft, had this to say about home prices “Tepid home sales have caused home prices to rise at the slowest pace for the first half of a year since 2011.  Price growth continues to be faster for lower-priced homes, as first-time buyers and investors are both actively seeking entry-level homes.  With incomes up and current mortgage rates about 0.8 percentage points below what they were one year ago, home sales should have a better sales pace in the second half of 2019 than a year earlier, leading to a quickening in price growth over the next year.”

Elsewhere, mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications increased 5.3% from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 5.3% for the week ended August 2, 2019.  The seasonally adjusted Purchase Index declined 2% from a week prior while the Refinance Index increased 12.0%.  Overall, the refinance portion of mortgage activity increased to 53.9% from 50.5% of total applications from the prior week.  The adjustable-rate mortgage share of activity was unchanged at 4.7% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.01% from 4.08% with points increasing to 0.37 from 0.34 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 3.5% coupon bond finished 12.5 basis points lower to close at $102.578 while the 10-year Treasury yield decreased 11.04 basis points to end at 1.745%.  The Dow Jones Industrial Average fell 197.57 points to close at 26,287.44.  The NASDAQ Composite Index dropped 44.93 points to close at 7,959.14.  The S&P 500 Index lost 13.40 points to close at 2,918.65.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 12.69%, the NASDAQ Composite Index has gained 19.95%, and the S&P 500 Index has advanced 16.43%.

This past week, the national average 30-year mortgage declined to 3.64% from 3.70%; the 15-year mortgage rate decreased to 3.32% from 3.38%; the 5/1 ARM mortgage rate fell to 3.45% from 3.60%; and the FHA 30-year rate remained unchanged at  3.25%.  Jumbo 30-year rates decreased to 3.71% from 3.80%.

Economic Calendar – for the Week of August 12, 2019

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

The FNMA 30-year 3.5% coupon bond ($102.578; -12.50 bp) traded within a narrower 48.4 basis point range between a weekly intraday low of $102.50 on Thursday and Friday and a weekly intraday high of 102.984 on Monday before closing the week at $102.578 on Friday.

Mortgage bonds traded lower on a sell signal generated last Tuesday from a slow stochastic crossover while “overbought.”  The bond managed to pop above the horizontal consolidation zone highlighted in the chart below as a yellow rectangle last Monday.  However, it trended back into this zone during the remainder of the week and appears headed for a test of dual support located at $102.453 and the 38.2% Fibonacci level at $102.346.  We could see a bounce higher off of these support levels this coming week resulting in stable mortgage rates, but a breach of support could result in slightly worse rates.

 

Tucson Mortgages Home Loan News 8-5-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of July 29, 2019
  • Economic Calendar – week of August 5, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes recorded their worst weekly performance so far this year after investors were disappointed with the outcome of the Federal Reserve’s policy meeting last Wednesday along with the post-meeting press conference conducted by Fed Chair Jerome Powell.  Also dealing a blow to the stock market was an announcement last Thursday afternoon that the U.S. would levy a new 10% tariff on all remaining Chinese imports (about $300 billion worth of goods) not currently facing duties on September 1st.  This announcement seemed to catch Wall Street and China by surprise.  However, a couple days prior it was announced China was not living up to promises made at the G-20 summit in late June.  The new tariff announcement will certainly get the attention of Chinese trade negotiators, and will hopefully prompt more meaningful negotiations resulting in a deal both nations can accept.

As for the Fed’s monetary policy meeting, the Fed announced a quarter-point cut in the federal funds target rate, which was widely expected, and now ranges from 2.00% to 2.25%.  The Fed also announced it would remove some upward pressure on longer-term interest rates by ending its balance sheet reduction efforts two months ahead of schedule.  This should be beneficial for prospective home buyers by putting at least some temporary downward pressure on mortgage rates.  However, investors were less thrilled with Fed Chair Powell’s post-meeting press conference in which he stated policymakers were thinking of the rate cut “as a mid-cycle adjustment to policy.”  Market participants interpreted this statement as meaning an easing cycle had not yet really begun and further rate cuts in coming months wouldn’t be considered.  Powell then confused everyone by suggesting further rate cuts were still possible.

The remainder of the week’s economic news revealed the economy continues to chug along with the July employment report showing another ample gain (164,000 vs. 160,000 expected) in nonfarm payrolls.  The unemployment rate held steady at 3.7% while average hourly earnings climbed 0.3% for a year-over-year rate of 3.2%, slightly more than forecast.

In housing last Tuesday, the National Association of Realtors (NAR) reported Pending Home Sales continued to increase in June to record gains over two consecutive months.  Each of the four major national regions noted a rise in contract activity, with the West Region showing the greatest sales improvement.  The Pending Home Sales Index moved 2.8% higher to 108.3 in June from 105.4 in May.  Year-over-year contract signings surged 1.6%, ending a 17-month streak of annual decreases.

NAR Chief Economist, Lawrence Yun, commented the 2.8% increase can be attributed to the current favorable housing conditions and predicted the rise is likely the start of a positive trend for home sales.

“Job growth is doing well, the stock market is near an all-time high and home values are consistently increasing.  When you combine that with the incredibly low mortgage rates, it is not surprising to now see two straight months of increases.”

Yun went on to remark “Homes are selling at a breakneck pace, in less than a month, on average, for existing homes and three months for newly constructed homes.  Furthermore, homeowners’ equity in real estate has doubled over the past six years to now nearly $16 trillion.  But the number of potential buyers exceeds the number of homes available.  We need to see sizable growth in inventory, particularly of entry-level homes, to assure wider access to homeownership.”

Regionally, the Northeast increased 2.7% to 94.5 in June and is now 0.9% higher than a year ago. In the Midwest, the index advanced 3.3% to 103.6 in June, 1.7% greater than June 2018.  In the South Region, pending home sales increased 1.3% to 125.7 in June, a 1.4% higher reading than last June.  The index for the West Region surged 5.4% in June to 96.8, an increase of 2.5% above a year ago.

Elsewhere, mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications decreased 1.4% from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 1.4% for the week ended July 26, 2019.  The seasonally adjusted Purchase Index declined 3% from a week prior while the Refinance Index increased 0.1%.  Overall, the refinance portion of mortgage activity increased to 50.5% from 49.8% of total applications from the prior week.  The adjustable-rate mortgage share of activity was unchanged at 4.7% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance remained unchanged at 4.08% with points increasing to 0.34 from 0.33 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 3.5% coupon bond finished 39.0 basis points higher to close at $102.703 while the 10-year Treasury yield decreased 22.54 basis points to end at 1.8554%.  The Dow Jones Industrial Average fell 707.44 points to close at 26,485.01.  The NASDAQ Composite Index dropped 326.14 points to close at 8,004.07.  The S&P 500 Index lost 93.81 points to close at 2,932.05.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 13.54%, the NASDAQ Composite Index has gained 20.63%, and the S&P 500 Index has advanced 16.96%.

This past week, the national average 30-year mortgage declined to 3.70% from 3.91%; the 15-year mortgage rate decreased to 3.38% from 3.56%; the 5/1 ARM mortgage rate fell to 3.60% from 3.70%; and the FHA 30-year rate dropped to 3.25% from 3.50%.  Jumbo 30-year rates decreased to 3.80% from 3.91%.

Economic Calendar – for the Week of August 5, 2019

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

The FNMA 30-year 3.5% coupon bond ($102.703; +39.0 bp) traded within a wider 67.1 basis point range between a weekly intraday low of $102.188 on Wednesday and a weekly intraday high of 102.859 on Thursday before closing the week at $102.703 on Friday.

Mortgage bonds continued to trade “sideways” within the yellow-shaded rectangle highlighted in the chart below until breaking above the rectangle on Thursday.  The bond then traded down to this rectangular consolidation pattern on Friday before closing above it.  The bond remains on a buy signal, but is “overbought” and susceptible to some profit-taking that could send prices toward support at the 38.2% Fibonacci retracement level if the stock market manages to rebound.  If this happens, mortgage rates could edge slightly lower in the week ahead.  On the other hand, if the stock market continues to correct to the downside, bond prices could continue to improve even if overbought, resulting in a slight improvement in rates.