Tucson Mortgages Home Loan News 6-23-2020

By John Crist on .

Week of June 15th, 2020 in Review

The number of people filing for unemployment for the first time remains in the millions, with another 1.5 million individuals filing claims during the week ending June 13. While this was a decline from the previous week’s initial jobless claims, the figure did exceed estimates, and points to an estimated staggering 16% unemployment rate currently.

The housing sector saw some positive news, however, as the NAHB Housing Market Index confirmed that confidence among home builders has been on the rise in June. All three components of the index, including current sales conditions, future expectations and prospective buyer traffic saw improvement when compared to the readings in May.

Meanwhile, Housing Starts were up 4.3% in May, though this was much less than the 22% expected. Building Permits, on the other hand, were 14% higher, beating estimates of a 10% gain. Low home loan rates have helped the demand for housing, and the high number of building permits could lead to stronger readings in Housing Starts this summer. However, there is an important caveat to keep in mind, as noted below.

Retail Sales were also on the rebound in May, while manufacturing in both the New York and Philadelphia regions have seen big improvements in June. The Cass Freight Index, which measures freight activity, also showed some improvement in May. However, the uptick was less than anticipated due in part to the reopening schedule unfolding slower than anticipated. Cass Freight forecasts a return to 2019 freight activity levels in 2021.

Lastly, the Fed was in the news again, announcing that they would be buying corporate bonds on top of the exchange-traded funds they are already buying. The Fed will begin buying a broad and diversified portfolio of corporate bonds to support market liquidity and the availability of credit for large employers. The program will allow for the purchase of up to $750 billion worth of corporate credit with maturities of 5 years or less.

Fed Chair Jerome Powell testified on Capitol Hill that the program fulfills a pledge the Fed made previously, and he noted that the program is not an effort to take over the market. He reiterated that the Fed will adjust their bond buying based on market conditions.


Unemployment Figures Still Staggering

Another 1.5 million people filed for unemployment benefits for the first time during the week ending June 13. Though this was a decline from the previous week, the number of claims filed was 300,000 higher than estimates. California (+243K), Georgia (+131K) and New York (+96K) saw the biggest gains.

Continuing claims, which measure people who continue to receive benefits, decreased by only 62,000 to 20.5 million. This figure is backwards looking, so when we add the following two weeks of initial claims, there are roughly 23.5 million people receiving benefits.

In addition, when we factor in the amount of new and continuing claims and the number of people in the labor force, we estimate that the unemployment rate is currently 16%. And when we try to estimate how many new jobs the Paycheck Protection Program has temporarily created, we think that the unemployment rate could be closer to 19% without it.


Builder Confidence Rebounds in June

Builder confidence has been on the rebound in June, per the NAHB Housing Market Index. This real-time read on builder confidence increased by the largest one-month increase ever, rising 21 points from 37 in May to 58 in June (after plunging all the way to 30 in April).

There was improvement from May to June in all three components of the survey. Current sales conditions jumped 21 points to 63, future expectations were up by 22 points to 68 and prospective buyer traffic almost doubled from 22 to 43. Keep in mind that 50 is the baseline, with readings above 50 signaling expansion and below 50 contraction. So, while this was a good rebound, it’s still well below the numbers we were seeing just a few months ago before the pandemic, which were in the high 70’s. And prospective buyer traffic is still below the baseline reading and in contraction.

The NAHB noted the urban to suburban move being made by many, saying, “Builders report increasing demand for families seeking single family homes in inner and outer suburbs that feature lower density neighborhoods.”

The limited inventory of existing homes certainly helps the demand for new homes, as does low home loan rates. But there is a caveat, as the NAHB explained, “Elevated unemployment and the risk of new, local virus outbreaks remain a risk to the housing market.”


Construction Off to Slower “Start” Than Expected

Housing Starts were up only 4.3% in May, which was much less than the 22%

expected. They were also down 23% when compared to May of last year. Starts for single family homes were flat and saw no gain.

Building Permits, on the other hand, shot up 14%, which was better than the 10% increase expected (though they are still down 9% when compared to last May). Permits for single family homes were up 12%.

Many people thought Housing Starts would rebound sooner, but builders were not purchasing land because they thought that demand for housing would return more slowly. In addition, available labor and material costs were an issue. But with Building Permits on the rise, Housing Starts may really rebound in June and moving forward. Again, as noted above, low home loan rates will help with demand, but continued high unemployment and potential future outbreaks of the virus will also be a limiting factor.


Retail Sales and Manufacturing on the Upswing

Retail Sales in May were up 17.7% after falling 14.7% in April – more than double the expected 8% gain. Clothing and accessories stores reported a whopping 188% gain, while furniture stores (+89.7%) and sporting goods, hobby, musical instruments and book stores (+88.2%) also saw big improvements. We will see how these figures continue to change and hopefully improve as states continue to reopen.

Manufacturing in the New York region also saw a big improvement, as the Empire State Index rose from -48.5 to flat in June. The Philadelphia Fed Index was another positive sign for manufacturing in that region, with June’s reading reported at 27.5, greatly exceeding expectations of -22.7.


Family Hack of the Week

Summer vacation plans have changed for many people this year, especially trips that involved long flights. If you’re considering a road or day trip, our friends at Real Simple offer these tips to help your family travel safely.

Before heading out, check for local, state and regional updates, as states and localities are in different phases of re-opening. Be prepared as well in case things change during longer trips.

Pack a kit for all members of your family, including gloves, hand sanitizer and masks (which are required in some places). Also, bring plenty of drinks, snacks and meals to limit any unnecessary stops. Experts recommend wearing gloves when pumping gas and throwing them away as soon as you’re done.

Choose outdoor activities and restaurants with outdoor seating, as they are great and safer options for your family to spend time together and also enjoy the summer weather.

If you’ll be staying overnight somewhere, don’t be shy about using antibacterial wipes on high-traffic surfaces like light switches, door handles, bathroom sinks and remote controls. And once you get home, disinfect anything you brought with you, including suitcase, coolers, backpacks and purses.

These tips will help your family enjoy outings safely this summer!


What to Look for This Week

More housing news is on the way, as we’ll get the scoop on May’s Existing Home Sales on Monday and New Home Sales on Tuesday. The FHFA Home Price Index for April follows on Wednesday.

The end of the week is equally busy, with the revised reading for first quarter GDP, May Durable Goods Orders and the latest weekly Initial Jobless Claims all being reported Thursday. Friday brings the Fed’s favorite inflation reading, Personal Consumption Expenditures, along with Personal Income and Spending for May and Consumer Sentiment for June.


Technical Picture

The Fed continues to stabilize the markets with their ongoing purchases of Mortgage Backed Securities. Mortgage Bonds spent much of last week trading in a tight range between support at their 25-day moving average and resistance at their 50-day moving average. While the 50-day has proved to be a tough ceiling for Bonds to break above, this narrow range means a breakout one way or the other is coming.


A Simple Explanation Of The Federal Reserve Statement (August 10, 2010 Edition)

By Todd Abelson NMLS #180858 on .

Putting the FOMC statement in plain EnglishToday, in its first meeting in 6 weeks, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged.

The Fed Fund Rate remains at a historical low, within a prescribed target range of 0.000-0.250 percent.

In its press release, the FOMC said that, since June, the pace of economic recovery “has slowed”. Household spending is increasing but remains restrained because of high levels of unemployment, falling home values, and restrictive credit.

Today’s statement shows less economic optimism as compared to the prior year’s worth of FOMC statements dating back to June 2009. The Fed is looking for growth to be “more modest in the near-term” than its previous expectations.

Weaknesses aside, the Fed highlighted strengths in the economy, too:

  1. Growth is ongoing on a national level
  2. Inflation levels remain exceedingly low
  3. Business spending is rising

As expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period”.

There were no surprises in the Fed’s statement so, as a result, the mortgage market’s reaction to the release has been neutral. Mortgage rates in Arizona are unchanged this afternoon.

The FOMC’s next meeting is scheduled for September 21, 2010.

Mortgage Approvals Are Getting More And More Scarce

By Todd Abelson NMLS #180858 on .

Federal Reserve Quarterly Lending Survey 2007-2009

The economy’s improving but lending standards are not. Nationally, banks are making mortgage approvals harder to come by.

Underwriting guidelines are tightening.

The data comes from the Federal Reserve’s quarterly survey to its member banks.  The Fed asks senior bank loan officers around the country to report on “prime” residential mortgage guidelines over the most recent 3 months and whether they’ve tightened.

For the period October-December 2009:

  • Roughly 1 in 4 banks said guidelines tightened
  • Roughly 3 in 4 banks said guidelines were “basically unchanged”

Just 2 of 53 banks said its guidelines had loosened.

Combine the Fed’s survey with recent underwriting updates from the FHA and generally tougher standards for conventional loans and it’s clear that lenders are much more cautious about their loans than they were, say, in 2007.

Today’s Tucson home buyers and would-be refinancers face a bevy of new borrowing hurdles including:

  • Higher minimum FICO scores
  • Larger downpayment requirements for purchases
  • Larger equity positions for refinances
  • Lower debt-to-income ratios

So, if you’re on the fence about whether now is a good time to buy a home, or make that refi, consider acting sooner rather than later.  It doesn’t necessarily matter that mortgage rates are low, or that there’s an up-to-$8,000 home purchase tax credit for households that qualify.  With each passing quarter, fewer and fewer applicants are eligible to take advantage.

7 Ways To Protect Your Credit Score For Better Mortgage Rates

By Todd Abelson NMLS #180858 on .

As mortgage lenders tighten approval standards   in Arizona and nationwide, the importance of a good credit score is rising.  Credit scores not only make the difference between a mortgage approval and mortgage turn-down, but they also play a large role in determining your actual mortgage note rate.

In the 3-minute piece, the NBC Today Show talks about 7 ways that homebuyers ruin their credit — often by accident.  Some of the highlighted mistakes include:

  • Closing open credit cards
  • Making appliance buys on credit prior to closing
  • Asking creditors to lower credit balances prior to closing

In general, a 740 FICO will insulate a borrower from the higher costs and/or rates associated with low credit scores.  Below 740, though, every 20 points adds to the damage.  Watch the video and apply what you can to your own situation.  The more you know, the more you can save.

A Simple Explanation Of The Federal Reserve Statement (January 27, 2010 Edition)

By Todd Abelson NMLS #180858 on .

Putting the FOMC statement in plain EnglishThe Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that the U.S. economy “has continued to strengthen”, that the jobs markets is getting better, and that financial markets are supportive of growth.

There was no mention of the housing market’s strength.  The last 3 statements from the Fed included that specific verbiage.

It’s the fifth straight statement in which the Fed spoke about the economy with optimism.  This should signal to markets that 2008-2009 recession is over and that economic growth is returning to U.S. economy.

The economy isn’t without threats, however, and the Fed identified several in its press release, including:

  1. Credit remains tight for consumers
  2. Businesses are reluctant to hire new workers
  3. Housing wealth is down

The message’s overall tone, however, remained positive and inflation appears is still within tolerance.

Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to wind down its $1.25 trillion commitment to the mortgage market by March 31, 2010.  This is noteworthy because Fed insiders estimate that the bond-buying program suppressed mortgage rates by 1 percent through 2009.

Mortgage market reaction to the Fed press release is, in general, negative. Mortgage rates in Tucson are rising this afternoon.

The FOMC’s next scheduled meeting is March 16, 2010.

Housing Permits Spike For The Second Straight Month

By Todd Abelson NMLS #180858 on .

Housing Starts Jan 2008-Dec 2009A “Housing Start” is a privately-owned home on which construction has started. It’s an important gauge of housing health because it tracks new housing stock nationwide.

In December 2009, starts fell by nearly 7 percent.

The news is mildly disappointing but not too bad. The likely cause for the Housing Starts drop is December’s rough weather conditions. It’s tough to break ground when Mother Nature won’t coordinate and last month was especially hazardous in a lot of parts of the country.

More cheery, however, is that for the second straight month, Housing Permits exploded.

A housing permit is an certification from local government that authorizes construction. After posting a 7 percent gain in November, permits rose by another 8 percent in December.

It’s a signal that housing is, indeed, in recovery — despite the falling number of actual starts. More permits mean that builders plan to bring more homes on the market for what’s expected to be a very busy spring home-shopping season.

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.  Therefore, Housing Starts should start rising soon anyway.

For home buyers, the news couldn’t be better.

With more homes coming online, competition among home sellers should increase, and that will suppress the rise in home prices in Tucson and nationwide.

It’s basic economics.  When home supplies grow faster than home demand, prices fall.

There’s 100 Days Left To Claim The Homebuyer Tax Credit

By Todd Abelson NMLS #180858 on .

100 days remain for the Home Buyer Tax Credit ExpirationNovember 6, 2009, Congress voted to extend and expand the First-Time Home Buyer Tax Credit program.  There’s 100 days left to claim it.

The expiration date of the up-to-$8,000 tax credit has been pushed forward to spring, requiring homebuyers in Tucson to be under contract for a home no later than April 30, 2010, and to be closed no later than June 30, 2010.

In addition, “move-up” buyers were also added to the program’s eligibility list meaning you don’t have to be a first-time home buyer to be eligible for the tax credit.  If you’ve lived in your home for 5 of the last 8 years, you meet the IRS requirements.

Move-up buyers are capped at a total tax credit of $6,500.

The tax credit’s basic eligibility requirements remain the same:

  • You can’t purchase the home from a parent, spouse, or child
  • You can’t purchase the home from an entity in which they’re a majority owner
  • You can’t acquire the home by gift or inheritance
  • All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however.

First, the subject property’s sales price may not exceed $800,000. Homes sold for more than $800,000 are ineligible.  And, also, household income thresholds have been raised to $125,000 for single-filers and $225,500 for joint-filers.

    And lastly, don’t forget that the program is a true tax credit — not a deduction.  This means that a tax filer who’s eligible for the full $8,00 credit and whose “normal” tax liability totals $5,000 would receive a $3,000 refund from the U.S. Treasury at tax time.

    The complete list of qualifying criteria is posted on the IRS website.  Review it with a tax professional to determine your eligibility.  Then mark your calendar for April 30, 2010.

    There’s just 100 days to go.

    What’s Ahead For Mortgage Rates This Week : January 19, 2010

    By Todd Abelson NMLS #180858 on .

    Inflation squeezes mortgage ratesMortgage markets showed little conviction last week, carving out just a narrow trading channel. There was very little data on which for markets to move, leaving mortgage rates momentum-bound.

    Luckily for rate shoppers, mortgage rate momentum was favorable. Rates were slightly lower Monday through Thursday before breaking downward Friday afternoon. Home shoppers in Tucson this past weekend caught a nice break.

    Last week marked the second straight week in which mortgage rates fell.

    This week, in holiday-shortened trading and with little economic data set for release, expect mortgage rates to again move on momentum. The biggest report of the week is Wednesday’s Producer Price Index.

    Producer Price Index is important to mortgage rates because of its role in inflation.  PPI is akin to a Cost of Living-type measurement, but for business.  As business costs rise, the thought goes, it’s not long before consumer costs rise, too. Businesses eventually pass on costs, after all.

    In this manner, a rising Producer Price Index can foreshadow rising consumer prices, and, therefore, inflation.

    Inflation is awful for mortgage rates.

    PPI expectations have revised downward this month, especially because last week’s data showed a deceleration in consumer prices nationwide. If PPI isn’t as weak as expected, mortgage rates will rise.

    Other influential data this week includes Housing Starts, Consumer Confidence and Initial Jobless Claims.

    So far, 2010 has been for mortgage rates in Arizona and around the country. If you’re in need of a rate lock, this week may be a good time to take one.

    RealtyTrac’s 2009 Foreclosure Report Gives Reason For Optimism

    By Todd Abelson NMLS #180858 on .

    Foreclosure deltas for the ten most foreclosure-heavy states of 2009

    Like real estate, it appears that foreclosure activity is a local phenomenon, too.

    As reported by RealtyTrac.com, more than half of all foreclosure-related activity in 2009 came from just 4 states:

    1. California
    2. Florida
    3. Arizona
    4. Illinois

    More than 1.4 million filings made in 2009 are attributed to the above states. Furthermore, each ranks in the Top 10 for 2009 Foreclosures Per Capita.

    The other states are Nevada, Utah, Georgia, Idaho, Michigan and Colorado.

    Versus 2008, foreclosures are up 21 percent nationwide and that’s a big number, but a deeper look at RealtyTrac’s annual reports reveals a more positive undertone on the housing market.

    1. 40 states fell below the national Foreclosures Per Capita average in 2009
    2. Foreclosure activity fell on an annual basis in 10 states as compared to 2008

    Foreclosures are still prevalent, though, and buying homes in foreclosure in Tucson continues to be big business.  First-time buyers, move-up buyers, and real estate investors each are bidding aggressively.

    Distressed homes account for one-third of home resale activity, according to an industry trade group.

    That said, buying foreclosures can be tricky.

    First, properties are often sold “as-is” and the cost of repairs may unwind the home’s status as a “value buy”.  Furthermore, a lender may require specific fixes to be made prior to closing and that, too, costs money.

    Second, buying a foreclosed home in Arizona isn’t as streamlined as buying a “normal” home. Closing on a foreclosure can be a 120-day process or longer. A 4-month time-frame may not fit your schedule.

    And, third, finding foreclosures can be difficult. Despite the growth in foreclosure search engines, it still takes a good real estate agent to uncover the best homes at the best prices.

    Read the complete foreclosure report and take a peek at RealtyTrac’s foreclosure heat maps.  If you like what you see, talk to your real estate agent about what to do next.

    There’s still good deals in the foreclosure market — you just have to know where to find them

    Retail Sales Dropped In December And Now So Are Mortgage Rates

    By Todd Abelson NMLS #180858 on .

    Retail Sales December 2009

    Mortgage rates are dropping this morning on weaker-than-expected Retail Sales data from December. Lower rates means more bang for your home-buying buck.

    Excluding motor vehicles and parts, December’s “ex-auto” sales receipts were down roughly $500 million from November. Analysts had expected receipts to grow.

    The relevance of Retail Sales to home affordability isn’t obvious, but it’s definitely logical.

    Retail Sales is directly related to consumer spending and consumer spending accounts for the majority of the U.S. economy. When consumer spending slows, the economy often does, too. It leads investors to seek out “safe” investments.

    It’s the reason why stock markets often drop on weak economic data — stocks are among the riskiest investment classes available.

    Conversely, the best place to find safety is in the market of government-backed bonds.  This world includes products like U.S. Treasuries and many of the mortgage-backed bonds that help set mortgage rates for people in Tucson.  Weak economic data puts mortgage bonds in demand.

    For rate shopper, this is good news.  More demand for mortgage bonds causes mortgage rates to fall.  Mortgage rates are lower this morning because Wall Street is shedding some risk.

    December’s Retail Sales report closes out a year of generally-weak data.  2009 marks just the second time that Retail Sales fell year-over-year since the government started tracking it 40 years ago.  The other year was 2008.

    For home buyers in Tucson and around the country, though, today may represent an opportune time to lock a mortgage rate.  Housing data is still improving and other economic indicators are showing strength.  Soon, Wall Street will shift from a “safe” mentality and move toward risk.

    When it does, mortgage rates will rise.