Tucson Mortgages Home Loan News 12-10-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of December 3, 2018
  • Economic Calendar – week of December 10, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market was extremely weak and volatile this past week with investor sentiment focused on the ongoing trade negotiations with China.  Many investors sought a “safe-haven” in the bond market by selling stocks and buying bonds, resulting in lower bond yields.

Market participants are now not only worried we are in the last stages of an economic cycle, they are also concerned that a March 1, 2019 deadline to settle the trade dispute with China won’t be enough time to resolve those major trade issues that have been festering for a long time.  The possibility of the U.S. increasing the tariff rate to 25% from 10% on $200 billion of Chinese goods if an acceptable deal can’t be made by the deadline weighed heavily on investors sentiment.

Another factor weighing on stocks was a flattening of the yield curve in the Treasury market where the 2-year yield (2.70%) and 3-year yield (2.71%) closed higher than the yield on the 5-year Treasury note (2.69%) this past week.  Furthermore, the difference between the 2-year and 10-year yields narrowed to its thinnest margin since 2007, just before the last recession.  When the 2-year yield inverts by becoming greater than the 10-year yield, it historically has signaled the imminent onset of an economic recession.

In economic news, the November Employment Situation Report released on Friday disappointed as Nonfarm Payrolls increased by a weaker than forecast 155,000 jobs vs. 189,000 expected while Average Hourly Earnings only increased 0.2% when a 0.3% increase was forecast.  This report with its decrease in job and wage growth acceleration may prompt the Federal Reserve to become more cautious about raising interest rates in 2019.  Hopefully, the Fed will not want to be blamed for pushing the U.S. economy into a recession.

Tuesday, CoreLogic released their latest Home Price Insights monthly report showing U.S. home prices increased 5.4% in October 2018 compared with October 2017.

In September, home prices increased 5.6% year-over-year and 0.4% month-over-month.  The October index increase represents the slowest year-over-year growth in home prices since January 2017.

Month-over-month, October prices increased 0.5%, including sales of distressed homes.  CoreLogic is forecasting housing prices to rise by 4.8% year-over-year in October 2019 and to drop by 0.7% month-over-month in November 2018.

Since the housing market bottomed out in March 2011, the CoreLogic index has risen by 57.8%.  As of October, home prices were 5.8% higher than they were at the April 2006 pre-crash peak, but when adjusted for inflation, home prices were 13.5% below the April 2006 peak.  CoreLogic CEO Frank Martell commented:

Rising prices and interest rates have reduced home buyer activity and led to a gradual slowing in appreciation.  October’s mortgage rates were the highest in seven and a half years, eroding buyer affordability.  Despite higher interest rates, many renters view a home purchase as a way to build wealth through home-equity growth, especially in areas where rents are rising quickly.  These include the Phoenix, Las Vegas and Orlando metro areas, where the CoreLogic Single-Family Rent Index rose 6 percent or more during the last 12 months.

As for mortgages, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed the number of mortgage applications increased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) increased 2.0% for the week ended November 30, 2018.  The seasonally adjusted Purchase Index increased 1% from the week prior while the Refinance Index increased 6%.

Overall, the refinance portion of mortgage activity increased to 40.4% from 37.9% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 7.4% from 7.9% 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 5.08% from 5.12% with points decreasing to 0.44 from 0.46 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond gained 60.9 basis points to close at $101.281 while the 10-year Treasury yield decreased 13.5 basis points to end at 2.858%.  The Dow Jones Industrial Average lost 1,149.51 points to close at 24,388.95.  The NASDAQ Composite Index retreated 361.29 points to close at 6,969.25.  The S&P 500 Index fell 127.08 points to close at 2,633.08.  Year to date on a total return basis, the Dow Jones Industrial Average has declined 1.34%, the NASDAQ Composite Index has gained 0.95%, and the S&P 500 Index has dropped 1.52%.

This past week, the national average 30-year mortgage rate dropped to 4.71% from 4.86%; the 15-year mortgage rate declined to 4.23% from 4.37%; the 5/1 ARM mortgage rate fell to 4.66% from 4.75% while the FHA 30-year rate dropped to 4.25% from 4.37%.  Jumbo 30-year rates decreased to 4.40% from 4.54%.

Economic Calendar – for the Week of December 10, 2018

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 4.0% coupon bond ($101.281, +60.9 bp) traded within a wider 89.0 basis point range between a weekly intraday high of $101.328 on Friday and a weekly intraday low of 100.063 on Monday before closing the week at $101.281 on Friday.

Mortgage bond prices continued to climb during the week, breaking above a dual band of overhead resistance at the 76.4% Fibonacci retracement level and 100-day moving average on Thursday and Friday.  These levels now become closest technical support.  The next level of overhead resistance is found at the 200-day moving average at $101.4399.

Something quite remarkable took place this past week.  Due to extreme fear in the stock market, investors sought a safe haven in bonds (including mortgage bonds), driving up bond prices to achieve extremely overbought conditions on a technical basis.  Both the slow and fast stochastic oscillators continued to show both the %K and %D lines in the oscillators measuring perfect “100” readings for the entire week!

This is a condition not seen in many years, if ever.  As long as the stock market shows weakness, the bond market will likely remain extremely overbought, but susceptible to a sharp correction.  Consequently, if and when the trade situation with China gets straightened out, it will likely trigger a strong relief rally in the stock market resulting in bond market profit-taking that will push bond yields and rates slightly higher.  It is impossible to predict when this scenario might play out.

Currently, the chart shows bond prices trending higher toward the 200-day moving average where the next level of resistance is found.  A move above this line would be considered bullish with rates likely to decline.  If bond prices are pushed lower from this level, rates should remain relatively stable as long as prices hold above the first support level identified in the chart at 100.913.

 

Tucson Mortgages Home Loan News 12-3-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of November 26, 2018
  • Economic Calendar – week of December 3, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market bounced back from its second correction of the year with the broader S&P 500 Index showing its best weekly gain since December 2011.  Treasuries also prospered with the 10-year Treasury yield falling to its lowest level in over two months to move just below the noteworthy 3% level.  The gains in stocks and bonds seem to have been precipitated by a speech made by Federal Reserve Chairman Jerome Powell on Wednesday.

Powell stated the federal funds rate is “just below” a neutral level that would neither stimulate the economy nor restrict economic growth to curb inflation.  This was a change in language from the Fed Chair who previously said in early October that the fed funds rate was “a long way from neutral.”

The softening in language likely stems from recent disappointments in economic data that would diminish the need for a steady pace of future rate hikes in 2019.  However, another 25 basis point rate hike appears to be in the cards for December after Thursday’s release of the FOMC’s minutes from its November 7-8 meeting did nothing to dispel the notion the Fed will be hiking rates next month.  The fed funds futures market is currently showing a probability for a December rate hike at 82.7%.

The week’s economic data were mixed.  The Commerce Department reported New Home Sales fell by nearly 9% in October to their lowest level in two and one-half years.  The decline was unexpected and a surprise given consensus expectations called for a 3.7% increase, although previous months’ sales were upwardly revised.

Pending Home Sales also chronicled a surprising decline with home prices rising less than expected in September.  Weekly jobless claims rose with their fourth consecutive increase, and a Midwest regional manufacturing index covering a nine-state region came in with a 50.6 reading, a five-month low, to miss Wall Street’s expectations by almost four points.

However, on a positive note, Personal Spending (+0.6% vs +0.4% forecast) and Income (+0.5% vs +0.4% forecast) increased at a solid rate in October and exceeded consensus estimates.

In housing, the Federal Housing Finance Agency (FHFA) released their House Price Index (HPI) last Tuesday showing house prices rose 1.3% in the third quarter of 2018.  House prices rose 6.3% from the third quarter of 2017 to the third quarter of 2018.  FHFA’s seasonally adjusted monthly index for September was up 0.2 percent from August.

Supervisory Economist Dr. William Doerner commented “Home prices continued to rise in the third quarter but their upward pace is slowing somewhat.  Rising mortgage rates have cooled down housing markets—several regions and over two-thirds of states are showing slower annual gains.”

Home prices increased in all 50 states and the District of Columbia between the third quarter of 2017 and the third quarter of 2018.

The top five areas in annual appreciation were: 1) Idaho 15.1%; 2) Nevada 15.0%; 3) Washington 10.6%; 4) Utah 10.0%; and 5) Colorado 9.2%.

The areas showing the smallest annual appreciation were:  1) Alaska 0.2%; 2) North Dakota 1.0%; 3) Louisiana 1.5%; 4) District of Columbia 1.6%; and 5) Connecticut 2.2%.

Also on Tuesday, the S&P/Case-Shiller 20-city index report covering the three-month period ending in September was released showing the index was flat on a seasonally adjusted basis in September compared to August.

Although it was 5.1% higher compared to its level a year ago, it recorded its lowest annual increase in nearly two years.  However, this appreciation level is still nearly double the rate of wage gains for the same time period.

Regionally, the West remains the best with Las Vegas seeing prices appreciate 13.5% for the year as of September.  Las Vegas was followed by San Francisco and Seattle.  However, Seattle’s fortunes may be reversing as prices there lost the most on a monthly basis in September.

The housing market is losing some steam as nine cities saw prices decline in September compared to August.  ShowingTime, a financial technology enabling more than 4 million property showings per month, indicated buyer traffic was 5% lower in October than a year ago, the third straight month of annual declines.

Also, showing activity was lower in the South compared to a year ago for the first time in 12 months.  In the West, showings were lower by double digits for the second month in a row.

Wednesday, New Home Sales fell 8.9% month-over-month in October to a seasonally adjusted annual rate of 544,000 to come in below the consensus forecast of 575,000. September was upwardly revised to 597,000 from 553,000.

Regionally, New Home Sales were 18.5% lower month-over-month, and 46.3% year-over-year in the Northeast; in the Midwest sales were down 22.1% month-over-month, and 16.7% year-over-year; in the South sales were down 7.7% month-over-month, and 11.6% year-over-year; in the West sales were down 3.2% month-over-month, and 1.3% year-over-year.

At the October sales pace, there is a 7.4 months’ supply of new homes for sale, which is the highest supply level since January 2011.  The increase in supply should foreshadow lower housing prices that will negatively impact profit margins for homebuilders.  The median sales price in October was 3.1% lower year-over-year to $309,700 while the average sales price climbed 0.3% higher to $395,000.

Thursday, the National Association of Realtors released their Pending Home Sales report showing sales falling to a four-year low, the latest sign of a housing-market correction.  Sales fell 2.6% to a reading of 102.1 in October from 104.8 in September, the lowest reading since June 2014.

The index, which tracks real estate contract signings, was down 6.7% compared to a year ago, missing the consensus forecast for an unchanged reading.  Contract signings usually precede closings by about 45 days, so the pending home sales release is considered a leading indicator for the existing-home sales report.

Regionally, the only region to see an increase in Pending Sales was the Northeast by 0.7%.  In the Midwest, sales dropped 1.8%; in the South they declined 1.1%, and in the West sales plunged 8.9%.

NAR chief economist, Lawrence Yun, commented “ten straight months of decline certainly isn’t favorable news for the housing sector.  The recent rise in mortgage rates has reduced the pool of eligible homebuyers… However, mortgage rates are much lower today compared to earlier this century, when mortgage rates averaged 8 percent.  Additionally, there are more jobs today than there were two decades ago.  So, while the long-term prospects look solid, we just have to get through this short-term period of uncertainty.”  Yun also suggested the Federal Reserve back off on their plan to systematically raising rates pointing out the recent sharp decline in oil prices.  “The inflationary pressure is all but disappearing.  Given that condition, there is less of a need to aggressively raise interest rates. Looking at the broader economy and keeping in mind that the housing sector is a great contributor to the economy, it would be wise for the Federal Reserve to slow the raising of rates to see how inflation develops.”

As for mortgages, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed the number of mortgage applications increased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 5.5% for the week ended November 23, 2018.  The seasonally adjusted Purchase Index increased 9% from the week prior while the Refinance Index increased 1%.

Overall, the refinance portion of mortgage activity decreased to 37.9% from 38.5% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 7.9% from 7.3% 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 5.12% from 5.16% with points decreasing to 0.46 from 0.48 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond lost 7.9 basis points to close at $100.234 while the 10-year Treasury yield decreased 2.8 basis points to end at 3.0460%.  The Dow Jones Industrial Average gained 1,252.51 points to close at 25,538.46.  The NASDAQ Composite Index advanced 391.56 points to close at 7,330.54.  The S&P 500 Index picked up 127.60 points to close at 2,760.16.  Year to date on a total return basis, the Dow Jones Industrial Average has added 3.31%, the NASDAQ Composite Index has gained 6.19%, and the S&P 500 Index has earned 3.24%.

This past week, the national average 30-year mortgage rate dropped to 4.86% from 4.94%; the 15-year mortgage rate declined to 4.37% from 4.43%; the 5/1 ARM mortgage rate remained unchanged at 4.75% while the FHA 30-year rate fell to 4.37% from 4.45%.  Jumbo 30-year rates decreased to 4.54% from 4.58%.

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

The FNMA 30-year 4.0% coupon bond ($100.672, +43.8 bp) traded within a wider 70.3 basis point range between a weekly intraday high of $100.703 on Friday and a weekly intraday low of 100.00 on Tuesday before closing the week at $100.672 on Friday.

Mortgage bond prices broke higher above resistance found at the 50-day moving average and in so doing moved up into an even more extremely “overbought” position than last week as measured by both the slow and fast stochastic oscillators.  Both the %K and %D lines in the oscillators are measuring perfect “100” readings – they can’t go above “100.”  Historically, the last two times over the past two years (06/06/17 and 08/31/17) when such extreme measurements occurred, bond prices trended substantially lower during the following month.  The current chart shows bond prices could move a little higher before encountering stiff resistance and moving lower to test support at the 50 and 25-day moving averages.  This scenario suggests mortgage rates could remain stable for a few more days before rising slightly higher over the next month.

Economic Calendar – for the Week of December 3, 2018

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

 

Tucson Mortgages Home Loan News 11-26-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of November 19, 2018
  • Economic Calendar – week of November 26, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market suffered sizeable losses this past week as several sectors entered bear markets led by the so-called FAANG stocks (Facebook, Amazon.com, Apple, Netflix, and Google parent Alphabet) that ended the week off more than 20% from their recent highs.  Crude oil has also entered into a bear market over the past three weeks crashing below $51 per barrel.  At least this should result in lower gasoline prices making holiday travel less expensive.

The week’s economic data were generally sub-par.  Wednesday, core Durable Goods Orders (orders excluding the volatile aircraft and defense sectors) were approximately flat in October following a decline in September that was larger than originally forecast.  Weekly jobless claims also increased to their highest levels since summer while the University of Michigan’s Consumer Sentiment Index declined more than forecast.

Measures of manufacturing and services activity from the IHS Markit Flash U.S. PMI report released Friday also missed expectations.  The Flash U.S. Composite Output Index fell to 54.4 from 54.9 in October, a 2-month low.  The Flash U.S. Services Business Activity Index fell to 54.4 from 54.8 in October, another 2-month low.  The Flash U.S. Manufacturing PMI dropped to 55.4 from 55.7 in October, a 3-month low, and the Flash U.S. Manufacturing Output Index dropped to 54.5 from 55.2 in October, another 3-month low.  The one bright spot for the week was the Existing Homes Sales report showing sales increasing more than expected to snap a six-month record of declines.

Tuesday, the Census Bureau released its October Housing Starts, Permits, and Completions report.  Housing Starts increased 1.5% month-over-month in October to a seasonally adjusted annual rate of 1.228 million units from an upwardly revised 1.210 million in September.

Building Permits fell slightly by 0.6% to a seasonally adjusted annual rate of 1.263 million from an upwardly revised 1.270 million in September.

 

Single-unit housing starts were lower across all regions except in the Northeast where starts rose by 14.8%.  Single-unit permits were up 10.9% in the Northeast and were 0.9% higher in the South.  However, they were 2.5% lower in the Midwest and were down 5.5% in the West.

The 1.137 million units under construction at the end of the period was 1.1% above the third quarter average and will register as a positive input in 4th Quarter GDP forecasts.  Yet, single-unit permits were down 0.6% while starts were 1.8% lower month-over-month and they were respectively down 0.6% and 2.6% on a year-over-year basis.

Wednesday, the National Association of Realtors (NAR) reported Existing Home Sales increased 1.4% month-over-month in October to a seasonally adjusted annual rate of 5.22 million.  The October reading represented the first month-over-month increase in seven months.  Year-over-year, total sales were 5.1% lower.

The median existing home price for all housing types increased 3.8% year-over-year to $255,400 – the 80th consecutive month of year-over-year gains.  The median existing single-family home price rose 4.3% year-over-year to $257,900.

Regionally, median home prices were +3.0% to $280,900 in the Northeast; +2.4% to $197,000 in the Midwest; +3.8% to $221,600 in the South; and +1.9% to $382,900 in the West.

Single-family home sales were up 0.9% month-over-month at a seasonally adjusted annual rate of 4.62 million but were 5.3% below the year-ago sales rate.  Unsold inventory is at a 4.3-months’ supply versus 4.4 months in September.  This is below the 6.0-months’ supply typically associated with a more balanced market. First-time buyers made up 31% of sales in October, down from 32% in September and 32% one year ago.

As for mortgages, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed the number of mortgage applications declined slightly from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 0.1% for the week ended November 16, 2018.  The seasonally adjusted Purchase Index increased 3% from the week prior while the Refinance Index fell 5% to reach its lowest level since December 2000.

Overall, the refinance portion of mortgage activity decreased to 38.5% from 39.4% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 7.3% from 7.7% 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 5.16% from 5.17% with points decreasing to 0.48 from 0.55 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond lost 7.9 basis points to close at $100.234 while the 10-year Treasury yield decreased 2.8 basis points to end at 3.0460%.  The Dow Jones Industrial Average lost 1,127.27 points to close at 24,285.95.  The NASDAQ Composite Index fell 308.89 points to close at 6,938.98.  The S&P 500 Index dropped 103.71 points to close at 2,632.56.  Year to date on a total return basis, the Dow Jones Industrial Average has lost 1.75%, the NASDAQ Composite Index has gained 0.52%, and the S&P 500 Index has dropped 1.54%.

This past week, the national average 30-year mortgage rate remained unchanged at 4.94%; the 15-year mortgage rate decreased to 4.43% from 4.44%; the 5/1 ARM mortgage rate rose to 4.75% from 4.71% while the FHA 30-year rate decreased to 4.45% from 4.47%.  Jumbo 30-year rates increased to 4.58% from 4.57%.

 

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

The FNMA 30-year 4.0% coupon bond ($100.234, -7.9bp) traded within a narrower 26.5 basis point range between a weekly intraday high of $100.328 on Monday and a weekly intraday low of 100.063 on Wednesday before closing the week at $100.234 on Friday.

Mortgage bond prices moved up into an “overbought” position while bouncing back toward the 50-day moving average resistance level last Friday.  The chart suggests we could see some range-bound “sideways” movement between the 25-day and 50-day moving averages this coming week which should provide a stable mortgage rate environment.

Economic Calendar – for the Week of November 26, 2018

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

 

Tucson Mortgages Home Loan News 11-19-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of November 12, 2018
  • Economic Calendar – week of November 19, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

Concerns over international trade, a decline in oil prices, and political ramifications from the mid-term election led to stock market weakness triggering an investor flight to “safety” in Treasury bonds resulting in a sharp drop in yields.

News of a circulating draft from the White House for plans to implement new tariffs on auto imports sparked a sell-off in stocks last Monday as traders believed there would be significant negative implications for domestic auto manufacturing if international supply chains were interrupted.

Tuesday, crude oil prices suffered their worst intraday decline since 2011 after President Trump criticized Saudi Arabia following their announcement of plans to cut crude oil exports by five hundred thousand barrels a day next month.  The Trump Administration has voiced concerns about high oil prices and doesn’t want to see global oil markets “overheat.”  Also on Tuesday, shares of financial stocks took a hit after Representative Maxine Waters, the apparent incoming head of the House Financial Services Committee, announced “the days of this committee weakening bank regulations” were coming to an end.

Thursday, there was news detailing efforts to resuscitate trade talks between the U.S. and China ahead of the upcoming G-20 meeting.  National Economic Council Director Larry Kudlow confirmed the U.S. and China have resumed trade discussions, and a Financial Times report suggested the U.S. and China are trying to reach a truce in the trade war ahead of the G-20 meeting scheduled for November 30 – December 1.  Also on Thursday, a poor reception to Great Britain Prime Minister Theresa May’s draft plan for the UK’s departure from the European Union (Brexit) resulted in a potential leadership crisis in the UK that alarmed international investors.  In a surprise move, Brexit secretary Dominic Raab and a couple of cabinet ministers resigned after approving the plan.  This will result in a meeting likely scheduled this week to determine if there will be a vote of no-confidence in Prime Minister Theresa May.

Friday, President Trump stated Chinese officials had sent him a list of 142 steps they were willing to take for a trade deal, which was “pretty complete.”  The U.S. has threatened to impose tariffs on all Chinese imports and raise the tariff rate from 10% to 25% on January 1, 2019, if progress is not made in negotiations.

In housing Tuesday, CoreLogic released its Loan Performance Insights Report for August showing the overall mortgage delinquency rate in the U.S. declined to its lowest level in more than 12 years.

On a national basis, the report shows 4% of mortgages were in some stage of delinquency during August (30 days or more past due, including those in foreclosure) representing a 0.6% point drop in the overall delinquency rate compared with August 2017, when it was 4.6%.  The foreclosure inventory rate measuring the share of mortgages in some stage of the foreclosure process was 0.5%, down 0.1% since August 2017.

The rate for early-stage delinquencies (30 to 59 days past due) was 1.8%, down from 2% in August 2017.  The portion of mortgages that were 60 to 89 days past due was 0.6%, down from 0.7% in August 2017.  The serious delinquency rate (90 days or more past due including loans in foreclosure) was 1.5%, down from 1.9% in August 2017.  This serious delinquency rate was the lowest for August since 2006 when it was 1.4% and was the lowest for any month since March 2007 when it was also 1.5%.

As for mortgages, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed the number of mortgage applications declined from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 3.2% for the week ended November 9, 2018.  The seasonally adjusted Purchase Index decreased 2.3% from the week prior while the Refinance Index fell 4.3% to reach its lowest level since December 2000.

Overall, the refinance portion of mortgage activity increased to 39.4% from 39.1% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 7.7% from 7.8% 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 5.17% from 5.15% with points increasing to 0.55 from 0.51 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond gained 71.9 basis points to close at $100.313 while the 10-year Treasury yield decreased 11.55 basis points to end at 3.0738%.  The Dow Jones Industrial Average dropped 576.08 points to close at 25,413.22.  The NASDAQ Composite Index fell 159.03 points to close at 7,247.87.  The S&P 500 Index lost 44.74 points to close at 2,736.27.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 2.81%, the NASDAQ Composite Index has gained 4.99%, and the S&P 500 Index has added 2.34%.

This past week, the national average 30-year mortgage rate fell to 4.94% from 5.05%; the 15-year mortgage rate decreased to 4.44% from 4.53%; the 5/1 ARM mortgage rate was unchanged at 4.71% while the FHA 30-year rate decreased to 4.47% from 4.57%.  Jumbo 30-year rates decreased to 4.57% from 4.61%.

Economic Calendar – for the Week of November 19, 2018

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 4.0% coupon bond ($100.313, +71.9bp) traded within a wider 76.6 basis point range between a weekly intraday high $100.313 on Friday and a weekly intraday low of 99.547 on Tuesday before closing the week at $100.313 on Friday – at the weekly high price.

Mortgage bond prices underwent a solid move higher as the stock market encountered weakness, and in the process, moved back above the 25-day moving average support level at $99.9438.  The bond is not yet “overbought” and should continue higher this coming week to test overhead resistance at the 50-day moving average located at $100.4188.  If this scenario plays out, mortgage rates should remain stable and may improve slightly.

 

Tucson Mortgages Home Loan News 11-12-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of November 5, 2018
  • Economic Calendar – week of November 12, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market continued to advance this past week while the bond market was mostly directionless.  Traders focused their attention on the midterm elections last Tuesday and seemed delighted at the prospects of legislative gridlock when it became apparent Democrats would take back the House of Representatives while the Republicans would remain in control of the Senate.

In fact, the major stock market indexes moved sharply higher on Wednesday with the S&P 500 Index registering its third-best daily gain over the past year.  Historically, the stock market has performed well in years with a Republican president and divided Congress, plus stocks rally on average by 37% after midterm elections and have rallied after every midterm election since 1946.

Thursday, the Federal Reserve released its latest monetary policy statement announcing it decided to leave the fed funds rate unchanged as was widely expected.  The Fed stated it expects to continue rate hikes as long as there is sustained economic growth, a strong labor market, and inflation close to its 2% target.  It is extremely likely the Fed will put a lump of coal in everyone’s Christmas stocking by raising rates at its upcoming December 19 FOMC meeting.  The Fed Funds Futures market currently pricing in a 75.8% probability for another 25 basis point rate hike.

In housing last Tuesday, CoreLogic® released their CoreLogic Home Price Index (HPI) and HPI Forecast for September 2018, showing home prices increased both year-over-year (+5.6%) and month-over-month (+0.4%).

The forward-looking CoreLogic HPI Forecast projects home prices will increase by 4.7% on a year-over-year basis from September 2018 to September 2019 and on a month-over-month basis, home prices are forecast to decrease by 0.6% from September to October 2018.

CoreLogic chief economist Dr. Frank Nothaft stated “The erosion of affordability in the highest cost markets has begun to slow home price growth.  Hawaii, California and Massachusetts had median sales prices above $400,000 this summer, the highest in the nation, while annual home price growth slowed steadily between June and September in these three states.

When comparing September 2018 with September 2017, annual price appreciation slowed more in these states than in the U.S. overall.

Nationally, annual price growth slowed 0.5 percentage points.  However, in Hawaii, California and Massachusetts, growth rates decreased by 1.7, 0.7 and 1.0 percentage points, respectively.”  Frank Martell, president and CEO of CoreLogic, commented “Our consumer research indicates younger millennials want to purchase homes but the majority of them consider affordability a key obstacle.  Less than half of younger millennials who are currently renting feel confident they will qualify for a mortgage, especially in such a competitive environment.”

According to the CoreLogic Market Condition Indicators (MCI), an analysis of housing values in the country’s 100 largest metropolitan areas based on housing inventory, 38% of metropolitan areas have an overvalued housing market as of September 2018.  The MCI analysis categorizes home prices in individual markets as undervalued, at value or overvalued, by comparing home prices to their long-run, sustainable levels, which are supported by local market fundamentals (such as disposable income).  Additionally, as of September 2018, 19% of the top 100 metropolitan areas were undervalued, and 43% were at value.

When looking at only the top 50 markets based on housing inventory, 46% were overvalued, 14% were undervalued, and 40% were at value.  The MCI analysis defines an overvalued housing market as one in which home prices are at least 10% above the long-term, sustainable level.  An undervalued housing market is one in which home prices are at least 10% below the sustainable level.

As for mortgages, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed the number of mortgage applications fell from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) declined 4.0% for the week ended November 2, 2018.  The seasonally adjusted Purchase Index decreased 5.0% from the week prior while the Refinance Index fell 3.0%.

Overall, the refinance portion of mortgage activity decreased to 39.1% from 39.4% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 7.8% from 7.6% 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 5.15% from 5.11% with points increasing to 0.51 from 0.50 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond gained 4.7 basis points to close at $99.594 while the 10-year Treasury yield decreased 3.07 basis points to end at 3.1893%.  The Dow Jones Industrial Average gained 718.47 points to close at 25,989.30.  The NASDAQ Composite Index rose 49.91 points to close at 7,406.90.  The S&P 500 Index added 57.95 points to close at 2,781.01.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 5.14%, the NASDAQ Composite Index has gained 7.29%, and the S&P 500 Index has added 4.02%.

This past week, the national average 30-year mortgage rate rose to 5.05% from 5.04%; the 15-year mortgage rate increased to 4.53% from 4.52%; the 5/1 ARM mortgage rate fell to 4.41% from 4.60% while the FHA 30-year rate increased to 4.57% from 4.55%.  Jumbo 30-year rates increased to 4.61% from 4.54%.

Economic Calendar – for the Week of November 12, 2018

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 4.0% coupon bond ($99.594, +4.7bp) traded within a narrower 46.8 basis point range between a weekly intraday high $99.859 on Wednesday and a weekly intraday low of 99.391 on Thursday before closing the week at $99.594 on Friday.

Mortgage bond prices remained “oversold” while trading in a mostly “sideways” direction near support at the 100% Fibonacci retracement level.  There was a weak buy signal on Friday from a positive stochastic crossover.  This suggests prices could move toward resistance found at the 25-day moving average at $99.987 and should this occur, mortgage rates will remain stable with the possibility of a slight improvement in rates.

 

 

Tucson Mortgages Home Loan News 11-5-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of October 29, 2018
  • Economic Calendar – week of November 5, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market managed to bounce higher during a volatile week of trading while bond yields were pushed higher (bond prices lower) as stock prices rose, and after the release of strong employment data from last Friday’s Employment Situation Summary (Jobs Report) for October.

Also adding some spice to trading during the week were a steady stream of reports and rumors that the U.S. is getting ready to slap tariffs on all remaining Chinese imports if no progress is made in trade negotiations between the two superpowers during the upcoming G20 summit in Argentina on November 30 and December 1.  The G20 summit is a meeting of finance ministers and leaders from Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United Kingdom, United States, and the European Union.  One major sticking point in negotiations is the rampant “theft of intellectual property”– primarily theft of U.S. technology by the Chinese that costs U.S. companies an estimated $225 billion to $600 billion annually.

Investor sentiment was lifted on Thursday following a tweet by President Trump that he had a long conversation with Chinese President Xi and “discussions are moving along nicely.”  However, sentiment sagged like a wet chalupa on Friday when the Administration’s economic adviser Larry Kudlow stated on CNBC that the U.S. is “not on the cusp” of a trade deal with China.  Currently, the

U.S. has tariffs on $250 billion worth of Chinese imports – almost half the value of all goods imported from China during the last year.

The highlight of this past week’s economic calendar was the Employment Situation Summary for October.

Nonfarm Payrolls increased by 250,000 and this was higher than the consensus forecast of 190,000.

Average Hourly Earnings increased 0.2% for October as expected, and have increased over the course of the year by 3.1%.

The unemployment rate remained at 3.7%, almost a 50-year low.  The strong jobs data suggests the Federal Reserve will remain on their path to tighten monetary policy.  While the Federal Reserve’s Federal Open Market Committee (FOMC) will be meeting this week, no rate hike is expected with a probability of only 7.2% for a 25 basis point hike.  However, the probability for the next rate hike is currently 79.2% at the Fed’s December 19 FOMC meeting.

In housing, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed the number of mortgage applications declined from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) dropped 2.5% for the week ended October 26, 2018.  The seasonally adjusted Purchase Index decreased 2.0% from the week prior while the Refinance Index fell 4.0%.

Overall, the refinance portion of mortgage activity decreased to 39.4% from 39.8% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 7.6% from 7.0% of total applications, its highest level since May 2017.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance remained unchanged at 5.11% with points decreasing to 0.50 from 0.52 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond lost 81.2 basis points to close at $99.547 while the 10-year Treasury yield increased 14.3 basis points to end at 3.220%.  The Dow Jones Industrial Average gained 582.52 points to close at 25,270.83.  The NASDAQ Composite Index rose 189.78 points to close at 7,356.99.  The S&P 500 Index added 64.37 points to close at 2,723.06.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 2.23%, the NASDAQ Composite Index has gained 6.57%, and the S&P 500 Index has added 1.85%.

This past week, the national average 30-year mortgage rate rose to 5.04% from 4.94%; the 15-year mortgage rate increased to 4.52% from 4.43%; the 5/1 ARM mortgage rate climbed to 4.60% from 4.45% while the FHA 30-year rate increased to 4.55% from 4.42%.  Jumbo 30-year rates increased to 4.54% from 4.38%.

Economic Calendar – for the Week of November 5, 2018

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 4.0% coupon bond ($99.547, -81.2 bp) traded within a wider 81.3 basis point range between a weekly intraday high $100.344 on Monday and a weekly intraday low of 99.531 on Friday before closing the week at $99.547 on Friday.

Mortgage bond prices failed to advance in the face of a rebounding stock market, negating the prior buy signal and technically oversold status.  There are times when technical signals just fail to work out and last week was a good example of this.

The bond once again finds itself “oversold” and close to support levels following a new sell signal last Wednesday from a negative slow stochastic crossover.  The stock market remains “on edge” over trade with China.  If a trade deal can be worked out with an end to the tariff war with China, the stock market will likely undergo a strong rally.

However, until such time a deal is reached, the stock market will likely remain volatile and could continue to undergo a correction which would push bond prices higher and yields and interest rates slightly and at least temporarily lower.  However, it is unlikely any trade deal between the U.S. and China will take place until after the G20 summit.  President Trump has offered to host a dinner for Chinese President Xi Jinping on December 1 in Buenos Aires after the summit, an invitation Xi Jinping has tentatively accepted.

 

Tucson Mortgages Home Loan News 10-29-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of October 22, 2018
  • Economic Calendar – week of October 29, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market suffered another horrible week to add to October’s reputation for being one of the worst investing months.  So far for October, the Dow Jones Industrial Average is 6.7% lower; the S&P 500 Index is down 8.8%; the Nasdaq Composite Index is down 10.9%; and the small cap Russell 2000 Index is 12.5% lower.  The equity market weakness and volatility along with some uninspiring economic data sparked increased demand for bonds and Treasuries, sending the yield on the benchmark 10-year Treasury note sharply lower for the week.

Economic reports released during the week were mixed.  Durable Goods Orders were slightly higher (+0.8%) in September but were considerably lower than August (+4.6%) and declined when excluding orders for defense aircraft.  On Friday, the Commerce Department reported its Advance Estimate of 3rd Quarter Gross Domestic Product (GDP) expanded at an annualized rate of 3.5%, slightly above consensus estimate of 3.3%.  However, investors are more concerned about future GDP growth and possible negative impacts to GDP caused by tariffs on overseas sales and input costs.  To be sure, U.S. tariffs are having a negative effect on the Chinese economy and there are signs of slowing economic growth in Europe, and investors are worried that a global economic slowdown will eventually lead to a slowdown here as well in the U.S.

In housing, the Census Bureau reported last Wednesday that New Home Sales fell 5.5% month-over-month in September to a seasonally adjusted annual rate of 553,000.

This was below the consensus forecast of 625,000 and was the weakest sales rate since December 2016.  Furthermore, August New Home Sales were revised sharply lower to 585,000 from 629,000.

 

Regionally, sales were off -40.6% in the Northeast; up +6.9% in the Midwest; down -1.5% in the South; and -12.0% lower in the West.

The median sales price of $320,000 was down 3.5% from the year-ago period while the average sales price of $377,200 was down 0.6% from the year-ago period.

Homes priced at $400,000 or above accounted for 31% of new homes sold compared to 34% in August, suggesting there are affordability issues for buyers due to rising mortgage rates.

There were 7.1-months of inventory of new homes based on the September sales rate and this is the highest supply level since March 2011.   Although median and average home prices were both lower year-over-year, it appears lower prices aren’t resulting in a greater number of new home sales due to rising mortgage rates having a negative impact on demand.

Also on Wednesday, Federal Housing Finance Agency (FHFA) announced their FHFA House Price Index (HPI) moved 0.3% higher in August.  Also, the previously reported 0.2% increase in July was revised upward to 0.4%.

On an annual basis from August 2017 to August 2018, house prices have appreciated 6.1%.

For the nine census divisions, seasonally adjusted monthly price changes from July 2018 to August 2018 fluctuated from -0.7% in the Middle Atlantic division to +0.8% in the Pacific division.

The 12-month changes were all positive, ranging from +4.0% in the Middle Atlantic division to +8.4% in the Mountain division.

Thursday, the National Association of Realtors (NAR) released their Pending Home Sales report showing pending sales rose 0.5% in September.  However, on a year-over-year basis monthly annual sales were 1.0% lower.  This was the ninth straight month of annual sales declines.  Lawrence Yun, chief economist for the NAR, had this to say “This shows that buyers are out there on the sidelines, waiting to jump in once more inventory becomes available and the price is right.  The general condition of the economy is excellent; it simply has not lifted home sales this year.  Home prices are still rising, so people who are purchasing are still seeing wealth gains.”

Regionally, pending home sales in the Northeast declined 0.4% for the month and were 2.7% below a year ago.  In the Midwest, sales increased 1.2% monthly but retreated 1.1% annually.  In the South, sales dropped 1.4% monthly but were 3.3% higher than a year ago.  As for the West, sales increased 4.5% monthly but declined 7.4%on a year-over-year basis. Also, homes in the West are the most expensive on average in the nation.

Affordability has increasingly been weighing on buyers.  Mortgage interest rates began rising at the beginning of September and are now a full percentage point higher than a year ago.

Elsewhere, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed the number of mortgage applications increased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) climbed 4.9% for the week ended October 19, 2018.  The seasonally adjusted Purchase Index increased 2.0% from the week prior while the Refinance Index increased 10.0%.

Overall, the refinance portion of mortgage activity increased to 39.8% from 38.1% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 7.0% from 7.1% 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 5.11% from 5.10% with points decreasing to 0.52 from 0.55 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond gained 46.8 basis points to close at $100.359 while the 10-year Treasury yield dropped 11.7 basis points to end at 3.0770%.  The Dow Jones Industrial Average lost 756.03 points to close at 24,688.31.  The NASDAQ Composite Index fell 281.82 points to close at 7,167.21.  The S&P 500 Index dropped 109.09 points to close at 2,658.69.  Year to date on a total return basis, the Dow Jones Industrial Average has lost 0.13%, the NASDAQ Composite Index has gained 3.82%, and the S&P 500 Index has dropped 0.56%.

This past week, the national average 30-year mortgage rate fell to 4.94% from 4.99%; the 15-year mortgage rate decreased to 4.43% from 4.47%; the 5/1 ARM mortgage rate dropped to 4.45% from 4.51% while the FHA 30-year rate decreased to 4.42% from 4.50%.  Jumbo 30-year rates fell to 4.38% from 4.42%.

Economic Calendar – for the Week of October 29, 2018

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 4.0% coupon bond ($100.359, +46.8 bp) traded within a wider 59.4 basis point range between a weekly intraday low $99.844 on Monday and a weekly intraday high of 100.438 on Friday before closing the week at $100.359 on Friday.  After trading slightly lower last Monday toward support, mortgage bonds bounced higher the rest of the week toward the first resistance level at the 25-day moving average ($100.366).

Mortgage bonds are showing a buy signal as the slow stochastic oscillator is trending higher and has just crossed back above the “20” oversold trigger line.  This suggests the bond could continue to rise and challenge overhead resistance levels – especially if the stock market continues to struggle this last week in October.  While some stock market mavens believe we may have seen a peak in the stock market and an end to this historically long bull market, there are others who believe the stock market has yet to undergo one last “blow-off top” before selling off for perhaps a decade or more.  While no one knows for sure what will happen, it appears in the short-term stocks are under selling pressure and this should benefit the bond market and push yields and mortgage rates slightly lower.

 

Tucson Mortgages Home Loan News 10-22-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of October 15, 2018
  • Economic Calendar – week of October 22, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market put in a “mixed” performance for the week despite companies representing about 14% of the S&P 500’s market cap reporting mostly favorable third quarter corporate earnings.  However, continuing angst over the U.S. – China trade conflict coupled with a report showing slower economic growth in China dampened investor sentiment.  China reported 6.5% year-over-year GDP growth and this was less than the previous quarter’s growth rate of 6.7% and less than the consensus forecast of 6.6% growth.

Bond yields edged higher following “hawkish” comments contained within the Federal Reserve’s minutes from their late-September monetary policy meeting.  The minutes, released last Wednesday, indicated a willingness among Fed policymakers to continue their steady pace of rate hikes.  The minutes also revealed discussion of raising rates past the “neutral” zone and into the “restrictive” zone in an effort to slow the economy and lower the risk of rising inflation.  As a result, the probability of a December rate hike remains high with the probability rising to 83.7% from 79.8% last week.

In housing, the Census Bureau released their latest Housing Starts and Building Permits data last Wednesday, showing Starts fell 5.3% in September to a seasonally adjusted annual rate of 1.201 million units.  This was a little below the consensus forecast of 1.221 million units with single-family starts declining 0.9% to 871,000.  Regionally, total starts were 29.0% higher in the Northeast with single-unit starts 6.7% lower.  The Midwest saw total starts 14.0% lower with single-unit starts 10.2% higher.  Total starts were 13.7% lower in the South with single-unit starts down 6.8%.  The West had a 6.6% increase in total starts with single-unit starts rising 7.0%.

Meanwhile, Building Permits declined 0.6% to a seasonally adjusted annual rate of 1.241 million permits coming in below the consensus forecast of 1.273 million.  The primary reason for this miss was a 9.3% drop in permits for buildings with five units or more.

Single-family permits climbed 2.9% to 851,000, matching last March’s total for the third-lowest annual rate this year.

Regionally, total permits were 9.8% lower in the Northeast with single-unit permits rising 13.7%.  Total permits in the Midwest were down 18.9% with single-unit permits 1.7% lower.  The South saw a gain of 0.6% in total permits with single-unit permits 1.6% higher.  Total permits out West increased 11.1% with single-unit permits gaining 5.8%.  The data from this latest report suggests the supply of new homes is failing to keep pace with the demand for new homes at more favorable and affordable price points.   Therefore, it is likely overall home sales activity will continue to be negatively impacted by affordability factors.

Friday, the National Association of Realtors (NAR) reported Existing Home Sales fell 3.4% month-over-month in September to a seasonally adjusted annual rate of 5.15 million.  This was below the consensus forecast of 5.30 million and was the lowest sales level since November 2015.  Also, total sales were 4.1% lower on a year-over-year basis.

Single-family home sales were 3.4% lower month-over-month at a seasonally adjusted annual rate of 4.58 million and were 4.0% below the year-ago sales level.  Existing home inventory for sale at the end of September fell from 1.91 million to 1.88 million but was up 1.1% from a year ago.  Unsold inventory currently stands at a 4.4-month supply versus 4.3 months in August and remains below the 6.0-month supply typically associated with a balanced market.  The median existing home price for all housing types rose 4.2% to $258,100 – the 79th straight month of year-over-year gains.  The median existing single-family home price was up 4.6% from a year ago to $260,500.  First-time buyers accounted for 32% of sales in September, up from 31% in August and 29% a year ago.  Coupled with the Housing Starts and Building Permits data, it appears a combination of high home prices, low inventory of affordable homes, rising mortgage rates, and the new tax law limiting incentives for homeownership are having an adverse impact on the housing sector this year.

Elsewhere, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed the number of mortgage applications decreased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 7.1% for the week ended October 12, 2018.  The seasonally adjusted Purchase Index decreased 6.0% from the week prior while the Refinance Index decreased 9.0%.

Overall, the refinance portion of mortgage activity fell to 38.1% from 39.0% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 7.1% from 7.3% 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 5.10% from 5.05% with points increasing to 0.55 from 0.51 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond fell 23.4 basis points to close at $99.891 while the 10-year Treasury yield increased 2.7 basis points to end at 3.194%.  The Dow Jones Industrial Average gained 104.35 points to close at 25,444.34.  The NASDAQ Composite Index fell 47.86 points to close at 7,449.03.  The S&P 500 Index added 0.65 of one point to close at 2,767.78.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 2.93%, the NASDAQ Composite Index has advanced 7.90%, and the S&P 500 Index has added 3.52%.

This past week, the national average 30-year mortgage rate rose to 4.99% from 4.94%; the 15-year mortgage rate increased to 4.47% from 4.42%; the 5/1 ARM mortgage rate climbed to 4.51% from 4.43% while the FHA 30-year rate remained unchanged at 4.50%.  Jumbo 30-year rates rose to 4.42% from 4.40%.

Economic Calendar – for the Week of October 22, 2018

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 4.0% coupon bond ($99.891, -23.4 bp) traded within a narrower 45.3 basis point range between a weekly intraday high of 100.266 on Wednesday and a weekly intraday low of $99.813 on Friday before closing the week at $99.891 on Friday.  After trading slightly higher from Monday through Tuesday, mortgage bonds traded lower toward support levels.

Mortgage bonds remain “oversold” while operating from a sell signal last Tuesday.  While we could see bonds continue down to support levels and then make a bounce higher, the overall trend remains negative.  If the third quarter earnings season just getting under way shows strong results, we could see the stock market begin to recover from recent weakness and move higher into the end of the year – a historically strong period for stocks.  If this scenario plays out, it would put added pressure on bond prices pushing yields and mortgage rates a little higher.

 

Tucson Mortgages Home Loan News 10-15-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of October 8, 2018
  • Economic Calendar – week of October 15, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

Indications of global economic weakness, rising Treasury bond yields, and seemingly no progress in trade negotiations between the U.S. and China combined to heavily weigh on investor sentiment during the week resulting in the sharpest stock market correction since last February.  The stock market swoon prompted President Trump to criticize the Federal Reserve, saying the Fed is “out of control” and has “gone crazy” with its rate hikes.  The Fed has raised rates three times this year and appears ready to raise rates once again at its December meeting.  The probability for a December rate hike currently stands at 79.7%.

Last Tuesday, the International Monetary Fund cut its 2018 and 2019 global economic growth forecast to 3.7% from 3.9%, stating tariffs between the U.S. and China, an imminent Brexit deal between Great Britain and the European Union, and the new trilateral trade agreement between the U.S., Canada, and Mexico could lead to slower growth.

Furthermore, investors received a mixed picture of inflation as producer (wholesale) prices for September rebounded to 0.2% from August’s reading of -0.1%.  However, consumer inflation as measured by the total Consumer Price Index (CPI) and core CPI, which excludes food and energy, only increased by 0.1% when both had been forecast to rise by 0.2%.  These monthly increases resulted in total CPI rising 2.3% year-over-year, versus 2.7% in August with the core CPI up 2.2%, unchanged from August.

Elsewhere, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed the number of mortgage applications decreased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 1.7% for the week ended October 5, 2018.  The seasonally adjusted Purchase Index decreased 1.0% from the week prior while the Refinance Index decreased 3.0%.

Overall, the refinance portion of mortgage activity fell to 39.0% from 39.4% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 7.3% from 7.1% 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 5.05% from 4.96% with points increasing to 0.51 from 0.49 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond gained 15.6 basis points to close at $100.125 while the 10-year Treasury yield decreased 6.6 basis points to end at 3.167%.  The Dow Jones Industrial Average plunged 1,107.06 points to close at 25,339.99.  The NASDAQ Composite Index fell 291.56 points to close at 7,496.89.  The S&P 500 Index lost 118.44 points to close at 2,767.13.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 2.51%, the NASDAQ Composite Index has advanced 8.60%, and the S&P 500 Index has added 3.50%.

This past week, the national average 30-year mortgage rate fell to 4.94% from 5.02%; the 15-year mortgage rate decreased to 4.42% from 4.50%; the 5/1 ARM mortgage rate climbed to 4.43% from 4.35% while the FHA 30-year rate decreased to 4.50% from 4.62%.  Jumbo 30-year rates fell to 4.40% from 4.50%.

Economic Calendar – for the Week of October 15, 2018

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 4.0% coupon bond ($100.125, +15.6 bp) traded within a narrower 62.5 basis point range between a weekly intraday high of 100.344 on Thursday and a weekly intraday low of $99.719 on Monday before closing the week at $100.125 on Friday.  Monday, the bond traded lower to touch exactly upon the 100% Fibonacci retracement support level before pulling slightly higher above this key level.  The bond then traded higher Tuesday through Thursday as the stock market was undergoing a correction.  Friday, the bond market softened as the stock market rallied with the major indexes moving back toward their 200-day moving averages after falling below them on Wednesday and Thursday.

Mortgage bond prices are now about mid-way between support and resistance levels while still “oversold” and operating on a buy signal from last Wednesday.  If the major stock indexes fail to rebound from their 200-day moving averages, it could lead to further stock market weakness while serving as a boost to bond prices resulting in slightly lower mortgage rates.

 

Tucson Mortgages Home Loan News 10-8-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of October 1, 2018
  • Economic Calendar – week of October 8, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

Domestic economic news caused a dramatic jump in bond yields that reached multi-year highs.  The yield on the benchmark 10-year Treasury note shot from 3.06% at the end of trading the previous week to 3.25% in intraday trading this past Friday.  This is the highest level for the 10-year Treasury note since the summer of 2011, and it had a negative impact on mortgage rates.

The largest move occurred Wednesday following an interview with Federal Reserve Chairman Jerome Powell when he described the economy as “firing on all cylinders.”  Wednesday’s economic data confirmed Powell’s comments as the Institute for Supply Management’s Non-manufacturing (Services) Index sharply increased in September to a record high of 61.1%, its highest level since the Institute began collecting data a decade ago.  Further, the ADP monthly employment report on private sector payroll growth also came in significantly higher than expected.

Bond yields continued to rise on Thursday, and especially on Friday, after the release of the Employment Situation (Jobs) report for September.  Also, fresh concerns over Italian and Greek debt triggered a rise in global bond yields with yields on 10-year German, Spanish, and Portuguese government debt rising to multi-month highs, and in the case of Great Britain, multi-year highs.

Tuesday, CoreLogic® released its CoreLogic Home Price Index (HPI™) and HPI Forecast™ for August 2018 showing home prices increased in both month-over-month and year-over-year time frames.

On a month-over-month basis, prices increased by 0.1% in August 2018.  Year-over-year from August 2017, home prices increased nationally by 5.5%.

Looking ahead, home prices are expected to decrease by 0.4% from August to September 2018 on a month-over-month basis.  On a year-over-year basis, the CoreLogic HPI Forecast predicts the national home-price index to continue to increase by 4.7% from August 2018 to August 2019.  Dr. Frank Nothaft, chief economist for CoreLogic, remarked “The rise in mortgage rates this summer to their highest level in seven years has made it more difficult for potential buyers to afford a home.  The slackening in demand is reflected in the slowing of national appreciation, as illustrated in the CoreLogic Home Price Index.  National appreciation in August was the slowest in nearly two years, and we expect appreciation to slow further in the coming year.”

Friday, the Employment Situation Summary (jobs report) for September came up short of the consensus forecast of 184,000 at just 134,000.  However, the August reading was revised higher by 69,000 to 270,000.

The Unemployment Rate dropped to 3.7%, its lowest level since 1969, even though the labor force participation rate remained unchanged at 62.7%.  Average Hourly Earnings growth was reported at 0.3% in September, but the August growth rate was revised down to 0.3% from 0.4%.

Overall, this latest jobs report shows the labor market remains strong.  Employers are having a difficult time finding qualified workers, and this will pressure wages higher and fuel wage-based inflation going forward.  Inflation leading to additional Fed rate hikes, higher bond yields, and higher mortgage rates.

Elsewhere, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed the number of mortgage applications remained unchanged from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) was unchanged for the week ended September 28, 2018.  The seasonally adjusted Purchase Index increased 0.1% from the week prior while the Refinance Index decreased 0.1%.

Overall, the refinance portion of mortgage activity was unchanged at 39.4% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 7.1% from 6.5% 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 4.96% from 4.97% with points increasing to 0.49 from 0.47 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond plunged 93.7 basis points to close at $99.969 while the 10-year Treasury yield increased 16.8 basis points to end at 3.233%.  The Dow Jones Industrial Average fell 11.26 points to close at 26,447.05.  The NASDAQ Composite Index fell 257.90 points to close at 7,788.45.  The S&P 500 Index lost 28.41 points to close at 2,885.57.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 6.99%, the NASDAQ Composite Index has advanced 12.82%, and the S&P 500 Index has added 7.93%.

This past week, the national average 30-year mortgage rate rose to 5.02% from 4.78%; the 15-year mortgage rate increased to 4.50% from 4.26%; the 5/1 ARM mortgage rate jumped to 4.35% from 3.95% while the FHA 30-year rate increased to 4.62% from 4.37%.  Jumbo 30-year rates climbed to 4.50% from 4.32%.

Economic Calendar – for the Week of October 8, 2018

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 4.0% coupon bond ($99.969, -93.7 bp) traded within a far wider 132.8 basis point range between a weekly intraday high of 101.047 on Tuesday and a weekly intraday low of $99.719 on Friday before closing the week at $99.969 on Friday.  After a slight rebound higher on Tuesday, mortgage bond prices plunged the remainder of the week on renewed inflation fears.  The bond fell through support levels to reach the 100% Fibonacci Retracement level at $99.719.  The bond is once again extremely “oversold,” but if the $99.719 support level fails to hold the next support level at $99.50 will come into play.   A continuation lower to the next support level should result in slightly higher mortgage rates.