Tucson Mortgages Home Loan News 1-14-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of January 7, 2018
  • Economic Calendar – week of January 14, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market recorded its third consecutive weekly gain to push the major indexes out of bear market territory while the Treasuries and mortgage bond markets slipped marginally lower.  So far, investors and economists have not shown much concern over the partial federal government shutdown that has entered into its third week.

Most of the week’s gains in stocks were attributed to optimism surrounding trade negotiations between the U.S. and China.  Three days of mid-level trade talks began last Monday in Beijing with the surprise attendance of China’s Vice Premier Liu He, China’s top economic official.  Liu reportedly will be visiting Washington in late January to continue trade talks.  China’s Ministry of Commerce said in a statement that “Although no breakthrough was achieved, the talks laid the foundation for the resolution of issues of mutual concern,” adding that the talks were “extensive, in-depth and detailed.”  President Trump also provided a boost to investor sentiment after tweeting trade talks were “going very well.”

The week’s economic reports were generally reassuring.  Weekly Jobless Claims fell below the consensus forecast to 216,000 from the prior week’s 233,000, and the NFIB Small Business Optimism Index fell less than expected in December to 104.4 from 104.8.  Friday, the Labor Department reported inflation as measured by the Consumer Price Index (CPI) had fallen in line with forecasts at -0.1% for December, with the Core CPI (which excludes food and energy costs) increasing by 0.2% for the month and 2.2% versus a year ago.

Wednesday, the Fed released its minutes from its December FOMC policy meeting.  The minutes revealed the path for U.S. monetary policy is “less clear” than before, and a contention the Fed can “afford to be patient” about future rate hikes.  Thursday, Fed Chairman Jerome Powell pointed to low inflation as one factor that will allow the Fed to “be patient in raising interest rates further.”  This rhetoric is currently fueling the fed funds futures market’s belief that there won’t be another interest rate hike in 2019.

In housing news, CoreLogic released its monthly Loan Performance Insights Report last Tuesday. The report shows 4.1% of mortgages were in some stage of delinquency nationally in October 2018, representing a 1 percentage point decline in the overall delinquency rate compared with October 2017, when it was 5.1%.  This was the lowest for the month of October in at least 18 years.

 

As of October 2018, the foreclosure inventory rate, measuring the share of mortgages in some stage of the foreclosure process, was 0.5%, down 0.1 percentage point since October 2017.  The rate for early-stage delinquencies – defined as 30 to 59 days past due – was 1.9% in October 2018, down from 2.3% in October 2017.  The share of mortgages that were 60 to 89 days past due in October 2018 was 0.7%, down from 0.9% in October 2017.  The serious delinquency rate – defined as 90 days or more past due, including loans in foreclosure, was 1.5% in October 2018, down from 1.9% in October 2017.  Frank Martell, president and CEO of CoreLogic, remarked “Despite some regional spikes related to hurricane and fire impacted areas, overall delinquency rates are near or at historic lows.”

As for mortgages, 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) increased 23.5% for the week ended January 4, 2019.  The seasonally adjusted Purchase Index increased 17% from a week prior while the Refinance Index increased 35%.

Overall, the refinance portion of mortgage activity increased to 45.8% from 42.7% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 8.4% of total applications from 7.6% the previous week.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.74% from 4.84% with points increasing to 0.47 from 0.42 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond lost 9.4 basis points to close at $101.969 while the 10-year Treasury yield increased 3.1 basis points to end at 2.699%.  The Dow Jones Industrial Average gained 562.79 points to close at 23,995.95.  The NASDAQ Composite Index added 232.62 points to close at 6,971.48.  The S&P 500 Index advanced 64.32 points to close at 2,596.26.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 2.87%, the NASDAQ Composite Index has gained 5.07%, and the S&P 500 Index has advanced 3.57%.

This past week, the national average 30-year mortgage rate rose to 4.57% from 4.54%; the 15-year mortgage rate increased to 4.14% from 4.11%; the 5/1 ARM mortgage rate rose to 4.42% from 4.40% while the FHA 30-year rate held steady at 4.17%.  Jumbo 30-year rates increased to 4.34% from 4.32%.

Economic Calendar – for the Week of January 14, 2019

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

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

The FNMA 30-year 4.0% coupon bond ($101.969, -9.4 bp) traded within a narrower 39.1 basis point range between a weekly intraday high of $102.188 on Monday and a weekly intraday low of 101.797 on Wednesday and Thursday before closing the week at $101.969 on Friday.

Mortgage bond prices moved lower to test technical support at the 61.8% Fibonacci retracement level ($101.856) and this level has held with Friday’s close.  The bond is no longer “overbought” so we could see bond prices lift for a bounce higher off of support, especially if the stock market pauses its recent advance or struggles this week.  The major stock indexes are currently slightly overbought and we could see some weakness in stocks this week for the benefit of the bond market.  Look for bonds to trade between support and resistance with mortgage rates holding steady or moving slightly lower.

 

Tucson Mortgages Home Loan News 1-7-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of December 31, 2018
  • Economic Calendar – week of January 7, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

Significant stock market volatility continued this past week with sharp swings lower and higher, most notably on Thursday and Friday.  The stock market began the week to the upside on Monday, December 31 after President Trump released a tweet he and President Xi Jinping of China had made “big progress” in trade talks.  However, some weak economic data out of China ignited investor concerns to send stock indexes sharply lower when trading opened on Wednesday.  The downward move was temporary though as the market rallied during the afternoon to close modestly higher.

Pronounced market volatility continued on Thursday and Friday.  After Wednesday’s market close, Apple CEO Tim Cook warned investors in a letter that the company was lowering its quarterly revenue guidance for the first time in 15 years.  The company lowered its sales forecast from earlier estimates of $89 billion to $93 billion to $84 billion for the quarter ended December 29.  In response, Apple shares plunged as much as 10% on Thursday, pulling the large-cap indexes sharply lower.

Friday, a blockbuster Jobs Report for December and favorable commentary from Federal Reserve Chairman Jerome Powell reversed investor sentiment sparking a strong rally in stocks while pushing bond prices lower and yields higher.  However, despite surging Friday in response to the Jobs Report and Powell’s commentary, Treasury yields ended the week lower as investors pursued safe-haven assets in light of the continued volatility in equity markets.

Wednesday in housing news, CoreLogic® released its Home Price Index (HPI) and HPI Forecast for November 2018, showing home prices increased both year-over-year and month-over-month.

Home prices increased nationally by 5.1% year-over-year from November 2017.  On a month-over-month basis, prices increased by 0.4% in November 2018.

As for the future, the CoreLogic HPI Forecast predicts home prices will increase by 4.8% on a year-over-year basis from November 2018 to November 2019.

On a month-over-month basis, home prices are forecast to decrease by 0.8% from November to December 2018.

Price gains in metropolitan cities show Las Vegas continues to surge with a gain of 11.7% followed by Denver with a gain of 6.6%.  The Western Region from the Rockies to the West Coast show the largest gains compared to the remainder of the country.

As for mortgages, 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) decreased 9.8% for the week ended December 28, 2018.

The seasonally adjusted Purchase Index decreased 8% from two weeks prior while the Refinance Index decreased 12%.

Overall, the refinance portion of mortgage activity decreased to 42.7% from 43.6% of total applications from the prior week.  The adjustable-rate mortgage share of activity was unchanged at 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 decreased to 4.84% from 4.86% with points decreasing to 0.42 from 0.47 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond gained 26.6 basis points to close at $102.063 while the 10-year Treasury yield decreased 5.0 basis points to end at 2.668%.  The Dow Jones Industrial Average gained 370.76 points to close at 23,433.16.  The NASDAQ Composite Index added 154.34 points to close at 6,738.86.  The S&P 500 Index advanced 46.20 points to close at 2,531.94.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 0.45%, the NASDAQ Composite Index has gained 1.56%, and the S&P 500 Index has grown 1.00%.

This past week, the national average 30-year mortgage rate dropped to 4.54% from 4.63%; the 15-year mortgage rate declined to 4.11% from 4.19%; the 5/1 ARM mortgage rate fell to 4.40% from 4.59% while the FHA 30-year rate dropped to 4.17% from 4.22%.  Jumbo 30-year rates decreased to 4.32% from 4.39%.

Economic Calendar – for the Week of January 7, 2019

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

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

The FNMA 30-year 4.0% coupon bond ($102.063, +26.6 bp) traded within a wider 75.0 basis point range between a weekly intraday high of $102.469 on Thursday and a weekly intraday low of 101.719 on Monday before closing the week at $102.063 on Friday.

Mortgage bond prices surged above resistance Monday through Thursday (excluding New Year’s Day on Tuesday when the markets were closed) then backed off on Friday when the stock market reversed direction with a sharp rally.  Mortgage bonds remain extremely overbought and susceptible to a slide lower toward former resistance that is now nearest technical support at the 61.8% Fibonacci retracement level ($101.856).  If the stock market can continue to regain its footing this week, mortgage bond prices could be pressured lower as money flows out of bonds and back into stocks.  There was a sell signal on Friday from a negative stochastic crossover and if this signal proves accurate bond prices will move lower toward support.  Should this scenario play out, mortgage rates could move slightly higher.

 

Tucson Mortgages Home Loan News 12-31-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of December 24, 2018
  • Economic Calendar – week of December 31, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

Extreme stock market volatility permeated the Christmas holiday trading week prompting many investors to seek relative safety in US Treasuries.  The flow of money into treasuries pushed the yield on the benchmark 10-year Treasury note down to its lowest level in almost nine months.  The CBOE Volatility Index (VIX) soared to a new 10-month high during the abbreviated Christmas Eve trading session, although on thin volumes.

Wednesday, trading volumes increased creating wide price swings in the major stock indexes.  The Dow oscillated by 1,186 points to record its first one-day 1,000-point gain in history and its largest percentage gain since 2009.  This was likely due to end-of-year position rebalancing by large institutional investors and pension funds.

Other factors for the surge in the stock market included rumors of a resumption in U.S.-China trade negotiations and reports of corporate insiders purchasing their companies’ stock reaching an eight-year high.  Also, a report on holiday retail spending from MasterCard showing the largest sales increase in five years (+5.1%) helped to restore and invigorate investor confidence.

In Housing news, home prices continued higher in October, rising 0.3% from the previous month, according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index (HPI).

The previously reported 0.2% increase in September remained unchanged.

The FHFA monthly HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac.

From October 2017 to October 2018, house price were 5.7% higher.

For the nine census divisions, seasonally adjusted monthly price changes from September 2018 to October 2018 ranged from -0.6% in the South Atlantic division to +1.4% in the Pacific division.

The 12-month changes were all positive, ranging from +3.3% in the Middle Atlantic division to +8.5% in the Mountain division.

Friday, the National Association of Realtors (NAR) reported Pending Home Sales, which measures signed contracts on existing homes, declined 0.7% to a reading of 101.4 from 102.1 in November, a four-year low.

This was below the consensus forecast calling for a 1.5% increase.  However, this report was written before a sharp decline in interest rates during the past month that have made mortgages more affordable.

Regionally, pending sales were 2.8% higher in the West and up 2.7% in the Northeast, but they fell 2.7% in the South and 2.3% in the Midwest.  However, sales were lower in all four regions when compared to the same time frame from a year ago.

Chief economist for NAR, Lawrence Yun, remarked “The latest decline in contract signings implies more short-term pullback in the housing sector and does not yet capture the impact of recent favorable conditions of mortgage rates.”  Yun predicts solid growth potential for home sales in the long-term as “Home sales in 2018 look to close out the year with 5.3 million home sales, which would be similar to that experienced in the year 2000.  But given the 17 million more jobs now compared to the turn of the century, the home sales are clearly underperforming today.  That also means there is steady longer-term growth potential.”  However, short-term, an “extended federal government shutdown could reduce sales by as many as 40,000 homes a month because federal flood insurance is temporarily unavailable.”

For the week, the FNMA 4.0% coupon bond gained 34.4 basis points to close at $101.797 while the 10-year Treasury yield decreased 7.0 basis points to end at 2.718%.  The Dow Jones Industrial Average gained 617.03 points to close at 23,062.40.  The NASDAQ Composite Index added 251.53 points to close at 6,584.52.  The S&P 500 Index advanced 69.12 points to close at 2,485.74.  Year to date on a total return basis, the Dow Jones Industrial Average has declined 6.70%, the NASDAQ Composite Index has dropped 4.62%, and the S&P 500 Index has lost 7.03%.

This past week, the national average 30-year mortgage rate dropped to 4.63% from 4.65%; the 15-year mortgage rate declined to 4.19% from 4.21%; the 5/1 ARM mortgage rate fell to 4.59% from 4.61% while the FHA 30-year rate dropped to 4.22% from 4.24%.  Jumbo 30-year rates decreased to 4.39% from 4.41%.

Economic Calendar – for the Week of December 31, 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 ($101.797, +34.4 bp) traded within a slightly narrower 59.4 basis point range between a weekly intraday high of $101.828 on Friday and a weekly intraday low of 101.234 on Wednesday before closing the week at $101.797 on Friday.

Mortgage bond prices dipped lower to test support last Wednesday before bouncing higher the remainder of the week to approach overhead resistance on Friday.  Mortgage bonds remain “extremely overbought” and have amazingly been “overbought” since November 20 – an exceedingly long and unusual time period.  This situation suggests bond prices will be susceptible to a sharp downward correction likely created by a sustained rebound in the stock market should such a rebound take place at the beginning of the New Year.  There are many negative factors already priced into the stock market so any good news that comes along could initiate a rally in stocks that would pressure bond prices lower.

In the short-term, we could see bond prices getting trapped between resistance at the 61.8% Fibonacci retracement level ($101.856) and support at the 200-day moving average ($101.368).  Should this happen, mortgage rates would remain relatively stable, fluctuating within a narrow range.

 

 

Tucson Mortgages Home Loan News 12-24-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of December 17, 2018
  • Economic Calendar – week of December 24, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

To say the stock market had another rough week is a huge understatement.  The major U.S. indexes set new yearly lows, and globally the eight largest stock exchanges entered into bear market territory after falling 20% or more from their 52-week highs.  U.S. equity markets are being battered by a multitude of concerns including rising interest rates, the ongoing trade fight with China, a fear the Federal Reserve could trigger a major recession by needlessly raising interest rates amid signs of slowing economic growth, and political turmoil in the US (“partial government shutdown”) and Great Britain (“Brexit”).  These concerns led to a flight to safety in U.S. Treasuries and bonds during the week pressuring yields lower.

Wednesday, the Federal Reserve’s Federal Open Market Committee (FOMC) decided to raise the target range for the fed funds rate to 2.25% to 2.50%, an increase of 25 basis points.  While this policy decision was widely expected, the financial markets were disappointed with Fed Chair Jerome Powell’s commentary during his press conference when he stated monetary policy does not need to be accommodative now and that the current policy is restrictive.  He further stated he doesn’t see the Fed changing its approach to balance sheet normalization and sees the preferred policy method being use of the fed funds rate.  However, the Fed in its economic projections reduced its forecast for the fed funds rate to 2.9% by the end of 2019 with two rate hikes and to 3.1% by the end of 2020 with one additional rate hike.

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) decreased 5.8% for the week ended December 14, 2018.  The seasonally adjusted Purchase Index decreased 7% from the week prior while the Refinance Index increased 2%.

Overall, the refinance portion of mortgage activity increased to 43.5% from 41.5% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 7.9% 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 decreased to 4.94% from 4.96% with points decreasing to 0.43 from 0.48 for 80 percent loan-to-value ratio (LTV) loans.

In Housing Monday, the NAHB Housing Market Index fell to a reading of 56 in December from 60 in November and well below the consensus market forecast of 61.  This is the lowest Index reading since May of 2015.

The sub-index for current single-family home sales slumped to 61 from 67.

The measure for home sales over the next six months went down to 61 from 65, and prospective buyers edged down to 43 from 45.

Historically, the NAHB Housing Market Index in the United States averaged 50.19 from 1985 until 2018, reaching an all-time high of 78 in December of 1998 and a record low of 8 in January of 2009.

Tuesday, the Housing Starts and Building Permits Report for November was reported stronger than forecast overall, but showed little to no growth for single-family units in both permits and starts.

Total starts increased 3.2% to a seasonally adjusted annual rate of 1.256 million units, but starts for single-family units dropped 4.6% to 824,000, the lowest since May 2017.  Total permits increased 5.0% to a seasonally adjusted annual rate of 1.328 million; however permits for single-family units were only 0.1% higher to 848,000.

Regionally, permits for single-units were 16.1% lower in the Northeast, 1.7% lower in the Midwest, 3.0% higher in the South, and 0.5% lower in the West.  Single-unit starts were 9.5% lower in the Northeast, 3.2% lower in the Midwest, 6.8% higher in the South, and 24.4% lower in the West.

Wednesday, Existing Home Sales were reported to have increased 1.9% month-over-month in November to a seasonally adjusted annual rate of 5.32 million, exceeding the consensus forecast of 5.20 million.  Total sales were down 7.0% from the same period a year ago.

The median existing home price for all housing types increased 4.2% year-over-year to $257,700.  The median existing single-family home price was up 5.0% year-over-year to $260,500.

Regionally, median home prices were +6.5% to $291,400 in the Northeast; +2.6% to $199,100 in the Midwest; +3.2% to $223,600 in the South; and +1.8% to $380,600 in the West.

Regionally, existing home sales were +7.2% in the Northeast; +5.5% in the Midwest; +2.3% in the South; and -6.3% in the West.

The inventory of homes for sale at the end of November fell to 1.74 million from 1.85 million but was 4.2% higher than a year ago.

Unsold inventory is at a 3.9-month’s supply versus 4.3 months in October and remains below the 6.0-month’s supply typically associated with a balanced market.

For the week, the FNMA 4.0% coupon bond gained 42.2 basis points to close at $101.453 while the 10-year Treasury yield decreased 10.1 basis points to end at 2.788%.  The Dow Jones Industrial Average lost 1,655.14 points to close at 22,445.37.  The NASDAQ Composite Index fell 577.68 points to close at 6,332.99.  The S&P 500 Index dropped 183.33 points to close at 2,416.62.  Year to date on a total return basis, the Dow Jones Industrial Average has declined 9.20%, the NASDAQ Composite Index has dropped 8.26%, and the S&P 500 Index has lost 9.61%.

This past week, the national average 30-year mortgage rate dropped to 4.65% from 4.72%; the 15-year mortgage rate declined to 4.21% from 4.28%; the 5/1 ARM mortgage rate fell to 4.61% from 4.70% while the FHA 30-year rate dropped to 4.24% from 4.25%.  Jumbo 30-year rates decreased to 4.41% from 4.46%.

Economic Calendar – for the Week of December 24, 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 ($101.453, +42.2 bp) traded within a 68.8 basis point range between a weekly intraday high of $101.688 on Wednesday and a weekly intraday low of 101.000 on Monday before closing the week at $101.453 on Friday.

Mortgage bond prices moved higher Monday through Wednesday, rising above the 200-day moving average (MA) resistance level, before backing off on Thursday and Friday.  The move above the 200-day MA is usually considered a bullish sign and this level now reverts to closest technical support.  However, the bond remains extremely overbought and Thursday’s trading completed a three-day “Evening Star” candlestick pattern – a bearish signal.  There was also a bearish signal from a negative stochastic crossover.

If bond prices can remain above their 200-day MA, we could see an advance toward the next level of resistance at the 61.8% Fibonacci retracement level ($101.856) and a slight improvement in mortgage rates.  A move below the 200-day MA could result in a continuation lower toward support at the 76.4% Fibonacci retracement level ($100.914) and a slight worsening in rates.

Tucson Mortgages Home Loan News 12-17-2018

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of December 10, 2018
  • Economic Calendar – week of December 17, 2018
  • Mortgage Rate Forecast with Chart

Weekly Review

It was another volatile week for Stocks.  Headlines regarding relations between China and the US caused significant Stock fluctuations.  In aggregate, Stocks ended the week lower by roughly 30 points, as measured by the S&P 500.  A big chuck of these losses came on Friday, caused by weak economic data from China and Europe, inciting fears of a global economic slowdown.  As far as developments between China and the US, China has agreed to lower tariffs on US auto imports from 40% to 15% for the next 90 days.

In economic news, the Consumer Price Index report, which measures inflation on the consumer level, showed that overall headline inflation dropped from 2.5% to 2.2%.  When looking deeper into the numbers, this was all due to the recent drop in oil prices.  When stripping out the volatile food and energy prices, the core reading showed that inflation actually rose from 2.1% to 2.2%.  Overall, inflation remains relatively tame and in line with the Fed’s target.  Next week the Fed’s favorite measure of inflation, Personal Consumption Expenditures (PCE) will be released.  This will be an important report to follow.  A surprise move higher in inflation can cause rates to move higher.

Inflation is the arch-enemy of Bonds and interest rates.  Why? Inflation erodes the value of a Bonds fixed return.  Meaning, the fixed amount of money you receive in interest from a Bond can buy less if the cost of goods goes up.  For that reason, interest rates have to rise in a higher inflation environment to compensate the investor.

The Fed’s 2 day meeting will begin on Tuesday of next week, with a statement and decision on hiking interest rates to follow on Wednesday.  There will also be a press conference held by Fed Chair, Jerome Powell, after the statement.  The market is estimating that there is a 78% probability that the Fed will hike, but it’s almost certain that they will.  This will curb inflation further.  It will also normalize the Fed Funds Rate more and give the Fed more bullets in their chamber, should the US go into recession.  If the US were to fall into a recession, the Fed will be able to cut interest rates to stimulate the economy.  The catch 22 is that if the Fed hikes interest rates too much, they could hike the US into a recession.  The statement and press conference to follow the Fed’s decision will be important and can impact the markets, depending on their stance on inflation, the economy, and most importantly, future hike plans for 2019.

The European Central Bank announced that they will end their asset purchases program at the end of December, cutting their purchases from 15B Euros in Bonds per month to zero.  They will, however, continue to reinvest the proceeds from maturing Bonds for an extended period of time…sound familiar?  This is exactly what the Fed did after Quantitative Easing.  After being an outright buyer, the Fed continued to purchase roughly $50B/month before beginning to taper reinvestments in October 2017, ending their purchases altogether this past October.  As you remember, rates moved higher following the stop in purchases.  Because the global economy is so interconnected, we have to be mindful that these moves by the ECB could pressures global rates higher.  Even though the ECB will continue to buy Bonds through reinvestments, it will be a reduction.

Mortgage Application data improved once again this week, due to another decline in rates the previous week.  Applications to purchase a home are now up 3.6% year over year, while Refinances are down 34%, which is an improvement from the 40% a few weeks ago.  Interest rates were about ¾% higher than they were last year, which is down from 1% last month.  It’s a positive sign to see the purchase market remain strong, even with higher rates and a housing market that is beginning to slow.

It’s important to make the distinction between a slowing housing market and a depreciating housing market.  The housing market is still strong and homes are still appreciating, albeit not at the levels they were previously.  Think of driving down a highway – If you were going 80mph and you slow to 50mph, you are still moving forward, just at a slower pace.  The media would lead you to believe that the housing market is falling apart, do not be fooled.

Economic Calendar – for the Week of December 17, 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

Mortgage Bonds have been trapped in a wide range between a dual floor of support, formed by the 100.914 Fibonacci Level and the 100-day Moving Average, and overhead resistance at the 200-day Moving Average.  Essentially, there is a solid floor of support that will support prices from moving much lower.  On the other hand, there is a ceiling of resistance that is very strong at the 200-day Moving Average that will likely keep a lid on prices and cap gains.  When Bonds are in a wide range like this, price swings and fluctuations can occur.  There is, however, more upside potential than downside risk.  This can all change next week, depending on some of the data and mainly the Fed Statement and decision.  Stay tuned.  The chart below shows the current technical levels above and beneath where Bonds are trading.

 

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.