Tucson Mortgages Home Loan News 9-18-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review:  week of September 11, 2017
  • Economic Calendar – week of September 18, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

This past week investors were rewarded with the three major stock indexes reaching new record all-time highs.  The rally began last Monday following early reports that damages from Hurricane Irma were not as severe as first projected when Irma was classified as a category 5 before slamming into Florida.  Also, the equity markets shrugged off another launch of a ballistic missile by North Korea that flew over the northern Japanese island of Hokkaido on Friday to continue the week’s safe-haven sell off.

The week’s most significant economic news arrived Thursday from a Commerce Department report showing the Consumer Price Index (CPI) rising by a greater than expected 0.4% in August resulting in a year-over-year increase of 1.9%.  The consensus estimate had called for a 0.3% increase in the August CPI.  This report led investors to consider the Federal Reserve’s view that the recent weaker than forecast inflation data was temporary might be true.  Expectations are now significantly increasing for another interest rate hike at the Fed’s December 13 FOMC policy meeting.  In fact, the Fed Funds futures market shows the probability of another rate hike by year end has jumped higher to 57.8% from 27.3% last week while the current implied probability for a rate-hike at the June 2018 FOMC meeting increased to 76.9% from last week’s 47.1%.

In housing, mortgage application volume increased during the week ending September 8.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) rose 9.9%.  The seasonally adjusted Purchase Index increased 11.0% from the prior week while the Refinance Index advanced 9.0%.

Overall, the refinance portion of mortgage activity increased to 51.0% of total applications from 50.9% in the prior week.  The adjustable-rate mortgage share of activity decreased to 6.7% of total applications from 7.2%.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance fell to 4.03% from 4.06% with points increasing to 0.40 from 0.38.

For the week, the FNMA 3.5% coupon bond lost 54.7 basis points to close at $103.28.  The 10-year Treasury yield increased 14.82 basis points to end at 2.2023%.  The major stock indexes ended the week higher.

The Dow Jones Industrial Average gained 470.55 points to close at 22,268.34, a new all-time high.  The NASDAQ Composite Index added 88.28 points to close at 6,448.47 and the S&P 500 Index gained 38.80 points to close at 2,500.23.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 12.68%, the NASDAQ Composite Index has advanced 19.79%, and the S&P 500 Index has added 11.68%.

This past week, the national average 30-year mortgage rate increased to 3.94% from 3.84%; the 15-year mortgage rate increased to 3.22% from 3.12%; the 5/1 ARM mortgage rate moved higher to 3.20% from 3.10% and the FHA 30-year rate rose to 3.50% from 3.35%.  Jumbo 30-year rates increased to 4.19% from 4.10%.

Economic Calendar – for the Week of September 18, 2017

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

Mortgage Rate Forecast with Chart – FNMA 30-Year 3.5% Coupon Bond

The FNMA 30-year 3.5% coupon bond ($103.28, -54.7 bp) traded within a 54.7 basis point range between a weekly intraday low of $103.703 on Monday and a weekly intraday high of $103.156 on Thursday before closing the week at $103.28 on Friday.

The stock market continued to move higher while bonds sold off in response.  Mortgage bonds fell below last week’s nearest support levels and these now become resistance levels.  The bond is no longer severely “overbought” and the slow stochastic oscillator is now moving toward an “oversold” level, but has not yet reached this position.  Technically it appears the bond will continue a little lower to test support at the 50-day and 100-day moving averages.  As a result, mortgage rates may rise slightly in the coming week.  Also, bond traders will be focusing on this coming week’s Federal Reserve FOMC meeting on Tuesday and Wednesday.  It is widely anticipated Fed Chair Janet Yellen will announce the beginning of a gradual reduction of assets, including mortgage bonds, to shrink its huge balance sheet resulting from its response to the 2008 financial crisis.  While Yellen is unlikely to “upset the apple cart” with such an announcement, you never know how traders will respond to the Fed’s plan for shrinking their balance sheet by selling bonds.

 

Tucson Mortgages Home Loan News 9-11-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review:  week of September 4, 2017
  • Economic Calendar – week of September 11, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

This past week investors were more focused on macro events than on individual economic reports. Stock market sentiment was negatively impacted by continuing geopolitical troubles with North Korea and its nuclear weapons testing program, the weekend arrival of potentially catastrophic Category 5 hurricane Irma in Florida, and waning confidence in Congress to enact meaningful tax reform that would ignite the US economy.  In particular, reports were circulating that the conservative House Freedom Caucus was beginning to write its own version of a tax reform plan, and the prospect of multiple, competing plans appeared to weigh on sentiment last Thursday.

Sentiment may also have been subdued by a speech by Minneapolis Fed President and FOMC member Neel Kashkari.  Considered a Fed “dove,” Kashkari said recent Fed rate hikes have been detrimental to the U.S. economy.  Kashkari’s comments sparked a rally in Treasuries that helped to push long-term Treasury yields lower.

Declining long-term Treasury yields and diminished expectations for another short-term rate hike from the Fed in December led to a decline in the U.S. dollar during the week.  The dollar fell to its lowest level against a basket of major foreign currencies since the beginning of 2015 and has fallen 10% against the euro in less than eight months.

The Fed Funds futures market currently shows a probability of another rate hike this year at just 27.3%, down from 40.8% last week.  The current implied probability for a rate-hike at the June 2018 FOMC meeting fell to 47.1% from last week’s 58.3%.

In housing, CoreLogic reported their Home Price Index (HPI) showed home prices increased significantly both month-over-month and year-over-year in July.  Nationally, the average cost of a single-family house increased nearly 0.9% from this time last month and 6.7% from this time last year.  The CoreLogic HPI Forecast suggests the trend of higher home prices will continue, leading to another 5% national gain in home prices year-over-year by July 2018.

CoreLogic CEO Frank Martell stated “Home prices in July continued to rise at a solid pace with no signs of slowing down.  The combination of steadily rising purchase demand along with very tight inventory of unsold homes should keep upward pressure on home prices for the remainder of this year. While mortgage interest rates remain low, affordability cracks are emerging as over a third of U.S. top cities are now overvalued.”

As for mortgages, mortgage application volume increased during the week ending September 1.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) rose 3.3%.  The seasonally adjusted Purchase Index increased 1.0% from the prior week while the Refinance Index advanced 5.0%.

Overall, the refinance portion of mortgage activity increased to 50.9% of total applications from 49.4% in the prior week.  The adjustable-rate mortgage share of activity increased to 7.2% of total applications from 6.9%.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance fell to 4.06% from 4.11% with points decreasing to 0.38 from 0.43.

For the week, the FNMA 3.5% coupon bond gained 35.9 basis points to close at $103.828.  The 10-year Treasury yield decreased 11.16 basis points to end at 2.0541%.  The major stock indexes ended the week lower.

The Dow Jones Industrial Average lost 189.77 points to close at 21,797.79.  The NASDAQ Composite Index dropped 75.14 points to close at 6,360.19 and the S&P 500 Index fell 15.12 points to close at 2,461.43.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 10.3%, the NASDAQ Composite Index has advanced 18.15%, and the S&P 500 Index has added 9.94%.

This past week, the national average 30-year mortgage rate decreased to 3.84% from 3.90%; the 15-year mortgage rate decreased to 3.12% from 3.18%; the 5/1 ARM mortgage rate moved lower to 3.10% from 3.18% and the FHA 30-year rate fell to 3.35% from 3.50%.  Jumbo 30-year rates decreased to 4.10% from 4.18%.

Economic Calendar – for the Week of September 11, 2017

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

Mortgage Rate Forecast with Chart – FNMA 30-Year 3.5% Coupon Bond

The FNMA 30-year 3.5% coupon bond ($103.828, +35.6 bp) traded within a 37.5 basis point range between a weekly intraday low of $103.578 on Tuesday and a weekly intraday high of $103.953 on Thursday and Friday before closing the week at $103.828 on Friday.

The bond managed to move higher this past week despite very choppy trading and while continuing to be extremely “overbought.”  The holiday-shortened week’s trading action was highlighted by alternating days of the bond moving higher, then lower.  This choppy trading also resulted in alternating daily buy and sell signals from positive and negative crossovers in the slow stochastic oscillator.  

It is difficult if not impossible to forecast directional movement in such a choppy trading environment.  Given that September is historically the worse performing month for the stock market; we could see mortgage bond and Treasury prices continue to improve slightly resulting in stable to slightly lower rates.  However, from a purely technical perspective, mortgage bonds are not likely to remain at such extremely overbought levels for much longer and will be susceptible to a move lower toward support levels resulting in rates edging a little higher from current levels.

 

Tucson Mortgages Home Loan News 9-4-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review:  week of August 28, 2017
  • Economic Calendar – week of September 4, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market ended higher for the week while bond prices moved ever so slightly higher resulting in the yield on the 10-year Treasury note to fall by less than one basis point on the week. Investors were bombarded by a bevy economic reports, the most significant of which were the inflation measuring core PCE Price Index for July and the August Employment Situation Summary. The inflation data contained within both of these reports helped to alleviate investor concerns of another rate hike by year end as the numbers were below expectations.

The core PCE Price Index, which excludes food and energy prices, fell on a year-over-year basis to +1.4% from +1.5% in June to stay well below the Federal Reserve’s year-over-year target of 2.0%.  It now seems unlikely that the Fed will be able to fulfill its forecast of one more rate hike by year-end.  Furthermore, the August Employment Situation Summary (jobs report) also showed no sign of accelerating wage inflation as there was only a weak increase in average hourly earnings of 0.1% when economists were expecting a 0.2% reading.

The Fed Funds futures market currently shows a probability of another rate hike this year at just 40.8% while suggesting the June 2018 FOMC meeting as the next most likely time for a rate-hike  with a current implied probability of 58.3%.

In housing, Pending Home Sales for July fell for the fourth time in five months with a decrease of 0.8% in the Pending Home Sales Index to 109.1.  Economists were expecting an increase of 0.5%.  Furthermore, June’s initial reading of an increase of 1.5% in Pending Sales was revised lower to 1.3%.  Lawrence Yun, National Association of Realtors (NAR) chief economist, said “With the exception of a minimal gain in the West, pending sales were weaker in most areas in July as house hunters saw limited options for sale and highly competitive market conditions.  The housing market remains stuck in a holding pattern with little signs of breaking through.  The pace of new listings is not catching up with what’s being sold at an astonishingly fast pace.  The reality, therefore, is that sales in coming months will not break out unless supply miraculously improves.”

As for mortgages, mortgage application volume decreased during the week ending August 25.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) fell 2.3%.  The seasonally adjusted Purchase Index declined 3.0% from the prior week while the Refinance Index decreased 2.0%.  

Overall, the refinance portion of mortgage activity increased to 49.4% of total applications from 48.7% in the prior week.  The adjustable-rate mortgage share of activity increased to 6.9% of total applications from 6.4%.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance fell to 4.11% from 4.12% with points increasing to 0.43 from 0.39.

For the week, the FNMA 3.5% coupon bond gained 6.3 basis points to close at $103.469.  The 10-year Treasury yield decreased 0.37 basis points to end at 2.1657%.  The major stock indexes ended the week higher.

The Dow Jones Industrial Average gained 173.89 points to close at 21,987.56.  The NASDAQ Composite Index jumped 169.69 points to close at 6,435.33 and the S&P 500 Index added 33.50 points to close at 2,476.55.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 11.3%, the NASDAQ Composite Index has advanced 19.42%, and the S&P 500 Index has added 10.6%.

This past week, the national average 30-year mortgage rate decreased to 3.90% from 3.95%; the 15-year mortgage rate decreased to 3.18% from 3.23%; the 5/1 ARM mortgage rate moved lower to 3.18% from 3.20% and the FHA 30-year rate fell to 3.50% from 3.60%.  Jumbo 30-year rates decreased to 4.18% from 4.23%.

Economic Calendar – for the Week of September 4, 2017

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

Mortgage Rate Forecast with Chart – FNMA 30-Year 3.5% Coupon Bond

The FNMA 30-year 3.5% coupon bond ($103.469, +6.3 bp) traded within a 39.1 basis point range between a weekly intraday low of $103.359 on Monday and a weekly intraday high of $103.750 on Friday before closing the week at $103.469 on Friday.

This past week we ended up pretty much with a sideways move although there were a couple of days during the week showing an increase in intra-day volatility, most notably on Tuesday and Friday.  The bond continues to be extremely “overbought” but is now more vulnerable to a turn lower as there is a new sell signal showing from a negative stochastic crossover as a result of Friday’s market action.  The bond closed on support on Friday, but any move lower will likely send prices toward the 25-day moving average leading to minimally higher mortgage rates in the coming week.

Tucson Mortgages Home Loan News 8-28-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review:  week of August 21, 2017
  • Economic Calendar – week of August 28, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market posted gains for the week largely due to a solid rally on Tuesday that may have been triggered by a report from Politico stating Republican lawmakers were working behind the scenes on tax reform legislation.  According to Politico, a consensus is emerging among top administration and congressional officials on ways to pay for individual and corporate tax cuts and reduced tax rates, including capping the mortgage interest deduction and eliminating the deduction for state and local tax payments.  Also, businesses would no longer be able to deduct interest payments.  Treasury prices increased during the week.  The yield on the 10-year Treasury Note fell by 2.80 basis points to end at 2.1694%.

The week’s economic and housing data continued to be mixed.  Durable Goods Orders declined by 6.8% in July, in sharp contrast to a gain of 6.4% during June.  The decline was largely driven by a substantial reduction in aircraft orders.  One encouraging piece of data came from the latest reading on core capital goods, a key measure of business investment, showing an increase of 0.4%.  Weekly Initial Jobless Claims increased slightly from 232,000 to 234,000, but remained well under market expectations of 237,000 claims.

In housing, the Federal Housing Finance Agency (FHFA) House Price Index (HPI) released last Tuesday showed home prices increased by 1.6% during the second quarter of 2017 compared to the first quarter.  For June 2017, the FHFA’s seasonally adjusted monthly index rose 0.1% from May.  On an annual basis from the second quarter of 2016 to the second quarter of 2017, home prices have risen 6.6%.  FHFA Senior Economist William Doerner remarked “U.S. house prices rose in most states during the second quarter.  New home sales are climbing but, relative to the overall population, they still remain low from a historical perspective.  The tight inventory is a major explanation for why house prices have been increasing every quarter over the last six years.”

New Home Sales for July disappointed by missing the consensus forecast of 615,000 with a seasonally adjusted annual reading of 571,000 that was 9.4% lower than an upwardly revised June rate of 630,000 (from an originally reported 610,000).  July’s reading was also 8.9% lower from the same period a year ago.  However, when taking into account the upward revisions that have taken place over the past three months that have collectively added 46,000 new home sales, the July sales pace was not really as bad as it first appeared.

The primary problem for New Home Sales appears to be a limited inventory of lower priced new homes for sale.  Also, higher average selling prices continue to act as a constraining factor.  The median sales price increased 6.3% year-over-year to $313,700 while the average sales price increased 4.6% to $371,200.  Based on the rate of July sales, the inventory of new homes for sale is currently at a 5.8-months’ supply versus 5.2 months for June.

Furthermore, the National Association of Realtors (NAR) reported last Thursday that Existing Home Sales edged 1.3% lower in July to a seasonally adjusted annual rate of 5.44 million versus a consensus forecast of 5.56 million.  Although the July’s sales rate was 2.1% above the year ago period, it was the lowest sales pace so far in 2017.  NAR Chief Economist Lawrence Yun commented “Homes are selling fast” while Zillow Senior Economist Aaron Terrazas stated “The American housing market is stuck in its own kind of stagflation: Existing home sales have been flat since last fall, while home values are up more than 4% over the same period.  For more than two years now, inventory has been has been contracting, pushing the housing market into an inventory crisis.”

Strong housing demand in July meant listings went into contract in under 30 days.  It also pushed prices higher.  The median existing home sales price in July was $258,300, a 6.2% increase compared to a year ago and the 65th straight month of year-over-year gains.  Inventory (1.92 million) was 9% lower than a year ago, and has fallen year-over-year for 26 consecutive months.  Unsold inventory is now at a 4.2-month supply at the current sales rate, versus 4.8 months a year ago and the 6.0-month supply typically associated with a more balanced real estate market.

One positive aspect was an increase in first-time home buyers who comprised 33% of buying volume compared to 32% in June.  However, that’s still substantially lower than the 40% market share historically taken by first-time home buyers.

As for mortgages, mortgage application volume decreased during the week ending August 18.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) fell 0.5%.  The seasonally adjusted Purchase Index declined 2.0% from the prior week while the Refinance Index increased 0.3%.  

Overall, the refinance portion of mortgage activity increased to 48.7% of total applications from 47.8% in the prior week.  The adjustable-rate mortgage share of activity decreased to 6.4% of total applications from 6.6%.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance was unchanged at 4.12% with points increasing to 0.39 from 0.38.

For the week, the FNMA 3.5% coupon bond gained 12.5 basis points to close at $103.406.  The 10-year Treasury yield decreased 2.80 basis points to end at 2.1694%.  The major stock indexes ended the week higher.

The Dow Jones Industrial Average added 139.16 points to close at 21,813.67.  The NASDAQ Composite Index rose 49.11 points to close at 6,265.64 and the S&P 500 Index gained 17.50 points to close at 2,443.05.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 10.38%, the NASDAQ Composite Index has advanced 16.39%, and the S&P 500 Index has added 9.12%.

This past week, the national average 30-year mortgage rate increased to 3.95% from 3.94%; the 15-year mortgage rate increased to 3.23% from 3.22%; the 5/1 ARM mortgage rate moved higher to 3.20% from 3.17% and the FHA 30-year rate remained unchanged at 3.60%.  Jumbo 30-year rates increased to 4.23% from 4.22%.

Economic Calendar – for the Week of August 28, 2017

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

Mortgage Rate Forecast with Chart – FNMA 30-Year 3.5% Coupon Bond

The FNMA 30-year 3.5% coupon bond ($103.406, +12.50 bp) traded within a 26.5 basis point range between a weekly intraday low of $103.188 on Tuesday and a weekly intraday high of $103.453 on Friday before closing the week at $103.406 on Friday.

Last week’s newsletter forecast range-bound trading with a sideways movement in mortgage bonds resulting in relatively stable mortgage rates for the week, and that was what we ended up with.  Rates differed on average by just a few basis points from the prior week.  At the risk of sounding like a broken record, not much has changed technically since last week.  The bond continues to be extremely “overbought” and susceptible to a turn lower, but could continue to be range-bound and trade between the identified support and resistance levels shown in the chart.

Additional sideways movement in the bond should result in stable mortgage rates in the coming week.

 

Tucson Mortgages Home Loan News 8-21-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review:  week of August 14, 2017
  • Economic Calendar – week of August 21, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

Volatility returned to the stock market this past week as geopolitical events exerted noticeable influence on traders.  Concerns about a potential military conflict with North Korea subsided to spark a rally in stocks last Monday that led the S&P 500 Index to record its largest one-day gain in almost four months.  However, these gains were entirely erased on Thursday with the S&P 500 Index’s largest decline in three months following protestor violence in Charlottesville, VA in addition to new terrorist attacks in Spain.  Investors are becoming increasingly worried that President Trump’s ability to move forward on economic and tax policy is being derailed by the constant criticisms voiced by opposing politicians and most of the so-called mainstream media.

The week’s economic data were mixed.  Retail Sales were reported stronger than expected and despite numerous negative headlines for retailers over the past several months, July’s Retail Sales were up 0.6% versus a +0.3% forecast.  Further, revisions in the data showed a +0.3% increase in June rather than the originally reported -0.2% decline.  For the trailing 12-month period, Retail Sales were 4.2% higher and near the five-year average.

In housing, July’s new Housing Starts and Building Permits were both more than 4% lower than June’s numbers with Starts declining by 4.8% to a seasonally adjusted annual rate of 1.155 million versus 1.217 million expected.  Permits fell by 4.1% to a seasonally adjusted annual rate of 1.223 million compared to expectations for 1.247 million.  Although Housing Starts were 5.6% lower than July of last year, the total for the first seven months of 2017 are about 2.5% ahead of 2016’s pace.  Also, July’s home builder sentiment was four points higher, recovering from an eight-month low in June.

As for mortgages, mortgage application volume increased minimally during the week ending August 11.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) rose 0.1%.  The seasonally adjusted Purchase Index declined 2.0% from the prior week while the Refinance Index increased 2%.  

Overall, the refinance portion of mortgage activity increased to 47.8% of total applications from 46.7% in the prior week.  The adjustable-rate mortgage share of activity decreased to 6.6% of total applications from 6.8%.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance declined to 4.12% from 4.14% with points unchanged at 0.38.

Following this past week’s political turmoil and economic news, the Fed Funds futures market now points to either the May or June 2018 FOMC meetings as the most likely time for the next rate-hike announcement with an implied probability of 50.4% for May and 59.9% for June.  Last week, the market expected the next rate hike to occur in June 2018 with an implied probability of 57.5%.

For the week, the FNMA 3.5% coupon bond lost 1.6 basis points to close at $103.281.  The 10-year Treasury yield increased 0.69 basis points to end at 2.1974%.  The major stock indexes ended the week lower.

The Dow Jones Industrial Average fell 183.81 points to close at 21,674.51.  The NASDAQ Composite Index dropped 40.03 points to close at 6,216.53 and the S&P 500 Index lost 15.77 points to close at 2,425.55.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 9.67%, the NASDAQ Composite Index has advanced 15.48%, and the S&P 500 Index has risen 8.34%.

This past week, the national average 30-year mortgage rate fell to 3.94% from 3.96%; the 15-year mortgage rate decreased to 3.22% from 3.24%; the 5/1 ARM mortgage rate was unchanged at 3.17% and the FHA 30-year rate was also unchanged at 3.60%.  Jumbo 30-year rates decreased to 4.22% from 4.24%.

Economic Calendar – for the Week of August 21, 2017

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

Mortgage Rate Forecast with Chart – FNMA 30-Year 3.5% Coupon Bond

The FNMA 30-year 3.5% coupon bond ($103.28, -1.60 bp) traded within a 42 basis point range between a weekly intraday low of $103.00 on Tuesday and Wednesday and a weekly intraday high of $103.42 on Friday before closing the week slightly lower at $103.28 on Friday.

Following a week of increased volatility in the financial markets the bond ended the week very nearly where it began with a loss of less than two basis points.  Technically, not much has changed since the last newsletter.  The next level of overhead resistance remains at $103.53.  It will take a further stock market correction for the bond to reach this target as the bond continues to be extremely “overbought” and susceptible to a turn lower.  With an expansion in the range between support and resistance as identified in the chart below, the bond could continue to be range-bound in the coming week.  Mortgage rates should hold at relatively stable levels in the coming.

 

Tucson Mortgages Home Loan News 8-14-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review:  week of August 7, 2017
  • Economic Calendar – week of August 14, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

It was risk-off trading this past week for stocks with the major indexes negatively influenced by some disappointing corporate earnings reports in the retail sector, and threatening rhetoric between North Korea and the U.S. that increased concerns about a possible military conflict on the Korean Peninsula.  As a result, the bond and precious metals markets received capital inflows with 10-year Treasury yields falling to 2.19%.

On Friday, the Bureau of Labor Statistics reported the latest inflation readings as measured by the Consumer Price Index (CPI) rose by only 0.1% in July when most economists were forecasting an increase of 0.2%.  The Core CPI, which strips out volatile food and energy costs, also was less than consensus expectations of 0.1% versus a forecast of 0.2%.  Over the past 12 months, consumer prices have increased 1.7%, which remains below the Federal Reserve’s 2% inflation target.  The subdued CPI data reduced the likelihood of a Fed rate hike with the Fed funds futures now showing just a 37.4% probability of a rate hike at the December FOMC meeting followed by probabilities of 38.8% and 45.7% for the January and March FOMC meetings respectively.

In housing, Mortgage application volume increased during the week ending August 4.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) rose 3.0%.  The seasonally adjusted Purchase Index gained 1.0% from the prior week while the Refinance Index increased 5%.  

Overall, the refinance portion of mortgage activity increased to 46.7% of total applications from 45.5% in the prior week.  The adjustable-rate mortgage share of activity increased to 6.8% of total applications from 6.6%.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance declined to 4.14% from 4.17% with points increasing to 0.38 from 0.36.

For the week, the FNMA 3.5% coupon bond gained 12.5 basis points to close at $103.297.  The 10-year Treasury yield decreased 7.32 basis points to end at 2.1905%.  The major stock indexes ended the week lower.

The Dow Jones Industrial Average fell 234.49 points to close at 21,858.32.  The NASDAQ Composite Index dropped 95.00 points to close at 6,256.56 and the S&P 500 Index lost 35.51 points to close at 2,441.32.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 10.60%, the NASDAQ Composite Index has advanced 16.23%, and the S&P 500 Index has risen 9.04%.

This past week, the national average 30-year mortgage rate fell to 3.96% from 3.99%; the 15-year mortgage rate decreased to 3.24% from 3.29%; the 5/1 ARM mortgage rate decreased to 3.17% from 3.18%; and the FHA 30-year rate fell to 3.60% from 3.65%.  Jumbo 30-year rates decreased to 4.24% from 4.28%.

Economic Calendar – for the Week of August 14, 2017

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

Mortgage Rate Forecast with Chart – FNMA 30-Year 3.5% Coupon Bond

The FNMA 30-year 3.5% coupon bond ($103.297, +25.0 bp) traded within a 44 basis point range between a weekly intraday low of $103.03 on Tuesday and a weekly intraday high of $103.47 on Thursday before closing the week higher at $103.297 on Friday.

The FNMA 30-year 3.5% coupon bond was able to move above resistance at $103.20 during the week on a flight to safety trade and this level now becomes nearest technical support.  The next level of overhead resistance is found at $103.53, and it will likely take a continuing decline in the stock market for the bond to reach this target as the bond remains extremely “overbought” and susceptible to a turn lower.  However, the bond could become range-bound between support and resistance as identified in the chart below and remain “overbought” for an extended period of time.  Regardless, mortgage rates should hold at relatively stable levels in the coming week unless there is a significant sell-off in stocks which would drive bond prices higher and yields and rates lower.

 

Tucson Mortgages Home Loan News 8-7-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review:  week of July 31, 2017
  • Economic Calendar – week of August 7, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

Although the stock market once again ended the week in a “mixed” fashion, the Dow Jones Industrial Average continued its march higher by setting consecutive new all-time highs during the week.  In fact, the Dow has set new all-time highs during each of the last eight trading days while crossing another 1,000 point milestone at 22,000 to close the week at 22,092.81.  Bond prices also gained some ground to send Treasury yields marginally lower.

The financial markets continue to be buoyed by mostly favorable economic data.  This past week Personal Income was reported unchanged at 0.0% for July versus a consensus forecast of a 0.3% increase, while Personal (consumer) Spending ticked higher by 0.1% in June after an upwardly revised 0.2% gain in May.  On the inflation front, the Core Personal Consumption Expenditures (PCE) Price Index, which excludes food and energy, increased by 0.1% in June to match expectations while the 12-month reading recorded a 1.5% increase.

Although the July ADP Employment data was weaker than expected with a reading of 178,000 new jobs created compared to 187,000 predicted by economists, the Employment Situation Summary (Jobs Report) for July was better than economic forecasts.  The Labor Department reported Non-farm Payrolls at 209,000, which was higher than the 181,000 expected.  The Unemployment Rate fell back to 4.3% from June’s reading of 4.4% to matching the reading for May, its lowest rate in 16 years.  Average Hourly Earnings rose 0.3% or by 9 cents to $26.36 to match the consensus forecast and is now up by 2.5% on the year.  Overall, both stock and bond participants liked what they saw in the jobs data with the strong job creation while wage inflation remained restrained.  The jobs data resulted in a slight increase in rate hike expectations for the Fed’s December FOMC meeting with the fed funds futures market now showing a 48.0% likelihood of a rate hike in December.  This is up from last Thursday’s closing reading of 46.8%.

In housing, the National Association of Realtors (NAR) reported their Pending Home Sales Index (PHSI) snapped a three month losing streak by posting a 1.5% gain in June to reach a reading of 110.2, up from May’s level of 108.6.  Lawrence Yun, chief NAR economist, remarked “The first half of 2017 ended with a nearly identical number of contract signings as one year ago, even as the economy added 2.2 million net new jobs.  “Market conditions in many areas continue to be fast-paced, with few properties to choose from, which are forcing buyers to act almost immediately on an available home that fits their criteria.  Low supply is an ongoing issue holding back activity. Housing inventory declined last month and is a staggering 7.1% lower than a year ago.  It appears the ongoing run-up in price growth in many areas and less homes for sale at bargain prices are forcing some investors to step away from the market.  Fewer investors paying in cash is good news as it could mean a little less competition for the homes first-time buyers can afford.”

Mortgage application volume decreased during the week ending July 28.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) fell 2.8%.  The seasonally adjusted Purchase Index fell 2.0% from the prior week while the Refinance Index decreased 4%.  

Overall, the refinance portion of mortgage activity decreased to 45.5% of total applications from 46.0% in the prior week.  The adjustable-rate mortgage share of activity decreased to 6.6% of total applications from 6.8%.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance were unchanged at 4.17% with points decreasing to 0.36 from 0.40.

For the week, the FNMA 3.5% coupon bond gained 25.0 basis points to close at $103.17.  The 10-year Treasury yield decreased 2.69 basis points to end at 2.2637%.  Stocks ended the week mixed with the NASDAQ Composite Index edging lower while the S&P 500 Index and Dow Jones Industrial Average moved higher.

The Dow Jones Industrial Average gained 262.50 points to close at 22,092.81.  The NASDAQ Composite Index fell 23.12 points to close at 6,351.56 and the S&P 500 Index added 4.73 points to close at 2,476.83.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 11.96%, the NASDAQ Composite Index has advanced 19.13%, and the S&P 500 Index has risen 11.67%.

This past week, the national average 30-year mortgage rate fell to 3.99% from 4.04%; the 15-year mortgage rate decreased to 3.29% from 3.33%; the 5/1 ARM mortgage rate increased to 3.18% from 3.17%; and the FHA 30-year rate fell to 3.65% from 3.75%.  Jumbo 30-year rates decreased to 4.28% from 4.33%.

Economic Calendar – for the Week of August 8, 2017

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

Mortgage Rate Forecast with Chart – FNMA 30-Year 3.5% Coupon Bond

The FNMA 30-year 3.5% coupon bond ($103.17, +25.0 bp) traded within a 51.5 basis point range between a weekly intraday low of $102.81 on Tuesday and a weekly intraday high of $103.328 on Thursday before closing the week higher at $103.17 on Friday.

Bond prices ended notably higher on Tuesday and Thursday before giving back some of the gains on Friday in reaction to the Jobs Report.  Still, the bond was able to break above a couple of resistance levels before falling back below resistance at the $103.20 level on Friday.  Friday’s reactionary trading resulted in a Hanging Man candlestick.  The Hanging Man is a bearish signal appearing in an uptrend and is a warning of a potential trend reversal lower.  However, the long lower shadow or wick of the Hanging Man is also a potentially a bullish signal, indicating that demand for the bond forced the price into the upper third of the price range for the day.  Therefore, confirmation of a trend reversal should be watched for.  Confirmation would be Monday’s candlestick closing below the real body of Friday’s Hanging Man candlestick.

Also, the bond is showing a sell signal from a negative stochastic crossover while extremely “overbought.”  This suggests the next move is lower toward support, and we could see a slight deterioration in mortgage rates this coming week.

 

Tucson Mortgages Home Loan News 7-31-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review:  week of July 24, 2017
  • Economic Calendar – week of August 1, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market ended the week “mixed” although the Dow Jones Industrial Average, the NASDAQ Composite Index, and the S&P 500 Index all reached new all-time highs during the week.  Bond prices ended the week a little lower with yields modestly rising.

Although there were several significant economic reports released during the week including the latest monetary policy statement from the Federal Reserve (FOMC), the financial markets largely shrugged off these news events.  The Fed’s latest policy directive kept the fed funds target range between 1.00% and 1.25% as widely expected.

More importantly though, the Fed signaled its intentions of beginning to reduce its bloated balance sheet by reducing its holdings of mortgage-backed securities and longer-dated Treasury notes “relatively soon.”  Most analysts took this to mean the Fed would begin this process in September or October resulting in upward pressure on long-term interest rates.  Anyone in the real estate market looking to buy a home should be aware of this as it appears mortgage rates may be heading higher in the not too distant future.

As a result of the Fed’s FOMC meeting last Wednesday, the fed funds futures market suggests the January FOMC meeting as next most likely time for another 25 basis point rate-hike announcement with an implied probability of 50.1%.

The week’s economic data were “mixed” with July Consumer Confidence reaching a higher than forecast reading of 121.1 versus 116.8 expected.  Manufacturing was less encouraging as June Durable Goods Orders excluding transportation came in at 0.2% when economists were expecting a reading of 0.5%.  Moreover, the first release of 2nd Quarter GDP disappointed with an annualized economic growth rate of 2.6% when economists had predicted an expansion of 2.8%.

In housing, the Federal Housing Finance Agency (FHFA) reported their seasonally adjusted monthly House Price Index (HPI) increased 0.4% in May with housing prices up by 6.9% on an annual basis.  Additionally, the S&P CoreLogic Case-Shiller U.S. National Home Price Index increased 5.6% in May to match the same increase as April.  

David Blitzer, S&P Dow Jones Indices managing director and chairman of the index committee, remarked “Home prices continue to climb and outpace both inflation and wages.  Housing is not repeating the bubble period of 2000 to 2006: price increases vary across the country unlike the earlier period when rising prices were almost universal; the number of homes sold annually is 20% less today than in the earlier period and the months’ supply is declining, not surging.  The small supply of homes for sale, at only about four months’ worth, is one cause of rising prices.  New home construction, higher than during the recession but still low, is another factor in rising prices.”

Meanwhile, Existing Home Sales fell 1.8% in June to a seasonally adjusted annual rate of 5.52 million versus 5.58 million forecast, largely due to low inventories.  The median existing home price increased 6.5% to $263,800, the 64th straight month of year-over-year gains.  The homes for sale inventory is now 7.1% lower than the same period a year ago with unsold inventory at a 4.3-month supply at the current sales rate.  First-time buyers were 32% of sales in June, down from 33% in May.

Furthermore, New Home Sales for June were reported at a seasonally adjusted annual rate of 610,000 to match the consensus forecast.  The median sales price fell 3.4% to $310,800 for the month, but average sales price rose 4.2% to $379,500.  The new homes for sale inventory now stands at a 5.4-months’ supply with the June sales rate with homes priced under $400,000 accounting for 69% of new homes sold during the month of June.

Mortgage application volume increased during the week ending July 21.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) gained 0.4%.  The seasonally adjusted Purchase Index fell 2.0% from the prior week while the Refinance Index increased 3%.  

Overall, the refinance portion of mortgage activity increased to 46.0% of total applications from 44.7% in the prior week.  The adjustable-rate mortgage share of activity increased to 6.8% of total applications from 6.7%.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance fell to 4.17% from 4.22% with points increasing to 0.40 from 0.31.

For the week, the FNMA 3.5% coupon bond lost 10.9 basis points to close at $102.92.  The 10-year Treasury yield increased 5.31 basis points to end at 2.2906%.  Stocks ended the week mixed with the NASDAQ and S&P 500 indexes slipping marginally lower while the Dow Jones Industrial Average marched higher.  However, all three of these major indexes reached new all-time highs during the week.

The Dow Jones Industrial Average rose 250.24 points to close at 21,830.31.  The NASDAQ Composite Index dropped 13.07 points to close at 6,374.68 and the S&P 500 Index lost 0.44 points to close at 2,472.10.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 10.46%, the NASDAQ Composite Index has advanced 18.42%, and the S&P 500 Index has risen 10.42%.

This past week, the national average 30-year mortgage rate rose to 4.04% from 4.00%; the 15-year mortgage rate increased to 3.33% from 3.29%; the 5/1 ARM mortgage rate decreased to 3.17% from 3.18%; and the FHA 30-year rate rose to 3.75% from 3.65%.  Jumbo 30-year rates increased to 4.33% from 4.29%.

Economic Calendar – for the Week of August 1, 2017

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

Mortgage Rate Forecast with Chart – FNMA 30-Year 3.5% Coupon Bond

The FNMA 30-year 3.5% coupon bond ($102.92, -10.9 bp) traded within a 53 basis point range between a weekly intraday low of $102.50 on Wednesday and a weekly intraday high of $103.03 on Monday before closing the week lower at $102.92 on Friday.

Bond prices fell Monday and Tuesday before bouncing back the remainder of the week.  The initial move lower sent the bond below several close-by support levels that were reclaimed by week’s end.  A new buy signal was triggered by Friday’s trading action, and the bond is not yet overbought, so we could see a test of overhead resistance at the 50-day moving average.  A move above this level should result in a slight improvement in mortgage rates, but if the bond is turned away from this level, we could see a slight deterioration in rates.  Market direction may not be fully determined until Friday with the arrival of the week’s most significant economic report – the July Employment Situation Summary (Jobs) report.

 

 

Tucson Mortgages Home Loan News 7-24-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of July 17, 2017
  • Economic Calendar – week of July 24, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market continued its advance with the NASDAQ Composite and S&P 500 Indexes reaching new all-time highs during the week while the Dow Jones Industrial Average slipped slightly lower.  Favorable earnings reports among technology and internet companies helped to boost the NASDAQ while a rally in crude oil prices aided energy sector stocks.

The bond market enjoyed moderate price increases with falling yields despite some favorable economic reports.  Initial jobless claims fell by 15,000 during the week ending July 15 to 233,000 to reach their lowest level in two months, suggesting continuing strength in the labor market.  Also, there were a couple of strong reports from the housing sector including the latest report on Housing Starts and Building Permits.

The Commerce Department surprised economists by reporting a rebound in homebuilding during June as Housing Starts surged 8.3% to a seasonally adjusted annual rate of 1.215 million units, the highest level since February.  Both single-family and multi-family construction increased.  Economists had forecast an increase in June Housing Starts to 1.160 million units from May’s upwardly revised reading of 1.122 million.  Although this was a welcome sign after seeing three straight months of declining Starts, construction activity remains constrained by rising lumber prices and land and labor shortages.  Meanwhile, Building Permits increased 7.4% to a seasonally adjusted annual rate of 1.254 million to exceed the consensus forecast of 1.196 million.

Mortgage application volume increased during the week ending July 14.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) gained 6.3%.  The seasonally adjusted Purchase Index increased 1.0% from the prior week while the Refinance Index increased 13%.

Overall, the refinance portion of mortgage activity increased to 44.7% of total applications from 42.1% in the prior week.  The adjustable-rate mortgage share of activity was unchanged at 6.7% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance remained unchanged at 4.22% with points decreasing to 0.31 from 0.40.

For the week, the FNMA 3.5% coupon bond gained 40.6 basis points to close at $103.03.  The 10-year Treasury yield decreased 9.44 basis points to end at 2.2375%.  Stocks ended the week mixed with the NASDAQ and S&P 500 indexes modestly higher while the Dow slipped slightly lower.

The Dow Jones Industrial Average fell 57.67 points to close at 21,580.07.  The NASDAQ Composite Index advanced 75.28 points to close at 6,387.75 and the S&P 500 Index gained 13.27 points to close at 2,472.54.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 9.20%, the NASDAQ Composite Index has advanced 18.66%, and the S&P 500 Index has risen 10.44%.

This past week, the national average 30-year mortgage rate fell to 4.00% from 4.06%; the 15-year mortgage rate decreased to 3.29% from 3.34%; the 5/1 ARM mortgage rate decreased to 3.18% from 3.22%; and the FHA 30-year rate fell to 3.65% from 3.75%.  Jumbo 30-year rates decreased to 4.29% from 4.35%.

Economic Calendar – for the Week of July 24, 2017

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

Mortgage Rate Forecast with Chart – FNMA 30-Year 3.5% Coupon Bond

The FNMA 30-year 3.5% coupon bond ($103.03, +40.6 bp) traded within a 48 basis point range between a weekly intraday low of $102.59 on Monday and a weekly intraday high of $103.08 on Friday before closing the week higher at $103.03.

Bond prices rallied during the week to move above overhead resistance found at the 38.2% Fibonacci retracement level (102.806); the 200-day moving average (102.83); the 25-day moving average (102.84); and the 50-day moving average (102.92).  These levels now revert back to support levels while resistance levels are now found at 103.20 and 103.53.  The chart suggests the bond can continue to rise higher toward resistance as the slow stochastic oscillator shows the bond is not yet overbought.  Should this scenario play out in the coming week as the chart suggests, it should lead to a slight improvement in mortgage rates.

 

Tucson Mortgages Home Loan News 7-17-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of July 10, 2017
  • Economic Calendar – week of July 17, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market resumed its bullish ways to end the week higher on firming oil prices and softer than anticipated inflation news.  The feeble inflation data coupled with disappointing economic news also helped to push Treasury prices higher and yields lower for the week.

Retail Sales for June fell for the second straight month, coming in below expectations at -0.2%. Economists had forecast June sales growth of 0.1%.  This weaker consumer spending will also have a negative influence on upcoming GDP models for the second quarter.  The Atlanta Fed’s GDPNow model forecast moved lower on Friday to 2.4% from 2.6% on Tuesday following the Retail Sales report.  Consumer sentiment is also sliding lower with the preliminary July reading of the University of Michigan’s Consumer Sentiment Index falling to 93.1 when analysts were expecting 95.1.

Core inflation at both the producer and consumer levels was reported below consensus forecasts at 0.1%.  Economists had expected core inflation at 0.2% for both.  This may cause the Federal Reserve to think twice about raising interest rates in December when Fed watchers next expect a rate hike.  In fact, Fed Chair Janet Yellen during her Wednesday testimony before the House Financial Services Committee referred to the recent weakness seen in inflation data by stating “monetary policy is not on a preset course” and “the Committee will be monitoring inflation developments closely in the months ahead.”  Also, Dallas Fed President and FOMC voting member Robert Kaplan stated he wants “greater evidence” of rising inflation before hiking rates again.

There were no economic reports from the housing sector other than the latest mortgage application data.  Application volume decreased during the week ending July 7.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) fell 7.4%.  The seasonally adjusted Purchase Index decreased 3.0% from the prior week while the Refinance Index decreased 13% to its lowest level since last January.

Overall, the refinance portion of mortgage activity decreased to 42.1% of total applications from 44.9% in the prior week.  The adjustable-rate mortgage share of activity decreased to 6.7% of total applications from 7.2%.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.22% from 4.20% with points increasing to 0.40 from 0.31.

For the week, the FNMA 3.5% coupon bond gained 21.9 basis points to close at $102.63.  The 10-year Treasury yield decreased 5.37 basis points to end at 2.3319%.  Stocks ended the week moderately higher.

The Dow Jones Industrial Average rose 223.40 points to close at 21,637.74.  The NASDAQ Composite Index advanced 159.39 points to close at 6,312.47 and the S&P 500 Index gained 34.09 points to close at 2,459.27.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 9.49%, the NASDAQ Composite Index has advanced 17.26%, and the S&P 500 Index has risen 9.85%.

This past week, the national average 30-year mortgage rate fell to 4.06% from 4.13%; the 15-year mortgage rate decreased to 3.34% from 3.38%; the 5/1 ARM mortgage rate increased to 3.22% from 3.20%; and the FHA 30-year rate was unchanged at 3.75%.  Jumbo 30-year rates decreased to 4.35% from 4.40%.

Economic Calendar – for the Week of July 17, 2017

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

Mortgage Rate Forecast with Chart – FNMA 30-Year 3.5% Coupon Bond

The FNMA 30-year 3.5% coupon bond ($102.63, +21.9 bp) traded within a 56 basis point range between a weekly intraday low of $102.36 on Monday and a weekly intraday high of $102.92 on Friday before closing the week higher at $102.63.

Bond prices rallied on Wednesday and then attempted a substantial rally on Friday before selling off hard after prices were unable to break above a dual layer of overhead resistance.  Friday’s trading action resulted in a “shooting star” candlestick – a potential bearish reversal signal.  This suggests the bond will likely test technical support before attempting any move higher.  Contrary to this signal is the presence of a positive stochastic crossover buy signal from an oversold position.

The bond is poised to continue a little lower for a test of support at the key 100-day moving average.  If this level holds, mortgage rates should hold steady and may improve slightly in the coming week.  However, if the 100-day moving average is breached to the downside, bond prices would move lower resulting slightly worse mortgage rates.