Tucson Mortgages Home Loan News 6-5-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of May 29, 2017
  • Economic Calendar – week of June 5, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market traded in a rather subdued fashion on Tuesday and Wednesday in a holiday shortened week before jumping higher on Thursday and Friday.  Stocks advanced Thursday following news the U.S. is pulling out of the Paris Climate Accord that was seen as having a destructive impact on the U.S. economy while bond prices modestly declined.  On Friday, both stocks and bonds reacted positively to the May Employment Situation Summary (jobs report).  The Goldilocks report was not too “hot” and not too “cold” – it was just right enough to pacify the bears.

While the headline nonfarm payrolls number was reported at 138,000, it easily missed the consensus forecast of 185,000 as did nonfarm private payrolls at 147,000 versus 172,000 expected.  Furthermore, each of the last two monthly job gains were downwardly revised with March’s payroll growth losing 29,000 while April’s gains dropped by 37,000 jobs.  Average hourly earnings also missed the consensus forecast with a 0.2% increase versus expectations of 0.3%.

The one encouraging piece of data was the unemployment rate falling to a 16-year low of 4.3%.  Also, the underemployment rate, which adds those who are working part-time but would prefer full-time work, fell to 8.4% from April’s reading of 8.6%.  Gary Cohn, President Trump’s chief economic advisor, has stated in recent months that the administration is concentrating on bringing the underemployment rate lower.

There were no housing reports released during the week other than the latest mortgage data.

Mortgage application volume declined during the week ending May 26.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) fell 3.4%.  The seasonally adjusted Purchase Index dropped 1.0% from the prior week, while the Refinance Index decreased 6.0%.

Overall, the refinance portion of mortgage activity decreased to 43.2% total applications from 43.9% from the prior week.  The adjustable-rate mortgage share of activity decreased to 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 remained unchanged at 4.17% with points decreasing to 0.32 from 0.39.

For the week, the FNMA 3.5% coupon bond gained 31.2 basis points to close at $103.38 while the 10-year Treasury yield decreased 9.09 basis points to end at 2.159%.  Stocks ended the week higher.

The Dow Jones Industrial Average added 126.01 points to end at 21,206.29.  The NASDAQ Composite Index advanced 95.61 points to close at 6,305.80 and the S&P 500 Index gained 23.25 points to close at 2,439.07.

Year to date on a total return basis, the Dow Jones Industrial Average has gained 7.31%, the NASDAQ Composite Index has advanced 17.14%, and the S&P 500 Index has risen 8.94%.

This past week, the national average 30-year mortgage rate fell to 3.98% from 4.02%; the 15-year mortgage rate declined to 3.24% from 3.28%; the 5/1 ARM mortgage rate dropped to 3.04% from 3.09%; and the FHA 30-year rate was unchanged at 3.75%.  Jumbo 30-year rates decreased to 4.27% from 4.30%.

Economic Calendar – for the Week of June 5, 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 ($103.38, +31.2 bp) traded within a narrow 47 basis point range between a weekly intraday high of $103.47 on Friday and a weekly intraday low of $103.00 on Thursday before closing the week at $103.38.

The bond moved only eight basis points higher from Tuesday through Thursday until jumping 24 basis points higher on Friday following a rather benign May Situation Summary (Jobs Report).  Friday’s trading powered the bond above a tough dual layer of overhead resistance at the 200-day moving average (103.24) and prior resistance at 103.297.  These levels should serve as nearest technical support.  If these support levels can manage to hold in the coming week, the bond could take out resistance at Friday’s intraday high of 103.469.  Further resistance lies considerably higher at the 23.6% Fibonacci retracement level at 103.967.  However, further movement to the upside will be difficult as the slow stochastic oscillator is at an extreme level suggesting a pending pullback in upward momentum.  Mortgage rates should hold fairly steady in the coming week.

 

Tucson Mortgages Home Loan News 5-29-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of May 22, 2017
  • Economic Calendar – week of May 29, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market bounced back this past week to record its seventh consecutive daily gain since selling off on Wednesday, May 17 following media speculation about the FBI’s investigation of potential Russian interference in the U.S. presidential election.  Meanwhile, the bond market largely traded sideways with mortgage bonds edging almost five basis points higher and mortgage rates holding steady.

Last Wednesday the Federal Reserve released the minutes from their May 2-3 FOMC meeting and there were no strong reactions from the stock and bond markets.  The minutes showed Fed officials were pondering on whether or not the first-quarter slowing in economic growth would be reversed during the second quarter.  However, Fed officials will only have about half of the 2nd Quarter’s economic data they will need to make a rate decision by their June 14 meeting, so there is a possibility the Fed may have to delay their next rate hike until September.  However, the Fed Funds Futures market is currently pricing in an 83.1% probability for a rate hike in June.

Fed officials also discussed their intention to gradually reduce the Fed’s $4 trillion balance sheet by shrinking their holdings of Treasury bonds and mortgage-backed securities.  This will likely put upward pressure on longer-term interest rates beginning later in the year.

There were several key economic reports from the housing sector this past week.  Tuesday, the Commerce Department reported New Home Sales fell 11.4% from nearly a 9-1/2-year high in April to a seasonally adjusted annual rate of 569,000 units.

However, March’s New Home Sales number was revised higher to 642,000 units (from 621,000), which was the highest level since October 2007.  The inventory level for new homes on the market increased 1.5% to 268,000 units and at April’s sales rate it would take 5.7 months to deplete the supply of houses on the market, up from 4.9 months in March.

Overall, the upward revisions in new sales for prior months more than compensated for the decline in April relative to the consensus forecast.  Therefore, the April report is not as poor as it initially appeared and the housing recovery likely remains unharmed within a tightening labor market.

Wednesday, the Federal Housing Finance Agency (FHFA) announced their House Price Index advanced 0.6% during the month of March.  This was slightly higher than the forecast of 0.5%. Year-over-year, the FHFA index has increased 6.2%.

Further, the National Association of Realtors reported Existing Home Sales fell 2.3% during April to 5.570 million units to come in below the consensus forecast of 5.650 million units.  Sales were 1.6% higher year-over-year.  Total housing inventory increased 7.2% to 1.93 million existing homes (9.0% lower than a year ago) marking the 23rd consecutive year-over-year decline.

Unsold inventory increased to a 4.2-month supply versus 3.8 months in March based on April’s sales rate.  The median home price for all housing types increased 6.0% to $244,800 while the median price for existing single-family homes rose 6.1% to $246,100.

As for mortgages, mortgage application volume increased during the week ending May 19.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) rose 4.4%.  The seasonally adjusted Purchase Index dropped 1.0% from the prior week, while the Refinance Index increased 11.0% to its highest level since March.

Overall, the refinance portion of mortgage activity increased to 43.9% total applications from 41.1% from the prior week.  The adjustable-rate mortgage share of activity increased to 8.2% of total applications.  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 4.23% with points increasing to 0.39 from 0.37.

For the week, the FNMA 3.5% coupon bond gained 4.7 basis points to close at $103.06 while the 10-year Treasury yield increased 1.54 basis points to end at 2.250%.  Stocks ended the week higher.

The Dow Jones Industrial Average added 275.44 points to end at 21,080.28.  The NASDAQ Composite Index advanced 126.49 points to close at 6,210.19 and the S&P 500 Index gained 34.09 points to close at 2,415.82.

Year to date on a total return basis, the Dow Jones Industrial Average has gained 6.67%, the NASDAQ Composite Index has advanced 15.36%, and the S&P 500 Index has risen 7.91%.

This past week, the national average 30-year mortgage rate held steady at 4.02%; the 15-year mortgage rate was unchanged at 3.28%; the 5/1 ARM mortgage rate was unchanged at 3.09%; and the FHA 30-year rate was unchanged at 3.75%.  Jumbo 30-year rates decreased to 4.30% from 4.31%.

Economic Calendar – for the Week of May 29, 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 ($103.06, +4.7 bp) traded within a narrower 40 basis point range between a weekly intraday high of $103.17 on Friday and a weekly intraday low of $102.77 on Wednesday before closing the week at $103.06.

The bond churned sideways on Monday and Tuesday week before edging marginally higher on Wednesday.  Interestingly, the bond closed at the same value of $103.06 on Wednesday through Friday.  Thursday, there was a weak buy signal from the slow stochastic oscillator taking place while “overbought.”  This suggests the bond could remain range-bound between current technical support ($102.806) and resistance ($103.297) this coming week unless the economic data from the May Employment Situation Summary (Jobs Report) on Friday triggers a strong reaction in the bond market.

Last week’s Initial Jobless Claims data will serve as the “sample week” for modeling and estimates for the upcoming ADP and Jobs Reports.  This data suggests there could be a stronger than forecast May Jobs Report that could result in a negative reaction in the bond market to send mortgage bond prices lower and interest rates slightly higher.

 

Tucson Mortgages Home Loan News 5-22-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of May 15, 2017
  • Economic Calendar – week of May 22, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The week’s economic news took a backseat to continuing political turmoil over alleged collusion between former Trump presidential campaign officials and the Russian government.  The stock market showed a sharp increase in volatility by plunging on Wednesday following allegations Tuesday evening that President Trump had requested ex-FBI Director James Comey to drop his investigation into retired general Michael Flynn who had business ties to Russia and briefly served as Trump’s National Security adviser.

Investors sold stocks and bought bonds as obstruction of justice allegations expanded the controversy surrounding Trump and threatened to weaken the Trump administration’s agenda for business-friendly legislation such as tax and health care reform.  As a result, bond prices moved higher sending Treasury yields to three-week lows.

In housing, the Commerce Department reported April Housing Starts fell 2.6% to a seasonally adjusted annual rate of 1.172 million units to miss the consensus forecast of 1.255 million.  A sizeable drop in apartment construction, an often volatile sector, was primarily responsible for the decline.  Construction of single-family homes edged higher by 0.4% to an annual rate of 835,000 units while construction of multi-family units fell 9.2% to a rate of 337,000 units.

Furthermore, Building Permits fell 2.5%, driven by a 4.5% decline in the single-family segment while multi-family permits increased by 1.4%.

As for mortgages, mortgage application volume decreased during the week ending May 12.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) fell 4.1%.  The seasonally adjusted Purchase Index dropped 3.0% from the prior week, while the Refinance Index retreated 6.0%.  Overall, the refinance portion of mortgage activity decreased to 41.1% total applications from 41.9% from the prior week.  The Refinance Index fell to its lowest level since September 2008.  The adjustable-rate mortgage share of activity decreased to 8.1% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance was unchanged at 4.23% with points increasing to 0.37 from 0.31.

For the week, the FNMA 3.5% coupon bond gained 39.1 basis points to close at $103.02 while the 10-year Treasury yield decreased 9.11 basis points to end at 2.2346%.  Stocks ended the week lower.  The Dow Jones Industrial Average fell 91.77 points to end at 20,804.84.  The NASDAQ Composite Index dropped 37.53 points to close at 6,083.70 and the S&P 500 Index lost 9.17 points to close at 2,381.73.  Year to date, the Dow Jones Industrial Average has gained 5.01%, the NASDAQ Composite Index has advanced 11.52%, and the S&P 500 Index has risen 6.00%.

This past week, the national average 30-year mortgage rate declined to 4.02% from 4.09%; the 15-year mortgage rate fell to 3.28% from 3.34%; the 5/1 ARM mortgage rate edged higher to 3.09% from 3.07%; and the FHA 30-year rate dropped to 3.75% from 3.85%.  Jumbo 30-year rates decreased to 4.31% from 4.36%.

Economic Calendar – for the Week of May 22, 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 ($103.02, +39.1 bp) traded within a 83 basis point range between a weekly intraday high of $103.297 on Thursday and a weekly intraday low of $102.469 on Tuesday before closing the week at $103.02.  Wednesday, mortgage bonds powered their way above a previously formidable dual layer of technical resistance formed by the 25-day moving average (102.67) and the 38.2% Fibonacci retracement level at $102.81.  Wednesday’s advance coincided with weakness in the stock market triggered by political turmoil.  The bond then traded lower on Thursday when the stock market showed greater stability and was turned away from the 200-day moving average resistance level (103.34).

The stock market continued to recover on Friday, helping to push bonds lower for a successful test of support (and former resistance) at the 38.2% Fibonacci retracement level (103.297).  The bond now finds itself nearly “overbought” while just above what appears to be a solid layer of technical support.  If support holds in the coming week, mortgage rates should remain very close to where they currently are.  However, a failure to hold support could lead to a slight worsening in rates to end where they were a couple of weeks ago.

 

Tucson Mortgages Home Loan News 5-15-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of May 8, 2017
  • Economic Calendar – week of May 15, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock and bond markets traded relatively flat for the week.  The major stock indexes ended “mixed” with the Dow Jones Industrial Average and S&P 500 edging lower while the NASDAQ Composite Index reached another new high before recording a 20 point weekly gain.  Mortgage bonds gained a few basis points while most mortgage rates ended the week unchanged from the prior week.

Political turmoil generated by scheming democrats aided by a colluding mainstream media over President Trump’s firing of FBI Director James Comey appeared to have weighed on investor sentiment.  The generated political storm raised uncertainty about the ability of the president to build a consensus to pass market-friendly legislation including meaningful tax reform.  Ongoing tensions from North Korea also hindered the stock market after the North Korean ambassador to the UN voiced new threats directed at the U.S. on Tuesday.

The week’s economic news was also mixed.  Weekly Initial Jobless Claims were reported below consensus estimates and near four-decade lows, while continuing claims hit their lowest level since 1988. April Retail Sales disappointed with a less than expected increase of 0.4% versus a 0.6% forecast.  Inflation as measured by the Consumer Price Index (CPI) was benign with a gain of 0.2% while the Core CPI, which excludes food and energy, gained only 0.1% when the consensus forecast was for a reading of 0.2%.  On a year-over-year basis, total CPI is up 2.2% while the Core CPI has risen 1.9%.  Chicago Fed President Charles Evans remarked after the CPI report that he expects one or two additional rate hikes this year with the actual number depending on the level of inflation.  The June FOMC meeting on June 14 still looks like the date for the next rate hike.  The Fed funds futures market currently shows an implied probability of 78.5% for a hike.

As for mortgages, mortgage application volume increased during the week ending May 5.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) rose 2.4%.  The seasonally adjusted Purchase Index increased 2.0% from the prior week, while the Refinance Index increased 3.0%.  Overall, the refinance portion of mortgage activity increased to 41.9% total applications from 41.6% from the prior week.  The adjustable-rate mortgage share of activity decreased to 8.2% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance was unchanged at 4.23% with points decreasing to 0.31 from 0.32.

For the week, the FNMA 3.5% coupon bond gained 3.1 basis points to close at $102.63 while the 10-year Treasury yield decreased 2.48 basis points to end at 2.3257%.  Stocks ended the week mixed.  The Dow Jones Industrial Average fell 110.33 points to end at 20,896.61.  The NASDAQ Composite Index gained 20.47 points to close at 6,121.23 and the S&P 500 Index lost 8.39 points to close at 2,390.39.  Year to date, the Dow Jones Industrial Average has gained 5.74%, the NASDAQ Composite Index has advanced 13.71%, and the S&P 500 Index has risen 6.79%.

This past week, the national average 30-year mortgage rate held steady at 4.09%; the 15-year mortgage rate was unchanged at 3.34%; the 5/1 ARM mortgage rate edged lower to 3.07% from 3.08%; and the FHA 30-year rate was unchanged at 3.85%.  Jumbo 30-year rates were also unchanged at 4.36%.

Economic Calendar – for the Week of May 15, 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, +3.1 bp) traded within a 66 basis point range between a weekly intraday high of $102.72 on Monday and a weekly intraday low of $102.06 on Thursday before closing the week at $102.63.  Mortgage bonds traded down for a test of support for most of the week before strongly springing back on Friday.  Friday’s rebound triggered a new buy signal from a positive stochastic crossover from an “oversold” position.  The bond should continue higher for a test of formidable resistance at the 25-day moving average at $102.67 and the 38.2% Fibonacci retracement level at $102.81.  The bond will have to break above these levels in order for us to see a meaningful improvement in mortgage rates.  If the bond is turned away from resistance, rates should remain close to present levels.

 

Tucson Mortgages Home Loan News 5-8-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of May 1, 2017
  • Economic Calendar – week of May 08, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes extended their gains with the S&P 500 Index and the Nasdaq Composite Index both reaching new all-time highs during the week.  A mixture of diverse earnings reports, political events, and economic news prompted investors to take a wait-and-see approach during the week which translated into modest market swings.  The earnings calendar was led by technology titan Apple which ended the week with a five point gain even though 2nd quarter revenue and future guidance reported after the close on Tuesday seemed to disappoint a number of investors.

Political events included legislation to continue funding the federal government until September and passage in the House of Representatives for a health care plan alternative to the Affordable Care Act.  Investors also cast their attention on an upcoming presidential run-off election (Sunday May 7) between polling favorite and pro-European Union (EU) globalist Emmanuel Macron and anti- EU nationalist Marine Le Pen.  Global markets reacted favorably ahead of the election as it was believed a Macron win would be more beneficial for the EU economy.

Economic reports were mixed during the week, but these were overshadowed by the Labor Department’s April Employment Situation Summary (Jobs Report).  The report was stronger than forecast with nonfarm payrolls reaching 211,000 versus expectations for 180,000 new jobs.  Non-farm private payrolls added 194,000 jobs versus a forecast of 175,000.  The unemployment rate fell to a decade low of 4.4% and was lower than the consensus forecast of 4.6%.  Average hourly earnings increased 0.3% to match the consensus forecast while March’s reading was revised lower to 0.1% from 0.2%.  The average workweek was reported at 34.4 hours – in line with estimates.

The bond market initially reacted negatively toward the jobs report on Friday before recovering, but was pressured lower earlier in the week after the Federal Reserve’s post-FOMC meeting statement Wednesday regarded weak first-quarter growth as “transitory.”  This strengthened expectations for a June rate hike and drove Treasury yields higher.   Indeed, the fed funds futures market is currently pricing in a 78.5% probability for a rate hike at the next Fed meeting on June 14.

As for mortgages, mortgage application volume fell slightly during the week ending April 28.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) retreated 0.1%.  The seasonally adjusted Purchase Index increased 4.0% from the prior week, while the Refinance Index decreased 5.0%.  Overall, the refinance portion of mortgage activity decreased to 41.6% total applications from 44.0% from the prior week.  The adjustable-rate mortgage share of activity decreased to 8.4% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.23% from 4.20% with points decreasing to 0.32 from 0.37.

For the week, the FNMA 3.5% coupon bond dropped 20.3 basis points to close at $102.594 while the 10-year Treasury yield increased 6.13 basis points to end at 2.35%.  Stocks ended the week modestly higher.  The Dow Jones Industrial Average rose 66.43 points to end at 21,006.94.  The NASDAQ Composite Index advanced 53.15 points to close at 6,100.76 and the S&P 500 Index added 15.09 points to close at 2,399.29.  Year to date, the Dow Jones Industrial Average has gained 6.30%, the NASDAQ Composite Index has advanced 13.33%, and the S&P 500 Index has risen 7.17%.

This past week, the national average 30-year mortgage rate held steady at 4.09%; the 15-year mortgage rate was unchanged at 3.34%; the 5/1 ARM mortgage rate was unchanged at 3.08%; and the FHA 30-year rate increased to 3.85% from 3.80%.  Jumbo 30-year rates rose from 4.35% to 4.36%.

Economic Calendar – for the Week of May 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 ($102.59, -20.3 bp) traded within a 53 basis point range between a weekly intraday high of $102.89 on Wednesday and a weekly intraday low of $102.36 on Thursday and Friday before closing the week at $102.59.  Mortgage bonds ran into what proved to be a solid line of resistance at the 38.2% Fibonacci retracement level at $102.81 on Monday through Wednesday before moving below support provided by the 25-day moving average on Thursday.  The bond then reacted to the employment report on Friday with an increase in volatility before settling higher to form a small bullish engulfing lines candle pattern which is a positive finding.  However, the slow stochastic oscillator shows a drop in momentum as it trends lower toward the “oversold” line.  These conflicting technical signals suggest the bond could trade sideways between support and resistance levels this coming week, and should this happen mortgage rates ought to hold steady with little change.

 

Tucson Mortgages Home Loan News 5-1-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of April 24, 2017
  • Economic Calendar – week of May 01, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market continued to march ever higher, especially early in the week when both the small-cap Russell 2000 and the technology-laden Nasdaq Composite Indexes reached record highs.  In fact, the Nasdaq Composite broke above the 6,000 mark for the first time ever.  Investor sentiment was enhanced in response to the election results in France when pro-European Union globalist Emmanuel Macron received more votes than anti- European Union nationalist Marine Le Pen during the first round of presidential elections.  The two candidates will now square off in a runoff election on May 7.

However, other political developments both here and abroad managed to keep investors wary.  President Trump’s proposal for meaningful tax reform, threats to pull out of NAFTA, a revised plan repeal and replace Obamacare (The Affordable Care Act), and escalating tensions between the U.S. and North Korea over the North Korean’s ballistic missile testing all combined to impact investor sentiment.

Bond yields crept higher as talk of potential tax cuts negatively impacted Treasury prices early in the week.  The yield on the 10-year Treasury reached its highest level in over two weeks on Wednesday, before pulling back as investors contemplated the possibility of a potential government shutdown.

In housing, the spring home selling season got off to a great beginning as New Home Sales soared to an 8-month high in March.  The Commerce Department reported New Home Sales at a seasonally-adjusted annual rate of 621,000 for March, easily exceeding the consensus forecast of 590,000.  March sales were the second-strongest since early 2008, and were just slightly lower than last July’s reading of 622,000 while being 15.6% higher than a year ago.  The median home sales price increased 1.2% to $315,000 and is 1.2% higher compared to a year ago while the average sales price increased 5.6% to $388,200.  Inventory continues to slide and at the current rate of sales, it would take just 5.2 months to exhaust available supply.

Home prices continue to march steadily higher and this was confirmed by both the Federal Housing Finance Agency (FHFA) and S&P/Case-Shiller.  The FHFA monthly House Price Index (HPI) for February showed home prices rose 0.8% in February and 6.4% annually in addition to an upward revision in January’s index to 0.2%.  The FHFA monthly HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. Because of this, the selection excludes high-end homes bought with jumbo loans or cash sales.  Meanwhile, the S&P/Case-Shiller National Home Price Index soared 5.8% in February, the largest gain in 32 months, when analysts had predicted a 5.7% increase.  This is further evidence strong home buyer demand continues to outweigh supply in the housing market.

Furthermore, the National Association of Realtors reported March Pending Home Sales, based upon contract signings, retreated 0.8% to 111.4 from 112.3 in February.  This slight loss in sales momentum was due to the scarcity of available inventory.  Despite the decrease in March, the index is 0.8% above a year ago and was the third best reading in the past year.

In the realm of mortgages, mortgage application volume increased slightly during the week ending April 21.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) rose 2.7%.  The seasonally adjusted Purchase Index decreased 1.0% from the prior week, while the Refinance Index increased 7.0%.  Overall, the refinance portion of mortgage activity increased to 44.0% total applications from 42.4% from the prior week.  The adjustable-rate mortgage share of activity increased to 8.7% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.20% from 4.22%, its lowest level since November 2016, with points increasing to 0.37 from 0.35.

For the week, the FNMA 3.5% coupon bond dropped 7.8 basis points to close at $102.797 while the 10-year Treasury yield increased 4.29 basis points to end at 2.289%.  Stocks ended the week higher.  The Dow Jones Industrial Average rose 392.75 points to end at 20,940.51.  The NASDAQ Composite Index advanced 137.09 points to close at 6,047.61 and the S&P 500 Index added 35.51 points to close at 2,384.20.  Year to date, the Dow Jones Industrial Average has gained 5.96%, the NASDAQ Composite Index has advanced 12.34%, and the S&P 500 Index has risen 6.49%.

This past week, the national average 30-year mortgage rate rose to 4.09% from 4.05%; the 15-year mortgage rate increased to 3.34% from 3.29%; the 5/1 ARM mortgage rate increased to 3.08% from 3.04%; and the FHA 30-year rate increased to 3.80% from 3.75%.  Jumbo 30-year rates rose from 4.32% to 4.35%.

Economic Calendar – for the Week of May 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 ($102.80, -7.8 bp) traded within a narrower 47 basis point range between a weekly intraday high of $102.86 on Friday and a weekly intraday low of $102.39 on Wednesday before closing the week at $102.80.  Mortgage bonds initially traded down to test support at the 25-day moving average early in the week before bouncing higher for a test of nearest resistance at the 38.2% Fibonacci retracement level ($102.806).  This bounce higher in the later portion of the week resulted in a positive stochastic crossover buy signal.  If the bond manages to break above resistance during this coming week that features numerous potential market-moving economic reports, we could see higher prices and lower yields resulting in a slight improvement in rates.

 

Tucson Mortgages Home Loan News 4-24-2017

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

Weekly Review

The stock market bounced around for most of the week, but recorded a moderate gain as investors focused on what is shaping up to be a strong first quarter corporate earnings season.  Investors were also able to overlook increasing geopolitical tensions between the U.S. and Korea and an expected delay in legislation to reform the U.S. tax code.  The 10-year Treasury yield fell as low as 2.167% on Tuesday to record a five-month low on lower than expected manufacturing production and housing starts.  The 10-year yield then recoiled to end the week at 2.246% after stocks continued to grind higher with the exception of oil shares.  Oil prices gave back all of the previous week’s gains, with West Texas Intermediate crude falling to $49.54 per barrel from last week’s close of $53.25.

The broader S&P 500 Index closed the week higher by 0.9% and this led to a retreat in rate hike expectations.  The fed funds futures market is now showing a 48.5% implied probability of a June rate hike, down from last week’s 57.3%.  Market mavens now believe July will be the most likely time for the Fed to announce its next rate hike with an implied probability of 53.6%.

Several economic reports released during the week indicated housing demand remains strong with home prices continuing to rise while home inventory remains constrained.

Housing Starts for March were reported at a seasonally adjusted annual rate of 1.215 million units.  This was slightly below forecasts of 1.256 million and 6.8% lower from February’s upwardly revised rate of 1.303 million units.  Single-family housing starts were down 6.1% to 821,000 while multi-unit housing starts were 7.9% lower to 394,000.  However, Building Permits shot 3.6% higher to a seasonally adjusted annual rate of 1.260 million units, but this was entirely due to permits for multifamily residential housing as single-family permits fell 1.1% to 823,000.

Furthermore, Existing Home Sales for March were also reported showing an increase of 4.4% to a seasonally adjusted annual rate of 5.71 million units, the largest increase in 10 years that handily exceeded the consensus estimate of 5.58 million units.  Sales were 5.9% above the same period a year ago, and although total inventory increased 5.8% to 1.83 million existing homes for sale at the end of March, it is 6.6% lower than a year ago.  At the current sales pace, there is only a 3.8 month supply of unsold inventory compared to an average of a 6.0-month supply typically seen in a balanced market.  The median existing home price for all housing types advanced 6.8% year-over-year to $236,400, the 61st consecutive month of year-over-year gains while the median existing single-family home price gained 6.6% year-over-year to $237,800.  First-time buyers comprised 32% of sales in March, up from 30% a year ago.  On average, properties stayed on the market for 34 days in March compared to 45 days in February and 47 days during March 2016.

As for mortgages, Mortgage application volume decreased slightly during the week ending April 14.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) fell 1.8%.  The seasonally adjusted Purchase Index decreased 3.0% from the prior week, while the Refinance Index increased 0.2%.  Overall, the refinance portion of mortgage activity increased to 42.4% total applications from 41.6% from the prior week.  The adjustable-rate mortgage share of activity decreased to 8.4% 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 4.22% from 4.28%, its lowest level since November 2016, with points decreasing to 0.35 from 0.38.

For the week, the FNMA 3.5% coupon bond dropped 12.5 basis points to close at $102.88 while the 10-year Treasury yield increased 1.43 basis points to end at 2.246%.  Stocks ended the week higher.  The Dow Jones Industrial Average rose 94.51 points to end at 20,547.76.  The NASDAQ Composite Index advanced 105.37 points to close at 5,910.52 and the S&P 500 Index added 19.74 points to close at 2,348.69.  Year to date, the Dow Jones Industrial Average has gained 3.97%, the NASDAQ Composite Index has advanced 9.80%, and the S&P 500 Index has risen 4.91%.

This past week, the national average 30-year mortgage rate rose to 4.05% from 4.04%; the 15-year mortgage rate increased to 3.29% from 3.27%; the 5/1 ARM mortgage rate decreased to 3.04% from 3.07%; and the FHA 30-year rate was unchanged at 3.75%.  Jumbo 30-year rates rose from 4.31% to 4.32%.

Economic Calendar – for the Week of April 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 ($102.88, -12.5 bp) traded within a narrower 50 basis point range between a weekly intraday high of $103.30 on Tuesday and a weekly intraday low of $102.80 on Thursday before closing the week at $102.88.  Mortgage bonds broke above resistance located at $103.13 on Tuesday but fell back toward support at the 38.2% Fibonacci retracement level ($102.806) during the remainder of the week.  The bond was substantially “overbought” for most of the week, and a sell signal from a negative stochastic crossover took place on Wednesday to help drive prices toward support.  If the bond continues to move lower to break below primary support, we could see prices slide toward the 25-day moving average, in which case mortgage rates would rise slightly higher.

 

Tucson Mortgages Home Loan News 4-17-2017

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

Weekly Review

The stock market closed moderately lower in an Easter Holiday-shortened the week characterized by lower than usual trading volumes.  In fact, Monday’s trading saw fewer shares changing hands than on any day so far this year.  Economic news seemed to take a back seat to geopolitical events during the week, events that weighed on equity investor sentiment while producing a boost for bond prices and lowing yields and interest rates.

Stocks were pressured lower on Monday following unconfirmed reports China was positioning troops along its border with North Korea.  Although this troop movement may have been an outcome from President Trump’s recent meeting with Chinese President Xi Jinping to put pressure on North Korea to stop its nuclear weapons testing, concerns over intensifying tensions in the Korean peninsula continued to be negative for investor sentiment throughout the week.

Furthermore, the ongoing civil war in Syria and how it is impacting relations between the U.S. and Russia also kept investors on edge.  Thursday, news that the U.S. had dropped the “Mother of All Bombs,” otherwise known as the GBU-43/B Massive Ordnance Air Burst bomb – the most powerful non-nuclear bomb in the US arsenal, on an ISIS target in Afghanistan also appeared to ignite a sharp decline in stocks prices to end the week.  This first-ever use of the 21,000 lb. GBU-43/B bomb was also meant to send a clear signal to North Korea to cease its nuclear missile testing.

Wednesday afternoon, stocks moved lower and bond prices higher in response to President Trump’s remarks to an interviewer with The Wall Street Journal when he stated the U.S. dollar is “getting too strong” and he hoped the Federal Reserve would keep interest rates low.  Trump “talking down the dollar” helped push the yield on the 10-year Treasury note to new five-month lows the following Thursday morning.

In housing, Mortgage application volume increased slightly during the week ending April 7.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) rose 1.5%.  The seasonally adjusted Purchase Index increased 3.0% from the prior week, while the Refinance Index remained unchanged at 4.0%.  Overall, the refinance portion of mortgage activity decreased to 41.6% of total applications from 42.6% from the prior week, falling to its lowest level since September 2008.  The adjustable-rate mortgage share of activity remained unchanged at 8.5% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.28% from 4.34% with points increasing to 0.38 from 0.31.

For the week, the FNMA 3.5% coupon bond gained 56.2 basis points to close at $103.00 while the 10-year Treasury yield decreased 15.02 basis points to end at 2.232%.  Stocks ended the week lower.  The Dow Jones Industrial Average fell 202.85 points to end at 20,453.25.  The NASDAQ Composite Index dropped 72.66 points to close at 5,805.15 and the S&P 500 Index lost 26.59 points to close at 2,328.95.  Year to date, the Dow Jones Industrial Average has gained 3.49%, the NASDAQ Composite Index has advanced 7.84%, and the S&P 500 Index has risen 4.03%.

This past week, the national average 30-year mortgage rate fell to 4.04% from 4.17%; the 15-year mortgage rate decreased to 3.27% from 3.38%; the 5/1 ARM mortgage rate decreased to 3.07% from 3.13%; and the FHA 30-year rate was unchanged at 3.75%.  Jumbo 30-year rates fell from 4.39% to 4.31%.

Economic Calendar – for the Week of April 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 ($103.00, +56.2 bp) traded within a 73 basis point range between a weekly intraday low of $102.297 on Monday and a weekly intraday high of $103.031 on Friday before closing the week at $103.00.  Geopolitical events during the week “trumped” technical signals and economic news (no pun intended) to send stocks lower while triggering a “flight to safety” for investors into bonds.  Mortgage bonds broke above resistance at the 38.2% Fibonacci retracement level ($102.806) and this level now becomes nearest support.  Although substantially “overbought,” the bond will set its sights on the next resistance level at $103.13.  If stocks continue to slide lower this coming week, we could see bond prices improve with mortgage rates slipping slightly lower.

 

Tucson Mortgages Home Loan News 4-10-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of April 3, 2017
  • Economic Calendar – week of April 10, 2017
  • Mortgage Rate Forecast with Chart
  • The “Bond God” Speaks – Investors Listen

Weekly Review

The stock market closed very modestly lower for the week although energy issues managed to show some strength in the middle of the week after oil prices rose to their highest level in a month.

Thursday evening’s cruise missile attack by the U.S. on a Syrian airbase in retaliation for Syria’s use of banned chemical weapons against its own populace also provided a lift for oil prices as well as defense stocks and gold with gold prices reaching a five-month high.

Stock prices were especially volatile on Wednesday as stocks initially rallied on a strong labor report from payroll processing firm ADP only to undergo a sharp reversal to the downside in the afternoon following a Reuter’s report that Speaker Paul Ryan confessed the House, Senate, and White House “aren’t on the same page yet on tax reform.”

The week’s most significant piece of economic news, the March Employment report from the Labor Department, showed new job growth came in well below forecasts with only 98,000 new jobs added in March, the worst showing since last May.  To rub a little salt into this wound, the prior month’s jobs number was revised lower.  A storm-related drop in employment in the Northeast may have been a contributing factor for the poor employment report.  Also a surprise was an unexpected drop in the unemployment rate to 4.5%, the lowest level in 10 years.  The poor payrolls showing had a positive impact on the bond market, with the yield on the 10-year Treasury note reaching its lowest level (2.27%) since last November.  However, bond yields climbed sharply higher (prices fell) during the afternoon after New York Fed President William Dudley stated the Federal Reserve may “temporarily halt rate increases when it reduces its bond portfolio.”

In housing, Mortgage application volume declined during the week ending March 31.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) fell 1.6%.  The seasonally adjusted Purchase Index rose 1.0% from the prior week, while the Refinance Index decreased 4.0%.  Overall, the refinance portion of mortgage activity decreased to 42.6% of total applications from 44.0% from the prior week.  The adjustable-rate mortgage share of activity remained unchanged at 8.5% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.34% from 4.33% with points decreasing to 0.31 from 0.43.

For the week, the FNMA 3.5% coupon bond gained 11.0 basis points to close at $102.44 while the 10-year Treasury yield decreased 1.28 basis points to end at 2.382%.  Stocks ended the week lower.  The Dow Jones Industrial Average fell 7.12 points to end at 20,656.10.  The NASDAQ Composite Index dropped 33.93 points to close at 5,877.81 and the S&P 500 Index lost 7.18 points to close at 2,355.54.  Year to date, the Dow Jones Industrial Average has gained 4.52%, the NASDAQ Composite Index has advanced 9.19%, and the S&P 500 Index has risen 5.21%.

This past week, the national average 30-year mortgage rate fell to 4.17% from 4.19%; the 15-year mortgage rate decreased to 3.38% from 3.40%; the 5/1 ARM mortgage rate increased to 3.13% from 3.10%; and the FHA 30-year rate decreased to 3.75% from 3.85%.  Jumbo 30-year rates fell from 4.43% to 4.39%.

Economic Calendar – for the Week of April 10, 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 ($102.44, +11.0 bp) traded within a 75 basis point range between a weekly intraday low of $102.328 on Monday and a weekly intraday high of $103.078 on Friday before closing the week at $102.44.  After advancing above the 100-day moving average on Monday, the bond traded mostly in a sideways direction with greater volatility shown on Friday with a large up and down swing in prices.  A sell signal was generated from a slow-stochastic crossover on Wednesday and the bond remains “overbought,” so we could see prices slide a little lower toward underlying support levels this coming week.  Should this happen, mortgage rates may worsen very slightly this coming week.  However, better rates may be just around the corner according to “Bond God,” Jeff Gundlach.

The “Bond God” Speaks – Investors Listen

Jeff Gundlach is the Chief Executive Officer of DoubleLine Capital managing over $100 billion in investor funds.  A recognized expert in bonds and other debt-related investments, he has been nicknamed the “Bond God” because of his prophetic bond market forecasts.

Recently, he provided an update to his investors on where he thought interest rates are headed for the remainder of the year.  Gundlach stated “I expect a rally on the 10-year Treasury.  A “rally” means bond prices will move higher and yields lower thus lowering interest rates.  How low can interest rates fall?  Gundlach believes rates will fall “to below 2.25% at a minimum and maybe a bit lower than 2%.”  After reaching this level, he believes rates will bounce back up and move higher by the end of the year although he says “I don’t think we’re going to see 3% on the 10-year this year.”

So far in 2017, the 10-year Treasury peaked on March 13 at 2.607% and is currently at 2.38%.

Gundlach believes long-term rates will head lower because our interest rates in the U.S. are significantly higher than they are in the rest of the developed world.  Comparable 10-year bonds in Germany and Japan pay investors just 0.25% or less, so international investors have an enormous incentive to take their money out of their low-yielding government bonds and move it into U.S. treasuries.

Tucson Mortgages Home Loan News 4-3-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of March 27, 2017
  • Economic Calendar – week of April 3, 2017

Weekly Review

The stock market had a pretty strong week, with the Dow closing almost 1% higher at 20,663 and the S&P 500 Index closing almost 1.5% higher at 2329.  There were several Fed speakers during the week and one of the things that they talked about was their balance sheet – They have $4 Trillion they are holding, $1.7 Trillion of which is Mortgage Backed Securities.  They want to eventually let this run off.  They would like to get the Mortgage portion off their balance sheet first and hold predominantly government securities.  And if they allow them to run off or sell them, it could be very disruptive because the Fed is still buying $4-7B per week on average from reinvestments.  This has been supporting Mortgage Bonds and if they decide to stop doing this, it takes a big buyer out of the market.

The week’s economic data were mixed.  In housing news, the Case-Shiller Home Price Index, which tracks the changes in the value of residential Real Estate across the US, showed that home prices in February continued to accelerate.  The report tracks the changes of Real Estate values in 10 cities, 20 cities, and nationally.  The national reading showed that home prices rose from 5.8% to 5.9% on a year over year basis…which is the best reading in over 2.5 years.  The 20-city index, which is also widely viewed, improved from 5.6% to 5.7%.  Seattle, Portland, and Denver reported the highest year-over-year gains among the 20 cities.

Pending Home Sales, which measures signed contracts on existing homes, rose by 5.5% to 112.3 in February.  This was much stronger than estimates of a 2.4% gain and a nice rebound from last month.  Sales are up 2.6% year over year and are at their highest level in nearly a year and second-highest level in over a decade.  This read is even more impressive when you consider it’s in the face of such low inventory levels.

The Mortgage Bankers Association released their Mortgage Application Data for the week ending 3/24, showing that overall application volume decreased by 0.8%.  Applications to Purchase a home increased by 1.0% and are up 4.3% year over year.  Refinances decreased by 3.0% and are down 26% from this time last year.  Interest rates are about 40bp higher than they were last year.  The Refinance share of Mortgage Applications decreased to 44.0% from 45.1% of total applications, the lowest it has been in over 8 years.  The ARM share of applications dropped slightly to 8.5% from 9.0% the previous week.

The Final look at the 4th quarter Gross Domestic Product (GDP) showed that GDP was revised up by 0.2% to 2.1%, which was better than estimates of 2.0%.  The economy expanded at 1.6% for all of 2016, which is its worst performance since 2011.  This is old news as we just finished the 1st quarter of 2017.  And there is quite a bit more optimism for future GDP reads with Trump’s plans for lower regulations, tax reform, and infrastructure spending.

Lastly, the Fed’s favored measure of inflation, Personal Consumption Expenditures (PCE), was released.  The headline figure increased from 1.9% to 2.1%.  This is the first time in almost 5 years that headline PCE inflation was over 2%.  The Core rate, which strips out food and energy prices and is the main focus of the Fed, remained unchanged at 1.8%…but last month’s figure of 1.7% was revised higher to 1.8%.  The Core PCE is also the highest it has been in almost 5 years, which shows that inflation has been accelerating.  The headline figure is now above the Fed’s 2% target, while the Core rate is very close.  Both the Headline and Core CPI readings are above 2%.

Economic Calendar – for the Week of April 3, 2017

The most important reports of the week will be the ADP Employment Report on Wednesday and the BLS Jobs Report on Friday.  The Market is anticipating between 170-180k job creations in each report.  Additionally, we will get the Minutes from the 3/15 Fed Meeting on Wednesday, which will give us a closer look into the mindset of the Fed and their decision to hike.