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.

 

Tucson Mortgages Home Loan News 3-27-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of March 20, 2017
  • Economic Calendar – week of March 27, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The stock market wavered during the week with the S&P 500 Index closing down over 1% on Tuesday for the first time in 109 trading days, and this helped bond prices to gain some ground with bond yields trending lower.  The decline in stocks was attributed to the uncertainty over whether or not Congress would repeal and replace “Obamacare,” otherwise known as the Affordable Care Act with the American Health Care Act.  This new bill was pulled from a vote on Friday, and it now appears legislators in the House will have to go “back to the drawing board” to craft a bill that will have greater legislative support.  Other concerns for equity traders included the frequency of future interest rate hikes and the acceleration of North Korea’s testing and development of long-range ballistic missiles.

The week’s economic data were mixed.  Existing Home Sales were reported a little below economist expectations, but New Home Sales exceeded forecasts.  Durable Goods Orders were reported gaining 1.7% versus a forecast of 1.3%, but when excluding transportation orders, Durable Goods increased just 0.4% when expectations called for a 0.7% increase.  On the labor front, Initial Jobless Claims increased to 258,000 exceeding consensus estimates of 239,000.

In housing, the National Association of Realtors reported Existing Homes Sales fell 3.7% in February to a seasonally adjusted annual rate of 5.48 million, missing the consensus estimate of 5.54 million.  Sales were hindered by rising prices and lower than usual home inventory.  Housing inventory increased in February by 4.2% to 1.75 million, but remains 6.4% lower than a year ago.

Supply levels have declined for 21 straight months with unsold inventory now at a 3.8-month supply at the current sales rate.  The median Existing Home sales price in February was $228,400, 7.7% higher than the same month a year ago, and the 60th consecutive month of year-over-year gains.  First-time home buyers accounted for 32% of sales.

Furthermore, the Commerce Department reported New Home Sales jumped 6.1% in February to an annual rate of 592,000, a seven-month high exceeding the consensus forecast of 560,000.  The median sales price fell 4.9% year-over-year to $296,200, but the average sales price increased 11.7% to $390,400.  Inventory of new homes for sale at the end of February at the current sales rate was at a 5.4-months’ supply versus 5.6 months in January.

Mortgage application volume declined during the week ending March 17.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) fell 2.7%.  The seasonally adjusted Purchase Index declined 2.0% from the prior week, while the Refinance Index decreased 3.0%.  Overall, the refinance portion of mortgage activity decreased to 45.1% of total applications from 45.6% from the prior week.  The adjustable-rate mortgage share of activity advanced to its highest level since October 2014 to 9.0% 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 4.46% with points increasing to 0.41 from 0.37.

For the week, the FNMA 3.5% coupon bond gained 37.4 basis points to close at $102.03 while the 10-year Treasury yield decreased 8.28 basis points to end at 2.4177%.  Stocks ended the week lower.  The Dow Jones Industrial Average fell 317.90 points to end at 20,596.72.  The NASDAQ Composite Index dropped 72.26 points to close at 5,828.74 and the S&P 500 Index lost 34.27 points to close at 2,343.98.  Year to date, the Dow Jones Industrial Average has gained 4.22%, the NASDAQ Composite Index has advanced 8.28%, and the S&P 500 Index has risen 4.70%.

This past week, the national average 30-year mortgage rate fell to 4.20% from 4.26%; the 15-year mortgage rate decreased to 3.41% from 3.46%; the 5/1 ARM mortgage rate was unchanged at 3.09%; and the FHA 30-year rate decreased to 3.80% from 3.85%.  Jumbo 30-year rates fell from 4.48% to 4.40%.

Economic Calendar – for the Week of March 27, 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 ($102.03, +37.4 bp) traded within a narrower 70 basis point range between a weekly intraday low of $101.59 on Monday and a weekly intraday high of $102.29 on Wednesday before closing the week at $102.03.  The chart shows bond prices continued the prior week’s advance on Monday and Tuesday only to taper off for the remainder of the week.

The bond closed Friday’s session barely above a dual layer of support at the 50-day moving average at $102.02 and the 50% Fibonacci retracement level at $101.868.  Resistance is located at the 100-day moving average at $102.44 and the 38.2% Fibonacci retracement level at $102.806.

The slow stochastic oscillator is beginning to “roll-over” and is very close to showing a negative crossover sell signal.  Any further price erosion will result in a sell signal, but at the moment the chart is not providing a clear-cut indication for future direction.

The chart’s daily candlesticks Wednesday through Friday showed a fair degree of market uncertainty mirroring the political uncertainty surrounding the Trump Administration’s first key piece of legislation – the American Health Care Act.  It now appears this bill is dead for the foreseeable future as the House Republican leadership has pulled the bill from a vote knowing they didn’t have enough votes for it to pass.  This setback for the Trump Administration may result in a sell-off for the stock market, and should this happen, bond prices could continue higher with mortgage rates improving slightly.

 

Tucson Mortgages Home Loan News 3-20-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of March 13, 2017
  • Economic Calendar – week of March 20, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

As anticipated, the Federal Reserve raised its short-term interest rate target range by 25 basis points to a range of 0.75% to 1.00% on Wednesday.  The financial markets responded to the Fed’s decision by rallying after Fed Chair Janet Yellen expressed confidence in the economy and stated the Fed intended to take a gradual approach to future interest rate hikes.  The markets’ expectations are now for two more rate hikes by the end of the year.  The fed funds futures market is currently projecting a 58.3% probability for the next 0.25% rate hike to take place on June 14, a 64.5% chance of a rate hike on July 26, and an 80% probability for a hike on September 20.

The stock market ended the week slightly higher while intermediate and longer-dated Treasury and mortgage bond prices moved higher with yields ending lower.  Overall, the week’s economic data was generally viewed in a positive light even though inflation appears to be gaining some momentum.  The February Producer Price Index increased 0.3% from January and rose 2.2% from February 2016, the highest rate in almost five years.  The concern here is inflation at the producer level may be passed along to consumers in the future.  Meanwhile, the Consumer Price Index (CPI) advanced 0.1% in February with core CPI rising at an annual rate of 2.2%.  Weekly Initial Jobless Claims declined by 2,000 to 241,000 showing the labor market continues to strengthen.

In housing, the Commerce Department reported construction of single-family homes increased 6.5% to 872,000 in February, the highest level since October 2007 while applications to build single-family homes increased to 832,000, their strongest level since September 2007.  Housing starts increased 3% to 1.288 million.  However, overall, construction permits fell 6.2% to 1.21 million due  to an abrupt 21.6% decline in permits in the often volatile multi-family construction sector.  Construction on apartment buildings and townhouses dropped 3.7% in February to 416,000.

Mortgage application volume rose during the week ending March 10.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) rose by 3.1%.  The seasonally adjusted Purchase Index advanced 2.0% from the prior week, while the Refinance Index increased 4.0%.  Overall, the refinance portion of mortgage activity increased to 45.6% of total applications from 45.4% from the prior week.  The adjustable-rate mortgage share of activity advanced to its highest level since October 2014 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 increased to 4.46% from 4.36% with points decreasing to 0.37 from 0.44.

For the week, the FNMA 3.5% coupon bond gained 54.7 basis points to close at $101.66 while the 10-year Treasury yield decreased 7.40 basis points to end at 2.501%.  Stocks ended the week marginally higher.  The Dow Jones Industrial Average gained 11.64 points to end at 20,914.62.  The NASDAQ Composite Index advanced 39.27 points to close at 5,901.00 and the S&P 500 Index added 5.65 points to close at 2,378.25.  Year to date, the Dow Jones Industrial Average has gained 5.83%, the NASDAQ Composite Index has advanced 9.62%, and the S&P 500 Index has risen 6.23%.

This past week, the national average 30-year mortgage rate fell to 4.26% from 4.35%; the 15-year mortgage rate decreased to 3.46% from 3.57%; the 5/1 ARM mortgage rate dropped to 3.09% from 3.13%; and the FHA 30-year rate decreased to 3.85% from 4.00%.  Jumbo 30-year rates fell from 4.54% to 4.48%.

Economic Calendar – for the Week of March 20, 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 ($101.66, +54.7 bp) traded within a slightly narrower 102 basis point range between a weekly intraday low of $100.70 on Monday and a weekly intraday high of $101.72 on Friday before closing the week at $101.66.  The chart shows bond prices rebounded on Wednesday as the Fed raised short-term rates by 25 basis points.  Wednesday’s advance challenged technical resistance found at $101.69.  Further resistance is located nearby at the 50% Fibonacci retracement level and 25-day moving average at $101.87.  Support levels are found at $101.31 and $100.93.

The slow stochastic oscillator is on the upswing, but is showing room for bond prices to further rise before bonds become “overbought.”  The test this coming week will be whether or not bond prices can break above the aforementioned resistance levels.  If the bond can break above these levels, we should see a slight improvement in mortgage rates for the week.

 

Tucson Mortgages Home Loan News 3-13-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of March 6, 2017
  • Economic Calendar – week of March 13, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes pulled back modestly from all-time highs reached the previous week to record its first weekly decline since the middle of January.  A crude oil inventory report on Thursday showing a sharp increase in supply sent oil prices below $50 a barrel for the first time since December.  This triggered selling in energy stocks to help push the overall market lower.

Economic news reinforced a growing conviction the Federal Reserve will indeed raise interest rates at its upcoming monetary policy meeting on March 15.  As of market close on Friday, the Fed Fund futures prices have priced in an 88.6% probability the Fed will raise rates by 25 basis points.  Longer-dated Treasury yields increased during the week with the yield on the 10-year Treasury note reaching its highest level since the middle of December.

The financial markets spent most of the week waiting for and focusing on the release of the February employment data.  Wednesday, the ADP Employment report was released showing the largest surge in private payrolls in over a decade.  Friday’s official Employment Situation Summary from the Department of Labor was also strong, showing an increase of 235,000 jobs for the month. Average Hourly Earnings gained 0.2% and were revised higher for previous months to indicate a rising trend toward an annualized growth rate of 3%, suggesting future inflation.

Mortgage application volume declined during the week ending March 3.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) rose by 3.3%.  The seasonally adjusted Purchase Index advanced 2.0% from the prior week, while the Refinance Index increased 5.0%.  Overall, the refinance portion of mortgage activity increased to 45.4% of total applications from 45.1% from the prior week.  The adjustable-rate mortgage share of activity advanced to its highest level since October 2014 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 increased to 4.36% from 4.30% with points increasing to 0.44 from 0.38.

For the week, the FNMA 3.5% coupon bond declined 76.6 basis points to close at $101.11 while the 10-year Treasury yield increased 9.29 basis points to end at 2.575%.  Stocks ended the week lower.  The Dow Jones Industrial Average fell 102.73 points to end at 20,902.798.  The NASDAQ Composite Index declined 9.02 points to close at 5,861.73 and the S&P 500 Index retreated 10.52 points to close at 2,372.60.  Year to date, the Dow Jones Industrial Average has gained 5.77%, the NASDAQ Composite Index has advanced 8.89%, and the S&P 500 Index has gained 5.97%.

This past week, the national average 30-year mortgage rate rose to 4.35% from 4.25%; the 15-year mortgage rate increased to 3.57% from 3.45%; the 5/1 ARM mortgage rate rose to 3.13% from 3.10%; and the FHA 30-year rate increased to 4.00% from 3.85%.  Jumbo 30-year rates rose from 4.39% to 4.54%.

Economic Calendar – for the Week of March 6, 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 ($101.11, -76.6 bp) traded within a slightly narrower 109 basis point range between a weekly intraday high of $101.95 on Monday and a weekly intraday low of $100.86 on Friday before closing the week at $101.11.  The chart shows bond prices failed to improve even though technical signals were slightly positive at the start of the week.  Bond prices continued to trend lower during the week until bouncing off of a support level at the 100% Fibonacci retracement level located at $100.91.  Overhead technical resistance is now found at former support at $101.45.

The slow stochastic oscillator shows bonds are at an extremely “oversold” position while also showing a positive stochastic crossover buy signal suggesting bond prices could continue to bounce higher toward resistance.  Wednesday, the Fed’s FOMC will likely raise interest rates by 25 basis points.  The last rate hike happened on December 16, 2016, and the bond’s price subsequently improved by 170 basis points by January 12, 2017.  We will have to wait and see if history repeats itself once more resulting in improving mortgage rates.

 

Tucson Mortgages Home Loan News 3-6-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of February 27, 2017
  • Economic Calendar – week of March 6, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes continued moving higher to record new all-time highs for the fourth consecutive week as investor sentiment was boosted following President Trump’s highly anticipated and successful first speech before both houses of Congress.  Bonds did not fare as well with prices falling and yields rising in response to the week’s positive economic data and President Trump’s speech proposing increased infrastructure spending and greater economic stimulus.

In economic news, a robust reading on manufacturing activity improved investor sentiment.  The Institute for Supply Management’s Purchasing Managers’ Index recorded its highest level since late 2014 with the New Orders Index reaching its highest level in almost four years.  Moreover, weekly Initial Jobless Claims fell to 223,000, the lowest level in 43 years.  On Friday, a speech by Fed Chair Janet Yellen made it fairly certain the central bank will raise interest rates at their next meeting on March 15.  Yellen stated “we currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect. Indeed, at our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.”  The two-year Treasury yield spiraled to its highest level in nearly 10 years following Yellen’s speech, but it didn’t seem to have much impact on longer-dated Treasury yields as these had already risen earlier in the week.

This past week in housing the National Association of Realtors (NAR) reported their Pending Home Sales Index, based on contract signings of previously owned homes, unexpectedly fell 2.8% to 106.4 in January, led by a shortage of housing inventory in the West and Midwest regions.  Furthermore, the December Pending Sales Index was revised lower from 1.6% to 0.8% to a value of 109.5.  Although this was the lowest reading since January 2016, the Index is now 0.4% higher since then.  NAR chief economist Lawrence Yun remarked “The significant shortage of listings last month along with deteriorating affordability as the result of higher home prices and mortgage rates kept many would-be buyers at bay.”

Mortgage application volume declined during the week ending February 24.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) rose by 5.8%.  The seasonally adjusted Purchase Index advanced 7.0% from the prior week, while the Refinance Index increased 5.0%.  Overall, the refinance portion of mortgage activity decreased to 45.1% of total applications from 46.2% from the prior week, the lowest activity since June 2009.  The adjustable-rate mortgage share of activity remained unchanged at 7.3% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased from 4.36% to 4.30% with points increasing to 0.38 from 0.35.

For the week, the FNMA 3.5% coupon bond dropped 90.6 basis points to close at $101.88 while the 10-year Treasury yield increased 16.64 basis points to end at 2.4816%.  Stocks ended the week higher with the major indexes continuing to set new record all-time highs on Wednesday.  The Dow Jones Industrial Average gained 183.95 points to end at 21,005.71.  The NASDAQ Composite Index rose 25.44 points to close at 5,870.75 and the S&P 500 Index advanced 15.78 points to close at 2,383.12.  Year to date, the Dow Jones Industrial Average has gained 6.29%, the NASDAQ Composite Index has advanced 9.06%, and the S&P 500 Index has gained 6.44%.

This past week, the national average 30-year mortgage rate rose to 4.25% from 4.12%; the 15-year mortgage rate increased to 3.45% from 3.33%; the 5/1 ARM mortgage rate rose to 3.10% from 3.01%; and the FHA 30-year rate increased to 3.85% from 3.75%.  Jumbo 30-year rates rose from 4.25% to 4.39%.

Economic Calendar – for the Week of March 6, 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 ($101.88, -90.6 bp) traded within a wider 117 basis point range between a weekly intraday high of $102.70 on Monday and a weekly intraday low of $101.53 on Friday before closing the week at $101.88.  The chart shows the bond failed to continue higher through overhead resistance, and instead pivoted lower as stocks continued their historic run higher while being extremely overbought technically.

The bond fell through several layers of support during the week until bouncing higher off of support found at $101.69 on Friday.  In fact, Friday’s action resulted in a small engulfing lines candlestick pattern, a buy signal suggesting higher prices in the short-term.  Overhead technical resistance is now found at the 76.4% Fibonacci retracement level at $102.07.

The slow stochastic oscillator shows bonds are becoming “oversold” suggesting bond prices could soon continue to move higher.  Meanwhile, the stock market remains extremely “overbought” with more pronounced sell signals being generated by numerous momentum indicators.  Although the stock market has probably already priced in the next rate hike by the Federal Reserve, as the Fed’s next policy meeting on March 15 approaches, investors may get nervous and begin to sell positions to lock in some of their profits.  Should this scenario take place, we may see a slight improvement in mortgage rates as bond prices improve.

Tucson Mortgages Home Loan News 2-27-2017

By Todd Abelson NMLS #180858 on .

Todd Abelson - Tucson Mortgage

  • Weekly Review: week of February 20, 2017
  • Economic Calendar – week of February 27, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes continued to grind their way higher to establish new all-time highs for the third consecutive week.  Meanwhile, bond prices received a boost (yields fell) in response to a rally in bond prices in Europe and Japan along with a month-over-month decline in the University of Michigan’s Consumer Sentiment Index.

The remainder of the week’s economic data was largely focused on the housing sector and was generally regarded as promising.  Also, the labor market appears to be slowly strengthening.  Although weekly Initial Jobless Claims increased 4,000 more than expected to 244,000, the more significant four-week average of jobless claims fell to its lowest level since 1973, falling to 241,000.  Continuing jobless claims declined by 17,000.

In housing, the National Association of Realtors reported Existing Home Sales in January soared to their highest level in a decade, rising 3.3% to a seasonally adjusted annual rate of 5.69 million.  Economists had predicted a sales pace of 5.57 million.  Further, December’s initial reading of 5.49 million in sales was revised higher to 5.51 million.  Home inventory continued to decline for the 20th consecutive month to a 3.6 months’ worth of supply.  Median home prices increased 7.1% from a year earlier to $228,900.

New Home Sales were also in the news this past week as the Commerce Department reported sales at a seasonally adjusted annual rate of 555,000 in January which was slightly below the consensus forecast of 566,000.  Still, this was 3.7% higher than December’s rate of 535,000 and 5.5% higher compared to the year ago sales pace.  January’s median new home sales price fell 1% from December to $312,900, but is still 7% higher than a year ago.  New home inventory in January held steady at 5.7 months at the current sales pace matching December’s inventory level.

Mortgage application volume declined during the week ending February 17.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) declined by 2.0%.  The seasonally adjusted Purchase Index fell 3.0% from the prior week, while the Refinance Index dropped 1.0%.  Overall, the refinance portion of mortgage activity decreased to 46.2% of total applications from 46.9% from the prior week, the lowest activity since June 2009.  The adjustable-rate mortgage share of activity accounted for 7.3% of total applications, down from 7.5% the prior week.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased from 4.32% to 4.35% with points increasing to 0.35 from 0.34.

Elsewhere, the Federal Reserve released the minutes from its latest policy meeting on Wednesday, indicating the economy was improving to extent the Fed will soon look to begin hiking interest rates.  The latest probabilities for a 25 basis point rate hike at future Fed policy meetings are as follows:  March 15 – 26.6%; May 3 – 51.7%; June 14 – 69.6%.

For the week, the FNMA 3.5% coupon bond gained 51.5 basis points to close at $102.78 while the 10-year Treasury yield decreased 10.48 basis points to end at 2.3152%.  Stocks ended the week higher with the major indexes continuing to set new record all-time highs during the week.  The Dow Jones Industrial Average gained 197.71 points to end at 20,821.76.  The NASDAQ Composite Index rose 6.73 points to close at 5,845.3, and the S&P 500 Index advanced 16.18 points to close at 2,367.34.  Year to date, the Dow Jones Industrial Average has gained 5.36%, the NASDAQ Composite Index has advanced 8.59%, and the S&P 500 Index has gained 5.74%.

This past week, the national average 30-year mortgage rate fell to 4.12% from 4.18%; the 15-year mortgage rate declined to 3.33% from 3.38%; the 5/1 ARM mortgage rate rose to 3.01% from 3.00%; and the FHA 30-year rate was unchanged at 3.75%.  Jumbo 30-year rates fell from 4.30% to 4.25%.

Economic Calendar – for the Week of February 27, 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 ($102.78, +51.5 bp) traded within a wider 86 basis point range between a weekly intraday high of $102.83 on Friday and a weekly intraday low of $101.97 on Tuesday before closing the week at $102.78.  The chart shows a nice continuation higher from last week’s buy signal carrying prices up to overhead technical resistance found at the 61.8% Fibonacci retracement level at $102.79.  Support is found at the 25-day moving average at $102.17.

The slow stochastic oscillator is not yet “overbought” suggesting bond prices have further room to run higher.  Another factor making the case for higher bond prices in the short-term are stock valuations becoming ever more “pricey” while the major stock market indexes become extremely “overbought.”  There currently are several key momentum indicators “rolling over” flashing sell signals suggesting a market consolidation or correction could soon be on the way.  However, the stock market could remain irrational and “overbought” for a longer period of time than we can imagine.  If this technical analysis prediction for a pull-back in stock prices does come to fruition this coming week, we should see a continuing move higher in mortgage bond prices with a slight improvement in mortgage rates.

 

Todd Abelson - Tucson Mortgage

Tucson Mortgages Home Loan News 2-20-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of February 13, 2017
  • Economic Calendar – week of February 20, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes continued to advance to establish new all-time highs for the second consecutive week.  Strong economic data helped to boost equity prices while depressing bond prices, propelling yields higher until a Friday bond rally sent yields lower to offset the yield increases seen earlier in the week.

Stronger economic data included Core Retail Sales increasing 0.6% in January while inflation as measured by the Core Producer Price and Consumer Price Indexes grew by a greater than forecast 0.6% and 0.3% respectively.  The latest readings on business sentiment from the National Federation of Independent Business and the New York Federal Reserve were both stronger than anticipated.

The emerging economic and inflation data may have led to Fed Chair Janet Yellen’s congressional testimony on Tuesday and Wednesday as being generally viewed more “hawkish” in nature, leading to speculation of a possible interest rate hike before June.  However, the latest 30-Day Fed Fund futures prices are predicting only a 17.7% probability for a March 15 rate hike and 44.1% chance of a rate hike on May 3.  In comparison, the probability for a 25 basis point rate hike on June 14 seems far more likely with a current probability of 69.9%.

In housing, the Census Bureau reported residential construction remained robust in January even though Housing Starts declined by 2.6%.  Still, the seasonally adjusted annual rate of 1.246 million was higher than analysts’ forecasts and December’s reading was revised higher to an annual rate of 1.279 million.  Meanwhile, Building Permits rose 4.6% for the month at a rate of 1.285 million, suggesting home construction may bounce higher in the coming months.

Mortgage application volume fell during the week ending February 10.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) declined by 3.7%.  The seasonally adjusted Purchase Index fell 5.0% from the prior week, while the Refinance Index dropped 3.0%.  Overall, the refinance portion of mortgage activity decreased to 46.9% of total applications from 47.9% from the prior week, the lowest activity since June 2009.  The adjustable-rate mortgage share of activity accounted for 7.5% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased from 4.35% to 4.32% with points unchanged at 0.34.

For the week, the FNMA 3.5% coupon bond fell 6.2 basis points to close at $102.27 while the 10-year Treasury yield increased 1.09 basis points to end at 2.420%.  Stocks ended the week higher with the major indexes setting new record all-time highs for the second consecutive week.  The Dow Jones Industrial Average gained 354.68 points to end at 20,624.05.  The NASDAQ Composite Index rose 104.45 points to close at 5,838.58, and the S&P 500 Index advanced 35.06 points to close at 2,351.16.  Year to date, the Dow Jones Industrial Average has gained 4.36%, the NASDAQ Composite Index has advanced 8.46%, and the S&P 500 Index has gained 5.02%.

This past week, the national average 30-year mortgage rate fell to 4.18% from 4.19%; the 15-year mortgage rate declined to 3.38% from 3.39%; the 5/1 ARM mortgage rate fell to 3.00% from 3.04%; and the FHA 30-year rate was unchanged at 3.75%.  Jumbo 30-year rates held steady at 4.30%.

Economic Calendar – for the Week of February 20, 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 ($102.27, -6.2 bp) traded within a narrower 67 basis point range between a weekly intraday high of $102.36 on Friday and a weekly intraday low of $101.69 on Tuesday before closing the week at $102.27.  The chart shows the bond trading in a “V” pattern, moving lower during the first half of the week before recovering on Thursday and Friday.

The bond gapped and closed above the 50 and 25-day moving averages on Friday and these two levels now become nearest technical support at $102.15 and $102.21 respectively.  Resistance is now located at the 61.8% Fibonacci retracement level at $102.79.  Friday’s trading resulted in a positive crossover buy signal in the slow stochastic oscillator so we should see a move higher in mortgage bond prices this coming week with a slight improvement in mortgage rates.

 

Tucson Mortgages Home Loan News 2-13-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of February 6, 2017
  • Economic Calendar – week of February 13, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes began the week trading relatively flat until rallying on Thursday and Friday to set new record all-time highs following a discussion between President Trump and aviation executives where Trump promised “something phenomenal in terms of tax reform” in the next few weeks.  The prospects for higher future corporate profits as a result of tax reform improved investor sentiment.  Another factor contributing to the rally were signals from the Trump Administration that they were willing to cooperate with congressional Republicans on a plan to reduce entitlement spending as long as current beneficiaries would not be negatively impacted.

The economic calendar was light with little in the way of data to have much influence on the bond market, but despite this, bond prices rose modestly while the yields decreased for intermediate and long-term Treasuries.  Friday, investors largely ignored an unexpected decline in the University of Michigan’s Consumer Sentiment Index for February.  The Index fell to 95.7 from January’s reading of 98.5 which was a decade high reading.  Economists had expected a reading of 97.9.  Still, there have only been five higher readings in the past 10 years.

Mortgage application volume rose modestly during the week ending February 3.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) advanced by 2.3%.  The seasonally adjusted Purchase Index rose 2.0% from the prior week, while the Refinance Index also increased 2.0%.  Overall, the refinance portion of mortgage activity decreased to 47.9% of total applications from 49.4% from the prior week, the lowest activity since June 2009.  The adjustable-rate mortgage share of activity accounted for 6.9% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased from 4.39% to 4.35% with points unchanged at 0.34.

For the week, the FNMA 3.5% coupon bond advanced 15.8 basis points to close at $102.33 while the 10-year Treasury yield decreased 5.75 basis points to end at 2.4091%.  Stocks ended the week higher with the major indexes setting new record all-time highs.  The Dow Jones Industrial Average gained 197.91 points to end at 20,269.37.  The NASDAQ Composite Index rose 67.36 points to close at 5,734.13, and the S&P 500 Index advanced 18.68 points to close at 2,316.10.  Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 2.50%, the NASDAQ Composite Index has advanced 6.12%, and the S&P 500 Index has gained 3.34%.

This past week, the national average 30-year mortgage rate fell to 4.19% from 4.24%; the 15-year mortgage rate declined to 3.39% from 3.44%; the 5/1 ARM mortgage rate fell to 3.04% from 3.05%; and the FHA 30-year rate dropped to 3.75% from 3.80%.  Jumbo 30-year rates decreased from 4.36% to 4.30%.

Economic Calendar – for the Week of February 13, 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 ($102.33, +15.8 bp) traded within a 77 basis point range between a weekly intraday high of $102.91 on Wednesday and a weekly intraday low of $102.14 on Friday before closing the week at $102.33.  The chart shows the bond moved higher Monday through Wednesday, breaking above resistance from the 50-day and 25-day moving averages.  On Wednesday, the bond closed above additional resistance at the 61.8% Fibonacci retracement level before being turned away on Thursday.  Thursday’s negative, red candlestick actually appears worse than it is as it reflects a monthly coupon bond repricing of -22 basis points after the close of trading.  The bond bounced back modestly on Friday, rising from the 50-day moving average to close on the 25-day moving average which also serves as closest resistance.

There is a negative stochastic crossover sell signal showing, but this is largely a result of the monthly coupon repricing and can therefore be discounted.  Overall, the chart indicates price direction is unclear, suggesting traders will likely take a wait-and-see approach until more robust economic data arrives this coming week.  Depending on economic and political news, bond prices could head in either direction, but will certainly break out of the current narrow range between technical support and resistance.  A break above resistance could lead to a slight improvement in mortgage rates while a drop below support could result in slightly worse rates.

Tucson Mortgages Home Loan News 2-6-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of January 30, 2017
  • Economic Calendar – week of February 6, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes finished the week “mixed” with little overall change as did bond prices.  The rather flat, lackluster performance in the financial markets may have been reflective of trader’s attention on the current political environment in Washington rather than on economic news and fourth-quarter corporate earnings reports.  For example, there were a number of earnings reports during the week easily exceeding analyst expectations that were unable to trigger significant stock gains.  A notable exception took place on Wednesday when Apple’s earnings surprise sparked a 6% rally in the shares.

The economic calendar was robust but generated little market reaction as stock indexes remained close to record levels.  The Federal Reserve’s Federal Open Market Committee (FOMC) maintained its current monetary policy on Wednesday while providing no solid clues when the next rate hike could be announced.   However, FOMC voting member Chicago Fed President Charles Evans stated a “slow pace of hikes is needed to help the U.S. economy weather downside shocks” while San Francisco Fed President Williams (non-FOMC voter) came out on Friday saying three rate hikes is a “reasonable guess” for the Fed in 2017 and a “March rate hike is on the table.”  Based on the latest CME Group 30-Day Fed Fund futures prices, the current probability for a March 15 rate hike of 25 basis points is only 13.3%.  The probability for a May 3 rate hike is 35.5% and the probability for a June 14 rate hike is currently 68.2%.

The most significant economic report for the week was Friday’s Employment Situation Summary for January showing greater than forecast job growth of 227,000 versus a consensus of 170,000.  However, the potentially inflationary Average Hourly Earnings only increased 0.1% compared to a consensus forecast of 0.3% while December’s reading was downwardly revised to 0.2% from an initially reported 0.4%.  This combination of substantial job growth and tepid wage growth should temper Fed officials from rushing toward their next rate hike.

In housing, the National Association of Realtors (NAR) reported Pending Home Sales in December increased 1.6% from November versus a consensus estimate of 1.3%.  The NAR stated “enough buyers fended off rising mortgage rates and alarmingly low inventory levels to sign a contract.  The main storyline in the early months of 2017 will be if supply can meaningfully increase to keep price growth at a moderate enough level for households to absorb higher borrowing costs.  Sales will struggle to build on last year’s strong pace if inventory conditions don’t improve.”

As for mortgages, mortgage application data for the week ending January 27 was released by the Mortgage Bankers Association (MBA) showing their overall seasonally adjusted Market Composite Index (application volume) fell by 3.2%.  The seasonally adjusted Purchase Index fell 6.0% from the prior week, while the Refinance Index declined 1.0%.  Overall, the refinance portion of mortgage activity decreased to 49.4% of total applications from 50.0% from the prior week.  The adjustable-rate mortgage share of activity accounted for 6.4% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased from 4.35% to 4.39% with points increasing to 0.34 from 0.30.

For the week, the FNMA 3.5% coupon bond advanced 14.1 basis points to close at $102.17 while the 10-year Treasury yield decreased 1.96 basis points to end at 2.4666%.  Stocks ended the week “mixed” with the Dow Jones Industrial Average dropping 22.32 points to end at 20,071.46.  The NASDAQ Composite Index rose 5.99 points to close at 5,666.77, and the S&P 500 Index advanced 2.73 points to close at 2,297.42.  Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 1.54%, the NASDAQ Composite Index has advanced 5.01%, and the S&P 500 Index has gained 2.55%.

This past week, the national average 30-year mortgage rate was unchanged at 4.24%; the 15-year mortgage rate was unchanged at 3.44%; the 5/1 ARM mortgage rate remained unchanged at 3.05%; and the FHA 30-year rate remained unchanged at 3.80%.  Jumbo 30-year rates increased to 4.36% from 4.35%.

Economic Calendar – for the Week of February 6, 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 ($102.17, +14.1 bp) traded within a 70 basis point range between a weekly intraday high of $102.45 on Friday and a weekly intraday low of $101.75 on Wednesday before closing the week at $102.17.  The chart shows the bond traded around the 76.4% Fibonacci retracement level ($102.071) during the past week and is poised to make a bounce higher off of this level on a technical basis.  There was a bullish moving average crossover buy signal as the 25-day moving average crossed above the 50-day moving average.  There was also a positive stochastic crossover buy signal from an oversold condition in the slow stochastic oscillator suggesting higher prices.  Should this scenario play out this coming week, we should see a rise in bond prices (lower yields) leading to slightly lower mortgage rates.

Tucson Mortgages Home Loan News 1-30-2017

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of January 23, 2017
  • Economic Calendar – week of January 30, 2017
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock indexes advanced to new all-time highs benefiting from a midweek rally triggered by encouraging corporate earnings reports and greater sentiment for economic growth. The Nasdaq Composite Index led the way with a 1.86% weekly gain, but investor attention was captivated by the Dow Jones Industrial Average finally closing above the 20,000 level.

The week’s economic calendar featured December Existing Home Sales and New Home Sales, Advance fourth quarter GDP, and December Durable Goods Orders that were all somewhat disappointing, but the financial markets appeared to largely shrug them off by not showing much reaction.  However, Treasury bond yields reversed their upward trajectory established on Tuesday and Wednesday following Friday’s poor GDP report.  The week ended with the fed funds futures market showing rate hike expectations remain firm with implied probabilities for a 0.25% rate hike of 25.3% on March 15, 42.8% on May 3, and 71.9% on June 14.

There were a couple of meaningful reports on the housing sector released during the week.  First, the National Association of Realtors announced sales of Existing Homes fell 2.8% in December to a seasonally adjusted annual rate of 5.49 million units.  This was below the consensus forecast of 5.55 million and was the lowest level since 1999.  However, November’s Existing Home Sales were revised higher to 5.65 million units, the highest sales pace since February 2007, from an initially reported 5.61 million units.  For the year, Existing Home Sales increased to their highest level since 2006, reaching 5.45 million units in 2016 from 5.25 million units in 2015.  Inventory of homes for sale continued to decline falling to its lowest level since 1999.  Instead of a “normal” market with about a six-month supply of homes, there were only 1.65 million homes for sale at the end of December representing a 3 ½ month supply at the current sales pace.

New Home Sales in December were also disappointing as the Commerce Department reported a decline to a seasonally adjusted annual rate of 536,000.  This was lower than the consensus forecast of 589,000 plus 10.4% lower than an upwardly revised November pace of 598,000 and 0.4% lower than a year earlier.  The median home sale price in December was 4.3% higher than in November and 7.9% higher than in December 2015, rising to $322,500.  The decline in sales increased the new home supply to 5.8 months of available inventory.  However, looking back on the year, an estimated 563,000 new homes were sold in 2016, 12.2% higher than in 2015 and the best year for New Home Sales since 2007.  Mortgage application data suggests New Home Sales should remain close to December’s level for another couple months before rebounding toward 600,000 by April.

As for mortgages, mortgage application data for the week ending January 20 was released by the Mortgage Bankers Association (MBA) showing their overall seasonally adjusted Market Composite Index (application volume) increased by 4.0%.  The seasonally adjusted Purchase Index rose 6.0% from the prior week, while the Refinance Index edged 0.2% higher.  Overall, the refinance portion of mortgage activity decreased to 50.0% of total applications from 53.0% from the prior week.  The adjustable-rate mortgage share of activity accounted for 5.7% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased from 4.27% to 4.35% with points decreasing to 0.30 from 0.39.

For the week, the FNMA 3.5% coupon bond was unchanged at $102.03 while the 10-year Treasury yield increased 1.94 basis points to end at 2.4862%.  Stocks ended the week higher with the Dow Jones Industrial Average gaining 266.53 points to end at 20,093.78.  The NASDAQ Composite Index rose 105.45 points to close at 5,660.78, and the S&P 500 Index advanced 23.38 points to close at 2,294.69.  Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 1.65%, the NASDAQ Composite Index has advanced 4.90%, and the S&P 500 Index has advanced 1.43%.

This past week, the national average 30-year mortgage rate decreased to 4.24% from 4.25% while the 15-year mortgage rate decreased to 3.44% from 3.45%.  The 5/1 ARM mortgage rate fell to 3.05% from 3.08%.  FHA 30-year rates increased to 3.80% from 3.75% and Jumbo 30-year rates increased to 4.35% from 4.30%.

Economic Calendar – for the Week of January 30, 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 ($102.03, unchanged) traded within a 101 basis point range between a weekly intraday high of $102.48 on Monday and a weekly intraday low of $101.47 on Thursday before closing the week at $102.03.  The chart shows the bond oscillated around resistance located at the 76.4% Fibonacci retracement level ($102.071) during the past week and is positioned once more to challenge this level.  The major stock indexes are “overbought” and showing signs of weakening so the bond market could benefit this coming week from a stock market consolidation or pause.   Should this occur, we could see a rise in bond prices (lower yields) leading to slightly lower mortgage rates.