Tucson Mortgages Home Loan News 9-2-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of August 26, 2019
  • Economic Calendar – week of September 2, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes snapped a four-week losing streak to record their best performance in nearly three months as prospects improved for a U.S. – China trade deal.  Despite President Trump’s assertion that the Chinese “want to make a deal very badly,” a spokesman for China’s Ministry of Commerce told reporters China had no plans to respond to the White House’s latest tariff escalation and remarked “China has ample means for retaliation.”  At the same time, China’s Foreign Ministry stated the two sides remained in “effective communication.”  China is facing a tariff rate of 24.3% by December 15 covering 96.8% of all Chinese imports to the U.S. if a trade deal is not reached by then.  However, China may be willing to take a “wait and see” approach to a trade deal before the November 2020 U.S. presidential election in hope that a Democrat candidate soft on trade gets elected.

The week’s economic reports were “mixed.”  Durable Goods Orders fell unexpectedly, but the Chicago Purchasing Manager’s Index surprised to the upside.  Personal Income growth for July was lower than expected, but Personal Spending increased by 0.6% to exceed expectations.

However, the Consumer Sentiment Index for August fell to its lowest level since late 2016 as consumers become more concerned about the impact of tariffs on Chinese imports.

In housing last Tuesday, the Federal Housing Finance Agency (FHFA) reported U.S. house prices increased 1.0% in the second quarter of 2019.  Comparing the year ago second quarter, house prices rose 4.99% percent from the second quarter of 2018 to the second quarter of 2019.  The FHFA’s seasonally adjusted monthly index for June was up 0.2% from May.

Dr. William Doerner, FHFA Supervisory Economist, remarked “House prices rose again in all states and the top 100 metro areas, but the pace of growth has slackened.  The majority of states and cities are experiencing slower house price gains than they did a year ago, even with constrained housing supply and extremely attractive mortgage rates.”

The top five areas in annual appreciation were: 1) Idaho 11.4%; 2) Utah 7.7%; 3) Tennessee 7.2%; 4) Georgia 6.9%; and 5) Arizona 6.9%. The areas showing the smallest annual appreciation were: 1) Delaware 1.2%; 2) Maryland 1.5%; 3) District of Columbia 1.8%; 4) Iowa 2.2%; and 5) New Jersey 2.7%.  Of the nine census divisions, the Mountain division experienced the strongest four-quarter appreciation with a 6.6% gain between the second quarters of 2018 and 2019 and a 1.3% increase in the second quarter of 2019.  Annual house price appreciation was weakest in the Middle Atlantic division where prices rose by 4.0% between the second quarters of 2018 and 2019.

Thursday, the National Association of Realtors (NAR) reported Pending Home Sales for July 2019 slowed by 2.5% and fell slightly by 0.3% from the year ago period.  All regions showed lower sales data from June.

 

Pending Sales in the Northeast Region fell 1.6% in July; the Midwest showed a 2.5% decline; the South decreased 2.4%; and the West dropped 3.4%.

NAR chief economist Lawrence Yun commented “Super low mortgage rates have not yet consistently pulled buyers back into the market.  Economic uncertainty is no doubt holding back some potential demand, but what is desperately needed is more supply of moderately priced homes.”

Elsewhere, the latest mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications decreased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 6.2% for the week ended

August 23, 2019.  The seasonally adjusted Purchase Index decreased 4% from a week prior while the Refinance Index decreased 8%.  Overall, the refinance portion of mortgage activity decreased to 62.4% from 62.7% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 6.1% from 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 to 3.94% from 3.90% with points increasing to 0.38 from 0.35 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the UMBS 3.0% coupon bond finished 32.8 basis points higher to close at $101.984 while the 10-year Treasury yield decreased 2.76 basis points to end at 1.499%.  The Dow Jones Industrial Average climbed 774.38 points to close at 26,403.28.  The NASDAQ Composite Index rose 211.11 points to close at 7,962.88.  The S&P 500 Index gained 79.35 points to close at 2,926.46.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 13.19%, the NASDAQ Composite Index has gained 20.01%, and the S&P 500 Index has advanced 16.74%.

This past week, the national average 30-year mortgage declined to 3.55% from 3.63%; the 15-year mortgage rate decreased to 3.25% from 3.33%; the 5/1 ARM mortgage rate fell to 3.38% from 3.42%; and the FHA 30-year rate decreased to 3.25% from 3.30%.  Jumbo 30-year rates decreased to 3.68% from 3.75%.

Economic Calendar – for the Week of September 2, 2019

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

Mortgage Rate Forecast with Chart – UMBS 30-Year 3.0% Coupon Bond

The UMBS 30-year 3.0% coupon bond ($101.984; +32.8 bp) traded within a wider 51.6 basis point range between a weekly intraday low of $101.484 on Monday and a weekly intraday high of 102.00 on Friday before closing the week at $101.984 on Friday.

After trading lower last Monday, mortgage bonds reversed direction and trended higher for the remainder of the week to challenge technical resistance at the 23.6% Fibonacci retracement level ($101.904) on Friday.  The bond is “overbought” but trading on a buy signal from last Tuesday.  If the price can continue to move higher above the 23.6% Fibonacci retracement level we could see a slight improvement in mortgage rates.  If the price falls back below the aforementioned resistance level, mortgage rates could edge slightly higher.  Overall, mortgage rates should remain relatively stable with no large interest rate moves in either direction.

 

 

Tucson Mortgages Home Loan News 8-26-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of August 19, 2019
  • Economic Calendar – week of August 26, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes recorded their fourth consecutive week of losses as the U.S.-China trade war continued to weigh on investor sentiment.  The stock market showed some early strength last week when the Trump administration announced on Monday it was temporarily halting a ban on U.S. firms doing business with Chinese telecommunications giant Huawei for 90 days.  Then on Wednesday, stocks continued higher after the Federal Reserve released the minutes from its July 30–31 monetary policy meeting showing policymakers wanted to remain flexible in responding to economic data.

However, the markets plunged on Friday after China announced they would impose new tariffs on $75 billion worth of U.S. imports, including a 25% levy on U.S. autos, 5% on auto parts, and 5% to 10% on 5,078 products, including soybeans, coffee, whiskey, seafood and crude oil.  The U.S. countered by announcing $250 billion of goods and products from China currently being taxed at 25% would be taxed at 30% and a remaining $300 billion of goods and products that were to be taxed at 10% will now be taxed at 15%.  President Trump also announced “We don’t need China and, frankly, would be far better off without them,” and “ordered” American companies “to immediately start looking for an alternative to China.”

The US Chamber of Commerce weighed in on the trade war by calling on the United States and China to “get back to the table” to discuss issues important to both sides, including intellectual property and market access.  The Chamber’s statement read in part “Today’s Chinese retaliation is unfortunate, but not unexpected.  The fact of the matter is that nobody wins a trade war, and the continued tit-for-tat escalation between the U.S. and China is putting significant strain on the U.S. economy, raising costs, undermining investment, and roiling markets.”

In housing last Wednesday, the National Association of Realtors reported Existing Home Sales increased 2.5% to a seasonally adjusted annual rate of 5.42 million units for July.  June’s sales rate was revised slightly higher to 5.29 million units from a previously reported 5.27 million units. Total sales were 0.6% higher than the same period a year ago.

The median existing home price for all housing types rose 4.3% year-over-year to $280,800 to reach the 89th consecutive month of year-over-year price gains.  The median existing single-family home price increased 4.5% year-over-year to $284,000.

Regionally, Existing Home Sales were 2.9% lower in the Northeast; 1.6% higher in the Midwest; 1.8% higher in the South; and 8.3% higher in the West.

Median home prices were 1.0% lower in the Northeast slipping to $305,800; 8.1% higher in the Midwest rising to $226,300; 5.2% higher in the South climbing to $245,100); and 3.7% higher in the West increasing to $408,000.  Single-family home sales increased 2.8% month-over-month to a seasonally adjusted annual rate of 4.84 million, and were 1.0% higher year-over-year.

The inventory of homes for sale at the end of July declined to 1.89 million from 1.92 million in June while inventory was 1.6% lower than a year ago.  Unsold inventory fell to a 4.2-months’ supply at the current sales rate versus 4.4 months’ for June.

Friday, the Census Bureau released their latest New Home Sales report showing sales declined 12.8% month-over-month to a seasonally adjusted annual rate of 635,000 in July.  This was below the consensus forecast of 645,000.  However, June’s New Home Sales report of 645,000 was revised significantly higher to 728,000.  Year-over-year, New Home Sales were 4.3% higher.

Regionally, New Home Sales were 50.0% higher in the Northeast; 11.1% lower in the Midwest; 16.1% lower in the South; and 14.2% lower in the West.

The median new home price fell 4.5% year-over-year to $312,800 while the average sales price declined 1.1% to $388,000.  The inventory of new homes for sale increased to 6.4 months at the July sales rate from 5.5 months in June.  Although there was a significant upward revision for June Sales, there was no follow-through sales momentum during July even with low mortgage rates and lower median home sales prices.  Sales were notably lower in three of the four national regions and the total number of new homes sold was below the 646,000 annual sales rate originally reported for June.

Elsewhere, the latest mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications decreased from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 0.9% for the week ended August 16, 2019.  The seasonally adjusted Purchase Index decreased 4% from a week prior while the Refinance Index increased 0.4%.  Overall, the refinance portion of mortgage activity increased to 62.7% from 61.4% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 6.4% from 6.0% 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 3.90% from 3.93% with points remaining unchanged at 0.35 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the UMBS 3.0% coupon bond finished 12.5 basis points lower to close at $101.656 while the 10-year Treasury yield decreased 3.54 basis points to end at 1.5266%.  The Dow Jones Industrial Average fell 257.11 points to close at 25,628.90.  The NASDAQ Composite Index dropped 144.22 points to close at 7,751.77.  The S&P 500 Index lost 41.57 points to close at 2,847.11.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 9.87%, the NASDAQ Composite Index has gained 16.83%, and the S&P 500 Index has advanced 13.57%.

This past week, the national average 30-year mortgage climbed to 3.63% from 3.58%; the 15-year mortgage rate increased to 3.33% from 3.25%; the 5/1 ARM mortgage rate rose to 3.42% from 3.40%; and the FHA 30-year rate increased to 3.30% from 3.25%.  Jumbo 30-year rates increased to 3.75% from 3.69%.

Economic Calendar – for the Week of August 26, 2019

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

Mortgage Rate Forecast with Chart – UMBS 30-Year 3.0% Coupon Bond

The UMBS 30-year 3.0% coupon bond ($101.656; -12.5 bp) traded within a narrower 37.5 basis point range between a weekly intraday low of $101.422 on Thursday and a weekly intraday high of 101.797 on Friday before closing the week at $101.656 on Friday.

Mortgage bonds continued to trade in a “sideways,” range-bound direction this past week, trading down to touch technical support on Thursday before bouncing a little higher on Friday.  The bond is currently trading on a sell signal from a negative slow stochastic crossover occurring last Tuesday.  However, the bond is no longer “overbought” and is slightly less susceptible to a pullback.  The stock market has become more volatile of late and selling pressure may continue this week after last Friday’s sharp sell-off unless bargain-hunters step in to buy stocks.  Should the stock market continue to correct, we could see investors move money into perceived safer-haven assets like Treasuries, mortgage bonds, and precious metals.  This would improve bond prices and slightly reduce yields resulting in slightly lower interest rates.  Mortgage rates should remain stable.

 

 

 

Tucson Mortgages Home Loan News 8-19-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of August 12, 2019
  • Economic Calendar – week of August 19, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes recorded their third consecutive week of losses as trade and economic growth concerns negatively impacted investor sentiment.  Some investors may have also been demoralized by a short-lived Treasury yield inversion that took place last Wednesday when the yield of the 10-year Treasury note fell below that of the two-year note.

Historically, such inversions have preceded a number of past economic recessions that have taken as long as two years to show up after an inversion.  However, the inversion was very short-lived as Thursday saw the 10-year Treasury yield climb back above that of the two-year note resulting in a slightly positive yield curve.  Furthermore, other factors including the current bond market environment where large central banks around the globe are holding vast quantities of government debt will likely make yield curve inversions a far less reliable indicator of future recessions.

Typically, what has happened in past yield curve inversions is short-term rates rise faster than long-term rates resulting in higher borrowing costs that reduce loan demand, squeeze lending margins, and reduce the supply of credit.  Yet in the current environment, both the 2-year and 10-year yields have been falling, lowering borrowing costs and increasing loan demand.  Indeed, the latest mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications increased 21.7% from the prior week as homeowners rushed to refinance.  Year-on-year, total mortgage applications jumped 81%, driven by a 196% increase in refinances and a 12% rise in mortgage purchases.

The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 21.7% for the week ended August 9, 2019.  The seasonally adjusted Purchase Index increased 2% from a week prior while the Refinance Index increased 37.0% to the highest level since July 2016.  Overall, the refinance portion of mortgage activity increased to 61.4% from 53.9% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 6.0% from 4.7% 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 3.93% (the lowest since November 2016) from 4.01% with points decreasing to 0.35 from 0.37 for 80 percent loan-to-value ratio (LTV) loans.

In housing last Tuesday, CoreLogic released its latest Loan Performance Insights Report showing the nation’s overall mortgage loan delinquency rate was 3.6% in May 2019, down from 4.2% in May 2018.  This delinquency rate includes all home loans 30 days or more past due, including those in foreclosure.  However, the foreclosure inventory rate was the lowest for a May in more than 20 years.

 

The serious delinquency rate, defined as 90 days or more past due including loans in foreclosure, was 1.3% in May 2019, down from 1.8% in May 2018.  The serious delinquency rate for May was below the average of 1.5% for the 2000 to 2006 pre-housing crisis period.  The foreclosure inventory rate was 0.4% in May 2019, down from 0.5% in May 2018.  Rising home prices have led to record amounts of home equity mitigating the risk of foreclosure.  The share of mortgages that were 30 to 59 days past due (early-stage delinquencies) was 1.7% in May 2019, down from 1.8% in May 2018.  The share of mortgages 60 to 89 days past due was 0.6% in May 2019, unchanged from May 2018.

Friday, the Census Bureau released housing data for the month of July indicating the housing market continues to struggle even with lower mortgage rates.  Total housing starts fell 4.0% month-over-month to a seasonally adjusted annual rate of 1.191 million units.  This was below the consensus forecast of 1.245 million.  Although single-family housing starts increased 1.3% month-over-month to 876,000, starts for the volatile multi-family housing segment plunged 9.2% to a rate of 406,000 units in July.  Housing completions increased 7.2% to 1.250 million units.  Realtors estimate housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month to fill the inventory gap.  Inventory of housing under construction fell 0.5% to 1.134 million units in July.

Meanwhile, total building permits increased 8.4% month-over-month to 1.336 million.  This was above the consensus forecast of 1.260 million and was primarily attributed to a 24.8% increase in permits for dwellings with five or more units.  Single-family permits rose 1.8% to 838,000.  Regionally, single-family starts were 22.9% higher in the Northeast, 1.6% higher in the Midwest, 3.9% lower in the South, and 8.1% higher in the West.  Single-family permits were 1.9% higher in the Northeast, 6.8% lower in the Midwest, 1.8% higher in the South, and 7.0% higher in the West.

The data from the report continues to show the supply of new single-family homes remains somewhat limited and will likely continue to curb overall housing sales due to supply and price constraints.  Thursday, a homebuilder confidence survey edged higher in August, but builders said they “continue to struggle with rising construction costs stemming from excessive regulations, a chronic shortage of workers and a lack of buildable lots.”

For the week, the UMBS 3.0% coupon bond finished 32.8 basis points higher to close at $101.781 while the 10-year Treasury yield decreased 17.20 basis points to end at 1.562%.  The Dow Jones Industrial Average fell 401.43 points to close at 25,886.01.  The NASDAQ Composite Index dropped 63.15 points to close at 7,895.99.  The S&P 500 Index lost 29.97 points to close at 2,888.68.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 10.97%, the NASDAQ Composite Index has gained 19.00%, and the S&P 500 Index has advanced 15.23%.

This past week, the national average 30-year mortgage declined to 3.58% from 3.64%; the 15-year mortgage rate decreased to 3.25% from 3.32%; the 5/1 ARM mortgage rate fell to 3.40% from 3.45%; and the FHA 30-year rate remained unchanged at  3.25%.  Jumbo 30-year rates decreased to 3.69% from 3.71%.

Economic Calendar – for the Week of August 19, 2019

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

Mortgage Rate Forecast with Chart – UMBS 30-Year 3.0% Coupon Bond

The UMBS 30-year 3.0% coupon bond ($101.781; +32.8 bp) traded within a wider 71.9 basis point range between a weekly intraday low of $101.250 on Tuesday and a weekly intraday high of 101.969 on Thursday before closing the week at $101.781 on Friday.

Mortgage bonds were range-bound this past week, dipping down to touch technical support on Tuesday before rebounding to reach technical resistance on Thursday.  The bond is currently trading on a buy signal from a positive slow stochastic crossover, but is “overbought” and susceptible to a pullback.  The technical chart below suggests the bond will challenge resistance located at the 23.6% Fibonacci level at $101.904.  A successful break above this level may propel the bond’s price toward the next level of resistance at $102.231.  However, a more likely outcome would be a pull-back into the trading range seen the past two weeks between support at $101.359 and resistance at $101.904.  Either way, mortgage rates are not expected to make any significant moves in either direction and should remain relatively stable.

 

Tucson Mortgages Home Loan News 8-12-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of August 5, 2019
  • Economic Calendar – week of August 12, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes saw a sharp increase in volatility during the week enduring the worst trading day of the year on Monday.  The markets then spent the rest of the week trying to recover most of their losses with the Dow Jones Industrial Average only losing 0.8%, the Nasdaq Composite losing just 0.6%, and the S&P 500 only down 0.5%.

Last Monday’s sell-off was triggered by China’s devaluation of its currency the yuan, allowing it to weaken beyond seven yuan per dollar in an effort to counteract President Trump’s latest China tariff announcement.  Also weighing on stocks were plunging U.S. Treasury yields resulting in a further flattening of the yield curve along with an announcement by China they were suspending U.S. agricultural purchases.  China’s currency devaluation was the greatest in 10 years prompting the U.S. to label China as a currency manipulator.

The flattening yield curve narrowed the spread between the 2-year (1.63%) and 10-year (1.74%) treasury yields instilling a degree of fear among some investors.  The 2-year / 10-year yield spread narrowed to its lowest difference since 2007, and when this spread “inverts” with the 2-year yield greater than the 10-year yield it is widely viewed as an indicator for a pending economic recession.

However, interest rates are currently either zero or negative in many countries.  There are 21 countries with central banks having zero interest rates and the European Central Bank, Japan, Sweden, Denmark, Switzerland and a number of private German banks currently have negative interest rates.  Negative rates are about the only tool many central banks have left to use in an effort to stimulate their economies, so it is likely this low interest rate environment will persist globally.  Low or negative interest rates will likely lead to an increase or expansion in asset values of real estate and equities.

The week’s economic calendar was light.  Labor market indicators remained strong with June job openings exceeding expectations while weekly jobless claims were less than forecast.  Friday, the Labor Department reported core producer prices, which exclude food and energy prices, had dropped 0.1% July, marking the first decline since 2017.  This decline in wholesale inflation helps to support the view the Federal Reserve will continue to cut short-term interest rates.  Indeed, the Fed funds futures market is currently pricing in an 88% probability for at least two more quarter-point rate cuts by the end of this year.

In housing last Tuesday, CoreLogic released its Home Price Index (HPI) and HPI Forecast for June 2019 showing home prices rose both year-over-year and month-over-month.  From June 2018, home prices increased nationally by 3.4%.

On a month-over-month basis, prices in June increased by 0.4%.  Single-family home prices are at an all-time high and continue to increase on an annual basis with CoreLogic forecasting an annual price growth increase of 5.2% from June 2019 to June 2020.  On a month-over-month basis, CoreLogic is forecasting home prices to increase by 0.5% from June 2019 to July 2019.  CoreLogic’s chief economist, Dr. Frank Nothaft, had this to say about home prices “Tepid home sales have caused home prices to rise at the slowest pace for the first half of a year since 2011.  Price growth continues to be faster for lower-priced homes, as first-time buyers and investors are both actively seeking entry-level homes.  With incomes up and current mortgage rates about 0.8 percentage points below what they were one year ago, home sales should have a better sales pace in the second half of 2019 than a year earlier, leading to a quickening in price growth over the next year.”

Elsewhere, mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications increased 5.3% from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 5.3% for the week ended August 2, 2019.  The seasonally adjusted Purchase Index declined 2% from a week prior while the Refinance Index increased 12.0%.  Overall, the refinance portion of mortgage activity increased to 53.9% from 50.5% of total applications from the prior week.  The adjustable-rate mortgage share of activity was unchanged at 4.7% 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 4.01% from 4.08% with points increasing to 0.37 from 0.34 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 3.5% coupon bond finished 12.5 basis points lower to close at $102.578 while the 10-year Treasury yield decreased 11.04 basis points to end at 1.745%.  The Dow Jones Industrial Average fell 197.57 points to close at 26,287.44.  The NASDAQ Composite Index dropped 44.93 points to close at 7,959.14.  The S&P 500 Index lost 13.40 points to close at 2,918.65.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 12.69%, the NASDAQ Composite Index has gained 19.95%, and the S&P 500 Index has advanced 16.43%.

This past week, the national average 30-year mortgage declined to 3.64% from 3.70%; the 15-year mortgage rate decreased to 3.32% from 3.38%; the 5/1 ARM mortgage rate fell to 3.45% from 3.60%; and the FHA 30-year rate remained unchanged at  3.25%.  Jumbo 30-year rates decreased to 3.71% from 3.80%.

Economic Calendar – for the Week of August 12, 2019

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

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

The FNMA 30-year 3.5% coupon bond ($102.578; -12.50 bp) traded within a narrower 48.4 basis point range between a weekly intraday low of $102.50 on Thursday and Friday and a weekly intraday high of 102.984 on Monday before closing the week at $102.578 on Friday.

Mortgage bonds traded lower on a sell signal generated last Tuesday from a slow stochastic crossover while “overbought.”  The bond managed to pop above the horizontal consolidation zone highlighted in the chart below as a yellow rectangle last Monday.  However, it trended back into this zone during the remainder of the week and appears headed for a test of dual support located at $102.453 and the 38.2% Fibonacci level at $102.346.  We could see a bounce higher off of these support levels this coming week resulting in stable mortgage rates, but a breach of support could result in slightly worse rates.

 

Tucson Mortgages Home Loan News 8-5-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of July 29, 2019
  • Economic Calendar – week of August 5, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes recorded their worst weekly performance so far this year after investors were disappointed with the outcome of the Federal Reserve’s policy meeting last Wednesday along with the post-meeting press conference conducted by Fed Chair Jerome Powell.  Also dealing a blow to the stock market was an announcement last Thursday afternoon that the U.S. would levy a new 10% tariff on all remaining Chinese imports (about $300 billion worth of goods) not currently facing duties on September 1st.  This announcement seemed to catch Wall Street and China by surprise.  However, a couple days prior it was announced China was not living up to promises made at the G-20 summit in late June.  The new tariff announcement will certainly get the attention of Chinese trade negotiators, and will hopefully prompt more meaningful negotiations resulting in a deal both nations can accept.

As for the Fed’s monetary policy meeting, the Fed announced a quarter-point cut in the federal funds target rate, which was widely expected, and now ranges from 2.00% to 2.25%.  The Fed also announced it would remove some upward pressure on longer-term interest rates by ending its balance sheet reduction efforts two months ahead of schedule.  This should be beneficial for prospective home buyers by putting at least some temporary downward pressure on mortgage rates.  However, investors were less thrilled with Fed Chair Powell’s post-meeting press conference in which he stated policymakers were thinking of the rate cut “as a mid-cycle adjustment to policy.”  Market participants interpreted this statement as meaning an easing cycle had not yet really begun and further rate cuts in coming months wouldn’t be considered.  Powell then confused everyone by suggesting further rate cuts were still possible.

The remainder of the week’s economic news revealed the economy continues to chug along with the July employment report showing another ample gain (164,000 vs. 160,000 expected) in nonfarm payrolls.  The unemployment rate held steady at 3.7% while average hourly earnings climbed 0.3% for a year-over-year rate of 3.2%, slightly more than forecast.

In housing last Tuesday, the National Association of Realtors (NAR) reported Pending Home Sales continued to increase in June to record gains over two consecutive months.  Each of the four major national regions noted a rise in contract activity, with the West Region showing the greatest sales improvement.  The Pending Home Sales Index moved 2.8% higher to 108.3 in June from 105.4 in May.  Year-over-year contract signings surged 1.6%, ending a 17-month streak of annual decreases.

NAR Chief Economist, Lawrence Yun, commented the 2.8% increase can be attributed to the current favorable housing conditions and predicted the rise is likely the start of a positive trend for home sales.

“Job growth is doing well, the stock market is near an all-time high and home values are consistently increasing.  When you combine that with the incredibly low mortgage rates, it is not surprising to now see two straight months of increases.”

Yun went on to remark “Homes are selling at a breakneck pace, in less than a month, on average, for existing homes and three months for newly constructed homes.  Furthermore, homeowners’ equity in real estate has doubled over the past six years to now nearly $16 trillion.  But the number of potential buyers exceeds the number of homes available.  We need to see sizable growth in inventory, particularly of entry-level homes, to assure wider access to homeownership.”

Regionally, the Northeast increased 2.7% to 94.5 in June and is now 0.9% higher than a year ago. In the Midwest, the index advanced 3.3% to 103.6 in June, 1.7% greater than June 2018.  In the South Region, pending home sales increased 1.3% to 125.7 in June, a 1.4% higher reading than last June.  The index for the West Region surged 5.4% in June to 96.8, an increase of 2.5% above a year ago.

Elsewhere, mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications decreased 1.4% from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 1.4% for the week ended July 26, 2019.  The seasonally adjusted Purchase Index declined 3% from a week prior while the Refinance Index increased 0.1%.  Overall, the refinance portion of mortgage activity increased to 50.5% from 49.8% of total applications from the prior week.  The adjustable-rate mortgage share of activity was unchanged at 4.7% 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 4.08% with points increasing to 0.34 from 0.33 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 3.5% coupon bond finished 39.0 basis points higher to close at $102.703 while the 10-year Treasury yield decreased 22.54 basis points to end at 1.8554%.  The Dow Jones Industrial Average fell 707.44 points to close at 26,485.01.  The NASDAQ Composite Index dropped 326.14 points to close at 8,004.07.  The S&P 500 Index lost 93.81 points to close at 2,932.05.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 13.54%, the NASDAQ Composite Index has gained 20.63%, and the S&P 500 Index has advanced 16.96%.

This past week, the national average 30-year mortgage declined to 3.70% from 3.91%; the 15-year mortgage rate decreased to 3.38% from 3.56%; the 5/1 ARM mortgage rate fell to 3.60% from 3.70%; and the FHA 30-year rate dropped to 3.25% from 3.50%.  Jumbo 30-year rates decreased to 3.80% from 3.91%.

Economic Calendar – for the Week of August 5, 2019

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

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

The FNMA 30-year 3.5% coupon bond ($102.703; +39.0 bp) traded within a wider 67.1 basis point range between a weekly intraday low of $102.188 on Wednesday and a weekly intraday high of 102.859 on Thursday before closing the week at $102.703 on Friday.

Mortgage bonds continued to trade “sideways” within the yellow-shaded rectangle highlighted in the chart below until breaking above the rectangle on Thursday.  The bond then traded down to this rectangular consolidation pattern on Friday before closing above it.  The bond remains on a buy signal, but is “overbought” and susceptible to some profit-taking that could send prices toward support at the 38.2% Fibonacci retracement level if the stock market manages to rebound.  If this happens, mortgage rates could edge slightly lower in the week ahead.  On the other hand, if the stock market continues to correct to the downside, bond prices could continue to improve even if overbought, resulting in a slight improvement in rates.

 

 

Tucson Mortgages Home Loan News 7-29-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of July 22, 2019
  • Economic Calendar – week of July 29, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes rebounded from losses recorded during the prior week with the S&P 500 and NASDAQ Composite indexes reaching new record highs in conjunction with improved investor sentiment toward corporate earnings news.  The second-quarter earnings reporting season is now in full swing with 145 of the S&P 500 companies having delivered their earnings results this past week.  Although overall earnings have been somewhat flat, a greater number of companies than usual have been beating their earnings estimates.  The companies that have managed to beat earnings expectations have been rewarded with stock price gains while those missing have been punished with stock sell-offs.  Bonds traded relatively flat to slightly lower with U.S. Treasury prices edging lower to send yields a few basis points higher.

The week’s economic data was a mixed bag, as usual, with existing home sales falling more than expected in June as did manufacturing activity in the mid-Atlantic region.  Last Wednesday, IHS Markit’s survey of overall manufacturing activity was reported falling to 50, the level dividing expansion and contraction.  On the plus side, durable goods orders for June (excluding transportation) increased far more than expected while weekly jobless claims dropped sharply to touch a three-month low.  Furthermore, the Commerce Department reported second quarter gross domestic product had grown at an annualized rate of 2.1%, exceeding the consensus forecast of 1.85%.

In housing last Tuesday, the Federal Housing Finance Agency released their House Price Index (HPI) report for May 2019.  The FHFA House Price Index recorded a 0.1 percent increase in U.S. home prices in May 2019 from the previous month.  From May 2018 to May 2019, house prices were up 5.0 percent.

For the nine census divisions, seasonally adjusted monthly price changes from April 2019 to May 2019 ranged from -1.0 percent in the East South Central division to +0.5 percent in the South Atlantic division.

The 12-month changes were all positive, ranging from +3.6 percent in the West South Central division to +6.7 percent in the Mountain division.​

Also last Tuesday, the National Association of Realtors (NAR) reported Existing Home Sales for June declined despite cheaper mortgages.

Existing Home Sales declined 1.7% month-over-month in June to a seasonally-adjusted annual rate of 5.27 million.  This was below the consensus forecast of 5.30 million and below an upwardly revised 5.36 million reported for May.  Total sales were 2.2% lower than the same period a year ago.

The median existing home price for all housing types increased 4.3% year-over-year to a record $285,700, representing the 88th consecutive month of year-over-year gains.

The median existing single-family home price was $288,900, up 4.5% year-over-year.

Regionally, existing home sales were +3.0% in the Northeast; +2.3% in the Midwest; -6.1% in the South; and -5.3% in the West.

Median home prices were +4.8% to $321,200 in the Northeast; +6.7% to $230,400 in the Midwest; +4.9% to $248,600 in the South; and +2.3% to $410,400 in the West.  Single-family home sales fell 1.5% month-over-month to a seasonally adjusted annual rate of 4.69 million and were 1.7% lower year-over-year.  The inventory of homes for sale at the end of June increased to 1.93 million from 1.91 million in May, and unsold inventory stood at 4.4-month supply at the current sales rate compared to 4.3 months in May.  Inventory remains below the 6.0-months’ supply typically associated with a more balanced market.  Overall, the recent decline in mortgage rates has failed to stimulate a meaningful increase in existing home sales that have been limited by a shortage of available housing inventory at lower price points. NAR’s chief economist Lawrence Yun remarked “Home sales are running at a pace similar to 2015 levels — even with exceptionally low mortgage rates, a record number of jobs and a record high net worth in the country.”

Wednesday, the Commerce Department reported New Home Sales rebounded 7.0% in June to a seasonally adjusted annual rate of 646,000 units.  Although this was below the consensus estimate of 660,000, it was above a downwardly revised 604,000 recorded for May.  Sales for April and March were also revised lower.  New Home Sales increased 4.5% from a year ago.

Regionally, New Home Sales for June were -4.2% in the Northeast; -26.3% in the Midwest; +0.3% in the South; and +50.4% in the West.  The median new home price was essentially unchanged year-over-year at $310,400 while the average sales price was 0.4% lower at $368,600.

The inventory of new homes for sale dropped to a 6.3 months’ supply at the June sales rate from 6.7 months in May.  Homes priced at $399,999 or less accounted for 73% of new homes sold, versus 71% in May and 70% a year ago.  Overall, sales activity remains weak despite the solid fundamental support from low mortgage rates, low unemployment, and a tight supply of existing homes for sale.

Elsewhere, mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications decreased 1.9% from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 1.9% for the week ended July 19, 2019.  The seasonally adjusted Purchase Index declined 2% from a week prior while the Refinance Index decreased 2%.  Overall, the refinance portion of mortgage activity decreased to 49.8% from 50.0% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 4.7% of total applications from 4.9%.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.08% from 4.12% with points decreasing to 0.33 from 0.38 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 3.5% coupon bond finished unchanged to close at $102.313 while the 10-year Treasury yield increased 3.08 basis points to end at 2.0808%.  The Dow Jones Industrial Average rose 38.25 points to close at 27,192.45.  The NASDAQ Composite Index gained 183.72 points to close at 8,330.21.  The S&P 500 Index added 49.25 points to close at 3,025.86.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 16.57%, the NASDAQ Composite Index has gained 25.54%, and the S&P 500 Index has advanced 20.70%.

This past week, the national average 30-year mortgage rate rose to 3.91% from 3.88%; the 15-year mortgage rate decreased to 3.56% from 3.59%; the 5/1 ARM mortgage rate rose to 3.70% from 3.65%; and the FHA 30-year rate dropped to 3.50% from 3.55%.  Jumbo 30-year rates increased to 3.91% from 3.90%.

Economic Calendar – for the Week of July 29, 2019

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

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

The UMBS 30-year 3.5% coupon bond ($102.313; Unchanged) traded within a slightly narrower 37.5 basis point range between a weekly intraday low of $102.203 on Friday and a weekly intraday high of 102.578 on Thursday before closing the week at $102.313 on Friday.

Mortgage bonds have mostly traded “sideways” since the end of May as highlighted in the yellow rectangle in the chart below, and continued to trade sideways this past week.  They have managed to stay above the 25-day moving average and the 23.6% Fibonacci retracement level this past week, and these levels provide a degree of technical support.  The bond is trading on a buy signal generated last Wednesday and not yet “overbought” so we could see further price appreciation toward the top of the current sideways trading range as highlighted below.  Should this scenario play out, mortgage rates could improve by moving slightly lower.

 

Tucson Mortgages Home Loan News 7-22-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of July 15, 2019
  • Economic Calendar – week of July 22, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

The major stock market indexes began the week by setting new all-time closing highs on Monday, but then slid lower during the remainder of the week as second quarter earnings season got under way.  Meanwhile, bond and U.S. Treasury prices pushed higher, sending yields slightly lower.

The week’s economic data were mostly encouraging.  Retail Sales recorded a second month of solid gains in June rising 0.4% versus a consensus forecast of 0.2%.  Regional manufacturing indexes were positive with the New York Empire State Manufacturing Index bouncing back to a reading of 4.3 from last month’s -8.6.  The Philadelphia Fed Manufacturing Index was reported far higher than expected at 21.8 compared to expectations of just 5.0.

Rumors circulated during the week about the possibility of a 50 basis point rate cut by the Federal Reserve at its July 30–31 monetary policy meeting.  Last week, Fed officials sent “mixed signals” over how aggressive they would be in cutting short-term interest rates.  Fed Chairman Jerome Powell stated policymakers would “act as appropriate amid increased uncertainties,” while Dallas Fed President Robert Kaplan reported he only favored a “modest tactical adjustment” to rates which investors interpreted as meaning only one quarter-point cut this year.  New York Fed President John Williams chimed in during a speech to say “it pays to act quickly to lower rates at the first sign of economic distress.”  Fed Vice Chairman Richard Clarida then announced on Fox Business Network that “you don’t have to wait until things get so bad to have a dramatic series of rate cuts.”  According to a report from The Wall Street Journal last Friday, the Fed is indicating it will go ahead with a quarter-point cut.  By Friday’s close, the Fed Funds Futures markets were pricing in a 100% chance of a 25-basis point cut and a 22.5% chance of a 50-basis-point cut at the end of July.

In housing last Tuesday, the National Association of Home Builders (NAHB) released their latest Housing Market Index showing the Index increased to 65 this July from 64 in June.  The July reading exceeded consensus market expectations of 64.

The sub-index for current single-family homes edged up to 72 from 71 in June while the measure for home sales over the next six months increased to 71 from 70.  The sub-index for prospective buyers increased to 48 from 47.

The NAHB Housing Market Index in the United States averaged 50.40 from 1985 until 2019, reaching an all- time high of 78 in December of 1998 and a record low of 8 in January of 2009.

Wednesday, the Commerce Department reported Housing Starts fell 0.9% month-over-month in June to a seasonally adjusted annual rate of 1.253 million units.  This was below the consensus forecast of 1.270 million.  Furthermore, Building Permits dropped 6.1% month-over-month to a seasonally adjusted annual rate of 1.220 million, and this was below the consensus forecast of 1.300 million.

 

In both Starts and Permits, the weakness was attributed to declines in multi-unit dwellings.  Single-family starts improved by 3.5% month-over-month to 847,000 while single-family permits increased 0.4% month-over-month.

However, Permits for multi-unit dwellings dropped 16.8% month-over-month in June, led by a 20.7% decline in dwellings with five or more units.

Starts for multi-unit dwellings declined 9.4% month-over-month in June.  Regionally, single-family housing starts in June were 6.1% higher in the Northeast; 8.0% higher in the Midwest; 1.1% higher in the South, and 9.8% higher in the West.

Elsewhere, mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications decreased 1.1% from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 1.1% for the week ended July 12, 2019.  The seasonally adjusted Purchase Index declined 4% from a week prior while the Refinance Index increased 2%.  Overall, the refinance portion of mortgage activity increased to 50.0% from 48.7% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 4.9% of total applications from 5.3%.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.12% from 4.04% with points increasing to 0.38 from 0.37 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 3.5% coupon bond gained 23.5 basis points to close at $102.313 while the 10-year Treasury yield decreased 5.60 basis points to end at 2.05%.  The Dow Jones Industrial Average fell 177.83 points to close at 27,154.20.  The NASDAQ Composite Index dropped 97.65 points to close at 8,146.49.  The S&P 500 Index lost 37.16 points to close at 2,976.61.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 16.40%, the NASDAQ Composite Index has gained 22.78%, and the S&P 500 Index has advanced 18.74%.

This past week, the national average 30-year mortgage rate fell to 3.88% from 3.95%; the 15-year mortgage rate decreased to 3.59% from 3.63%; the 5/1 ARM mortgage rate fell to 3.65% from 3.70%; and the FHA 30-year rate dropped to 3.55% from 3.63%.  Jumbo 30-year rates decreased to 3.90% from 3.97%.

Economic Calendar – for the Week of July 22, 2019

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

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

The FNMA 30-year 3.5% coupon bond ($102.313; +23.5 bp) traded within a 43.8 basis point range between a weekly intraday low of $101.984 on Tuesday and a weekly intraday high of 102.422 on Thursday before closing the week at $102.313 on Friday.

Mortgage bonds made a move higher during the latter half of the week to break above the 25-day moving average and resistance provided by the 23.6% Fibonacci retracement level.  As the bond is still trading on a buy signal generated last Tuesday and not yet “overbought,” we can anticipate further price appreciation toward $102.50 and perhaps secondary resistance located at $102.73.  Should this scenario play out, mortgage rates would improve moving slightly lower.

 

Tucson Mortgages Home Loan News 7-15-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of July 8, 2019
  • Economic Calendar – week of July 15, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

It was a busy week, highlighted by Fed Chair Jerome Powell’s remarks in front of the House and Senate.  Powell said that since June, uncertainty continues to weigh on the economy.  He also said that inflation pressure remains muted and that the Fed will act as appropriate to sustain the expansion.  This was a signal that the Fed will still be cutting rates at their meeting July 31st, something that was in question after the very strong June Jobs Report that was released earlier this month.  That was all the Stock and Bond markets needed to hear, with both moving higher in reaction.  Stocks, in fact, set record highs, with the S&P 500 breaking above 3,000 for the first time ever.

In economic news, Housing Wire published an article that said that more than 8.2 million borrowers can now benefit from refinancing their mortgages, according to Black Night Financial.  This is 1.5 million more than before the recent rate drop and the biggest number in almost 3 years.  There are now almost 4.5 times more refinance candidates that there were in November 2018.  Of the 8.2 million mortgages that can benefit, 35% of them were originated in 2018.

According to Black Night, borrowers who refinanced could reduce their mortgage by 0.75% with an average savings of $266 per month.  Use our Refinance Comparison and Debt Consolidation calculators to show your clients the benefits of refinancing.

CoreLogic released their Loan Performance report for the month of April, and there were some big improvements.  Loans 30-days or more past due improved significantly from 4.0% to 3.6%, while seriously delinquent loans, which is defined as 90-days or more, dropped from 1.4% to 1.3%.  Seriously delinquent homes in foreclosure were unchanged at 0.4%.  Incomes and home price growth continue to support strong loan performance.

The Mortgage Bankers Association reported their Mortgage Application data for last week, as they do every Wednesday.  Overall, Mortgage Application volume was down 2.4%.  Applications to purchase a home were up 2.0% and are up 5.5% from this time last year, which is a decline from the 10% year over year gain seen last week.  Refinances were down 7.0%, but are still up a very healthy 88.0% year over year.  There was an adjustment for the 4th of July Holiday, which could be affecting the numbers a bit.  This should be smoothed rout by next week.  The Refinance share of mortgage activity decreased from 51.0% to 48.7% of total applications.  Adjustable Rate Mortgages or ARM’s increased 5.3% of all applications.

The average 30-year mortgage decreased from 4.07% to 4.04% week over week, but rates are about 72bp or almost 3/4 lower than this time last year.  Remember that the rate the MBA cites typically has some amount of decimal points included.

On the inflation front, the Consumer Price Index (CPI), which measures inflation on the consumer level, showed that overall inflation increased in June, but moderated on a year over year basis.  The headline reading was up 0.1% for the month and decreased from 1.8% to 1.6% year over year.  But this was almost all due to gasoline prices, which dropped 3.6%.

Looking at the more important Core rate, which strips out food and energy prices, increased 0.3% for the month and on a year over year basis increased from 2.0% to 2.1%.  Bonds moved slightly lower after the hotter than expected inflation data…although it still remains relatively tame.

Within the report, rents rose by 0.3% for the month and are increasing at a rate of 3.9% on a yearly basis, which is a pretty big jump from 3.7% last month.  Medical care costs rose by 2% year over year, which is down from 2.1%.

Economic Calendar – for the Week of June 24, 2019

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

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

Mortgage Bonds moved lower over the course of the week, breaking beneath some important technical levels.  Bonds fell under the 102.274 Fibonacci level, as well as their 25-day Moving Average.  These levels will now act as ceilings on the way up.  Bonds have a significant amount of space to the downside until reaching the next floor of support, all the way down at the 50-day Moving Average.  For now, they are testing the aforementioned ceiling at the 25-day Moving Average.

The 10-year moved back up to 2.10% also breaking some key technical levels.  Yields broke above their 25-day Moving Average after breaking above 2.03% in the previous week.  Yields find themselves in the middle of a very wide range between support at the 25-day Moving Average and overhead resistance at the 50-day Moving Average.

 

Tucson Mortgages Home Loan News 7-1-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of June 24, 2019
  • Economic Calendar – week of July 1, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

Stock market trading was rather restrained this past week with investors mostly biding time on the sidelines as world leaders met in Osaka, Japan at the G-20 Summit on Friday and Saturday.  Although the S&P 500 Index retreated 0.3% this week it still recorded a 6.9% increase for the month, its best June performance since 1955.

Investors anxiously waited for any news concerning international trade coming out of a scheduled meeting between President Trump and China’s President Xi Jinping during the G-20 after the market’s close on Friday.  Earlier on Wednesday, Treasury Secretary Steven Mnuchin stated he estimated trade negotiators were “90% of the way there” in reaching a trade deal.  Saturday morning, it was reported President Trump and President Xi Jinping had reached an agreement to restart trade negotiations.  President Trump stated the U.S. would not add tariffs on an additional $300 billion worth of Chinese imports and would continue to negotiate with China “for the time being.”  In what is being viewed as a significant concession to break a negotiation impass, Trump revealed he would allow U.S. companies to continue to sell electronics components to Chinese technology giant Huawei “where there’s no great national security problem.”  As a result, we might see the stock market open the week with a rally on Monday.

The week’s economic data was reported mostly lower than consensus forecasts.  Measures of manufacturing activity in the Chicago, Dallas, and Kansas regions unexpectedly fell into contraction with readings below “50,” and overall durable goods orders declined far more than forecast in May. Although personal spending and income data showed solid gains in May, weekly jobless claims climbed more than expected and consumer confidence fell sharply in June, reaching its lowest level in almost two years due to “a less favorable assessment of business and labor market conditions.”

In housing last Tuesday, the Federal Housing Finance Agency released its House Price Index (HPI) for April showing house prices rose 0.4% for the month from March.

The previously reported 0.1% increase for March 2019 remained unchanged.

From April 2018 to April 2019, house prices were up 5.2%.

For the nine census divisions, seasonally adjusted monthly house price changes from March 2019 to April 2019 ranged from -0.6% in the West North Central division to +1.2% in the Mountain division.

The 12-month changes were all positive, ranging from +4.0% in the Middle Atlantic division to +7.8% in the Mountain division.

Also Tuesday, the Commerce Department reported New Home Sales declined 7.8% month-over-month in May to a seasonally adjusted annual rate of 626,000.  This was just below the consensus forecast of 683,000 and lower than an upwardly revised 679,000 in April.  Sales were 3.7% lower from a year ago.

Weaker sales activity in the West region was a major contributing factor for the lower than expected results with sales there down 35.9% month-over-month.

Sales were also down 17.6% in the Northeast region.  However, sales were 6.3% and 4.9% higher in the Midwest and South regions respectively.

The inventory of new homes for sale increased to a 6.4-month supply from a 5.9-month supply in April.  Homes priced below $400,000 accounted for 70% of new homes sold versus 66% in April.  The median new house price declined 2.7% from a year ago to $308,000 in May.  Even though there was a decline in mortgage rates and the median sales price, demand for new homes was relatively soft in May.

Thursday, the National Association of Realtors (NAR) reported their Pending Home Sales Index rose 1.1% to 105.4 in May from 104.3 in April.  However, year-over-year contract signings fell 0.7%, marking the 17th straight month of annual decreases.

Regionally, the pending home sales index in the Northeast increased 3.5% to 92.0 in May and is now 0.5% below a year ago.  In the Midwest, the index rose 3.6% to 100.3 in May, 1.2% lower than May 2018.

Pending home sales in the South edged 0.1% higher to an index of 124.1 in May, which is 0.7% higher than last May.  The index in the West declined 1.8% in May to 91.8 and was 3.1% lower than a year ago.

NAR Chief Economist Lawrence Yun remains optimistic saying “Rates of 4% and, in some cases even lower, create extremely attractive conditions for consumers.  Buyers, for good reason, are anxious to purchase and lock in at these rates.  The Federal Reserve may cut interest rates one more time this year, but there is no guarantee mortgage rates will fall from these already historically low points.  Job creation and a rise in inventory will nonetheless drive more buyers to enter the market.  Home builders have not ramped up construction to the extent that is needed.”

Elsewhere, mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications increased 1.3% from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 1.3% for the week ended June 21, 2019.  The seasonally adjusted Purchase Index declined 1% from a week prior while the Refinance Index increased 3%.  Overall, the refinance portion of mortgage activity increased to 51.5% from 50.2% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 6.5% of total applications from 6.1%.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.06% from 4.14% with points increasing to 0.35 from 0.38 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 3.5% coupon bond gained 6.3 basis points to close at $102.188 while the 10-year Treasury yield decreased 5.20 basis points to end at 2.007%.  The Dow Jones Industrial Average fell 119.17 points to close at 26,599.96.  The NASDAQ Composite Index dropped 25.47 points to close at 8,006.24.  The S&P 500 Index lost 8.70 points to close at 2,941.76.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 14.03%, the NASDAQ Composite Index has gained 20.66%, and the S&P 500 Index has advanced 17.35%.

This past week, the national average 30-year mortgage rate moved to 3.81% from 3.80%; the 15-year mortgage rate decreased to 3.61% from 3.62%; the 5/1 ARM mortgage rate fell to 3.66% from 3.72%; and the FHA 30-year rate was unchanged at 3.60%.  Jumbo 30-year rates decreased to 3.87% from 3.88%.

Economic Calendar – for the Week of July 1, 2019

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

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

The FNMA 30-year 3.5% coupon bond ($102.188; +6.3 bp) traded within a narrower 26.5 basis point range between a weekly intraday low of $102.016 on Wednesday and a weekly intraday high of 102.281 on Thursday before closing the week at $102.188 on Friday.

As last week’s technical chart suggested, mortgage bonds traded within a relatively narrow range between nearest support and resistance levels.  The 23.6% Fibonacci retracement level is becoming more formidable as technical resistance while the 25-day moving average serves as support.  As such, we could continue to see the bond trade sideways between these levels.

The bond is currently trading on a weak sell signal generated on Monday, June 24 from a negative crossover in the slow stochastic oscillator.  The week may start out with stocks rallying from news that trade negotiations with China are resuming, and if this happens we could see additional pressure on bond prices early in the week with the bond trading toward support and mortgage rates edging a little higher.  However, on Friday the June Jobs Report will be released.  If the payrolls numbers come in weaker than forecast, we could see a bounce higher in bond prices and slightly lower mortgage rates.  Either way, rates shouldn’t make a significant move in either direction.

 

Tucson Mortgages Home Loan News 6-24-2019

By Todd Abelson NMLS #180858 on .
  • Weekly Review: week of June 17, 2019
  • Economic Calendar – week of June 24, 2019
  • Mortgage Rate Forecast with Chart

Weekly Review

Several catalysts during the week powered the stock market higher with the broader S&P 500 Index gaining 2.2%, the technology-laden Nasdaq Composite Index gaining 3.0%, the small-cap Russell 2000 Index adding 1.8%, and the Dow Jones Industrial Average advancing 2.4%.  The most significant catalyst arrived Wednesday when the Federal Reserve strengthened investor expectations for an interest rate cut later on this year by removing the word “patient” from their monetary policy statement referencing interest rate adjustments and stated they “will act as appropriate to sustain the (economic) expansion,” indicating a willingness to cut interest rates if necessary.

The bond market also responded very favorably to the Fed’s new policy language and was also bouyed by European Central Bank (ECB) President Mario Draghi’s statement saying the ECB “could introduce new stimulus measures, possibly including renewed purchases of corporate debt, to lift growth and inflation.”  In response to all of the recent cental bank news citing low inflation levels as a reason for easier monetary policy, the fed funds futures market is now showing a 100% implied probability of an interest rate cut at the Fed’s July 31 FOMC meeting.  The expectations for lower interest rates sent bond yields lower across the globe with the yield on U.S. 10-year treasuries briefly falling below 2.00% for the first time since 2016 before closing the week at 2.059%.

Another catalyst providing a boost to stocks, this time in the energy sector, occurred when Iran decided to shoot down a U.S. Global Hawk surveillance drone over the Strait of Hormuz.  This news pushed crude oil 9.2% higher on Thursday while increasing geopolitical tension in the Middle East.  President Trump initially ordered a retaliatory military strike on Iran, but then cancelled it at the last moment after learning the damage inflicted and estimated loss of 150 Iranian lives wasn’t proportional to the downing of an unmanned drone.

Additional positive investor sentiment happened when news broke there would be “an extended meeting” at the G-20 conference scheduled to be held June 28–29 in Japan between President Trump and Chinese President Xi Jinping.  Investors are hoping progress can be made toward resolving the ongoing trade war between the U.S. and China.

In housing last Tuesday, the U.S. Census Bureau and the Department of Housing and Urban Development released their latest Housing Starts and Building Permits report showing Housing Starts declined 0.9% month-over-month in May to a seasonally adjusted annual rate of 1.269 million.  This was slightly above the consensus forecast of 1.240 million but below April’s upwardly revised 1.281 million in April.

Single-family housing starts declined 6.4% month-over-month to 820,000 and were 12.5% lower year-over-year.  Multi-unit starts increased 10.9% month-over-month in May.  Regionally, single-family starts were 25.8% lower in the Northeast; 5.8% lower in the Midwest; 3.3% higher in the South; and 19.9% lower in the West.

Meanwhile, Housing Permits increased 0.3% month-over-month in May to a seasonally adjusted annual rate of 1.294 million.  This was marginally below the consensus forecast of 1.295 million and just above an upwardly revised 1.290 million in April.  Single-family building permits increased 3.7% month-over-month to 815,000, but were 3.3% lower year-year.  Multi-unit permits declined 5.0% month-over-month in May.  Regionally, single-family permits were 2.0% lower in the Northeast, 0.9% lower in the Midwest, 7.7% higher in the South, and 1.0% lower in the West. Despite the slip in the number of Starts, Permits increased to their best level since January suggesting the housing market is primed to hold steady during the traditionally strong summer months.

Friday, the National Association of Realtors (NAR) released their Existing Home Sales report showing sales increased 2.5% month-over-month in May to a seasonally-adjusted annual rate of 5.34 million.  This was above the consensus forecast of 5.30 million and above an upwardly revised 5.21 million in April.  However, total sales were 1.1% lower year-over-year. Single-family home sales increased 2.6% month-over-month to a seasonally adjusted annual rate of 4.75 million, but were 0.8% lower year-over-year.

Regionally, existing home sales were 4.7% higher in the Northeast; 3.4% higher in the Midwest; and 1.8% higher in both the South and West.

Existing home prices for all housing types continued to rise with the median price increasing 4.8% year-over-year to a record $277,700.  The median existing single-family home price was 4.6% higher year-over-year rising to $280,200.

Home inventory listed for sale at the end of May increased to 1.92 million from 1.83 million in April and was 2.7% greater than a year ago.  At the current sales rate, unsold inventory was at a 4.3-month supply versus 4.2 months in April and remains below the 6.0-months’ supply typically seen in a balanced real estate market.

Elsewhere, mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications fell 3.4% from the prior week.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) declined 3.4% for the week ended June 14, 2019.  The seasonally adjusted Purchase Index decreased 4% from a week prior while the Refinance Index also decreased 4%.  Overall, the refinance portion of mortgage activity increased to 50.2% from 49.8% of total applications from the prior week.

The adjustable-rate mortgage share of activity decreased to 6.1% of total applications from 7.9%.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.14% from 4.12% with points increasing to 0.38 from 0.33 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 3.5% coupon bond gained 20.3 basis points to close at $102.125 while the 10-year Treasury yield decreased 2.70 basis points to end at 2.059%.  The Dow Jones Industrial Average gained 629.52 points to close at 26,719.13.  The NASDAQ Composite Index added 235.05 points to close at 8,031.71.  The S&P 500 Index advanced 63.48 points to close at 2,950.46.  Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 14.54%, the NASDAQ Composite Index has gained 21.05%, and the S&P 500 Index has advanced 17.70%.

This past week, the national average 30-year mortgage rate dropped to 3.80% from 3.92%; the 15-year mortgage rate decreased to 3.62% from 3.71%; the 5/1 ARM mortgage rate fell to 3.72% from 3.85%; and the FHA 30-year rate declined to 3.60% from 3.71%.  Jumbo 30-year rates decreased to 3.88% from 3.91%.

Economic Calendar – for the Week of June 24, 2019

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

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

The FNMA 30-year 3.5% coupon bond ($102.125; +20.3 bp) traded within a much wider 79.7 basis point range between a weekly intraday low of $101.828 on Monday and a weekly intraday high of 102.625 on Friday before closing the week at $102.125 on Friday.

The bond showed an increase in volatility Wednesday through Friday, spiking higher on Wednesday to close just above the 23.6% Fibonacci retracement resistance level.  Thursday, the bond’s price opened higher than Wednesday’s close then traded down to close just above the 23.6% Fibonacci retracement resistance level once again.  Friday was volatile with a 59.4 basis point trading range between the intraday high and low before closing below the aforementioned resistance level.

What to make of all this volatility?  Technically, the slow stochastic indicator shows a buy signal from Wednesday’s trading action but also shows the bond is “overbought” and susceptible to a pull-back in price.  The chart suggests we will likely see the bond trade between nearest support and resistance levels resulting in little movement in mortgage rates this coming week.