Monthly Archives: June 2014

Mortgage Rates at 1-Month Lows; Volatility Ahead

Mortgage rates moved lower again, with the best options available in the morning hours.  After that, bond markets including MBS (the mortgage-backed-securities that most directly affect mortgage rates) moved back into weaker territory on the day, prompting some lenders to raise rates in the afternoon.  The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains at 4.125%, with most borrowers seeing today’s improvement in the form of lower closing costs.  Expressed in terms of ‘effective rate,’ the drop in closing costs amounts to 0.02%.

Even after the afternoon reprices, today’s rates are still the best this month and very close to being the best this year.  Only 2-3 days were better at the end of May.  Any time rates are at a periodic low like this, it’s never a bad decision to lock in the improvements.  While we could see modest gains from here, the risk is rapidly increasing that the recent trend of improvement will take a breather, or even reverse next week.  If you’re not able to lock today, or not interested, just be aware that the prospects for volatility will be increasing after Monday night.

Home Prices Nearing Pre-Crash Levels

Home price are again approaching the high point they reached in 2006, before the bottom fell out of the housing market.  Black Knight in its Home Price Index Report for April says that U.S. home prices are now only 12 percent off of that peak.

Black Knights Home Price Index (HPI) was up 0.9 percent in April to $236,000 from $234,000.  This is 6.4 percent higher than the HPI in April 2013 of $222,000.  Prices peaked nationally in June 2006 at $269,000.

Nineteen of the 20 largest states posted month-over-month increases with Arizona which was unchanged for the month, being the lone exception.  The largest gains were in Georgia and Massachusetts each of which posted 1.6 percent appreciation.  Maryland was up 1.4 percent and Delaware and Michigan each increased by 1.3 percent.  After Arizona the smallest price increases were in Iowa (0.4 percent) followed by five states that each posted increases of 0.5 percent, Vermont, Nevada, Nebraska, New York, and Hawaii.

Texas and Colorado set new price peaks as they have done each month since mid-2013.  Dallas, Denver, Houston, San Antonio, Austin and San Antonia also each set another new post-crash high and were joined in April by Nashville.  That city set a new HPI of $200,000, up 1.4 percent from March.

Black Knight’s report summarizes sales concluded each month using a repeat sales analysis of home prices on their transactions dates.  The HPI represents the price of non-distressed sales by taking into account price discounts for bank-owned real estate (REO) and short sales.

Mortgage Rates Now Lower Than a Year Ago

Mortgage rates moved modestly lower again today.  While that leaves them a bit higher than the best rates of this year, it enables an important year-over-year milestone.  On June  20th 2013, bond markets were convulsing and rates were in the midst of what we called “The worst 2-day move in 4 years.”  That move brought the average closing-cost adjusted rate up to 4.29%.  Today’s average is 4.18%.  So for the first time in over a year, and as Calculated Risk suggested would happen soon, mortgage rates are officially lower year-over-year.

While this is primarily a factor of the timing of 2013’s rapid increases, it’s nonetheless a welcome development on some level.  Given all the turmoil that was yet to come on June 20th last year, it’s reassuring that markets were able to take a logical step back from the brink of insanity (where ‘insanity’ = rates so high that no one is interested in real estate outside cash buyers).

Today’s rates didn’t have to move in order to hit the 1-yr milestone, and indeed they moved very little.  Some lenders were actually in worse shape today, but closing costs were just slightly lower on average (0.02% in terms of effective interest rate).  The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains 4.25%, but 4.125% is becoming viable once again.

Mortgage Rates Slightly Lower to Start Week

Mortgage rates improved again today despite stronger-than-expected economic data.  When economic reports are better than forecast, rates tend to move higher, but geopolitical tensions are currently weighing on markets to some extent, especially since last Thursday.  In fact, today’s rate sheets fell back almost perfectly in line with Thursday’s latest offerings.   The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains 4.25%. Many borrowers will see today’s improvement only in the form of lower closing costs (equivalent to 0.03% in terms of rate).

As was the case on Friday, today’s market movements don’t really tell us anything new.  Rather, they simply reiterate the fact that the push toward higher rates from late May has run its course.  That doesn’t mean rates couldn’t continue higher–simply that we’re waiting for the next trend to develop.  In the meantime, the range of movement has been very narrow, making for lower risk and reward for floating.  That said, rates are still much closer to recent lows than they usually stay after historically similar bounces, which is ample justification for those inclined to lock.

Mortgage Rates Rise to 1-Month Highs

Mortgage rates continued higher today adding to a losing streak that has only seen one day of improvement in the last 9.  Rate sheets now most closely match those seen on May 10th.  The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) is back at 4.25% for the second straight day.  Most borrowers will still see the same rate as was quoted yesterday, but with higher closing costs.  The increase equates to 0.02% in terms of rate.

While yesterday’s trading activity didn’t really make much of a statement about the current state of events for mortgage rates, today confirms recent moves higher.  In other words, we could have held out some hope that markets were just digesting last week’s big events and that rates might still snap back lower.  Today builds a case against any quick moves lower, and begins to make last week’s only positive day for rates look like an outlier in an otherwise determined trend higher.

On a positive note, we’re NOT seeing any huge movement in either direction for now.  That decreases the pain involved in missing the opportunity to lock.  It also limits the incentive to float.  For the sake of perspective, keep in mind that May 10th rates (also today’s) were close to the lowest seen in 2014 before that point, and the lows that followed never went more than an eighth of a point lower.

Mortgage Rates Back up to Last Wednesday’s Levels

Mortgage rates rose moderately today.  Market conditions were exceptionally quiet and after trading opened in the secondary mortgage market, there was almost no movement for the rest of the day.  This follows 2 days at the end of last week that also realized very little of their rate-movement potential, though they did see some volatility.  Unsurprisingly, that leaves rates very much in line with Wednesday’s–the day before the volatility showed up.

In other words, financial markets braced for bigger impact from last week’s European Central Bank Announcement and the Employment Situation report.  While there was a decent amount of back and forth movement, rates ultimately leveled off as if those events never even happened.  The most most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) is back to 4.25% with today’s weakness, though 4.125% remains close.  Some borrowers will still see the same rate as was quoted Friday, but with higher closing costs.  The increase equates to 0.04% in terms of rate.

Last week’s conclusion holds true: the inspiration for the next concerted market movement is anyone’s guess at this point.  It’s not safe to plan on rates moving in either direction in the short term, but recent levels of volatility suggest there’s not much risk in being wrong.

Mortgage Rates Higher Still; Big Day Ahead

Mortgage rates were higher yet again today.  This time around, the move wasn’t quite as brisk as the past few days.  In fact, morning rate sheets were slightly stronger than yesterday’s in some cases.  But mid-morning market volatility prompted most lenders to issue mid-day reprices, raising rates to the worst levels of the week.

The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) is now back up to 4.25%, though 4.125% is still close for some lenders.  Some borrowers will see today’s weakness in the form of higher closing costs vs yesterday.  Expressed in terms of effective interest rates, the increase equates to 0.03%.

Tomorrow is potentially a very big day with the release of data that financial markets have been very anxious about.  The European Central Bank (ECB) is widely expected to do “something.”  No one knows exactly what that will be, but the best guess is that it involves cutting policy rates.  From their, they may also announce other liquidity measures (so-called ‘long-term refinancing operations’ or LTROs).  There’s an outside chance they’ll even embark on some form of asset purchases similar to quantitative easing in the US.

The point is that there are a lot of variables with respect to tomorrow’s ECB news.  Depending on what they do (or don’t do), as well as the comments during the press-conference (begins at 8:30am) markets could react in a big way.  From there, the hugely important Employment Situation report on Friday morning could either add to the momentum, or counteract it.  Either way, the prospects for volatility are as high as they’ve been so far in 2014.  There’s no way to know how rates will move over the next 2 days, but the moves could be big.