Monthly Archives: April 2015

Mortgage Rates Up on Mixed Economic and Housing Data

Mortgage Rates Up On Mixed Economic & Housing Data

Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates slightly higher amid mixed housing and economic reports.


  • 30-year fixed-rate mortgage (FRM) averaged 3.68 percent with an average 0.6 point for the week ending April 30, 2015, up from last week when it averaged 3.65 percent. A year ago at this time, the 30-year FRM averaged 4.29 percent.
  • 15-year FRM this week averaged 2.94 percent with an average 0.6 point, up from last week when it averaged 2.92 percent. A year ago at this time, the 15-year FRM averaged 3.38 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.85 percent this week with an average 0.5 point, up from last week when it averaged 2.84 percent. A year ago, the 5-year ARM averaged 3.05 percent.
  • 1-year Treasury-indexed ARM averaged 2.49 percent this week with an average 0.4 point, up from last week when it averaged 2.44 percent. At this time last year, the 1-year ARM averaged 2.45 percent.

Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following links for the Regional and National Mortgage Rate Details and Definitions. Borrowers may still pay closing costs which are not included in the survey.


Pending Home Sales Highest Since June 2013

Momentum appears to be building toward a healthy spring market according to data released today on March pending home sales.  The National Association of Realtors® (NAR) said its Pending Home Sales Index (PHSI), reached 108.6 in March, a 1.1 percent increase over the previous month.  At the same time the February Index number was revised upward from 106.9 to 107.4.

March is the third consecutive month that pending sales have increased month over month and the Index is now at its highest level since June 2013 when it was 109.4.  The PHSI was up 11.1 percent from the March 2014 level of 97.7.  It has now increased year-over-year for seven consecutive months.

The PHSI is a leading indicator based on executed home purchase contracts. These contracts are generally expected to be reflected in residential sales in about two months.

Lawrence Yun, NAR chief economist, said the encouraging pending sales numbers resulted from more buyers than usual entering this year’s competitive spring market. “Demand appears to be stronger in several parts of the country, especially in metro areas that have seen solid job gains and firmer economic growth over the past year,” he said. “While contract activity being up convincingly compared to a year ago is certainly good news, the increased number of traditional buyers who appear to be replacing investors paying in cash is even better news. It indicates this year’s activity is being driven by more long-term homeowners.”

However, he also said that “Demand in many markets is far exceeding supply, and properties in March sold at a faster rate than any month since last summer. This in turn has pushed home prices to unhealthy levels – nearly four or more times above the pace of wage growth in some parts of the country. Simply put, housing inventory for new and existing homes needs to improve measurably to improve affordability.”

The PHSI in the Northeast was down (by 1.5 percent) for the fourth straight month to 80.2 but is still 0.6 percent above a year ago. In the Midwest the index declined 2.5 percent to 107.5 but remained 11.3 percent higher than in March 2014.

Pending home sales in the South increased 4.0 percent to an index of 126.5, 12.4 percent above last March.  The West was up 1.7 percent for the month and 15.6 percent on an annual basis.

Home Prices Overtaking Pre-Crash Peak

Home prices nationally are now within 3 percent of the peak they reached in March 2007.  The Federal Housing Finance Agency (FHFA) released its purchase only Home Price Index (HPI) for February showing that home prices increased 0.7 percent on a seasonally adjusted basis compared to January and were 5.4 percent higher than in February 2014.  The increase brought home prices back to January 2006 levels and within 2.7 percent of the pre-crash peak.

The numerical index number in February was 220.5 compared to 219.0 in January and 209.2 in February 2014.  The index is calculated using home sales price information from mortgages sold to or guaranteed by the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.  The basis for the index is January 1991=100.

The seasonally adjusted  monthly increase ranged across the nine census divisions from -1.3 percent in the East South Central Division (Kentucky, Tennessee, Mississippi, Alabama) to +1.8 percent in the South Atlantic division (all East Coast states from Delaware to Florida).  All regions posted positive changes for the 12-month period ending in February.  The smallest increase was in the Middle Atlantic division (New York, New Jersey, Pennsylvania) at 2.6 percent, the largest, at 6.9 percent was in the Pacific Division (West Coast states plus Alaska and Hawaii.)

Surging Home Sales Herald Strong Spring Market

The spring housing market blasted in across the county last month and existing home sales jumped 6.1 percent from the February level to the highest annual rate in 18 months.  The National Association of Realtors® (NAR) said March sales were at a seasonally adjusted annual rate of 5.19 million units compared to 4.89 million in February.  The rate of sales tied those in September 2013, which had been the most recent high in sales.  The March increase was the largest month-over-month gain since a +6.2 percent change in December 2010.

The pace of sales of existing single-family homes, townhomes, condominiums, and co-ops in March was 10.4 percent higher than in March 2014 and represented the sixth consecutive month of annual increases.  It was also the largest year-over-year increase since August 2013’s 10.7 percent rise.

Single-family home sales rose 5.5 percent to a seasonally adjusted annual rate of 4.59 million from 4.35 million in February, and were 10.9 percent above the 4.14 million pace a year previous. Existing condominium and co-op sales increased 11.1 percent to a seasonally adjusted annual rate of 600,000 units in March from 540,000 units in February, and are now 7.1 percent higher than March 2014 (560,000 units).

Lawrence Yun, NAR chief economist, says the housing market appears to be off to an encouraging start this spring. “After a quiet start to the year, sales activity picked up greatly throughout the country in March,” he said. “The combination of low interest rates and the ongoing stability in the job market is improving buyer confidence and finally releasing some of the sizable pent-up demand that accumulated in recent years.”

The inventory of existing homes increased to 2.0 million homes for sale, a gain of 5.3 percent for the month and 2.0 percent higher than a year earlier.  The unsold inventory is estimated at a 4.6-month supply at the current sales pace, down from 4.7 months in February.

“The modest rise in housing supply at the end of the month despite the strong growth in sales is a welcoming sign,” adds Yun. “For sales to build upon their current pace, homeowners will increasingly need to be confident in their ability to sell their home while having enough time and choices to upgrade or downsize. More listings and new home construction are still needed to tame price growth and provide more opportunity for first-time buyers to enter the market.”

The median existing-home price for all homes in March was 7.8 percent higher than in March 2014 at $212,100.  The month was the 37th consecutive one in which annual prices increased and the change was the largest since an 8.8 percent year-over-year gain in February 2014.  The median existing single-family home price was $213,500, up 8.7 percent from March 2014 and the median condo price was 1.6 percent higher at $201,400.

Foreclosures made up 7 percent of sales during the month and 3 percent were short sales.  Total distressed sales accounted for 11 percent of all sales in February and 14 percent in March 2014.  Foreclosures sold for an average discount of 16 percent below market value in March while short sales were also discounted 16 percent.

For the third time in 12 months the share of first-time buyers broke through 30 percent, rising to that exact number in March from 29 percent in February. Investors purchased 14 percent of homes sold in both February and March but this was down from 17 percent in March 2014.  Seventy percent of investors paid cash for the homes they purchased during the month and total cash sales accounted for 24 percent of all transactions, down from 26 percent in February and 33 percent the previous March.

Properties typically stayed on the market for a shorter time period in March (52 days) compared to February (62 days), and are also selling slightly faster than a year ago (55 days). Short sales were on the market the longest at a median of 165 days in March, while foreclosures sold in 56 days and non-distressed homes took 51 days. Forty percent of homes sold in March were on the market for less than a month.

Regional sales also boomed in March.  Sales in the Northeast increased 6.9 percent to an annual rate of 620,000, and were 1.6 percent above a year ago.  Prices however eased with the median down 1.6 percent from a year earlier to $240,500.

In the Midwest, existing-home sales jumped 10.1 percent to an annual rate of 1.20 million in March, and were 12.1 percent above March 2014. The median price in the Midwest was $163,600, up 9.7 percent from a year ago.

Existing-home sales in the South climbed 3.8 percent to an annual rate of 2.19 million in March, and were 11.7 percent above March 2014. The median price in the South was $187,900 an annual increase of 9.3 percent.

Existing-home sales in the West rose 6.3 percent to an annual rate of 1.18 million in March, and 11.3 percent compared to the prior year. The median price in the West gained 8.3 percent to $305,000.

The time to invest in a second home is now

With interest rates projected to rise and inventory increasingly tight, the window for purchasing a second home at an affordable price may be starting to close.

Such sentiment has helped to fuel the recent boom in vacation property sales among affluent investors, many of whom are feeling flush on the heels of a six-year stock market rally. Demand is particularly high among baby boomers who are prepositioning for retirement.

“Last year’s impressive increase reflects long-term growth in the number of baby boomers moving closer to retirement and buying second homes to convert into their primary home in a few years,” said Lawrence Yun, chief economist for the National Association of Realtors (NAR).

Vacation home sales rose 57 percent last year over 2013, to 1.3 million properties, well above their most recent peak level in 2006, according to NAR. In fact, vacation home sales accounted for 21 percent of all real estate transactions last year, their highest market share since the survey was first conducted in 2003. NAR found in a survey that 85 percent of vacation buyers think now is a good time to purchase real estate.

Three main themes emerge when you consider a real estate investment properly.

1. Only buy a second home from a position of financial strength—gamblers need not apply.

2. Additional costs can add up and eat into the benefits of buying a second home.

3. The value investment play may have already peaked, so scrutinize deal pricing closely.

Mortgage Rates Steady Despite Market Volatility

Mortgage rates were unchanged again today, continuing a trend of minimal movement that has been intact for all but one day since Monday April 6th.  Rates aren’t much different today than they were then, but being sideways at these levels is certainly not a bad thing when more than a few lenders are offering 30yr fixed rates of 3.625% on top-tier scenarios.

It will be nearly two full weeks until we get any data that’s significant enough to justify a big move in rates.  Between now and then, it’s hard to see where motivation will come from, as markets are telling us that weakness in the moderately important economic reports is not enough on its own. Today saw volatile underlying market conditions that ended up ‘canceling themselves out’ for lack of a better term.  Bonds were weaker mid-morning, and erased the weakness in the afternoon.  Most lenders didn’t change rates during the day.

The biggest risk is that these levels represent some sort of perfect storm of resistance (a “floor” of sorts, blocking rates from further progress).  We won’t be able to rule that out unless we break lower fairly soon.  The longer that continues to elude us, the more it makes sense to favor locking.  Rates could move quite a bit higher without technically exiting the long-term trend lower.  Think of this like rates descending in a tunnel since the beginning of 2014.  Recently, like most times during that descent, we’ve been nearer the floor of the tunnel.  But every so often, we’ll bounce up and hit our heads on the roof of the tunnel.  If the next few weeks are to be one of those times, it seems like we’ll know soon.

MBS Day Ahead: Retail Sales Once Again Expected to Turn Positive. Do We Care?

Last time we saw a Retail Sales report, the forecast called for a move back to +0.3 after the worst 2-month stretch since the onset of the financial crisis.  Those two months came in at -0.9 and -0.8 for a total 2-month slide of -0.17.  The previous 2-month record holder in mid 2012 only managed -0.11.  But instead of breaking into positive territory, Retail Sales backtracked another -0.6.

This is a report that has a good track record of motivating bond market movement.  It’s hit and miss in terms of how pronounced the reactions have been, but certainly there have been some big ones.  It would have been more than fair to expect the surprisingly weak showing in the last report was grounds for a bigger bond market rally.  Instead, bonds ended up in negative territory by the end of the day (though they did rally fairly well on the initial news).

The dark horse back then was a wretchedly persistent bounce in European Bond markets.  German Bunds had just bottomed out after mind-bending 20bp rally over the course of several days (official inception of QE purchases) and were clearly ready for their first corrective move.  Treasuries and MBS had also been rallying, and although it wasn’t on the same scale as Europe, global bonds agreed to cool their jets on the approach to March 18th’s FOMC Announcement.  In the end, Retail Sales ended up being lost in the shuffle.  Indeed its effects are impossible to distinguish from any other random movement unless you know what you’re looking for (even then, it still blended in!).

All that to say, there’s no guarantee that Retail Sales will have a big effect.  That said, it could be argued that they would have had a bigger effect last time were it not for bigger gorillas in the room.  Moreover, data is more interesting now than it was in early March when European markets still had the “New QE smell” and when we were getting ready to hear from the Fed after 2 very strong jobs reports.  Now that we’ve had the rotten jobs report and a slew of other tepid-to-weak data, every little bit of evidence informing that bigger picture is useful.

Mortgage Rates Mostly Unchanged Over the Weekend

Mortgage rates didn’t move much over the weekend in terms of lenders’ rate sheets.  Most are offering the same conventional 30yr fixed rate of 3.75% to top tier borrowers.  Some of the more aggressive lenders are at 3.625%.  In both cases, upfront costs were just microscopically higher today, on average.

In terms of the mortgage-backed securities (MBS) that drive lenders’ rate sheets, things improved steadily throughout that day.  It wasn’t quite enough for most lenders to go to the trouble of reissuing rate sheets, but if these levels were to remain intact, tomorrow’s rate sheets would be slightly better.

Unfortunately, tomorrow’s rate sheets won’t come out before the key economic data–Retail Sales at 8:30am.  If the data happens to come in stronger than expected, it could put upward pressure on rates before most lenders are able to lock in the morning.  That said, a worse-than-expected report also stands a chance to help rates improve.

Mortgage Rates Back Near This Week’s Lows

Mortgage rates were at their highest levels in more than a week yesterday, but have fallen back to the best levels in 4 days today, on average.  Some lenders are slightly higher than yesterday.  Most are lower.  In all cases, the overall scope of the movement has been exceptionally small after Monday’s big move higher.  Most lenders are quoting conventional 30yr fixed rates of 3.75% to top tier borrowers though there are an aggressive few at 3.625%.  The average quote would have the same contract rate as yesterday with the improvement being seen in the form of lower closing costs.

Despite the modest gains today, the broader short term trend has been toward higher rates.  That said, the longer-term trend has unequivocally been toward lower rates and isn’t yet close to exiting that trend.  While that does mean that those with longer time horizons or more risk tolerance might benefit from floating, rates are so close to long-term lows that the risk vs reward is questionable.  It could become less questionable when and if rates break those recent lows, but until then, 3.625% is as low as average rates have been on a widely-available basis (late January).  We’d need to see widespread availability of 3.5% in order to entertain the possibility that the downtrend is extending.

Purchase Applications Hit 21-Month High

A healthy increase in purchase mortgage applications last week was met with shrinking refinance activity leaving the Mortgage Bankers Association’s Market Composite Index for the week ended April 3 essentially unchanged. The Composite, a measure of application volume, increased 0.4 percent on a seasonally adjusted basis from the previous week and was 1.0 percent higher on an unadjusted basis than the Composite for the week ended March 27.

The seasonally adjusted Purchase Index and its unadjusted counterpart both increased by 7 percent compared to the previous week and the unadjusted index was 12 percent higher than during the same week in 2014.  According to Michael Fratantoni, MBA’s Chief Economist, it was the highest level of activity for the seasonally adjusted Purchase Index since July 2013 and the third straight week that purchase volume had increased.

At the same time the Refinance Index decreased 3 percent and the share of applications that were for refinancing dropped from 60 percent to 57 percent.  It was the lowest market share for refinancing since early October.

The FHA share of total applications increased to 13.2 percent from 12.8 percent the previous week and the VA share rose to 10.7 percent from 10.5 percent. The USDA portion of the application volume remained unchanged at 0.8 percent.

Both contract and effective mortgage interest rates were lower during the week ended April 3 than the previous week.  The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,000 or less) decreased 3 basis points to 3.86 percent.  Points decreased to 0.27 from 0.36.

Jumbo 30-year FRM (mortgage balances greater than $417,000) had an average contract rate of 3.81 percent, the lowest level since May 2013, with 0.26 point.  The previous week the rate was 3.90 percent with 0.34 point.

Thirty-year FRM with FHA guarantees had an average contract rate of 3.69 percent with 0.18 point.  The prior week the average rate was 3.73 percent with 0.13 point.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.15 percent from 3.21 percent.  Points were unchanged at 0.29.

The average contract interest rate for 5/1 adjustable rate mortgages declined by 17 basis points resulting in the lowest level for these loans since May 2013.  Points increased from 0.41 to 0.45.  The ARM share of applications during the week decreased from 5.6 to 5.5 percent.

MBA’s data is gathered through its Weekly Mortgage Application Survey.  The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted since 1990. Respondents include mortgage bankers, commercial banks and thrifts.  Base period and value for all indexes is March 16, 1990=100 and rate based on loans with 80 percent loan to value ratios.  Points include the origination fee.