Monthly Archives: January 2016

Home Prices still Defying Predictions

No matter how much it is predicted, home price gains are still failing to decelerate.  All three of the S&P/Case-Shiller indices were slightly higher on an annual basis in November than they were in October and the Federal Housing Finance Agency’s (FHFA’s) Home Price Index (HPI) recorded a greater year-over-year increase in November 2015 than it did in November 2014.

The S&P/Case Shiller U.S. National Home Price Index, covering all nine U.S. census divisions rose 5.3 percent in November compared to 5.1 percent in October.  The Case-Shiller 10-City Composite posted a 5.3 percent increase compared to a 12 month gain of 5.0 percent in October while the 20-City Composite was up 5.8 percent versus 5.5 percent the previous month.

FHFA reported home prices rose 5.9 percent on a seasonally adjusted annual basis.  The annual increase a year earlier was 5.4 percent.

Case-Shiller reported the highest annual increases were again in Portland, San Francisco, and Denver; prices in all three rose by double digits.  Portland was up 11.1 percent, San Francisco 11.0, and Denver 10.9 percent.  Fourteen cities reported higher annual price gains in November than in October while Phoenix extended its streak of 12-month increases to a full year. Even beleaguered Detroit improved, posting a 6.3 percent annual gain compared to 5.1 percent in October.

The three Case Shiller indices also rose significantly month-over-month on a seasonally adjusted basis, each rising 0.9 percent compared to October.  On a non-seasonally adjusted basis the National Index was up 0.1 percent as was the 20-City composite while the 10-City was unchanged.  Fourteen of the 20 cities tracked by the indices had monthly increases before seasonal adjustment; all improved on an adjusted basis.

David M. Blitzer, Managing Director and Chairman of the S&P Dow Jones Index Committee said, “Home prices extended their gains, supported by continued low mortgage rates, tight supplies and an improving labor market.  Sales of existing homes were up 6.5 percent in 2015 vs. 2014, and the number of homes on the market averaged about a 4.8 months’ supply during the year; both numbers suggest a seller’s market. The consumer portion of the economy is doing well; like housing, automobile sales were quite strong last year. Other parts of the economy are not faring as well. Businesses in the oil and energy sectors are suffering from the 75% drop in oil prices in the last 18 months. Moreover, the strong U.S. dollar is slowing exports. Housing is not large enough to offset all of these weak spots.


December existing home sales jumped a record 14.7 percent

U.S. home resales rebounded strongly in December from a 19-month low and prices surged, indicating the housing market recovery remained intact despite signs of a sharp deceleration in economic growth in recent months. The National Association of Realtors said existing home sales jumped a record 14.7 percent to an annual rate of 5.46 million units, after being temporarily held back by the introduction of new mortgage disclosure rules, which had caused delays in the closing of contracts in November.

Sales were also boosted by unseasonably warm weather and buyers rushing into the market in anticipation of higher mortgage rates. The Federal Reserve raised its benchmark overnight interest rate in December, the first rate hike in nearly a decade.

The mortgage disclosure rules are intended to help homebuyers understand their loan options and shop around for loans suited to their financial circumstances. Realtors said the rules had significantly increased contract closing time frames.

November’s sales pace was unrevised at 4.76 million units. Economists had forecast home resales rebounding 8.9 percent to a 5.20-million rate in December. Sales rose 6.5 percent to 5.26 million units in 2015, the strongest since 2006.

Last month’s snap-back should offer some assurance that domestic demand remains fairly healthy, even as growth appears to have braked sharply at the end of 2015 because of a downturn in manufacturing and mining activity.




Lower Rates Spur Refi Applications

Applications for mortgages rose significantly during the week ended January 15 as fixed rate mortgage interest rates fell to the lowest levels since mid-autumn.  The Mortgage Bankers Association (MBA) reported that its Market Composite Index, a measure of loan application volume rose 9.0 percent during the week on an adjusted basis and 12 percent unadjusted.

Compared to the week ended January 8 the Refinance Index was up 19 percent and the share of all mortgage applications that were intended for refinancing jumped from 55.8 percent to 59.1 percent.  Purchase mortgage applications increased 2 percent on their adjusted index and 4 percent unadjusted.  The unadjusted index was 17 percent higher than during the same week in 2015.

Mortgage Rates Fall Back to 2-Month Lows

Mortgage rates moved moderately, but somewhat precipitously lower today.  How can the improvement be both moderate and precipitous?  A fair question.  It was moderate in the sense that the overall change from yesterday’s latest rates wasn’t that big.  It was precipitous not only in the sense that it was somewhat unexpected, but also because there was a fairly abrupt change in market conditions between the morning and afternoon.  In fact, many lenders began the day with HIGHER rates than yesterday.  Almost all lenders would go on to release positively-revised rate sheets–in some cases, two times.

The abrupt move in financial markets is attributable to several factors, with the most digestible being the drop in oil prices below $30/barrel.  Indeed, any time you can draw a connection between the day’s top financial market headline and mortgage rate movement, there’s little sense in exploring the more esoteric phenomena that are playing a supporting role.

The most aggressive lenders are quoting conventional 30yr fixed rates at 3.875% while the majority is still at 4.0%.

Mortgage Rates at 1-Month Lows Ahead of Jobs Report

Mortgage rates inched slightly lower today, adding to an already impressive string of improvements in the new year.  Rates typically take most of their cues from economic data, but that hasn’t been the case this week–at least not in the traditional sense.  Instead of US economic data being the center of attention, it’s instead been the volatility in global stock markets–especially China’s.  Successive days of heavy losses have pulled down stock prices worldwide, and sent investors fleeing for safer havens.

One of the quintessential safe-haven investments is the bond market.  This includes things like US Treasuries as well as the mortgage-backed securities that dictate mortgage rates.  In a nutshell, this is why rates have been able to perform as well as they have heading into the beginning of the year.

There is a curve-ball though.  Simply put, if it weren’t for the heavy losses in stocks and the generally high level of global market anxiety, there’s plenty of reason to suspect rates wouldn’t be nearly as interested in moving lower.  In fact, they’re increasingly looking opposed to the idea in that their descent is slowing despite stock prices falling more rapidly.  The risk is that a bounce in stocks–even if only temporary–could serve as the cue for rates to make the bounce higher that it seems like they’re waiting to make.

Tomorrow morning’s Employment Situation is the most important piece of economic data on any given month.  It will provide the ultimate test to see if rates are truly willing to ignore the economic data and continue following stock prices.