Archive for the ‘Mortgage News Daily’ Category

Fannie Mae's Economic and Strategic Research (ESR) group is still expecting that economic growth will "likely" be solid in the third quarter, but they are otherwise hedging their bets.  In their October Outlook, the economists said the lower job growth in September does not alter their view that the labor market is strong, but GDP growth has probably slowed from its second quarter pace, partly reflecting a deceleration of product investment and consumer spending.

The surge of soybean exports that tried to get ahead of tariffs has subsided and with a strengthening dollar, the trade deficit has probably widened, and residential fixed investment is probably also down, extending that decline into a third straight quarter. Real estate sales commissions are part of that calculation and home sales have declined as interest rates have risen.

The share of closed loans originated for home purchase continues to inch higher.  Ellie Mae, in its September Origination Insight Report, says that share jumped from 68 percent in August to 71 percent.   The upward trend in purchasing was most pronounced for FHA loans where the share rose 5 percentage points to 83 percent. For Conventional loans the share moved to 69 percent from 66 percent while there was only a 1-point increase in the VA share, to 73 percent.

The distribution of loans did shift slightly for the first time in months. The VA and FHA shares of closed loans remained at 10 and 20 percent respectively but the Conventional shared dipped by 1 point to 65 percent.   The share of adjustable rate mortgages (ARMS) increased to 7.2 percent from 6.6 percent in August.  

Mortgage rates failed to extend yesterday's modest improvement, moving modestly higher by the end of the day.  This takes the average lender very close to the long-term highs seen on October 5th.  Indeed, prospective borrowers shouldn't be surprised to see the highest rates since early 2011. 

In and of itself, today wasn't too dramatic.  We were already fairly close to these highs yesterday and, in general, have been holding in a fairly sideways pattern nearby for most of the month.  As has been the case for more than 2 years, we are in a rising rate environment, and there's no compelling reason for an immediate change.  That said, the higher rates go, the harder it will be for them to continue moving higher. 

Existing home sales slipped in September, following a month in which sales were almost totally flat.  The National Association of Realtors® (NAR) said that closed transactions for existing single family homes, townhouses, condos, and cooperative apartments was at a seasonally adjusted rate of 5.15 million in September.  This was a 3.4 percent decline from both the July and August rate, both of which came in at 5.34 million units. The last month in which existing home sales posted a month-over-month gain was in March. Sales are now down 4.1 percent year-over-year from the September 2017 rate of 5.37 million.

Mortgage rates recovered most of yesterday's losses today, following turmoil in European financial markets.  What does Europe have to do with rates in the US?  A lot, actually.  In fact, Europe deserves credit for most of the glacial move toward lower rates seen from early 2014 through mid-2016, and was a key ingredient of the low rate environment in 2011-2012. 

More recently, Europe has been heading in a more American direction when it comes to monetary policy, and that's resulted in upward pressure on rates.  Most recently, investors are having some doubts about Italy's willingness to play nice with EU rules.  When that happens, investors seek safety in the core of the European bond market.  In other words, they buy bonds from Germany and other safe-haven countries.  While US bonds aren't high on that list, they still experience some of the benefits, and higher demand for bonds equates to lower rates.

Evidence is growing that the housing market is cooling, and Zillow is adding to the pile of proof. However, its contribution points more to a slowdown in the rental market than breaking any news about housing prices.  

The company says that annual rent growth has now slowed nationally for eight straight months and turned negative on an annual basis last month for the first time since July 2012. The annual rate of growth in September was -0.2 percent, not only a negative but far from the peak rate of appreciation, 6.6 percent, in July 2015.  Still, monthly rent is hardly pocket change.  The national median after that 0.2 percent or $36.00 decline, was $1,440. 

Anyone who has ever worked as a real estate agent will understand the real reasons behind a new finding from the National Association of Realtors® (NAR). The organization recently conducted a survey among its Realtor members to find out how many considered themselves as members of a team.

The survey, conducted in July, involved a sample of 50,436 active Realtors^.  A total of 3,483 useable responses were received for an overall response rate of 6.9 percent. The responses indicated that the team concept is becoming more common in the real estate world, although it certainly is not dominating it.  Twenty-six percent of respondents said they were members of a team.

Mortgage rates moved higher at a quicker pace today, following the release of the Minutes from the most recent Fed meeting.  But correlation isn't necessarily causality in this case.

The Minutes provide a more detailed account of the Fed meeting that resulted in September's rate hike.  That rate hike was foregone conclusion and the Fed has been a relative open book in the intervening 3 weeks.  In other words, there wasn't bound to be much by way of surprises.  Even so, investors are always looking for clues in this more robust snapshot of the Fed's decision-making process.  As such, it has the potential to cause some market volatility.

All three reports on residential construction activity in September were disappointing, but no more so than any of the other housing data that speaks to the ongoing process of leveling-off.  While there had been some erosion expected from the August numbers, the actual data did not meet analysts' expectations.  Upward revisions to August permitting took some of the sting out of that report, but the opposite happened with housing starts.  Results were particularly poor in the South, likely resulting from the impact of Hurricane Florence.

Permits for residential construction were issued at a seasonally adjusted annual rate of 1,241,000 units.  This is 0.6 percent lower than the August estimate of 1,249,000 and 1.0 percent below the annual rate of 1,254,000 the previous September.  The August number was an upward revision from the 1,229,000 units previously reported, wiping out some of that month's original 5.7 percent loss.

Purchase mortgage originations are expected to increase a bit in 2019, but not by enough to offset the continuing decline in refinancing.  A forecast from the Mortgage Bankers Association (MBA), released Tuesday at its 2018 Annual Convention and Expo, predicts a 4.2 percent gain over the 2018 volume of purchase mortgages next year to a total of $1.24 trillion.  However, the association expects refinancing activity to fall 12.3 percent to $395 billion.  The result will be a net decrease of about $1 trillion in total originations to $1.63 trillion.