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Mortgage Rates Comically Flat

Mortgage rates are fairly hilarious today, though they're not hilariously higher or lower than they were on Friday.  Rather, the entertainment comes from the fact that rate sheets across multiple lenders are as close to the previous business day's rates as any other day of 2014.  That's incredibly uncommon, but it stands to reason given the fact that markets are fairly flat and market participants increasingly tune out on big holiday weeks.  Perhaps the thesis here is that while we should generally expect muted movement on a day like today, the extent to which today's movement is muted goes beyond our wildest expectations.  If lenders aren't essentially saying they've tuned out for the week, it's quite the coincidence.

 

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Existing Home Sales Fall From October Peak

Existing home sales in November fell far short of sales the previous month according to today's report from the National Association of Realtors® (NAR).  Sales in November were at a seasonally adjusted annual rate of 4.93 million units, the lowest since May's 4.91 million unit pace and a 6.1 percent decline from the previous month.  November sales were still 2.1 percent higher than a year earlier, the second consecutive month of year-over-year gains.

October was a banner month for existing home sales with volume originally reported at an annual rate of 5.26 million units.  Despite the slight downward revision to 5.25 million reported today October remains the best month for sales since September 2013.

 

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Mortgage Rates Hold the High 3′s

Mortgage rates found their footing today, moving slightly lower after spending the past two days rising at the quickest pace in months.   Most lenders had seen enough strength in the morning to offer lower rates right out of the gate, but some improved rate sheets later in the day as bond markets crept into better territory. 

The gains bring 3.875% back into clear focus as the most logical, most prevalent conforming 30yr fixed rate quote for top tier borrowers.  Some of the more aggressive lenders will be quoting 3.75% by default, but they're the exception. 

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Real Estate Investors Profit From Hidden Markets

RealtyTrac devotes the bulk of its most recent edition of HousingNewsReport, its monthly web magazine to detailing some real estate investment strategies.  The lead article by Octavio Nuiry, Managing Editor gives advice compiled from interviews with and articles by several successful investors.  However, even if the advice did come from Warren Buffet we can hardly get excited about such business models as buying distressed properties or finding undervalued ones. 

However one useful theme did emerge from several of the investors featured in Nuiry's article, "Real Estate Investment Strategies for 2015."   The message was characterized by Tony Youngs, a Georgia investor as finding the "hidden market," one to which no one else is paying attention.

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Mortgage Rates are Actually Higher Today

Mortgage rates moved higher at a much quicker pace today.  This runs counter to the most widely-circulated weekly rate report from Freddie Mac, which indicates a new low for 2014.  The Freddie data isn't wrong, just a little behind.  Still, it's important for consumers to understand that today's rates are no longer the year's lowest.

This is a fairly common discrepancy between Freddie's rate survey and reality, and it's only a problem when markets move sufficiently after their survey results are in.  Considering that usually occurs by Tuesday, you may already be able to guess why such a survey is now outdated.  Simply put, yesterday and today combined for the biggest 2-day move higher in rates since April.  Today's adjustment was much bigger than yesterday's, and was completely unavailable to be counted in the survey.

 

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2014 Economy and Housing: From Deep Hole to Whimper

Referring to its "roller-coaster pattern of economic growth," Fannie Mae summarized the economy and housing in 2014 as a year that started with a deep hole and ended with a whimper.  A brutally cold first quarter put economic growth in that deep hole at the beginning but it came back "with a vengeance" making the second quarter the strongest for growth in more than two years.  The third quarter saw growth flag again and it "is poised to weaken further, as some unsustainable forces that drove activity in the third quarter reverse in the final quarter."

Fannie Mae's Macroeconomic Forecasting Team headed by Senior Vice President and Chief Economist Doug Duncan reprise 2014 in the December edition of its Economic and Strategic Research report.  They see the year overall as one in which economic growth comes in at what they call an unspectacular pace of 2.1 percent, 1 percentage point below the 2013 pace.  Next year however will be better, driven by improving private domestic demand, a better outlook for consumer income, rising consumer and business confidence, a broadening housing recovery and they expect full year 2015 growth of 2.7 percent.

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Lenders Gloomy about Purchase Demand and Profits

Fannie Mae's writers use the word "stable" repeatedly to describe many of the findings from its fourth quarter 2014 Mortgage Lender Sentiment Survey, especially where the senior executives completing the questionnaire detailed their operational expectations.

The November survey found fewer lenders reporting tightened credit standards. Thirteen percent of respondents said their standards had tightened for GSE eligible loans compared to 28 percent in the first quarter of 2014.  More lenders reported their institutions had loosened standards for non-GSE-eligible loans than reported tightening them, the second consecutive quarter this pattern has prevailed.

 

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Mortgage Rates Slightly Higher After Fed Announcement

Mortgage rates rose at an acceptable pace today, following the FOMC Announcement and press conference.  Rates are driven by bond markets (mortgage-backed-securities, to be specific) and bond markets make a big deal of digesting and reacting to Fed policy.  The FOMC Announcement is the Fed's most official statement and has the biggest market moving potential of anything that occurs on a scheduled basis. All that having been said, the statement doesn't always merit the market movement its capable of producing.  Sometimes markets don't react much at all. 

Today produced something just slightly more serious than that, but nothing remotely close to its potential. 

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Former Countrywide Employee Awarded $57 Million in BofA Whistleblower Case

The person who perhaps made it possible for state and federal governments to collect billions from the Bank of America will apparently be amply compensated for his actions.  The New York Times is reporting that Edward O'Donnell, a former employee at Countrywide Mortgage which was purchased by the bank in 2008, will receive a whistle-blower reward of more than $57 MILLION  for his role in an August civil settlement.

Bank of America agreed to pay $16.65 billion in penalties to settle claims from federal prosecutors and several state attorneys general.  The bank was sued as successor in interest to Countrywide, one of the largest mortgage lenders in the country at the beginning of the century, has been repeated accused, along with its founder and CEO Angelo Mozilo of writing and selling shoddy mortgages...

 

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Lower Rates Fail to Stir Mortgage Applications

Mortgage applications were down modestly during the week ended December 12, with purchase applications accounting for the decline.  The Mortgage Bankers Association said its Market Composite Index, a measure of application volume, lost 3.3 percent on a seasonally adjusted basis from the week ended December 5 and was 4 percent lower on an unadjusted basis.

The Refinance Index was unchanged from the previous week but the portion of all mortgage applications intended for refinancing rose from 64 percent to 66 percent.  This was the highest share of applications captured by refinancing since December 2014.

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