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Mortgage Rates Almost Perfectly Unchanged This Week

Mortgage rates were almost perfectly unchanged today.  That leaves them right in line with last Friday's levels.  I devoted a considerable number of words in yesterday's article to explaining why most other articles about mortgage rates were inaccurate yesterday.  Suffice it to say that the absence of change compared to last Friday fully drives home the point I was making.  In short, due to the primary source data that most news organizations use for their big mortgage story each week, the average article proclaimed a nice drop in rates.  In actuality, that drop happened at the end of last week.  From there, rates have barely budged.  

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Fannie Mae Research: Housing, What a Drag?

Fannie Mae's monthly Economic Development papers always have the best headlines, pithy and to the point. The August one reads. "Growth Picks Up as Expected, No Thanks to Housing."  Sort of says it all. The company's Economic and Strategic Research (ESR) Team is upgrading its estimate of third quarter growth based on the acceleration of headline economic growth in the second quarter.  Consumer spending and net exports drove the action although business inventories declined and dragged on growth. So too did residential investment, which had a negative impact for the fourth time in five quarters, subtracting 0.04 percentage point from the GDP. The residential investment component includes homebuilding, renovations, and brokerage commissions. 

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Second Quarter Loan Performance Shows Steady Improvement

Loan performance continued to improve in the second quarter. The overall delinquency rate on one-to-four-unit residential properties fell to a seasonally adjusted rate of 4.36 percent of all loans outstanding at the end of that period, a 27-basis point (bp) decline from the first quarter of this year.  The National Delinquency Survey conducted by the Mortgage Bankers Association (MBA) found delinquencies in all stages were lower than during the first quarter; the 30-day delinquency rate dropped 2 bps while the 60-day and 90-delinquency buckets dropped by 8 and 18 bps respectively.  The overall rate, however was up 12 bps from the second quarter of 2017.

 

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Mortgage Rate Misinformation Run Amok!

Be careful what you read--or perhaps, who you trust--about mortgage rates today.  There's a lot of misinformation out there.  Don't be mad.  No one is out to get you.  No one is out to intentionally deceive you (at least not when it comes to today's mortgage rate news.  Rather, the misinformation is a byproduct of a few unfortunate realities that we contend with on a regular basis.

The first reality is that Freddie Mac's weekly rate survey is widely relied upon by media outlets.  There's nothing wrong with Freddie's data as long as you understand what you're getting.  It is a stale, loosely accurate report of what a few lenders are offering on a few days of any given week.  Over time (preferably, a LONG time), it does a nearly perfect job of capturing the ups and down in mortgage rates. 

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Purchase Origination Share Remains at Survey High

Purchase loans held on to the June share of 71 percent of closed loans in July which remains the highest share in the seven-year history of Ellie Mae's Origination Insight Report. Refinances also held steady, remaining at 29 percent although the percentage of refinancing through the VA gained 2 percentage points to 25 percent. Conventional and FHA stayed at 31 and 19 percent respectively.   The distribution of new loans remained the same as in June as well, with 66 percent of originations going to conventional loans, 20 percent FHA, and VA loans accounting for 10 percent.  

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Construction Numbers Post Sluggish Recovery

As analysts had predicted, both housing permits and starts recovered, albeit only slightly, in July after a poor showing the previous month. The U.S. Census Bureau and the Department of Housing and Urban Development now report that housing permits are being issued at a pace higher than in 2017, but housing starts are still lagging the earlier number. Permits for privately owned residential construction were issued in July at a seasonally adjusted annual rate of 1,311,000 units. This is an increase of 1.5 percent from the June rate of 1,292,000 (revised from 1,273,000 units).  July's permitting rate is now 4.2 percent higher than that of July 2017.

 

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Economic Environment Depressing Millennal Homeownership

It shouldn't be news to anyone that the homeownership rate of the Millennial generation continues to be anemic.  While it has improved slightly since 2015, the Urban Institute's (UI's) new research shows that, at that point it was 37 percent, 8 percentage points lower than the homeownership rate of Gen Xers and baby boomers at the same age. This translates into 3.4 million fewer homeowners among these 75 million young adults.

UI researchers Laurie Goodman, Jung Hyun Choi, Jun Zhu, writing in the Institute's Urban Wire blog, say that demographic and lifestyle choices, delayed marriage, increasing diversity, have played a role in the decline, it is the economic environment that has been most determinative.

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Mortgage Rates Barely Lower Despite Bond Market Cues

Mortgage rates fell only modestly today despite a much stronger move in broader bond markets.  I spend a lot of time espousing the fact that rates are based on bonds, so it's fair to wonder how days like today happen.

Indeed, interest rates are based on bonds, but there are a wide variety of rates and bonds!  It's a common misconception that mortgage rates are actually and firmly linked to the 10yr Treasury yield.  In reality, this only appears to be the case because the bonds that underlie mortgage tend to move in the same direction as 10yr Treasuries.  The magnitude of their moves is also generally the same, but there are notable exceptions.  Today was one such exception.

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Builder Confidence Retreats Once Again

Rising concerns about costs and labor shortages continue to take a toll on home builder sentiment according to the August Housing Market Index (HMI). The Index, a joint product of the National Association of Home Builders (NAHB) and Wells Fargo, dipped another point to 67. The HMI has been moving in a narrow range between 68 and 70 since March. The index scored an 18 year high in of 74 last December and has trended lower since. The August number is the lowest so far this year. The index is a distillation of information gathered through a monthly survey that NAHB has been conducting for 30 years.

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Mortgage Applications: Purchase Volume Decline, Refis Stabilize

It was another week of decline for mortgage applications as those for home purchase slid for the fifth week in a row. The overall volume of applications, as measured by the Mortgage Bankers Association's (MBA's) Market Composite Index, declined by 2.0 percent on a seasonally adjusted basis during the week ended August 10.  On an unadjusted basis the volume lost 3 percent compared to the prior week.The seasonally adjusted Purchase Index decreased by 3 percent and was down 4 percent unadjusted.  The unadjusted version was also 3 percent lower than during the corresponding week in 2017.

 

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