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Mortgage Rates Rise Only Modestly Despite Market Weakness

Mortgage rates moved modestly higher today despite bigger movement in underlying bond markets.  In part, this is a byproduct of the way rates behaved at the end of last week, when lenders didn't adjust rates lower as quickly as bond market strength would have suggested.  In short, rates are playing it closer to the vest while the bonds that underlie and inform rate movement have been a bit more volatile.  

Bonds and rates frequently react to economic reports and other news that speaks to the health of the economy or the rate-setting policies of the Federal Reserve.  Although we did have a key report on new home construction and several speakers from the Fed today, rates were preoccupied with less overt motivations.  One example would be bond traders who decided to sell bonds today simply because trading levels hit certain targets. 

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Housing Starts Still Under The Weather; Single-Family Permits on The Mend

The U.S. Census Bureau is mum on causation, but results from the southern region would indicate that the August and September hurricanes probably drove declines in both housing permits and housing starts in September. Both were down by over 4 percent compared to their August numbers, although housing starts had previously been very weak. Housing completions did rise. The Bureau, in conjunction with the Department of Housing and Urban Development, reports that housing permits nationwide were issued at a seasonally adjusted annual rate of 1,215,000, down 4.5 percent from the August estimate of 1,272,000 units.

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Hurricanes Impact on Housing Could Last

Fannie Mae has lowered its third quarter projections for GDP growth by 0.2 percent to an annualized 2.4 percent based on its assessment of the overall impacts of the recent hurricanes.  The company's Economic and Strategic Research (ESR) Group says the storms appeared to have slowed consumer spending growth and dragged modestly on consumer and business confidence.  They also disrupted home sales, a sector already suffering from tight inventory. The overall economic impacts of the storms are expected to be short-lived so the fourth quarter estimates have been revised up slightly to reflect a rebound in activity and the start of rebuilding efforts.  Their GDP growth forecast for all of 2017 remains at 2.2 percent.

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Mortgage Applications Regain Footing

The volume of mortgage applications increased last week for the first time since early September.  The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of that volume, rose 3.6 percent on a seasonally adjusted basis during the week ended October 13.  It did decline 7 percent on an unadjusted basis from the week ended October 6, a week was shortened by the Columbus Day holiday.  The week's results included an adjustment to account for that event.

The increase in the Composite Index was the result of gains in both refinance and purchase mortgage applications.  The seasonally adjusted Purchase Index was up 4 percent compared to the previous week although the unadjusted version fell 6 percent. The Purchase Index was 9 percent higher than during the same week in 2016.

 

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Mortgage Rates Rise a Bit More From Recent Lows

Mortgage rates were at their best levels in roughly a month last Friday afternoon.  Since then, they've risen modestly on each of the past two business days.  As has been the case for quite some time, day-to-day movement continues to be very tame.  The actual interest rates at the top of loan quotes rarely change from one day to the next.  Instead, fine-tuning adjustments to the overall cost of financing come courtesy of slightly higher upfront costs--at least in today's case.

In other words, if you were being quoted 3.875% yesterday on a 30yr loan yesterday, chances are you'd be seeing the same rate today, but with upfront costs just a bit higher (or a lender credit that's just a bit lower, depending on the scenario). 

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Builders’ Confidence Returns as Hurricane Worries Wane

After reacting strongly to Hurricanes Harvey and Irma with a four-point drop in September, the Housing Market Index (HMI) regained its footing in October. The National Association of Home Builders (NAHB) says the HMI, which measures its new home builder member's attitudes toward the new home market gained four points this month, reaching 68, its highest reading since May. Analysts had expected the index, which NAHB cosponsors with Wells Fargo, to remain unchanged from September at 64. "This month's report shows that home builders are rebounding from the initial shock of the hurricanes," said NAHB Chairman Granger MacDonald.

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Construction Numbers Look Much Better Broken Down by State

It has been a rather dismal spring and summer for construction, one in which permitting has declined in three out of the last four months. Going more granular, however, a report from the National Association of Home Builders (NAHB) finds that residential permitting, and thus construction, is picking up steam in many states. The Census Bureau releases two separate reports covering aspects of residential construction each month.  The one MND readers are most familiar with is the Residential Construction Report which provides details on the issuing of building permits, housing starts, and unit completions. 

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Mortgage Rates Sideways to Slightly Higher

Mortgage rates were sideways to slightly higher today, depending on the lender.  Underlying bond markets suggested a bit more movement, and that will likely be reflected in tomorrow morning's rate sheets unless bonds improve overnight.

In other words, effective rates are just a bit lower this afternoon than bond market trading levels would imply.  This happens fairly often when bonds move during the day, but not by a wide enough margin to prompt mortgage lenders to reissue the day's rate sheets. 

All that having been said, the change would still be fairly minimal in the bigger picture, with most any lender continuing to quote the same interest rate (just with slightly higher upfront costs).  After dropping at the best pace in more than a month to the lowest levels in roughly a month on Friday, this modest pullback isn't yet cause for concern, but that could change if the weakness continues tomorrow.

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Mortgage Rates Back Into The 3’s After Inflation Report

Mortgage rates moved lower today.  For many lenders, it was the biggest drop in more than a month and it also brings them to the best levels in roughly a month.  Others were more hesitant to make significant updates to today's rate sheets based on this morning's strength in bond markets (which underlie mortgage rates).  If you're not seeing much of an improvement compared to yesterday at a specific lender, they're more likely to pass along that improvement if bond markets continue holding in current territory at the start of next week.

Just to be clear on how much improvement you might expect from a day like today, we're talking about roughly one quarter of ...

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Mortgage Guidelines Could be Twice as Loose and it Still Wouldn’t be 2007 Again

The Mortgage Bankers Association's Mortgage Credit Access Index, released earlier this week, showed continued slight easing in the credit markets, especially in the jumbo loan space.  A second similar index from the Housing Finance Policy Center, has credit tightening slightly. The Centers Credit Availability Index (HCAI) moved off the recent peak of 5.4, set in the first quarter of this year, to 5.1 in the second quarter.  The Center says the decline was due primarily to a shift in market composition, from the government channel to the portfolio channel where lending standards are tighter.

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