Mortgage rates rose to the highest level in 3 weeks after today's Fed Announcement. The move was a two-part process with initial rate sheets being weaker in the morning and mid-day reprices (lenders raising rates) following the Fed. The pace of the movement was moderate, leaving 4.0% intact as the most prevalently-quoted conforming 30yr fixed rate for top tier borrowers, but 4.125% is now much closer than it had been. Many lenders are already there today.
It's important to understand that the Fed ending QE and today's rise in rates are not in a direct causal relationship. Market participants unanimously agreed that today would mark the end of the Fed's third round of quantitative easing (QE3) and that part of the announcement was no surprise....(read more)
Completed foreclosures rose slightly in September CoreLogic said today, but the long-term trend continues to be a relatively precipitous drop from the record high numbers of the last six years. The company's September National Foreclosure Report notes a 4.7 percent increase in the number of homes lost to foreclosure during the month relative to the August number, 46,000 units compared to 44,000. The September total however represents a year-over-year drop of 32.6 percent from 68,000 foreclosures the previous September 2013 and is 61 percent below the number at the peak of activity in 2010.
Mortgage application numbers during the week ended October 24 backed off a bit from the numbers posted during the week ended October 17 but were still elevated compared to other recent weeks. The Mortgage Bankers Association's (MBA's) Weekly Mortgage Applications Survey for last week reported almost entirely declining numbers but for context we will include the increases from the previous week in which there was unusually high refinancing volume.
MBA's Market Composite Index, a measure of mortgage loan application volume fell 6.6 percent on a seasonally adjusted basis from the previous week when it had posted an 11.6 percent increase. On an unadjusted basis the Index was down 7 percent following a 12 percent gain.
Mortgage rates were almost universally sideways today with very few lenders changing rate sheets noticeably from yesterday. As such, the most prevalent conforming 30yr fixed rate quote remains 4.0% for top tier borrowers. It continues to be the case that paying points upfront in exchange for a lower rate may make sense to some borrowers at these levels. There's nothing inherently bad or good about that strategy. It's simply a trade-off between upfront costs and monthly payment.
The bond markets that underlie mortgage rate movement have arguably been hunkering down for a bigger dose of volatility with tomorrow's big Fed Announcement....(read more)
August data released this morning by S&P Dow Jones Indices reveals that, while home prices throughout the U.S. continue to increase, the rapid pace in those gains seen earlier continues to decelerate. The S&P/Case-Shiller National Index as well as both composite indices eked out 0.2 percent increases from July to August but all three slipped to lower year-over-year gains than they posted the previous month.
The 10-City Composite Index was up 5.5 percent compared to August 2013 and the 20-City gained 5.6 percent. Both composites had posted 6.7 percent increases from July 2013 to the same period in 2014. The National Index, which covers all nine U.S. Census divisions, had a 5.1 percent annual growth in August against 5.6 percent in July.
Mortgage rates were almost perfectly unchanged over the weekend. Most lenders are still right in line with Friday's most prevalently-quoted conforming 30yr fixed rate of 4.0% for top tier borrowers. That said, most of those rate sheets also still have reasonable costs for borrowers interested in paying more upfront for a lower rate. For instance, the time required to break even on additional upfront costs is roughly 5 years when moving down from 4.0 to 3.875% or 3.75%, depending on the lender.
Today was uneventful in terms of movement in the markets that underlie mortgage rate changes. The rest of the week, however, stands a good chance to be increasingly volatile. Wednesday afternoon's Fed Announcement is the main event in that regard. The Fed is widely expected to confirm the end of the asset purchases associated with its 3rd round of quantitative easing (QE3). While that won't be a surprise if it happens, it will require additional verbiage changes in a statement that hasn't been forced to undergo any meaningful changes in months....(read more)
Home price increases wound down further in August. The Home Price Index released by Black Knight Financial Services today rose a negligible 0.1 percent from July to August and was 4.9 percent higher than a year earlier. In August of 2013 the year-over-year price gain was 9 percent and as recently as April increases were running 6.4 percent on an annual basis.
The company said that nearly half of the 20 largest states actually saw price declines from July to August although eight of the largest metro areas hit new peak price levels. Black Knight's Home Price Index for the U.S. was $241,000 in August, the same number as in July. The HPI registered $230,000 in August 2013.
Pending home sales, while increasing only slightly in September, exceeded those of a year earlier, the first time in 11 months this has occurred. The National Association of Realtors® (NAR) also said that its Pending Home Sales Index (PHSI), which rose 0.3 percent to 105.0 is at its second-highest level since last August.
The index is a forward indicator based on contracts signed for the purchase of a home. The September reading is 1.0 higher than in September 2013 and it is the fifth consecutive month in which the PHSI has exceeded 100. Contract signings are generally expected to turn into home sales within 60 to 90 days.
Mortgage rates caught a break today and were able to ease just slightly lower heading into the weekend. This is somewhat refreshing because yesterday's bigger move higher was the kind of thing that historically results in further upward pressure. The gains weren't quite enough to get the average top tier rate quote back into the 3's for conforming, 30yr fixed loans. 3.875% and 3.75% remain viable for some borrowers looking to pay more money upfront in exchange for a lower monthly payment. In general though, 4.0% is the most prevalent quote today.
New home sales increased only slightly in September, up 0.2 percent over August, bringing the annual rate of those sales to 467,000. Sales were up 17.0 percent from the September 2013 pace of 399,000 units.
Perhaps bigger news in today's joint release from the Census Bureau and the Department of Housing and Urban Development was the revision to the August new home sales number. The initial report of those sales indicated a very significant 18 percent increase over July's number, sending sales to a seasonally adjusted annual rate of 504,000 and over the half-million mark for the first time since May 2008. The estimate was well over analysts' expectations; the consensus had been 430,000 units. Turns out the analysts were closer to the mark than the government agencies which today downgraded the August estimate to an annual rate of 466,000.
This takes what had been a potential trend of improvement back into the stagnant sub-500k range that's been intact throughout the post-crisis period.