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Mortgage Rates Mildly Lower; Volatile Week Ahead

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.

 

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Suddenly, The New Home Sales Trend is Flat Again

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.

 

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Fannie Mae sees Growth Expanding, Downgrades Loan Origination Expectations

Fannie Mae said on Thursday that real economic growth in the last two quarters of 2014 appear poised to exceed 3.0 percent, providing a solid basis for growth in 2015.  However the housing recovery will remain "choppy."

The October Economic and Housing Outlook published by Fannie Mae says reduced fiscal uncertainty and slowing monetary intervention has enabled momentum in the private sector to build while total government spending no longer declined.  Those government cutbacks had been masking improvement in the private economy. Housing contributed to growth as well, rebounding strongly in the second quarter from sharp drops in the previous two quarters

 

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Even Bad News is Good in September Foreclosure Summary

September appears to have been another month in which loan performance improved and the states continued to slog through the overhang of delinquent mortgages left over from, in some cases, the early days of the housing crash.  Black Knight Financial Services released a "first look" at its data for the month showing overall improvement in delinquency and foreclosure metrics.

The inventory of delinquent loans - those for which one or more payments have been missed but the loan is not yet in foreclosure - declined by 3.90 percent or 117,000 loans in September, nearly reversing a huge 146,000 delinquent loan increase in August.  This brought the 30+ day rate down to 5.67 percent and was a 12.22 percent drop representing 388,000 fewer loans compared to September 2013.

 

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Mortgage Rates Actually Moved Higher Today

Mortgage rates did as expected and departed their recently more stable range today.  Unfortunately, we got the less enjoyable of the two potential departures with rates moving higher at a moderate pace.  At the same time, the world's most widely-followed weekly check on rates from Freddie Mac indicated a move in the other direction!

The discrepancy is a result of Freddie's survey methodology.  It's not that the data is inaccurate--simply stale.  Here's what it means when Freddie says rates were lower this week: Human survey respondents chiming in at some point between Sunday and Monday this week reported lower rate quotes to Freddie than they did at some point between Sunday and Wednesday last week.  Given that Freddie tells us they receive more responses earlier on in their survey periods AND that last week's big move lower in rates didn't happen until Wednesday, it makes sense that the numbers could come out lower this week.

 

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Remodeling Market Stability a Positive Sign for Housing

Builders who engage in home remodeling continue to display confidence in their market the National Association of Home Builders (NAHB) said today.  NAHB's Remodeling Market Index (RMI) rose from 56 in the second quarter of 2014 to 57 in the third quarter.

NAHB described the current index reading as a "high water mark" and said it was the sixth consecutive quarter that the reading has been above the benchmark of 50.  This indicates that more remodelers report a higher level of activity compared to the previous quarter than those who see activity as down. 

The RMI averages responses about current activity with those about future expectations for work.  Both current and future responses are based on calls for bids, amount of work committed for the next three months, backlog of jobs, and appointments for proposals.

 

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Negative Equity Falling, but Still Exceeds $1 trillion

The percentage of American homeowners a mortgage that was seriously underwater fell to 15 percent in the third quarter of 2014 RealtyTrac said on Thursday.  There were 8.1 million properties with mortgages that met the company's definition of seriously underwater - where the combined loan amount of the homes mortgage(s) is at least 25 percent higher than the properties market value.  The combined market value of negative equity in these properties is an estimated $1.4 trillion.

In the second quarter of 2014 there were an estimated 9.1 million residential properties in a negative equity situation or 17 percent of all mortgaged homes.  The new third quarter figures were the lowest since RealtyTrac began following the issue in the first quarter of 2012.  Negative equity, which is a leading indicator of the possibility of foreclosure and seriously dampens a homeowner's ability to refinance or sell the property, peaked according to RealtyTrac's data in the second quarter of 2012 at 12.8 million properties or 29 percent.

 

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Mortgage Rates at a Standstill, but not for Long

Mortgage rates had their single flattest day since October 2nd today.  This is the polar opposite of last week's exceptional volatility.  The most interesting thing about it is that this is the way rates typically respond to that kind of rapid movement.  It goes something like this: one day, in particular, sticks out as utterly insane and the ensuing days get less and less insane until the insanity completely dries up.

Last Wednesday was ground zero for insanity, and today there's none to be found.

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Freddie Mac Economists Prescribe L.I.F.T. for Economy

Frank E. Nothaft and Leonard Kiefer, Freddie Mac's chief and deputy chief economists have come up with a formula for lifting the economy from its continuing low-growth status to a trajectory of robust sustainable growth.  And that's what they are calling it, L.I.F.T.  The acronym stands for Labor, Income, Fixed Investment, and Trust and in the current edition of the company's U.S. Economic and Housing Market Outlook they lay out the parameters for each.

Labor

The labor market must fully recover, providing solid employment gains, less long term unemployment, and broad-based income growth.  Unless the labor market recovery accelerates, any improvement in the housing market will also lag.  Last month the unemployment rate finally fell below 6 percent for the first time since the recovery began but that number does not tell the full story.

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Best Week of Year for Refis; MBA sees Purchase Loan gains Next Year

Falling interest rate precipitated a major refinancing rally during the week ended October 17 even though Columbus Day shortened the business weeks in some locations.  The Mortgage Bankers Association's (MBA's) Refinance Index jumped 23 percent compared to the previous week, the largest increase for the index this year, far surpassing an 11 percent gain in January and taking the index to its highest level since November 2013.  Applications for refinancing made up a 65 percent share of all applications compared to 59 percent the previous week and the average size of a loan for refinancing rose to $306,000 the highest level since MBA started its survey in 1990.

 

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