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Mortgage Rates Barely Higher, More Volatility Ahead

Mortgage rates started the day in fairly rough shape with most lenders offering noticeably higher rates vs yesterday.  As stock markets slid into the afternoon, the bond markets that underlie mortgage rates improved.  Most lenders put out better rate sheets at some point in the day.  In most cases this brought them fairly close to yesterday's latest levels though rates were just slightly higher on average.  The most prevalently-quoted conforming 30yr fixed rate for flawless scenarios remains 4.25%.

Tomorrow brings what is traditionally the most important economic report of any given month.  The Employment Situation Report is expected to show the economy adding 233k jobs in July with the unemployment rate holding steady at 6.1 percent.  Of those two figures, markets focus almost exclusively on job creation (expressed in "nonfarm payrolls").  If payrolls are significantly higher than 233k tomorrow, rates will likely move higher as well.  There is absolutely no way to know how it will come in ahead of time, but considering what's at stake, risk outweighs reward when it comes to floating (assuming you have the chance to lock tonight).

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Longest Recorded Refi Boom Ends; New Demographic Emerges

Freddie Mac has officially declared that the refinancing boom is over.  The company's Refinance Report for the second quarter of 2014 said that the longest refinance boom in the 24 years since it started keeping records officially ended in the second quarter.  That occasion was marked when the share of mortgages originated for refinancing fell below 50 percent for the first time since the third quarter of 2008.

Frank Nothaft, Freddie Mac vice president and chief economist, said, "The housing market realized a significant shift in the second quarter of this year as refinance activity fell below 50 percent marking the onset of the first purchase-dominated market the industry has seen since 2000 and an end to the refinance boom that started in late 2008. In this time we saw fixed mortgage rates hit all-time lows, with the 30-year fixed-rate mortgage falling well below 4 percent. We also estimate over 25 million American borrowers refinanced their loans to the tune of over $70 billion in total interest payment savings. However, since 2008 homeowners cashed-out approximately $215 billion in home equity, adjusted for inflation."

 

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Concentration of Foreclosure Inventory is a Concern – CoreLogic

While completed foreclosures increased slightly from May to June, the foreclosure inventory, a count of homes in the process of foreclosure, continued to slide.  CoreLogic's National Foreclosure Report for June puts the number of homes lost to foreclosure during the month at 49,000 units.  While this was an increase of 2.7 percent compared to May's 48,000 completed foreclosures, it was down 9.9 percent from the 54,000 foreclosures in June 2013. 

Even at the declining rate, completed foreclosures are still running at better than twice what is historically considered normal.  CoreLogic points out as a basis of comparison that in the six years before the 2007 decline in the housing market, completed foreclosures averaged 21,000 per month. Since the foreclosure crisis began in earnest in September 2008 there have been approximately 5.1 million foreclosures completed.

 

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Mortgage Rates Highest in More Than a Month After GDP

For weeks, we've discussed the prospects for increased volatility centered on today's economic calendar.  The chances of a bigger move were much higher going into today's GDP data, and a bigger move is exactly what we got.  Unfortunately, it was in an unfriendly direction.  GDP was significantly stronger than expected, which caused an equally significant amount of weakness in the secondary mortgage market.  With the data released at 8:30am and most lenders not putting out their first rate sheets until after 9am,  mortgage rates shot rapidly higher right out of the gate.

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California Realtors get Heads-Up on Short Sale Complications

A short sale program for properties serviced by Nationstar, which bills itself as one of the nation's largest independent loan servicers, is the subject of a new member advisory from the California Association of Realtors (C.A.R.).   C.A.R. is acquiescing to the program about which it has been in talks with the servicer for the last year but which it has been told by the California Bureau of Real Estate (BRE) does not violate any laws.

Nationstar requires most of its mortgaged properties to be listed on auction.com before a short sale is finalized.  The company says it utilizes this business model as a verification system to insure owners receive the best possible price. 

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Homeownership at 19 Year Low

The rate of homeownership in the U.S. continued to slide in the second quarter of 2014, reaching a 19 year low. The Commerce Department said that the seasonally adjusted homeownership rate fell to 64.8 percent during the quarter, down 0.1 percentage point from the first quarter and 0.3 points compared to the second quarter of 2013. The recent rate was the lowest for the statistic since the second quarter of 1995.

Homeownership peaked at 69.4 percent in the second quarter of 2004 and stayed within a range of 68.0 and 69.0 over the next 13 quarters before falling below 68.0 in the fourth quarter of 2007. While there have been quarterly ups and downs the homeownership rate has eroded at a fairly steady rate since then.

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Slow, Mixed Week for Mortgage Applications

It was a mixed and largely directionless week for mortgage applications as the volume of applications for home purchases inched up fractionally while applications for refinancing fell.  The Mortgage Bankers Association said its Market Composite Index, a measure of loan application volume was down slightly during the week ended July 25 on both a seasonally adjusted and a non-adjusted basis with the former decreasing 2.2 percent and the latter 2.0 percent compared to the previous week.

The Refinance Index fell 4 percent, wiping out an identical gain during the week ended July 18.  The share of applications that were for refinancing declined from 54.4 percent to 53 percent.

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Mortgage Rates Slightly Lower; Volatility Ahead

Mortgage rates were slightly lower today, holding inside a low and narrow range that's been intact for nearly 2 weeks.  The movement was small enough that some lenders are unchanged compared to yesterday, but they're the exception.  The most prevalently-quoted conforming 30yr fixed rate for flawless scenarios is still a bit of a toss-up between 4.25% and 4.125%.  Today's improvement tips the scales toward 50/50 whereas 4.125% was less prevalent yesterday.

For about the same amount of time that rates have been low and stable, we've been anticipating the next 3 days in financial markets.  In short, there is an impressive confluence of data and events that stands as good of a chance to break the monotony as anything.  Rates could either bounce back up toward the previous 2014 range, or they could improve to levels not seen since early 2013.  And of course, there's always a chance that markets don't deliver on either potential move. 

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Seasonally-Adjusted Home Prices Declined in May

Home price gains continued to slow in May, posting smaller annual increases than In April the S&P Dow Jones Indices said today.  The Indices' Case-Shiller 10-City Composite Index was up 9.4 percent compared to May 2013 and the 20-City was 9.3 percent higher.  In April the two composites posted annual increases of 10.9 and 10.8 percent respectively.

Both Composites increased by 1.1 percent from April to May and for the second straight month all 20 cities had positive returns.  But that's only true on an unadjusted basis.  When it comes to to home price data, seasonal buying/selling trends tend to be kind to prices in the Spring and Summer months.  Adjusting for those affects, prices were down 0.3 percent in May--the first seasonally-adjusted decline in more than 2 years.

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Mortgage Rates Unchanged to Start Important Week

Mortgage rates didn't move much to start the week, with a nearly equal number of lenders moving both higher and lower.  On average, rates were just barely higher.  Even then, the actual rates being quoted are the the same today versus Friday with the only differences seen in the form of closing costs.  The most prevalently quoted conforming 30yr fixed rate remains at 4.25% for flawless scenarios with 4.125% available to a lesser extent.

As the week progresses, so should the movement in the world of interest rates.  Mortgages and Treasury yields alike have been bumping around at the lower end of their ranges in 2014.  There's a decent chance that this week's events will either help break those ranges, or prompt a bounce back toward higher levels.  Bottom line, rates have been low and sideways, but they should look more like they're choosing a direction by the end of the week.

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