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March Home Prices Surge 6.7 Percent Year-Over-Year

CoreLogic released the first of the major home price estimates for March on Tuesday.  The company's Home Price Index (HPI) estimates for both January and February were substantially higher both month over month (0.4 to 0.7 percentage points) and year-over-year (1.2-1.5 points) than the other three indices we follow, those from S&P Case-Shiller, the Federal Housing Finance Agency, and Black Knight Financial Services.  They appear to be on track to be higher again this month. 

The company said its Home Price Index (HPI) increased by 6.7 percent compared to March 2015 and was 2.1 percent higher in March of this year than in February.  This is a slight deceleration from the annual increase it reported in January (6.8 percent), but nearly double its estimate of the January to February gain.

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SoFi’s Capital Raise; A Glance at Millennials; UK Parents Lend More Than Most Banks!

Change is all around us. The Wall Street Journal reports that the CFPB plans to bring the largest online lending platforms under its supervision by 2017. In the primary markets LendingClub said it expects loan losses on its loans will increase and it is raising interest rates on some loans based on changing credit risk. Avant said its online loan origination declined 27% in Q1 vs. Q4. And Bank of America is now offering customers the ability to check their credit score through the bank’s website, supposedly through a link with TransUnion. (BofA, by the way, says it settled another lawsuit -this time with FHLB of Seattle - for $190 million.)

How about this news out of England? The average amount being lent or gifted by parents, multiplied by 300,000 adult children a year receiving assistance for a house purchase, is enough to put the "Bank of Mum and Dad" at the equivalent of a top 10 UK mortgage lender!

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Mortgage Rates Slightly Lower Despite Market Weakness

Mortgage rates moved just slightly lower today, despite the fact that bond markets were suggesting a move in the other direction.  Mortgage rates are primarily determined by the prices of mortgage-backed-securities (MBS), which tend to behave a lot like 10yr Treasuries over time.  Both Treasuries and MBS lost ground today, meaning their prices moved lower and their yields moved higher.  This typically results in mortgage lenders offering slightly higher rates, but it was not the case today.  What gives?

There are at least two factors to consider when trying to piece together justification for today's rate sheet resilience.  First of all, lenders hadn't fully adjusted rate sheets to replect the gains seen last Friday.  In fact, lenders have consistently been hesitant to get too aggressive with rates already as low as they are.  Point being, there's extra room for markets to weaken a bit without necessitating big changes in lender rate sheets. 

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Price Increases Muting Interest Rate Affordability

Any benefits to affordability delivered by recent improvements in interest rates have been significantly downgraded or even erased by home price increases.  Black Knight Financial Services said in its March Mortgage Monitor that the interest rate declines the country enjoyed during the first months of 2016 could have saved a homebuyer $44 per month on a mortgage used to purchase a median priced home.  However, home price appreciation cut that back to just $18 per month.

At the time the Monitor's data was compiled, in March 2016, mortgages interest rates had fallen year-to-date by about 35 basis points.  Black Knight used those lower rates to calculate principal and interest payments to determine how lower rates impacted affordability of an 80 percent loan-to-value (LTV) 30-year fixed rate mortgage.  All things being equal those declines would have saved borrowers "significant" money on a home purchase, but rising home prices are muting the effect.  In some parts of the country home price gains could soon wipe out all the benefits from falling rates.

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Construction Spending Dips but Multi-Family Stays Strong

Overall construction spending rose 0.3 percent in March to a seasonally adjusted annual rate of $1.14 trillion compared to $1.13 trillion in February.  The Census Bureau said this is 8.0 percent higher than spending in March 2015.  On a year-to-date basis through the end of March there has been $240.4 billion in construction put in place in the U.S., 9.1 percent more than at the same point in 2015.

Private construction expenditures in March were at a seasonally adjusted annual rate of $842.3 billion, up 1.1 percent from the previous month and an 8.5 percent increase compared to a year earlier.  More than half of that annual rate is coming from the residential construction industry were spending increased 1.6 percent from February to an annual pace of $435.5 billion and was up 7.8 percent from a year earlier. 

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Mortgage Rates End Week at Lows

Mortgage rates moved just slightly lower in most cases, to end the week at the best levels since April 19th.  Mor importantly, the past 3 days of improvements go a long way toward defeating a worriesome trend toward higher rates that began in early April.  With the recent gains, the average conventional 30yr fixed rate is back down to 3.625% on top tier scenarios after having briefly moved up to 3.75%.  That said, keep in mind that rate sheet offerings have varied more widely than normal from lender to lender due to recent market volatility.  

Mortgage rates are primarily determined by trading levels in bond markets.  

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Does The Bank of Mom and Dad Help Homeownership?

Does a financial boost from mom and dad make it more likely a young person will buy a home?  It depends.  And that might change.

Those statements are more or less the bottom line from a working paper prepared by three University of Southern California professors, Dowell Myers, Gary Painter, and Julie Zissimopoulos that is part of a larger study on parental financial transfers to adult children.  The three based their work on two data sets, Panel Study of Income Dynamics (PSID) and the Health and Retirement Survey (HRS), that provide information on parental financial transfers, adult children's transitions into homeownership, and a variety of child and parent demographic, social, and financial characteristics.  The working paper is profiled by Myers and Fannie Mae's Patrick Simmons on the FM Commentary blog

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CFPB to Reopen Know Before You Owe Rulemaking

The Consumer Financial Protection Agency (CFPB) just opened the door to possible changes and refinements in its Know Before You Owe rule.  The agency, in a letter addressed trade groups representing principal mortgage origination stakeholders such as the American Bankers Association, Mortgage Bankers Association and credit union trade groups and their members said it has begun drafting a Notice of Proposed Rulemaking (NPRM) on the rule, and hope to open it for comment in late July.

CFPB acknowledged the implementation of the rule, which contains the Truth-in-Lending Disclosures (TRID) requirement has posed many operational challenges, particularly because of the "diversity of participants, from small to large financial institutions, mortgage brokers, real estate brokers, and title companies, through warehouse lenders, investors, due diligence firms, and rating agencies, whose perspectives may vary as to what compliance under the rule requires."

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Mortgage Rates Back Down to Last Week’s Range

Mortgage rates continued lower for a second straight day, ultimately making it back to levels not seen since last Tuesday.  Today's improvements are partly an extension of yesterday's reaction to the Fed Announcement, but also acknowledge the end of this week's Treasury auction process.  This often involves a slight artificial pressure toward higher yields beginning on Tuesday with the pressure being released after the week's last auction on Thursday afternoon.

Mortgage rates aren't directly linked to Treasury yields, but they do tend to move in the same direction by roughly similar amounts each day.  Case in point, at the highest recent levels, 10yr yields were up to 1.94% and are back to 1.83% currently.  That's roughly the same round trip experienced by mortgage rates with several lenders moving up to 3.75% earlier this week and now back down to 3.625% in terms of conventional 30yr fixed quotes on top tier scenarios.

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Homeownership near its lowest in history

Home sales may be rising, but homeownership in the United States is heading down once again.

After gains in the second half of 2015, the homeownership rate fell to just 63.6 percent, seasonally adjusted, in the first quarter of this year, according to the U.S. Census Bureau. Homeownership hit a high of 69.4 percent in 2004, during one of the biggest housing booms in history. That was also when mortgage lending was arguably at its loosest level in history. The homeownership rate is now just one-tenth of 1 basis point higher than its all-time low in the second quarter of 2015.

Watch how...

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