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More 2017 Lows for Rates; More Trump Drama

Mortgage rates moved lower again.  Drama surrounding the Trump administration was also present.  But this time around, the political theater wasn't responsible for the move lower in rates.  In fact, it resulted in multiple lenders adjusting rate sheets higher in the middle of the day.  Fortunately, rates fell enough in the morning that the net result was still positive.  The average lender is at new lows for 2017 (lowest since just after the November 2016 election, in fact).  

3.875% is now the most prevalently-quoted conventional 30yr fixed rate for top tier scenarios, although quite a few lenders remain at 4.00%.

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Freddie Mac to Automate Appraisals for Some Purchase Mortgages

Freddie Mac announced today that, going forward, not every application for a purchase mortgage will necessarily trigger an appraisal.  A new automated alternative to traditional appraisals, which the company introduced for refinances in June, will soon be available for purchase mortgages. It may save borrowers in some instances as much as $500, and reduce their wait to close a loan by seven to ten days.

Freddie Mac's automated collateral evaluation (ACE) uses a proprietary model to assesses the need for an appraisal by using data from multiple listing services, public records, and information on historical home values to determine collateral risks. Lenders must submit loan data through Freddie Mac's Loan Product Advisor to determine if a property is eligible for ACE. ACE will be available for qualified home purchases beginning on Sept. 1, 2017.

 

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Freddie Mac Puts Price on All-Cash Transactions

As investors flooded into the housing market after it collapses, they brought cash with them.  At one point, 35 percent of home sale transactions were closed without a mortgage, i.e. were all-cash sales.  Home prices are up, the bargains are gone, but cash sales remain significantly elevated compared to historic levels.

In the August edition of Freddie Mac's Outlook, the company's economists reference recent data from the National Association of Realtors® (NAR) indicating that 18 percent of homes sold in June were all-cash transactions.  Historically, about 10 percent of home sales are for cash.

 

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Trump Administration Drama Pushing Rates Even Lower

Mortgage rates fell yesterday in response to a tweet about Trump disbanding his councils of CEOs.  Twitter was in play again today.  This time around it was Gary Cohn, Trump's economic advisor.  Rather, it was rumors of Cohn's departure that sent financial markets into a tail-spin.  Terror attacks in Spain may have played a supporting role.  The net effect was heavy losses for stocks and solid gains for bonds.  When bonds improve, rates fall.

Mortgage lenders continue to be slow to pass along the gains in bond markets in general, but they're certainly passing them along. 

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CoreLogic – Don’t Overlook Rates in Affordability Discussions

Although homes are about as afforable as they were pre-2008, the rate at which their prices are increasing is cause for concern.  Andrew LePage, CoreLogic Professional in Research Analysis, says the role of rising interest rates should not be overlooked; they can affect affordability more than home price appreciation. 

Household incomes have not been keeping up with rising home prices, but the persistently low interest rates have mitigated some of the impact.  But LePage asks, what will happen now that rates are trending higher again? 

 

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Refis Enjoy Nice Bounce Thanks to Lowered Rates

There is still life left in refinancing.  While at nowhere near the levels of a few years ago, Ellie Mae's Origination Insight Report for July reported that the percentage of loans that were for refinancing increased by three points to 35 percent.  That gain followed two months of decline.  The refi share was up 2 to 3 percentage points across all loan types.

The increase in refinancing was due of course to the recent lowering of interest rates.  On average, the 30-year note rate on closed loans dropped to 4.25 percent, down from 4.41 percent in April and the lowest level since January.

The share of all originations remained unchanged for each loan type, with Conventional loans garnering 64 percent, FHA 22 percent, and VA 10 percent.  The share of adjustable rate mortgages dropped to 5.7 percent from 5.9 percent the previous month.

 

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Mortgage Rates Back to 2017 Lows on Trump Tweet

Mortgage rates dropped today after news broke (first rumors, then confirmation via Twitter) that President Trump was disbanding his councils of CEOs.  The move apparently came in response to attrition among several CEOs following Trump's press conference on recent events in Charlottesville, VA.  In not so many words, Trump disbanded the councils before any more CEOs had a chance to quit.  

Political turmoil--especially that which appears "anti-business" in any way--always runs the risk of hurting stocks and helping bonds.  That's exactly what happened today.  "Helping bonds" in this context means higher demand for bonds among investors.  Excess demand for bonds pushes rates lower.  

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Pitiful Housing Supply Slighted Dampened Q2 Home Sales

Headstrong is a rather interesting word, but the National Association of Realtors® (NAR) chose it to describe the continuing imbalance between supply and demand in the housing market.  NAR blames this imbalance for slightly tempering home sales as well as pushing continued robust price growth in the second quarter of 2017.

NAR says the national median existing single-family home price in the second quarter rose 6.2 percent from the same quarter in 2016, an increase from $240,700 to $255,600.  This is a slight moderation from the 6.9 percent year-over-year price growth logged in the first quarter of this year, but the most recent median price still set a new peak, surpassing Q3 2016's median of $241,300. NAR says single-family home prices increased compared to the same quarter of 2016 in 154 or 87 percent of the 178 metropolitan statistical areas it tracks. 

 

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Construction Indicators Slide, Housing Starts Suffer

After posting unexpectedly high numbers in June, all three residential construction indicators lost ground in July, and one, housing starts, is now running below its year-ago rate. While the softening is primarily in the multi-family sector, starts have declined in four of the last five months and permits in three of the last four.

The U.S. Census Bureau and the Department of Housing and Urban Development said privately owned housing starts were at a seasonally adjusted annual rate of 1,155,000 units, a 4.8 percent decline from June's estimate of 1,213,000, which was revised down from 1,215,000.  July starts were down 5.6 percent from the 1,223,000-unit annual rate in July 2016. 

 

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Purchases Drag Down Mortgage Application Volume

A decline in applications for home purchases nearly overwhelmed the gain made by refinancing activity during the week ended August 11.  The Mortgage Bankers Association reported that its Market Composite Index, a measure of application volume, managed to increase a meager 0.1 percent on a seasonally adjusted basis when compared to the previous week. The unadjusted index fell 1 percent.

The seasonally adjusted Purchase Index decreased 2 percent from one week earlier and the unadjusted Purchase Index was down 3 percent. The unadjusted index remained 10 percent higher than the same week in 2016.

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