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Mortgage Rates Hold 14-Month Lows

Mortgage rates didn't budge today--a logical result with no signs of life in underlying bond markets.  In the current case, this is just fine with us considering the bond market has gone silent while remaining at the best levels in 14 months.  Specifically, mortgage-backed-securities (MBS, the most important ingredient in determining mortgage rates) are at 14 month highs.  When MBS are higher, rates are lower (14-month lows in this case).  10yr Treasury yields, on the other hand, spent a few hours at stronger levels on January 3rd, 2019.

The only reason I bring up the modest discrepancy between Treasuries and MBS is to illustrate a point that we should keep in mind this week.  Treasuries are capable of moving much more quickly than mortgage rates.  That's why Treasuries made it to lower rates in early 2019 whereas MBS didn't have time to react by comparison. 

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Builder Confidence Holds Steady After Recovering From 2018 Lows

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) held steady in March, after partially recovering from substantial loses at the end of 2018.  The Index, a measure of new-home builders' confidence in the market for newly constructed homes was unchanged at 62 on a 100-point scale. The index finished 2018 at 56, a more than three-year low, after dropping an aggregate of 12 points in November and December. NAHB says affordability still remains a key concern for builders.

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Rates Stay Low; Bigger Risks/Rewards Next Week

Mortgage rates remained at recent lows today, as underlying bond markets strengthened.  For US Treasuries, this brought rates to new multi-month lows.  Mortgage-backed bonds, on the other hand, simply returned in line with the best levels of the week.  That allowed mortgage lenders to continue offering the best rates of the week (also the best rates in more than year!).

For most of 2019, rates have remained locked in a narrow range.  The past few days have done more than any others to challenge that range, but it will likely take friendly words from the Fed next Wednesday to fuel any further improvement. 

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Aging Americans, Aging Housing Stock Driving Remodel Boom

Nearly 80 percent of America's housing stock is at least 20 years old and twice that share of homes were built 50 or more years ago. With new construction still well behind its pre-recession levels Americans have been remodeling these older homes in huge numbers. The Joint Center on Housing Studies says there was $425 billion spent nationally on maintenance and improvement, a 10 percent increase from 2015 and more than a 50 percent gain from the 2010 low.  In fact, that spending, by both owner occupants and landlords, has been the dominant share of residential investment in the years since the recession and generated 2.2 percent of total economic activity in 2017. 

 

 

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MBA has a More Upbeat View on New Home Sales

Even though the January Census Bureau report on new home sales published on Thursday wasn't all that encouraging for the spring market, the Mortgage Bankers Association (MBA) is predicting more upbeat news for February.  The Association's Builder Application Survey (BAS) shows a 6 percent increase in new home purchase applications from the previous month and a 3-point gain from February 2018.  Those numbers are not seasonally adjusted. MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 690,000 units in February 2019, based on its survey data and assumptions regarding market coverage and other factors. 

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Mortgage Rates Lowest in More Than a Year

Mortgage rates held steady today, despite moderate weakness in underlying bond markets.  This occurred for two reasons.  First, yesterday saw bond markets improve, but not by enough for lenders to adjust rates lower in the middle of the day.  Second, today's bond market weakness happened gradually throughout the day and was thus not big enough to prompt a mid-day rate change from lenders.  The implication is that rates would likely be very slightly higher tomorrow if bond markets were to hold steady overnight.

By remaining in current territory, rates are also remaining at the lowest levels since January 2018.  The average lender can now offer conventional 30ry fixed rates of 4.375% on top tier scenarios.  FHA rates are a quarter point lower (or more, depending on the lender), but they carry mandatory mortgage insurance (so the payment could be higher for the same loan amount).

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Surge of New Home Sales in West Salvage January Numbers

It seems like only yesterday that we were looking at the December new home sale numbers - well actually it was 6 days ago. Now we have the January sales numbers as the Census Bureau and the Department of Housing and Urban Development continue to catch up from the shutdown's data drought. However, while December sales surprised everyone with a 16.9 percent increase to 621,000 units (now revised to 652,000) January took back a lot of those gains. Sales were at a seasonally adjusted rate of 607,000 units, a 6.9 percent reversal. 

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Housing Market OK to Weather an Economic Downturn

Folks who follow real estate might be getting a little nervous.  Since that category includes almost everyone who owns a home, wants to own a home, or makes money buying, selling, building, or furnishing a home, that could be a lot of edgy people.  And not without reason.  Ralph Mclaughlin points out in CoreLogic's Insights blog that is seems lately as though the roof of the housing market might cave in.  There has been a lot of volatility as of late.  He cites as examples, a seven straight month decline in the S&P CoreLogic Case-Shiller Home Price Index, a whopping 12 percent plunge in new home at the end of last year, and rising inventories of available homes.  

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Mortgage Rates Technically Lower, But Risk Rising Tomorrow

Mortgage rates were officially lower today, despite some weakness in the bond market.  In general, bond market weakness coincides with rates moving higher.  This time around, the weakness was minimal, and mortgage lenders had a bit of catching up to do with respect to yesterday's bond market gains.  The changes were very small for the average lender, but they technically result in yet another long-term low (best rates since January 2018).

Clouds began to roll in by the end of the day in response to a glut of news out of the UK.  As expected, British politicians voted to avoid exiting the EU without some sort of deal.  On a somewhat unexpected note, there seems to be a quickly growing consensus that a different brexit compromise deal has enough support to pass, or at least to come much closer than the just-defeated compromise deal.  This is giving markets hope for a less uncertain outcome.  

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Lender Survey: Easing Standards, Increased Demand, and More Profit

While still far from buoyant, mortgage lenders were a little more upbeat about their expected profit margins and the demand outlook for both purchase and refinance mortgages when responding to Fannie Mae's first quarter Mortgage Lender Sentiment Survey. The net share of lenders reporting that demand had increased for purchase mortgages over the prior three months fell to a new survey low, however the net responses reflecting more positive expectations for the upcoming three months rose compared to one year ago.  The responses were consistent across all loan types.

 

 

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