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Mortgage Rates Steady at 1-Month Highs

Mortgage rates didn't budge, compared to yesterday's, which leaves them in line with their highest levels since late June.  A small majority lenders have moved up from quoting conventional 30yr fixed rates of 3.375% to 3.5% during the course of this week, and a several are already as high as 3.625% for top tier scenarios.  That's about as stratified as it gets when it comes to each lenders' best possible rate on any given scenario.  The stratification is a product of market volatility, all-time lows in benchmark rates (like US Treasuries) earlier this month, and varying lender strategies with respect to their business flow.  

While it's good to be aware of the discrepancy in rate offerings, it's also good to remember that the "lowest rate" isn't always "the best deal."  It certainly can be, but ultimately, the lender that gets the deal to the finish line as expected counts for a large part of the "value" equation.  

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Fannie Mae sees Brexit as Mostly Positive for Housing

Fannie Mae's economists have upgraded projections for economic growth in the second quarter to by 0.3 percent to 2.4 percent because of unexpectedly strong consumer spending in May although they have left the forecast for the second half of the year unchanged at 2.0 percent.  The full year the company's Economic and Strategic Research group's report for July upgrades its predictions for the full year by 0.1 percent to 1.8 percent but adds that heightened uncertainty and financial volatility associated with Brexit and with the U.S. elections "point to elevated downside risks to our forecast." 

Freddie Mac's economic forecast for the month had put a higher premium of the Brexit impact, saying it would shave 10 basis points off the GDP for the remainder of 2016 and all of 2017 leading to final numbers of 1.9 percent and 2.2 percent respectively.

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The Start isn’t the End in Home Building

Every month the Census Bureau and the Department of Housing and Urban Development issues statistics on residential construction - permits authorized, construction starts, and homes completed.  No one seems to pay much attention to the last one because it is pretty well baked into the leading indicators in the series, permits and starts, but there is more to the story.

The National Association of Home Builders' (NHAB's) Eye on Housing recently posted some data as to what transpires along the timeline from obtaining a permit to pounding the last nail.  NAHB writer Na Zhao relied on the Census Bureau's Survey of Construction (SOC) to provide the data.

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Mortgage Rates Highest in Nearly a Month

For most lenders, you'd have to go back to late June in order to see  mortgage rates any higher than they were today, although several lenders did offer improvements as market conditions allowed in the afternoon.  Additionally, there really wasn't much upward movement in rates from yesterday.  Rather, this is simply the culmination of a slow, steady move higher over the past 2 weeks.  For now, the worst side effect of this gradual movement is that it's finally bringing conventional 30yr fixed rates back up to 3.5% on top tier scenarios.  3.375% is still widely available, but 3.5% is now slightly 'more available.'  

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Boomers Ignoring Conventional Housing Wisdom

Oh those Baby Boomers.  Even as they age they don't retire, at least not from the public stage.  This week those over age 55 were the subject of Freddie Mac's Insight report.

Freddie Mac Chief Economist Sean Becketti says the conventional wisdom is that Boomers, those born from the time World War II ended through 1964, are like Peter Pan, they refuse to grow older, not retiring but launching instead second and third careers, shunning senior centered communities in favor of aging in place or moving into center cities.  "It seems like," he says, "you have to be a lot older these days to be a senior citizen."

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First-Time Buyers Help Push Home Sales to 9-Year High

Sales of existing homes increased in June for the fourth consecutive month.  The National Association of Realtors® (NAR) said it was encouraged to see the month also bring a modest increase in the percentage of first-time homebuyers.

Sales of existing single-family homes, townhomes, condominiums, and cooperative apartments rose 1.1 percent from May to a seasonally adjusted annual rate of 5.57 million units.  Sales in May were at a rate of 5.51 million, a downward revision from the 5.530 million originally reported.  Sales were up 3.0 percent from the June 2015 rate of 5.41 million units. Last month's sales were at the highest annual pace of any month since February 2007

May sales topped analysts' expectations.  Those polled by Econoday had expected sales in a range of 5.40 million to 5.56 million.  The consensus was 5.475 million.

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Four Divisions Post Home Price Losses

Prices increased by 0.2 percent from April to May on a seasonally adjusted basis according to figures released today by the Federal Housing Finance Agency (FHFA).  Its House Price Index (HPI) reflects prices of homes purchased with mortgages backed by Fannie Mae and Freddie Mac.  A 0.2 percent gain had been reported in April as well, but FHFA's report on Thursday revised that up to 0.3 percent.

The national HPI, which was benchmarked to 100 in January 1991 was 216.8 in May, down from 217.2 the previous month. On a year-over-year basis house prices were up by 5.6 percent. The annual gain in April was 5.9 percent.

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Purchases Dominated Pre-Brexit

While it's a bit of retrospective considering the drop in rates brought on by the Brexit news late in the month, the share of purchase  originations hit a near two-year high in June according to data released this week by Ellie Mae.  Purchases represented 65 percent of all loans that were closed during the month, up from 62 percent in May and the highest percentage since August 2014.  Eighty-five percent of FHA originations were for purchase mortgages as well.

Jonathan Corr, president and CEO of Ellie Mae said, "Purchases are continuing their upswing, representing 65 percent of the total loans closed in June, the highest percentage since August of 2014. Refinances represented only 34 percent of closed loans last month," he said. "FHA purchases are also on the rise, representing 85 percent of closed FHA loans, the highest percentage since September of 2014."

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CoreLogic: Home Price Surge is Different this Time

CoreLogic, in a recent article on its blog, celebrated, if that's the word, the 10th anniversary of the housing bubble.  Principal Economists David Stiff said that the CoreLogic Case-Shiller Home Price Index reached its peak in July 2006.  And the beginning of the end.  Over the next six years the index dropped 27 percent and still remains down 4 percent from its "peak nominal value." (He notes that, in inflation-adjusted terms, the March national Case-Shiller index was down18 percent from its peak value.)

Stiff says the recovery, while incomplete nationally may soon get there, likely hitting or surpassing those 2006 levels next spring or summer.  Meanwhile, many local markets are back to pre-crisis prices and 40 percent of metro areas have set new price peaks.  Another 30 percent are closing in, now within 10 percent of those old levels.  In addition, both mortgage default rates and foreclosure inventories are at eight-year lows and about 2.5 million new jobs are being created each year.

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Discussing “Discount Points” Amid Eerily Steady Mortgage Rates

Mortgage rates held perfectly steady today, with most lenders offering the exact same quotes as yesterday.  The most prevalent conventional 30yr fixed rates remain in a range of 3.375% to 3.5% on top tier scenarios, but some lower quotes are possible in certain circumstances.  This has to do with the upfront costs associated with any given rate.  

Policies vary by lender, but in many cases, you have the option to pay more money upfront in exchange for a lower rate.  Some refer to this as "paying points," buts that's a bit of an archaic and pejorative term.  Self-annointed gurus used to say "never pay points!" But that's not always good advice.  Discount (or "discount points") offers a perfectly legitimate and objective choice to pay more money upfront in exchange for a lower interest rate.  Whether or not the trade-off makes sense to you is fairly subjective.  

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