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Mortgage Rates Hit Holiday Weekend at Recent Lows

Mortgage rates moved much lower this week with another strong move today.  As we discussed yesterday, this is certainly at odds with the prevailing news coverage, which continues to focus on yesterday's Freddie Mac survey.  Here's a link to yesterday's article, or you can take my word for it that Freddie's survey is now outdated.

Or you could just forget all that and consider the following.  At several huge, "household name" lenders, the upfront costs on a 30yr fixed quote of 4.75% are now the same as they were for 4.875% just a few days ago.  That's a strong week by anyone's standards, and it brings today's rates in line with the lowest of the past several weeks. 

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Homebuyers Battle the Trifecta: Rates, Inventory, and Prices

The May edition of Freddie Mac's monthly Outlook, produced by its Economic & Housing Research Group, is focused on the resiliency of the American homebuyer. It notes that, "Through the first five months of 2018, home shoppers have battled the trifecta of climbing home prices, higher mortgage rates and low supply."   One entry in the trifecta is interest rates, and Freddie Mac's economists see firming inflation continuing to put upward pressure on rates in general, including mortgage rates. They continued to climb during May, reaching 4.66 percent by the middle of the month.  Rates, according to their forecast, will average 4.9 percent in the fourth quarter of this year and 5.4 percent by the same quarter in 2019.

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Flipping; Turning into a Dangerous Game?

CoreLogic says flipping is back.  The term applies to the act of buying, renovating and/or repairing a house, then reselling it, all within a short timeframe.  Investors who specialize in flipping are always out there, but when prices are rising, or appear about to, lots more people join in the game. Bin He, writing in CoreLogic's Insights blog, looked at the current levels of flipping, using as the criteria a house that is bought then sold in under 12 months. He found that 6.2 percent of home sales in the first quarter appeared to be flips.  This matches the previous post-crash high in the first quarter of 2013.

 

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Another Reminder Not to Trust Mortgage Rate Headlines

Mortgage rates moved lower again today, bringing them to the best levels in at least 2 weeks.  This assertion is very much at odds with the prevailing mortgage rate headlines today.  News stories abound with talk of sharp increases to fresh 7-year highs (google news search if you don't believe me), yet nothing could be more of a disservice to the demographic that typically looks for mortgage rate news (people who are in the market)!

If you are indeed in the market or otherwise have a vested interest in day-to-day mortgage rate fluctuations, you need to understand that all those news stories are based on Freddie Mac's weekly rate survey, and that Freddie Mac is wrong.  To be fair, it's not so much "wrong" as it is "late."  Unfortunately, Freddie's survey typically captures lenders' claimed rate quotes for Monday and Tuesday. 

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Existing Home Sales Reverse Course, Down 3%

Existing home sales put an end to two straight months of gains, retreating in April on both a monthly and annual basis.  The National Association of Realtors® said the sales of single-family homes, townhouses, condos, and cooperative apartments dropped by 2.5 percent from March's estimate of 5.60 million to a seasonally adjusted annual rate of 5.46 million. That put sales at a 1.4 percent deficit when compared to April 2017.  It was the second straight month that sales have lagged on an annual basis. Economists polled by Econoday were not looking for greatly improved numbers but results even missed that target

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Home Price Index Shows Signs of Losing Momentum

Home prices in the first quarter of 2018 were 1.7 percent higher than at the end of the fourth quarter of last year.  The Federal Housing Finance Agency said its Housing Price Index (HPI) gained 6.9 percent when compared to the level at the end of March 2017.  On a monthly basis prices were 0.1 percent higher than in February. The month over month rate of increase in March was significantly higher than the 0.6 percent gain from January to February, but the annual increase slowed compared to the previous month.  The rate of appreciation from February 2017 to February 2018 was 7.2 percent.

 

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Tax Cut Gains Forecast to Fade Away in 2019

Fannie Mae is backing down slightly on its economic forecast for the remainder of 2018.  The first quarter GDP growth of 2.3 percent was the slowest in a year, down from 2.9 percent a year earlier.  The company's economists, led by vice president and chief economists Doug Duncan, say they expect growth to pick up later in the year but the economic boost from last December's Tax Cuts and Jobs Act and this February's Bipartisan Budget Act of 2018, will fade next year and the labor market will tighten more than previously thought.  The earlier full-year 2018 forecast remains at 2.7 percent, but the company is lowering its projections for 2019 by two-tenths to 2.3 percent.                                                                                                                                           

 

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April Delinquencies Improve Despite Historic Pattern

Loan performance continued to improve in April, even though Black Knight says mortgage delinquencies have a historic pattern of increasing during that month.  The overall delinquency rate declined 1.6 percent from March to a national rate of 3.67 percent.  That rate is down by 10.17 percent from the previous April.  Black Knight notes, in its "first look" at the month's loan performance data, that not only did April's improvement buck a trend that has affected the month's numbers 85 percent of the time, it also ended seven months of annual increases, behavior that started with last fall's hurricanes.

 

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Mortgage Rates Drop to Lowest Levels in 2 Weeks

This week hadn't been too traumatic for mortgage rates through yesterday afternoon, but neither had it been positive in any noticeable way.  That changed today as rates fell abruptly to the lowest levels since last Monday.  Granted, at the time, last Monday's rates were still pretty close to the worst in 7 years, but the point is that we've managed to find our way back from the even higher rates that followed.

Help came chiefly from European political developments where Italy is a day or two away from confirming a government that could end up pushing the country out of the Eurozone.  Even though that's far from guaranteed, the mere risk of such a thing is enough to drive investors toward safer haven bonds like those issued by Germany or the US.  In general, excess demand for bonds means rates move lower.

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Houses Passes S2155, Unwinds Less of Dodd-Frank Than Hoped

The House of Representatives passed a sweeping overhaul of regulations included in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act on Tuesday.  Senate Bill 2155, which passed the upper house in March, received a 258 to 259 vote in the House.  It now goes to the White House for what is expected to be certain presidential approval. The bill did not go nearly as far as the House had hoped in rolling back Dodd-Frank.  Leadership agreed to vote on the compromise bill negotiated in the Senate between Republicans and Democrats only after a promise of a vote latter this year on other changes House members, especially House Financial Services Chair Jeb Hensarling (R-TX) were demanding.

 

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