Mortgage rates rose rapidly today, almost completely erasing the improvement following last week's Fed Announcement. This is especially ironic considering most major media outlets are running Freddie Mac's weekly mortgage rate survey headline. Because that survey receives most of its responses on Monday and Tuesday, it fully benefited from the stronger levels earlier in the week after having totally missed out on last Wednesday and Thursday's big move lower. As such, the headlines suggest that rates are significantly lower this week. That was certainly true on Tuesday afternoon, but rates have risen roughly an eighth of a point since then. That's a big move considering we've gone entire months without moving more than an eighth.
In the past five years there has been a monumental shift in mortgage loan servicing. Bank servicing subsidiaries, which once dominated in the market, no longer even constitute a majority of companies servicing Ginnie Mae mortgage loans. In an article in the CoreLogic Insights blog Faith Schwartz CoreLogic's senior vice president of Government Solutions, takes a look at how and why depository institutions have been releasing their servicing rights and what the implications may be for investors and consumers.
Schwartz says that seven years after the collapse of the housing market and after many many changes to regulations affecting mortgage originations, the face of those originations have changed and this is also having an effect on loan servicing. This trend of transferring servicing from banks to non-bank servicers, she says, can most likely to attributed to a combination of regulatory changes, reputational risks and basic economics.
While a study released on Thursday by RealtyTrac shows a huge discrepancy between the growth in home prices and increasing wages, it appears that housing in most of the country remains affordable. The California company looked at wage growth and home price appreciation over recent two year periods and found that the former is far from keeping up with the latter.
In its analysis RealtyTrac used data on median home prices taken from deeds registered in 184 metropolitan statistical areas in the two years that ended in December 2014 and Bureau of Labor Statistics wage data from the second quarter of 2012, when home prices hit bottom and began to recover, and the second quarter of 2014. It adopted the six month time lag between the beginning of the two two-year time periods based on the hypothesis that a change in average wages would take at least six months to impact home prices....(read more)
Mortgage rates finally moved noticeably higher today, something they haven't done on 11 out of the last 12 days. Yesterday, I pointed out that such a winning streak is not the sort of thing we see too often, and that a step back toward higher rates was increasingly likely. This, then, is that step, but the same difficult question remains. Will it simply be a brief correction or the beginning of a broader bounce?
As of this evening, the magnitude of the weakness and the volume behind it are just barely getting up to levels where they shouldn't be disregarded as a mere course correction. That's still the least defensible of the two options though. Reason being: even after today's losses, the recent downtrend leading back from 2015's highest rates in early March remains intact. It would take another similar day of weakness to call that trend into question.
Freddie Mac said today that housing market stability "stumbled a bit" due to the cold winter weather and softening economic growth. The company's Multi-Indicator Market Index (MiMi) declined slightly in January a decline described as broad-based rather than concentrated in just a few state or metropolitan markets. Despite the lower MiMi index, Freddie Mac's economists said that "an improving labor market and attractive mortgage rates continue to promise a strong spring homebuying season."
The national MiMi value declined a slight 0.20 percent from December to January to stand at 74.6, indicating a weak housing market overall. In addition to the month-over-month negative change there was a 3-month decline of -0.37 percent. On a year-over-year basis, the U.S. housing market has improved by 3.39.
Stoked by the lowest interest rates in several weeks the volume of applications for mortgages to both purchase and refinance homes increased by the largest percentages during the week ended March 20 than at any time since early January. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, jumped 9.5 percent on a seasonally adjusted basis from the week ended March 13 and was up 9.0 percent on an unadjusted basis.
Applications for refinancing made up 61 percent of the total, up 2 percentage points from the previous week with much of the activity centered on refinancing; MBA's Refinance Index rose 12 percent compared to the previous week. The Purchase Index was 5 percent higher than the previous week on both a seasonally adjusted and an unadjusted basis, each reaching its highest level since January. The unadjusted Purchase Index was 3 percent above its level during the same week in 2014.
Mortgage rates fell again today, extending an exceptionally strong 2+ week move back to lower levels after an exceptionally weak 5 week move to 2015 highs. The previous trend topped out after the big jobs report released on March 6th, and we've moved lower or held steady on all but one day since then. For the record, that's 11 out of 12 winning days for rates--not the sort of trend we see too often. It's increasingly likely that the trend will be interrupted (meaning a step back toward higher rates), but it's more difficult to say if that would be a brief correction or the beginning of a broader bounce.
Any lender with a pulse is back down to 3.75% at the very least and many have moved on to 3.625% in terms of the most common conventional 30yr fixed rates....(read more)
Three economists writing for the Federal Reserve Bank of San Francisco's Economic Letter, are theorizing that the explosion of lending, especially mortgage lending, has played a more important role in shaping the business cycle that previously thought. If they are correct, they say, then economic policy must adapt to this reality.
In their paper, "Mortgaging the Future?" the three, Oscar Jordà vice president in the Economic Research Department of the Bank, Moritz Schularick, professor of economics at the University of Bonn; and Alan M. Taylor professor of economics and finance at the University of California, Davis say that bank lending has quadrupled as a ratio to GDP in advanced economies since World War II. This lending has been driven to a large extent by the growth in mortgage loans which has in turn allowed households to leverage up. This "Great Mortgaging" as they call it has also fundamentally changed the nature of traditional banking and profoundly influenced the dynamics of business cycles.
New home sales rose on a seasonally adjusted annual basis in February, partially because of a near tripling of sales in the Northeast. Nationally sales of newly constructed single-family homes were up 7.8 percent from January to an annual rate of 539,000 units. January sales were revised upward from 481,000 units to 500,000. February sales were 24.8 percent higher than a year earlier when they were estimated at 432,000.
On a non-adjusted basis there were an estimated 44,000 new homes sold during the month compared to 37,000 in January and 35,000 in February 2014. The homes sold were almost evenly divided across completed homes, homes under construction, and those for which construction had not yet begun.
Mortgage rates continued lower today, reaching levels not seen since February 9th. This further solidifies the positive move that followed last week's FOMC Announcement and Press Conference and offers ongoing confirmation that the disconcerting trend toward higher rates that began in February is defeated. While that doesn't necessarily have any implications as to the direction of the next trend, it does mean that we're no longer following the same steep and steady path toward higher rates.
The bond markets that underlie mortgage rates were relatively quiet today despite some volatility in other markets. Typically, the moves in those other markets would result in more weakness for bonds, and thus imply higher rates.