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Mortgage Rates Edge Higher Ahead of Retail Sales Data

Mortgage rates were sideways to slightly higher today, depending on the lender.  With the exception of the past two days, this leaves us at the best levels in more than 3 weeks.  In general, that move was made possible by financial drama in Turkey, but caveats abound. 

It's taken a massive amount of pain in Turkish markets/currency to result in a fairly modest move for US interest rates in the bigger picture.  Moreover, US rates continue paying attention to multiple sources of inspiration.  Turkey was just one among many in that regard, and even then, only when Turkish market movement was its most extreme. 

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Mortgage Rates Edge Higher Ahead of Retail Sales Data

Mortgage rates were sideways to slightly higher today, depending on the lender.  With the exception of the past two days, this leaves us at the best levels in more than 3 weeks.  In general, that move was made possible by financial drama in Turkey, but caveats abound. 

It's taken a massive amount of pain in Turkish markets/currency to result in a fairly modest move for US interest rates in the bigger picture.  Moreover, US rates continue paying attention to multiple sources of inspiration.  Turkey was just one among many in that regard, and even then, only when Turkish market movement was its most extreme. 

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Florida, Houston Delinquencies Still Reflecting 2017 Storms

The effects of Hurricane Irma continue to be felt in the Southeast, with Florida the only state to report an increase in its delinquency rate in May.  The rate in the state was up 1 percentage point compared to May 2017 and gave Florida the third highest rate in the nation at 6.2 percent. CoreLogic, in its Loan Performance Insights Report, said the rest of the nation continues to improve, although Texas, still impacted by Hurricane Harvey, saw rates remain the same as a year earlier.  The national rate was 4.2 percent compared to 4.5 percent in May 2017, the lowest rate for a May in 12 years and within 0.1 percent of the previous low in May 2006. The rate is also well below the pre-crisis period of 2000 to 2006 when the share of delinquent mortgages averaged 4.7 percent.

 

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Mortgage Rates Hold Steady at 3-Week Lows

Mortgage rates stayed steady at the lowest levels in more than 3 weeks as financial markets are still accounting for additional risks relating to Turkey.  Simply put, Turkey is in the midst of a debt/currency/banking crisis and investors are worried about some sort of domino effect among banks that are heavily invested in Turkish banks.  All this is worth a bit of "safe-haven" demand for US Treasuries, which offer essentially risk-free returns and a liquid place to park money temporarily.

When investors buy more bonds--all other things being equal--it causes bond prices to rise.  When bond prices rise, investors are technically willing to accept lower interest payments, and it's that part of the equation that speaks to lower interest rates on US Treasuries and mortgage rates.

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Mortgage Rates Noticeably Lower on Global Market Drama

Mortgage rates, and indeed most interest rates, are tied to movement in the bond market.  In turn, bonds tend to benefit when big, scary stuff is shaking global economic confidence.  In today's case, the debt crisis in Turkey did just that.  Investors sought safe haven in bonds, and rates moved to the lowest levels since July 20th.

Lest you think that Turkey is a constant arrow in the quiver of potential market movers for rates, understand that things have had to get pretty bad for US markets to unequivocally respond.  This has been a festering for several days (even months, depending upon how nervous or clairvoyant you might be by nature).  Today was really the first day that where there's no doubt that Turkey is in the drivers' seat for global financial markets.

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Aging Housing Stock; Problem and Opportunity

An aging housing stock is usually thought of as a problem.  Older homes can be more expensive to maintain and easily fall into enough disrepair to be a health or safety hazard or completely uninhabitable.  Construction since the housing crisis has not kept pace with the homes that age out or are otherwise removed from the housing stock and this means that the overall age of the U.S. housing stock is gradually aging. Na Zhao, writing in the National Association of Home Builders' (NAHB's) Eye on Housing blog says data from the 2016 American Community Survey (ACS) puts the median age of owner-occupied homes at 37 years compared to a median age of 31 years in 2005. 

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Affordability at 10-Year Low, Tariffs and Rate Hikes Made It Worse

We now have an unfortunate sign that the recovery is complete. The National Association of Homebuilders (NAHB) says housing affordability is the lowest level since just before the housing crisis hit.  The NAHB says the Wells Fargo Housing Opportunity Index (HOI) shows that a combination of rising home prices and higher mortgage rates now means that only 57.1 percent of new and existing homes sold during the second quarter of 2017 were affordable to families earning the U.S. median income of $71,900.  This is down from the 61.6 percent of homes sold in the first quarter that were affordable to median-income earners and is the lowest reading since mid-2008.

 

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Lowest Mortgage Rates in Several Weeks

Mortgage rates finally did what they were supposed to do today.  Specifically, they fell in response to bond market improvement.  That's the way it should be, but over the past two days the typical relationship between bonds and mortgage lenders' rates has been a bit inconsistent due to the timing of market movement throughout the day.

On Tuesday, bonds weakened throughout the day.  This would normally coincide with rates moving higher, but the bond market weakness didn't happen quickly enough for most lenders to take action.  As such, they were left to make the adjustment the following morning.  Then on Wednesday, bonds improved, but not quickly enough for most lenders to bring rates lower.  That left us with a bit of an advantage to start the day today. 

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Fannie Mae Announces Wildfire Policies

Fannie Mae has informed us that they too have activated their disaster response policies for homeowners, this time for those affected by the California wildfires. Homeowners impacted are eligible to stop making mortgage payments for up to 12 months during which time they will not incur late fees or have delinquencies reported to the credit bureaus. While homeowners are advised to contact their mortgage servicers as soon as possible those servicers are also authorized to suspend or reduce a homeowner's mortgage payments immediately for up to 90 days if they believe a homeowner has been affected, even without homeowner contact.  Any eligibility for up to 12 months forbearance will not be affected.  

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MBA Says New Home Purchase Apps Reflect Housing Start Surge

The Mortgage Bankers Association (MBA) says that responses to its recent Mortgage Builder Applications Survey indicates an increase of 3.6 percent in applications for financing newly constructed homes in July compared to the same month in 2017.  That is an 0.2 percent uptick from June. Based on the survey results, which are not seasonally adjusted, and other assumptions about factors that include market coverage, MBA estimates that new single-family home sales were running at a seasonally adjusted annual rate of 637,000 in July.  This is an 8.5 percent increase from MBA's June estimate of 587,000 units. On an unadjusted basis, MBA estimates that there were 53,000 new home sales during the month, the same number as in June.

 

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