Aug 27, 2013

Improvements in the economy ... the bad times will pave way for the good ...

The housing sector continues to improve despite the recent rise in home loan rates, as housing starts rose 5.9 percent from June to July to 896,000 on an annualized basis. This was in line with estimates. Building permits, a sign of future construction, were up 2.7 percent, coming in above expectations. In addition, the National Association of Home Builders Housing Market Index rose to 59 in August from the 57 recorded in July. This is the best level in nearly eight years.

Retails Sales for July were also positive, rising for the fourth straight month.  When stripping out autos, sales surged by 0.5 percent, the fastest pace this year. And there was good news for the labor market, as Weekly Initial Jobless Claims fell to 320,000, a level not seen since October 2007. There were no apparent seasonal distortions in the numbers. In the manufacturing sector, Empire State Manufacturing came in above expectations, while the Philadelphia Fed Index came in just below expectations.

What does this mean for home loan rates? Remember that the Fed has been buying $85 billion of bonds a month to help stimulate the economy and housing market. This includes mortgage bonds, to which home loan rates are tied, and these purchases have helped home loan rates remain attractive. 

The Fed has said the rate of its purchases will continue to depend on economic data and could be increased or decreased accordingly. The data that continues to come in will be a key factor in whether the Fed begins tapering these purchases as early as its meeting in mid-September, or if it waits until later in the year or even 2014.
One thing that is also important to note is that inflation at both the wholesale and consumer levels remains moderate, as evidenced by the Producer and Consumer Price Indexes for July. This gives the Fed cover to continue its bond purchases if economic data takes a turn for the worse.

Now remains a great time to consider a home purchase or refinance, as home loan rates remain attractive compared to historical levels.

And there’s good news for borrowers, About 47.72 percent of mortgages from June 2013 had an average FICO score under 700, compared to only 28.53 percent from June 2012. As credit requirements ease and home buying picks up pace, lenders will be competing for attention and loyalty from Realtors. This changes the competitive landscape, placing new requirements on mortgage professionals.

Aug 9, 2013

Mortgage Rates Sharply Higher; More Volatility to Come

Mortgage rates rose abruptly today, moving  highest levels since July 9th as financial markets prepare for tomorrow's important Employment Situation Report.  These preparations refer to several underlying factors including the reaction to this morning's stronger-than-expected economic data as well as concern that similarly stronger data tomorrow could lead rates even higher.  Today's move took 30yr Fixed best-execution to the upper edge of 4.5% with 4.625% very close.  Tomorrow is an extraordinarily important day with the highest prospects for volatility since the last employment report caused the biggest one-day rise in rates of the past 10 years.  It can go either way, depending on the data (which will be released well before any lenders release rate sheets for the day).

To be clear, if the data is weak enough, it would likely result in lower rates, but the range of possibilities is wide, and it's "easier for markets to play defense" against rising rates than it is to try to guess when, and by how much the longer-term trend higher will stop.  It's similar to the popular phrase "no one wants to catch the falling knife."  Traders aren't eager to trade rates aggressively lower in a rising rate environment.  Our only big moves lower in rate since early May have been in response to even bigger moves higher.  There continues to be no organic drive toward lower rates, and that continues to be very scary to anyone hoping to see lower rates any time soon.

Today's Best-Execution Rates
  • 30YR FIXED - 4.5% - 4.625%
  • FHA/VA - 4.25%
  • 15 YEAR FIXED -  3.625%-3.75%
  • 5 YEAR ARMS -  3.0-3.25% depending on the lender