Mortgage Market News

The crisis surrounding Greece and its creditors may be getting kicked down the road as a possible extension may be struck to avert the troubled country from defaulting on debt payments. Greece has until Tuesday, June 30 to reach a deal to make a $1.7 billion payment to the International Monetary Fund. Rumors are swirling that if no agreement is reached, a form of bridge financing may be granted that will extend Greece a few more months. The sides will be meeting in Brussels on Saturday to avert a default by Greece.
Consumer Sentiment rose to its highest level since January in the final reading in June, signaling that spending will continue to bolster the U.S. economy. The University of Michigan's Consumer Sentiment Index rose to 96.1 for June, from the 90.7 recorded in May. Within the data, consumer optimism hit its highest level in June and improved at the fastest pace since 2004. In addition, consumer spending shows growth of 3% in 2015. Recent economic data in May has been on the positive side, which is fueling the optimistic tone for U.S. consumers.
The recent talk of home buying for millennials has taken center stage in the housing market world. A recent report from Realtor.com revealed that millennials are now looking seriously into purchasing their first homes and are set to gain market share in the second half of the year. Realtor.com said a metric is showing that in mid-June, 65% of 25 to 34-year-olds intend to purchase a home within the next three months, up from 54% in January. The millennial sector is large and can be just what is needed to bolster the housing market.
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Consumers across the nation spent their hard earned dollars on cars and trucks in May, while they paid more for gas at the pumps. The Commerce Department reported on Thursday that Personal Spending surged by 0.9% in May, the fastest pace in six years and above the 0.7% expected. A key reason behind the upswing in spending comes as the job market continues to improve, while wages have edged higher. Personal Incomes rose by 0.5% in the last two months, fueling the solid spending in May.
A disturbing report surfaced this week ... Americans throw out $165 billion worth of food each year. A recent report shows that 76% of Americans say that at least once a month leftovers go right into the garbage and not in the refrigerator. Of that 76%, 70% report being bothered that they waste that much food. The report broke it down to reveal that individual households waste $640 in food every year. One big reason that so much food is wasted is because many consumers misinterpret expiration dates. There are 160 billion pounds of food thrown away each year in the U.S. alone, which puts food waste as the single largest contributor of solid waste in landfills.
Motor club AAA reported on Thursday that the upcoming July 4th holiday will see an estimated 41.9 million Americans traveling over the holiday weekend. The 4th falls on a Saturday this year, which will extend the weekend, since many are off that Friday. It is further estimated that 85% of the near 42 million that say they will travel, will drive by car to the destinations. The good news this year is that filling up the car at the gas pumps will be the cheapest in five years. The national average price for a regular gallon of gasoline is at $2.78, 88 cents less than last year
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Mortgage Market News

The Bureau of Economic Analysis reported on Wednesday that the final reading for first quarter Gross Domestic Product (GDP) showed that economic growth contracted by 0.2%, though less severe from the -0.7% from the second reading. In addition, the negative reading for the quarter was the fifth time in the six-year recovery that the economy couldn't’t produce at least an anemic reading of 1%. Growth in the first quarter was stunted by a negative trade balance due to the stronger dollar, harsh weather and the West Coast port closing.
Government sponsored entity Freddie Mac released its U.S. Economic and Housing Market Outlook for June showing that with low debt servicing costs and improving household balance sheets, more Americans may be at a point where they are ready to start taking on more mortgage debt. Freddie Mac said that this is yet another sign the economy and housing markets are moving to more normal levels. However, Freddie Mac is now forecasting that Gross Domestic Product for all of 2015 will come in at 2.0%, down from the original forecast of 2.3%.
The latest Existing Home Sales data for May showed that first time home buyers made up 32% of sales, the largest share since September 2012. There are a few factors for the rise ... the government is trying to lower mortgage costs for first time buyers and for other borrowers with less than stellar credit ratings. In addition, down payment requirements are easing a bit, which opens up the pool of would be buyers. However, the recent rise in home prices have curtailed some buyers as the rise is outweighing the increase in wages.
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Housing news continues to be on the positive side this week as the sector continues to improve. The Commerce Department reported that May New Home Sales rose 2.2% from April to an annual rate of 546,000, the fastest pace in seven years. Economists were expecting sales to rise to 525,000, while April was revised to 534,000 from 517,000. The May rate is up nearly 20% from the same period last year. Within the report it showed that the median price declined by 1% from last year to $282,000.
Getting a new job "ain't" what it used to be as far as how much time it takes from the initial interview until the time you are seated at your new desk. The interview process took up to 23 days in 2014, up from nearly 13 days five years ago. Companies are looking for more than the right person for the right job, they are also looking for loyalty traits. Candidates who have the right character to fit in with the company culture also goes a long way.
The cost of renting continues to edge higher across the country due to financial pressures and a still rather pessimistic view on the housing sector. Rents have risen 4.3% in May from a year ago and are rising at double digit rates in Denver, San Francisco and San Jose, California as increased job opportunities lure in Americans, a faster pace than construction can match. The rise in rentals is also weighing on what would-be buyers can save for a down payment to purchase a home. This is exacerbated by cities with a higher amount of both technology and financial related jobs. For instance, a one bedroom apartment in New York City averaged $3,521 last month.
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The National Association of REALTORS® reported on Monday that May Existing Home Sales rose 5.1% from April to an annualized rate of 5.35 million units, the highest pace in nearly six years. The biggest gains were seen in the Northeast, while all major regions experienced sales increases in May. The gains were due in part by an increase in the share of sales to first time home buyers. "Solid sales gains were seen throughout the country in May as more homeowners listed their home for sale and therefore provided greater choices for buyers," said Lawrence Yun, NAR chief economist.
Home sales in May revved up as reported by the RE/MAX National Housing Report. Completed transactions rose by nearly 9% in May from April's level and 3.5% higher than May 2014. Across the nation, 38 of the 53 metro areas tracked by RE/MAX reported higher sales year-over-year, with 11 reported as double digit increases. Reasons cited for the positive numbers include both job growth and slowly wages, rents are quickly increasing, while mortgages are becoming more accessible.
According to a recent report released by the Economic Policy Institute, chief executive officer (CEOs) made 303 times as much as the average worker in 2014. CEO salaries for the largest firms on average rose to $16.3 million in 2014, up nearly 4% from last year and up a whopping 55% since the end of the Great Recession in 2009. Within the report it showed that since 1978, inflation adjusted CEO pay soared 997%, while the average worker saw an 11% increase in the same time period.
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The Greek tragedy continues as no deal has been reached for another lifeline, as the country inches closer to a default. The European Central Bank has raised emergency funds of $3.7 billion (3.3 billion euros) after there were large withdrawals this past week at Greek banks. There was also a rumor that the banks may not open for business on Monday, but that rumor has been denied. Withdrawals from banks hit 1 billion euros on Thursday.
Home builder KB Home reported on Friday that the company reported earnings that beat both revenue and earnings expectations due in part to positive momentum being generated across its business. The builder said that at the end of the second quarter there were higher backlogs in each of its four regions of the country compared to last year. KB Home said it had net income of $9.6 million or 10 cents oer share in the quarter, better than the 8 cents expected. The company expects "measurable" growth in revenue and deliveries in the second half of 2015.
A recent survey shows that 66% of Americans across the country have seen an increase in their commuting costs, spending $2,600 annually to get to and from work. The highest costs were seen in Los Angeles, at $16, with Chicago and San Francisco the lowest at $11 per day. But it doesn't end just in the wallet, as the average worker spends 200 hours commuting each year. The longest commute is seen by New Yorkers at an average of 73 minutes, with Chicago second at 64 minutes per day.
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Fannie Mae released its second quarter 2015 Mortgage Lender Sentiment Survey with the main thrust being that lenders are feeling more positive on purchase demand, profit margins and credit standards. The report went on to reveal that lenders' near term outlook for both purchase and profit margins are at high levels, and above the 2014 results. In addition, more lenders feel that credit is loosening a bit rather than tightening.
Homeowners who owe more than their home is worth received some good news today as analytics firm CoreLogic reported that the underwater mortgage share was down to 10.2% in the first quarter of 2015. More than 254,000 properties regained positive equity in the first three months of this year. Negative equity, often referred to as "underwater" or "upside down," refers to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.
The Mortgage Bankers Association (MBA) said today that mortgage rates increased again in the latest week, hitting highs for 2015. The MBA said that the 30-year rate mortgage with conforming loan balances of $417,000 or less, increased.Though mortgage rates have been edging higher, historically, they are still near the lower end of the range dating back to 1971, when Freddie Mac began tracking rates.
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Housing news was mixed this morning as the Commerce Department reported that construction on new homes fell 11.1% from April, reversing the large gain seen in April from March. Housing Starts fell to a seasonally adjusted rate of 1.04 million units, below the 1.10 million expected, while April Housing Starts were revised up to 1.17 million units, which was near an eight year high. The Northeast took the biggest hit down nearly 27%.Within the report it showed that single-family housing starts fell by 5.4%.
The housing data did have a bright spot, Building Permits, a sign of future construction, rose by 11.8% in May to an annual rate of 1.275 million, above the 1.10 million expected. The 1.275 million is the highest level since 2007. Permits for single-family homes rose by 2.6%, while multi-dwelling permits surged 26%, the most since January 1990.
Gas prices at the pump continue to edge higher as the national average price for a regular gallon hit $2.80 in the latest survey. That is up from $2.69 a month ago, though below the $3.66 seen a year ago. But those prices are expected to decline by the end of the year. The U.S. Energy Information Administration is forecasting that the price will decline to as low as $2.27 per gallon in December and also expects the average price to be $2.60 for June through August. For all of 2015, prices will average near $2.43, the lowest since 2009.
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The National Association of Home Builders reported on Monday that its Housing Market Index for newly built, single family homes rose by five points in June to 59, the best level since September 2014. Within the report it showed that current sales conditions, sales expectations and the component that measures buying traffic all increased in June. “Builders are reporting more serious and committed buyers at their job sites and this is reflected in recent government data showing that new-home sales and single-family construction are gaining momentum,” said NAHB Chairman Tom Woods.
The first of three key manufacturing reports was released this morning showing that the conditions in June declined and this was the second negative reading in the past three months. The June New York State Manufacturing Index fell by 2%, below the 6.0 expected and down from the 3.1 registered in May. Future conditions also slipped as optimism fell for a second consecutive month, while labor market conditions showed a slight increase.
A recent poll conducted by data firm Reuters revealed that those polled feel that an interest rate hike will take place in September, after near zero percent interest rates for the past decade. The results showed that the recent robust May jobs report and the much better than expected Retail Sales data are key reasons to usher in a rate hike in early fall. The Federal Reserve cut its benchmark Fed Funds Rate to near zero in December 2008, a level that still stands today.
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Consumer sentiment rebounded in early June, surpassing the final May reading as expectations for higher wages lifted confidence. The early June Consumer Sentiment report increased to 94.6 from the 90.7 registered in May. Back in January the index hit an 11-year high of 98.1. “The June gain was due to the most favorable personal financial prospects since 2007, with households expecting the largest wage gains since 2008,” said Richard Curtin, chief economist at Michigan’s Survey of Consumers that compiles the sentiment index.
The regularly scheduled Federal Open Market Committee meeting will kick off on Tuesday, June 16 in Washington D.C. where Fed members meet to discuss the economic environment in the U.S. and monetary policy. The big topic that will be at the forefront is the timing of when the short term interest rate, the Fed Funds Rate, will begin to increase after being near zero since the beginning of 2009. As the economy continues to improve, zero percent rates have no where to go but higher. The job market has improved considerably since the end of the Great Recession in late 2009, while the housing market and overall economy have gained strength.
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Consumers across the country opened their wallets in May and spent in a big way at their local retailers on purchases of automobiles and a range of other products, boosting hope that the U.S. economy will continue to gather some steam. Retail Sales rose by 1.2% in May, near in line with estimates and a big jump from the 0.2% recorded in April. Retail Sales measures total receipts of retail stores from samples representing all sizes and kinds of businesses in retail trade throughout the nation. The report is a key gauge of consumer spending, which makes up nearly two-thirds on economic output in the U.S.
In the housing sector, analytics firm CoreLogic reported that cash sales now make up nearly 35% of total home sales, down 2.8% in March from February. In March 2014, cash sales made up 39% of total sales, while the peak was hit back in January 2011 when cash sales were 47%. In the period before the housing crisis began in 2008, the average hovered near the 25% level. CoreLogic now forecasts that if cash sales continue to decline, the average of 25% could be achieved by mid-2016.
The recent spate of near positive economic data has pushed home loan rates way above the 4% level, reports Freddie Mac.
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Job openings across the nation surged in April as the labor market continues to improve. The Bureau of Labor Statistics reported that its JOLTS report (Job Openings and Labor Turnover Survey) rose to the highest since its inception in 2000. Job openings totaled 5.38 million in April from the 5.11 million in March. From April 2014 to April 2015, job openings are up 22% with big gains seen in both the private and public sector.
The National Federation of Independent Business (NFIB) reported on Tuesday that its small business optimism index rose in May with owners feeling more confident regarding their economic environment. The index rose by 1.4 points to 98.3, the highest level since December, but still below the 99.5 average that was achieved through 2007. The index was established in 1973 with the average hovering near the 98.0 level.
British banking giant HSBC has reported that it will undergo a major overhaul cutting up to 50,000 jobs around the globe. The bank will also sell several underperforming units and reduce the size of its global investment banking business with an aim to shed billions of dollars in costs. The announced job cuts comes after the bank cut 37,000 jobs from 2011 to 2014. Back in April, HSBC also said that it will formally review whether or not to move its headquarters away from Britain, given the tough regulatory environment and high tax base for banks in that country.
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The National Association for Business Economics (NABE) reported on Monday that the U.S. economy is now expected to expand at a slower pace in 2015, compared to the original projections in March. Sluggish growth in the first quarter of this year is spilling over into the second quarter, which has dampened the outlook for 2015. The think tank now expects Gross Domestic Product to rise by 2.4% this year, down from the 3.1% forecasted in March.
The NABE panel does see some positives going forward into the second half as consumer spending, residential investment, and government expenditures are all expected to increase at a faster pace in both 2015 and 2016. In addition, nearly 75% of panel members see the first hike in interest rates by the Federal Reserve in the third quarter of this year. Founded in 1959, the National Association for Business Economics is the professional association for those who use economics in their work. NABE has over 2,600 members and 42 chapters nationwide.
Credit card debt in the U.S. spiked in April, signaling that Americans have picked up their spending habits after a slowdown during the first quarter, which could have been weather related. Consumer debt rose by $20.54 billion in April, or at a 7.33% annual rate, as reported by the Federal Reserve. Estimates were looking for a rise of $16 billion. However, borrowing for cars and education rose at the slowest pace since July 2012. Consumer spending accounts for more than two-thirds of economic output in the U.S. and as Americans decrease spending, growth typically slows.
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Employers across the nation planned fewer job cuts in May than in April as energy sector layoffs eased. Outplacement firm Challenger, Gray & Christmas reported that companies across the nation laid off 33% fewer workers in May than in April. Since the year began, there have been 242,830 pink slip handed out. Just recently, JPMorgan Chase said it will be laying off 5,000 workers.
The International Monetary Fund (IMF) chief, Christine Lagarde, said on Thursday that due to low inflation and wage growth, the U.S. Federal Reserve should delay any rate hikes until the first half of 2016. The IMF went on to say that "long term unemployment, subdued participation, and high levels of part-time work point to remaining employment slack." As far as economic growth, the IMF said that the weaker growth in the first few months of 2015 will unavoidably pull down 2015 growth.
Gas prices at the pumps continue to rise as oil prices have jumped from the early 2015 lows. The average price for a regular gallon of gasoline is at $2.79, up from $2.62 a month ago. Since late January, prices at the pump is 71 cents higher and increase 26 out of 31 days in May. In addition, refineries conduct maintenance in the spring to prepare for the busy production of gasoline during the busy summer driving season. With June now on the calendar, prices could begin to decline as refineries complete maintenance.
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Private employers added more workers in May than April as moderate job growth continues. Payroll processor ADP reported that the private sector added 201,000 jobs in May, which was in line with estimates and up from the 169,000 recorded in April. Mark Zandi, chief economist of Moody’s Analytics, said, “The job market posted a solid gain in May. Employment growth remains near the average of the past couple of years. At the current pace of job growth the economy will be back to full employment by this time next year."
Over in the service sector of the economy, the Institute for Supply Management reported that its ISM Service Index grew at a slower rate of 55.7 in May, below the 57.8 recorded in April and below the 57.1 expected. Readings above 50 show expansion, below 50, contraction. The 55.7 is the lowest level since April 2014. Economic data has been mixed in the past few months showing an economy that is somewhat improving, but not a pace that would be considered normal in a post-recession economy.
At the height of the spring buying season, mortgage applications continued to decline in the latest week as home loan rates have edged higher in the past month. The Mortgage Bankers Association (MBA) reported that its Market Composite Index, a measure of total mortgage loan application volume, fell by 7.6% in the latest week. The refinance index fell 12%, while the purchase index was down 3%. The MBA also reported that the 30-year fixed rate mortgage with conforming balances ($417,000 or less), is 4.05% with 0.33 points.
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Home prices across the nation rose on an annual basis in April led by old fashioned supply and demand, low mortgage rates, and improving finances and confidence. The CoreLogic Home Price Index, which includes distressed sales, rose 6.8% from April 2014 through April 2015. It was the 38th consecutive year-over-year increase in home prices nationally. However, prices are still 9% lower from the peak hit back in April 2006. The spring buying season is typically the strongest time of the year for housing.
Federal Reserve Governor Lael Brainard spoke in Washington this morning and said that recent slowing economic data raises concerns of a weaker than expected economy. Ms. Brainard cites the reasons, which include: a stronger dollar (which makes U.S. imports more expensive around the globe), weakness in Europe and China, along with a drop in oil prices that have decreased energy investments. In addition, recent data does not suggest a significant second quarter bounce and that the strong dollar delays rate normalization.
The highly anticipated May Jobs Report will be released this Friday, June 5. Expectations are that employers added 225,000 new workers last month. The question will be whether or not robust hiring will keep up after solid numbers in April of 233,000, compared with only 85,000 jobs created in March. The Labor Department's Bureau of Labor Statistics will release the report Friday morning at 8:30 a.m. ET.
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U.S. construction spending surged in April to an annual rate of $1 trillion, up 2.2% from March, and a near six and a half year high. The 2.2% rise was the largest monthly percentage increase since May 2012 and was better than the 0.8% increase expected. The gains were led by a jump in private construction to the tune of 1.8%. Public construction also saw big gains soaring 3.3%. Strong support from construction could lead to a more solid economy as the year progresses.
Inflation remained tame in April from March and also remained subdued on a year-over-year basis. The Federal Reserve's favorite inflation gauge, the Core PCE, rose by a scant 0.1% in April, below the 0.2% expected. From April 2014 to April 2015, the Core PCE rose by 1.2%. The Federal Reserve wants to see inflation trend to near its 2% mark annually. Core PCE measures prices paid by consumers for goods and services, which excludes volatile food and energy prices.
Consumer spending in April was flat as Americans channeled incomes into savings accounts. The Commerce Department reported on Monday that Personal Spending was unchanged in April, which was below the 0.2% expected and down from the 0.5% recorded in March. Personal Incomes rose by a healthy 0.4%, and with spending flat the savings rate rose by 5.6%, the second highest level since December 2012.
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