Mortgage Market Rates

U.S. economic growth rebounded in the second quarter of this year, led by a rise in consumer spending along with an increase in exports. The Bureau of Labor Statistics reported that Gross Domestic Product, the total value of goods and services produced in the U.S., rose by 2.3%. This was well above the anemic 0.6% recorded in the first quarter, which was revised from -0.2%. On the negative side, business spending declined during the quarter, led lower by decreased spending on buildings and plants, while inventories also fell. In addition, the report revealed that inflation remained subdued.
The Federal Reserve released its monetary policy statement yesterday leaving interest rates unchanged, which left investors scratching their heads as to the timing of the first rate hike. The statement read that that both the labor market and the housing sector were improving, while inflation continues to run below its long-run objective. There was no hint as to when the first rate hike may take place. The interest rate in question is the short-term Fed Funds Rate, which is the rate banks lend their balances to other banks overnight. The Fed Funds Rate has been at 0.25% since late 2008.
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Mortgage Market News

The Mortgage Bankers Association (MBA) reported today that total mortgage application volume was little changed in the latest week, while mortgage rates ticked lower. The MBA said its Market Composite Index, a measure of total loan application volume, rose 0.8% for the week ended July 24, 2015. The refinance index rose 2%, while the purchase index was unchanged. The MBA went to say that the average contract rate for 30-year fixed rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.17% from 4.23%.
A rise in home prices is beginning to push potential buyers to the sidelines. The National Association of REALTORS® (NAR) reported that Pending Home Sales (signed contracts to purchase existing homes) fell 1.8% in June from May. This was below the +1% expected. The NAR also said limited is constraining sales as "low inventories in many markets reduced choices and pushed prices above some buyers' comfort level."
United Parcel Service (UPS) reported earnings this week; the shipping company is considered by many to be a barometer of the U.S. economy. UPS is the biggest member of the Dow transports, which economists feel to have a good pulse of the economy. UPS said it sees the U.S. economy slowing, which is somewhat contradictory of what Fed Chair Janet Yellen a few weeks ago when she said that she sees the economy strengthening in the second half of 2015. The big reason that shipping companies may have their finger on the pulse of the economy is because they are the middle men between what goods are produced, and for what people consume
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Mortgage Market News

Consumers weren't feeling too confident in July as the weight of the geo-political issues in Greece and the instability in the Chinese Stock markets weighed on their minds. The Conference Board released its July Consumer Confidence Index today, which fell to 90.9, a 10-month low, down from the 101.4 registered in June and below the 100 expected. Consumers were also less optimistic surrounding the labor markets, while business condition optimism declined. The Conference Board is a global, independent business membership and research association working in the public interest.
Home price gains in a selected 20-city index remained solid in May, though the actual numbers fell a bit below what was estimated. The Case Shiller 20-city Home Price Index rose 4.9% from May 2014 through May 2015, though below the 5.6% gain expected. From April to May, prices rose 1.1%. Within the report it revealed that first time homebuyers are still sitting on the sidelines. Without those buyers, there is less activity as existing homeowners aren't seeing the liquidity and demand that supports selling their homes and trading up for a new purchase.
The U.S. Census Bureau reported today that the U.S. homeownership rate fell to 63.4% in the second quarter of 2015 as Americans have moved to rentals after the fallout from the housing bubble burst in 2008. The 63.4% is just below the 63.7% in the first quarter and below the 64.7% from the same period in 2014. Rates peaked at 69.2% at the end of 2004, during the housing boom. In comparison, multifamily dwelling construction surged 55% in June from June of 2014, while in the same period, single-family starts rose 15%.
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Mortgage Market News

Black Knight Financial Services reported today that its Home Price Index in May rose 1.1% from April as the housing sector continues to gradually improve. The current price was pegged at $251,000, which is 5.1% higher than May 2014 and is up 25% from the market bottom. The price peak came in June of 2006 at $268,000. Black Knight tracks prices as of their transaction dates every month from more than 18,500 U.S. zip codes. New York led the gains in May with a 1.8% appreciation month-over-month.
Oil prices continue to edge lower due to an uptick in supplies and lower demand around the globe. The price of West Texas Intermediate fell to $47.20 a barrel on Monday morning, down from $62 in late June. The decline in oil prices has led gas prices at the pump lower in the last month, after having increased from the early 2015 lows. The national average price for a regular gallon of gasoline fell to $2.71, down six cents in the past month. It is forecasted that gas prices will continue to edge lower as summer gives way to fall.
U.S. Stock markets begin the week on a lower note after a big decline in the Chinese Stock markets. China's Shanghai Composite fell 8.5% overnight and is down nearly 30% since the June highs. The China market had been up 150% in June before the recent slide, which was deemed to overvalued or in bubble territory. Stock prices here in the U.S. fell last week as the Federal Reserve gears up to begin raising interest this year. This week, Fed members will meet to discuss monetary policy with the meeting centering on as to the timing of rate hikes later this year.
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Mortgage Market News

U.S. housing starts in June rose 9.8 percent to 1.17 million, the second-highest level since November 2007. The demand for apartments fueled the surge, following a 16.9 percent decrease the previous month and a 37.5 percent rise in April. Single-family home starts declined throughout the country, with the largest drop in the Northeast at 27.3 percent. Building permits also reached an eight-year high.
The Consumer Price Index rose 0.3 percent last month after increasing 0.4 percent in May. In the 12 months through June, the Core Consumer Price Index (sans food and energy costs) rose 1.8 percent after May's 1.7 percent increase. This inflation measure is still below the Fed’s target 2 percent. Price increases hit gasoline, rent, recreation, personal care, tobacco, airfare and food (most notably eggs at 18.3 percent — the biggest gain since 1973 due to an egg shortage caused by bird flu).
A Greek tragedy has been averted as the EU approved a bridge loan of 7.16 billion euros ($7.76 billion) for Greece. The loan saves Greece from defaulting on payments due to the European Central Bank and International Monetary Fund. It further buys time as terms of a third bailout are finalized.
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Investors seem to be putting positive stock in Greece’s bailout proposals. All signs this morning point to trading on the uptick. Standard & Poor’s 500 Index climbed 1 percent to 2,072.62 at 9:32 a.m. in New York, after closing yesterday down 1.2 percent this week. Dow kicked off with a 200-point rally led by Visa and JP Morgan. NASDAQ is up too. While the week could end on a positive note after wild swings, news headlines on the weekend could usher in an exciting Monday.
U.S. wholesale inventories rose at their fastest pace in six months, according to today’s release from the Commerce Department. Wholesale inventories increased 0.8 percent from a month earlier, more than forecast. Petroleum products, computer equipment and drugs saw the biggest gains. Inventories are a key component of gross domestic product changes.
Yesterday, the American Bankers Association released new data pointing to a healing housing market. Fewer Americans are falling behind on their home-equity loans. In fact, delinquency rates on fixed-term home equity loans fell to 3.12% in the first quarter, the lowest since 2008. The delinquency rate on home-equity lines of credit declined to 1.42% from 1.48% in the fourth quarter.
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Mortgage Market News

Fannie Mae released its June 2015 National Housing Survey this week stating that consumer attitudes on housing may signal a healthier purchase market ahead. The survey said that those who believe now is a good time to sell a home reached a new survey high as the mark crossed above the 50% threshold for the first time in the survey's history. The positive results are due in part to an improving job market and income growth.
The International Monetary Fund (IMF) for the second time this year has warned the U.S. Federal Reserve to hold off on any potential interest rate hikes until 2016. The IMF cites the Greek saga, the slowing Chinese economy, the continued strength of the U.S. dollar, as well as still-depressed demand for housing despite a recovery. In addition, slower growth around the globe is another key factor to hold off on rate hikes.
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Mortgage Market News

Black Knight Financial Services reported on Monday that between traditional and HARP programs, 6.5 million Americans could likely both qualify and benefit from refinancing in the coming months. The current refinance opportunities could result in savings of up to $500 each month at today's rates. Black Knight said that three million borrowers could save at least $200 per month. However, if rates go up a half percentage point, 2.6 million people will fall out of that refinanceable population.
The Institute for Supply Management released its ISM Service Index revealing that the sector remained steady in June as the economy continues to modestly improve. The ISM Index rose to 56.0 in June, up from the 55.7 recorded in May, though just below the 56.3 expected. Most of the components within the report saw gains, with the exception of the employment component, which fell to 52.7 from 55.3. In last week's June Jobs Report the numbers said that a large portion of the 223,000 jobs created were through private service companies.
This past holiday weekend drivers saw the lowest prices for gas at the pumps since 2009. The national average price for a regular gallon of gas is at $2.77. AAA spokesman Mark Jenkins said that gas prices peaked for the year in June hitting an average of $2.80. Prices averaged $2.45 in the first half of the year, which is the cheapest average for the first six months since 2009. AAA went on to say that the average price is likely to remain below $3 this year.
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Mortgage Market News

The Bureau of Labor Statistics reported on Thursday that U.S. employers added 223,000 new workers in June, just below the 230,000 expected as the job markets continues to steadily improve. Hiring’s were widespread in June, with the exception of the energy sector, due to the decline in oil prices. Within the report it also showed that the Unemployment Rate fell to 5.3%, the lowest level since May 2008. However, the April and May numbers were reduced by 60,000, signaling that although the sector is improving, it is still not robust nearly seven years into a recovery.
Mortgage rates hit 2015 highs this week headed into the holiday weekend, though just slightly higher than the previous week. Freddie Mac reported that the 30-year conforming mortgage rate ($417,000 or less) hit 4.08% this week with 0.6 in points and fees. The 4.08% is up from 4.02% last, though down from 4.12% last year this time. Looking at mortgage rates from a historical perspective, rates are near the all-time lows of the mid 3% mark, well below the near 17% seen back in 1981.
On the lighter side, with the 4th of July upon us, some fun facts to offer at your holiday barbecue this weekend. It is said that the real day of independence is July 2, for that's when Congress accepted Jefferson's declaration. Thomas Jefferson drafted the Declaration of Independence on a "laptop", which was a writing desk that could fit on ones lap. Only two men signed the Declaration of Independence on July 4th 1776 - John Hancock and Charles Thompson. Congress declared July 4th as an official holiday in 1870 as part of a bill to officially recognize other holidays, Christmas being one of them. And last, July 4th is the "biggest hot dog holiday of the year," according to TIME magazine, with Americans reportedly consuming about 155 million of them on Independence Day alone.
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Mortgage Market News

The first of two key employment reports was released this morning showing that private employers added more jobs than expected as the sector continues to improve. ADP Private Payrolls rose by 237,000 in June, above the 220,000 expected and up from the 203,000 jobs created in May. Within the data it revealed that small businesses added 120,000 jobs, mid-sized companies added 86,000, while large ones added 32,000. The report comes ahead of Thursday's government jobs report. A noted economist said after the ADP release that "the U.S. job machine remains in high gear."
Home loan rates hit a nine-month high in the latest week as an improving economy has pushed the price of the underlying Bonds that dictate home loan rates to 2015 lows. The rise in home loan rates pushed mortgage application volumes considerably lower in the latest survey. The Mortgage Bankers Association reported that its Market Composite Index, a measure of total loan application volume, decreased 4.7% for the week ending June 26, 2015. In addition, the refinance index fell 5%, while the purchase index decreased 4%. The average contract for a conforming 30-year fixed-rate mortgage ($417,000 or less) rose to 4.46% with 0.33 in points.
The granddaddy of all economic reports (Non-farm payrolls) will be released on Thursday morning and will surely garner attention around the globe. The government's Non-farm Payrolls report is expected to show that employers added 220,000 jobs in both the private and public sector in June. The 220,000 would be down from the 280,000 created in May, but the number could be greater or less than what is anticipated. Non-farm payrolls is a statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number of paid U.S. workers of any business, excluding, general government employees, private household employees, employees of nonprofit organizations and farm employees.
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