10
Nov
By support
Market Outlook

What’s Ahead For Mortgage Rates This Week – November 10, 2014

Negotiation Tips: How to Ask the Seller to Pay the Closing CostsLast week’s economic reports contained mixed reports indicating that the economy continues to recover with occasional “blips” in its progress. Construction spending was lower than expected.

A Federal Reserve survey of senior loan officers indicated that credit standards remain strict for mortgages and other types of lending. According to the survey, a “modest net fraction” of large banks had eased credit standards for prime mortgage lending.

First-Time Homebuyers Struggle as Market Share Hits 27-Year Low

The National Association of REALTORS® (NAR) reported that first-time buyers’ share of home purchases has slipped to 33 percent, which was its lowest level in 27 years. According to Lawrence Yun, chief economist for the NAR, high home prices and mortgage insurance costs along with strict mortgage credit requirements continue to sideline first-time buyers.

In other news, the Department of Commerce reported that construction spending dropped by 0.40 percent in September as compared August’s reading of -0.50 percent and an expected reading of +0.70 percent. September’s reading represented a seasonally-adjusted annual construction spending rate of $950.90 billion.

Mortgage Rates: Average 30-Year Mortgage Rate Tops Four Percent

Average mortgage rates rose last week according to Freddie Mac. The average rate for a 30-year fixed rate mortgage rose by four basis points to 4.02 percent. The average rate for a 15-year fixed rate mortgage rose by eight basis points to 3.21 percent, while the average rate for a 5/1 adjustable-rate mortgage rose by three basis points from 2.94 percent to 2.97 percent. Average discount points remained at 0.50 percent for all three types of mortgages.

This is not altogether bad news, as higher mortgage rates are typically prompted by improving economic conditions. 2014 started with an average rate for 30-year fixed rate mortgages of 4.05 percent.

Labor Reports Suggest Stronger Jobs Markets

Last week’s economic news included several reports that indicated improvements in U.S. labor markets. The Department of Labor released its Non-Farm Payrolls report for October with a reading of 214,000 jobs added against expectations of 243,000 jobs added and September’s reading of 256,000 jobs added. While this appears contrary to stronger labor markets, analysts said that a new low in the national unemployment rate of 5.80 percent indicated that fewer new jobs were needed. October was the ninth consecutive month reporting 200,000 or more jobs added.

The ADP employment report, which tracks payrolls in the private sector, reported an increase of 5,000 jobs from September’s reading of 225,000 jobs to October’s reading of 230,000 jobs.

Weekly jobless claims fell to 278,000 against expectations of 285,000 new jobless claims filed and the prior week’s reading of 288,000 new claims filed. This reading supports a stronger jobs market and may compel would-be home buyers to enter the market as concerns about unemployment and jobs wanes.

The national unemployment rate reached a new low with October’s reading of 5.80 percent. In related news, Fed Chair Janet Yellen indicated in a speech on Friday that the target Federal funds rate will likely rise in 2015, but she gave neither a prospective date nor details about how much the benchmark federal funds rate may rise.

03
Nov
By support
Market Outlook

What’s Ahead For Mortgage Rates This Week – November 3, 2014

What's Ahead For Mortgage Rates This Week - November 3, 2014Last week’s economic news brought mixed developments as pending home sales moved to their second highest level of 2014.

The Federal Open Market Committee (FOMC) announced the expected end of asset purchases under its quantitative easing program. In its post-meeting statement, the committee noted improvements in overall economic conditions labor markets as indications of better than expected economic trends.

The Case-Shiller Home Price Index reports for August showed continued slowing in housing price gains. Mortgage rates were higher, but consumer confidence exceeded expectations.

Pending Home Sales Rise, Case-Shiller Reports Slower Price Gains

The National Association of REALTORS® reported that pending home sales gained 0.30 percent in September for an index reading of 105 as compared to August’s reading of 104.7. Analysts said that lower home prices and more homes available likely brought more buyers into the market.

The S&P Case Shiller 10 and 20-city home price index reports for August showed further slowing in home price growth with a year-over-year reading of 5.60 percent as compared to July’s year-over-year reading of 6.70 percent.

This was the slowest price increase since November 2012. Home price growth is slowing as demand decreases. Tight mortgage qualification requirements are likely contributing to lower demand for homes.

FOMC ends QE, Mortgage Rates Rise

The Fed ended its asset purchases under its QE program according to a statement after the FOMC meeting on Wednesday. This move was expected, and the statement repeated its plan to leave the target federal funds rate unchanged for a considerable period after the QE program’s conclusion. Analysts interpreted that to mean that no rate change would likely occur until approximately June 2015.

Mortgage rates responded to the demise of QE with an across the board increase. Average rates reported by Freddie Mac on Thursday were 3.98 percent for a 30-year fixed rate mortgage, 3.13 percent for a 15-year mortgage and 2.94 percent for a 5/1 adjustable rate mortgage. Discount points were unchanged at 0.50 percent for all three loan types.

New Jobless Claims Up, But No Big Deal

Housing market trends are connected with what’s happening in labor markets. Last week’s report for new jobless claims took an unexpected jump with 287,000 new jobless claims filed against predictions of 281,000 new claims and 284,000 new jobless claims filed the prior week. The four-week average for new jobless claims dropped to 281,000 and new claims remained below the 300,000 benchmark for the seventh consecutive week.

October’s Consumer Confidence Index rose to a reading of 94.50 as compared to the expected reading of 87.3 and September’s reading of 89.0. The Consumer Sentiment Index for October was also showed an increase of 0.50 percent with a reading of 86.9 against a predicted reading of 86.4 and September’s reading of 86.4.

What’s Ahead

Next week’s scheduled economic news includes construction spending for September, Non-farm payrolls, national unemployment, and the ADP employment report. Regularly scheduled reports on mortgage rates and new jobless claims will be released on Thursday.

30
Oct
By support
Market Outlook

Case-Shiller 20 City Home Price Index And FOMC QE Update

Case Shiller 20 City Home Price Index And FOMC QE UpdateAccording to the S&P Case-Shiller 20 City Home Price Index, Home prices rose by 0.20 percent in August. Three of the 20 cities tracked saw home prices drop, while Detroit, Michigan posted the highest price growth. The seasonally adjusted growth rate for cities tracked declined by 0.10 percent as compared to a decline of 0.10 percent in July.

Detroit led monthly home price growth with a gain of 0.80 percent. Dallas, Denver, Colorado and Las Vegas, Nevada posted gains of 9.50 percent as compared to July. Cities posting declines in home price growth included San Francisco at -0.40 percent, Charlotte, North Carolina and San Diego, California at -0.10 percent.

Home prices increased by a seasonally-adjusted year-over-year rate of 5.60 percent in August, which was the lowest reading since November 2012. Year-over-year home prices grew by 6.70 percent in July. August home prices were 16 percent lower than their 2006 peak.

The Case-Shiller National Home Price Index posted a year-over-growth rate of 5.10 percent. This index covers all nine U.S. census regions.

Analysts note that slower growth in home prices will likely attract more buyers, but is a sign of overall decline in demand for homes. August home prices were 16 percent lower than their 2006 peak. As the jobs market continues to improve and if mortgage rates remain low, more buyers are expected to enter the housing market.

FOMC Statement: QE Ends, Labor Market Forecast Brighter

In its customary post-meeting statement, The Federal Open Market Committee (FOMC) of the Federal Reserve announced that it voted to reduce asset purchases under its current quantitative easing (QE) program to zero. The committee’s decision concluded 37 consecutive monthly purchases of Treasury bonds and mortgage-backed securities.

FOMC cited “substantial improvement” in the outlook for the labor market since the inception of QE purchases, and also noted “sufficient underlying strength in the broader economy” as the basis for the committee’s decision. The demise of QE was no surprise as FOMC has consistently tapered asset purchases each month along with its advisory that it planned to end asset purchases under the current QE program this year.

The FOMC characterized the pace of economic improvement as “moderate,” but also said that “labor market conditions improved somewhat further with solid job gains and a lower unemployment rate.” Along with the stronger outlook for jobs, the Fed noted that “underutilization of labor resources is gradually diminishing.”

The committee held to its position that it would not increase the target federal funds rate for a “considerable time” after the quantitative easing program ended. Analysts following the Fed estimate that no changes to the federal funds rate will be made until June 2015 or later.