Chris BaileyThe Bailey Team Real Estate
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Mortgage Information Category
The Christmas week saw mortgage rates moving mostly sideways, with limited economic data or significant news to push rates either way. Stock markets and Treasuries did move higher last week, but it appeared to have limited impact on mortgage rates, at least for the time being. We wrap up 2013 with mortgage rates that are almost a percentage point higher than at the beginning of the year. It is worth remembering that while rates have been moving slowly upward, we remain in historically low territory. The mortgage industry has gone through many significant changes in the last few years, and more changes are coming. Through all of the ups and downs, we are blessed and fortunate to live in a country that places a high value on homeownership. If our economy is finally at the point of a self-sustaining recovery, we are likely to see rates continuing to move upward in 2014. This holiday-shortened week starts with some slight upward pressure on rates that could be ratcheted upward by stronger-than-expected Consumer Confidence or ISM Index readings.
Mortgage rates bounced around some last week, with limited economic news or data to guide the markets. The biggest economic news was that Retail Sales came in slightly higher than expected. This week is an extremely busy week for financial markets. The week is full of economic data points
including Industrial Production, the Consumer Price Index, GDP, Housing Starts, Existing Home Sales, and more. If all of this data comes in at or above expectations, upward pressure on mortgage rates is certain to be growing. The biggest news of this week will likely be 2013’s final meeting of the
Federal Reserve Open Market Committee. Over the last few weeks, we have seen many signs of an improving economy. Many analysts believe that the economy has gained enough steam for the Fed to begin to taper QE3. If they do begin to taper, the size of the taper may impact rates. The greater the reduction in Fed purchases, especially of MBS’s, the more rates are likely to grow. Alternatively, if the Fed does not taper, we could see rates moving slowly downward.
Last week brought several indicators of a strengthening economy. New home sales, private and federal employment and mortgage rates rose.
The Department of Commerce released construction spending numbers for October with mixed results. Although public projects fueled an 0.80 percent increase in month-to-month construction spending, residential construction fell by 0.60 percent.
Analysts had expected an increase of 0.50 percent and also noted that the negative effect of the government shutdown was a “blip.” October’s reading for construction spending was the highest since 2004.
CoreLogic released data that home prices rose by 0.20 percent, which represents a year-over-year growth rate of 12.50 percent for home prices. Pending home sales were suggested that November sales are expected to hold steady as compared to October, and projected year-over-year sales for November at 12.20 percent.
Slower growth in home prices was attributed to higher mortgage rates and a fear of a housing bubble in the West, where demand for homes far exceeds the number of available homes.
Not wanting to buy at the top of the current housing market, some potential buyers may be waiting for the talk of another housing bubble to subside before buying. Robert Shiller, co-author of the Case-Shiller Housing Market Index, noted that home buyers may not be “psychologically ready” for another housing bubble.
New home sales for October were higher than expectations of 419,000 homes sold on a seasonally-adjusted annual basis. October’s reading of 444,000 new home sales was 21.60 percent higher than September’s reading of 354,000 new homes sold. The national median home price fell by 4.50 percent to $245,800 in October; this was the lowest month-to-month reading since November 2012.
The number of available homes fell to a 4.90 month supply in October. This may cause buyers to put their home searches on hold as they wait out the winter months and hope for supplies of available homes to increase.
U.S. Employment Improving, Mortgage Rates Rise
ADP a private-sector provider of payroll services reported 215,000 new jobs added in November as compared to October’s reading of 184,000 jobs added. Weekly jobless claims supported the ADP reading as new jobless claims fell to 298,000 against expectations of 325,000 new claims and a prior reading of 321,000 new claims.
The Bureau of Labor Statistics brought more good news with its Non-Farm Payrolls report and Unemployment Rate for November. Non-Farm payrolls added 203,000 jobs in November against expectations of 180,000 jobs added and October’s reading of 200,000 jobs added.
The National Unemployment rate dipped to 7.00 percent in November against expectations of a 7.20 percent reading and October’s reading of 7.30 percent. The Federal Reserve has set a benchmark unemployment rate of 6.50 percent as an indicator of economic recovery.
Last week’s strong economic news boosted mortgage rates; Freddie Mac reported that the average rate for a 30-year fixed rate mortgage rose by 17 basis points to 4.46 percent with discount points lower at 0.50 percent.
The average rate for a 15-year fixed rate mortgage also gained 17 basis points at 3.47 percent with discount points at 0.40 percent. The average rate for a 5/1 adjustable rate mortgage rose by 5 basis points to 2.99 percent with discount points at 0.4 percent.
What’s Coming Up
This week’s scheduled economic news includes Retail Sales, Weekly Jobless Claims and Freddie Mac’s report of average mortgage rates.
The Veterans Day holiday on Monday contributed to a quiet week for economic news. On Wednesday the reading for the federal budget deficit for October fell from September’s reading of -$120 billion to -$92 billion.
Freddie Mac Released Its Primary Mortgage Market Survey On Thursday
The average mortgage rates increased across the board, but remain below historical levels. The rate for a 30-year fixed rate mortgage rose by 9 basis points from 4.16 percent to 4.35 percent with discount points decreasing from 0.80 percent to 0.70 percent.
The average 15-year mortgage rate rose from 3.27 percent to 3.35 percent with discount points the same at 0.70 percent. The rate for a 5/1 adjustable rate mortgage increased from 2.96 percent to 3.01 percent with discount points moving from 0.50 percent to 0.40 percent.
Weekly Jobless Claims were released Thursday and were reported at 339,000 new claims. This was higher than the expected number of 335,000 new claims, but lower than the prior week’s reading of 341,000 new claims.
In other news, Janet Yellen, the President’s choice for chairing the Federal Reserve, defended the Fed’s quantitative easing policy during her first confirmation hearing before the Senate Banking Committee. QE, which involves Fed purchases of $85 billion monthly in Treasury and mortgage backed securities, was designed to keep long-term interest rates and mortgage rates low.
Credit Reporting Agency: Mortgage Defaults Reach 5-Year Low In Q3 2013
TransUnion, one of three major credit reporting agencies in the U.S., reported that mortgage defaults fell to a five-year low to a reading of 4.09 percent for the third quarter of 2013.
This reading is lower year-over-year than the revised reading of 5.33 percent for the third quarter of 2012. The reading for third quarter 2013 mortgage defaults is also lower than the reading of 4.32 percent for the second quarter of 2013.
A mortgage default is defined as a home loan that is at least two months past due on payments.
Analysts cite moderate but stable job gains, comparatively low mortgage rates and a short supply of available homes as factors contributing to improvements in the housing sector. Analysts noted that mortgage defaults have declined during the past five quarters.
As defaulted mortgage loans made before the economy crashed are foreclosed, mortgage defaults were expected to continue falling. TransUnion reported that it expects mortgage defaults to fall below 4.00 percent by year-end.
What’s Coming Up: NAHB Index, FOMC Minutes
This week, the National Association of Home Builders is scheduled to release its Home Builder Confidence Index for November.
Along with the weekly releases of Jobless Claims and Freddie Mac’s PMMS report on mortgage rates, the FOMC is expected to release the minutes of its last meeting. Existing Home Sales for October are also set for release.