Wednesday, April 29, 2015

Pending Home Sales Highest Since June 2013

Momentum appears to be building toward a healthy spring market according to data released today on March pending home sales.  The National Association of Realtors® (NAR) said its Pending Home Sales Index (PHSI), reached 108.6 in March, a 1.1 percent increase over the previous month.  At the same time the February Index number was revised upward from 106.9 to 107.4.
March is the third consecutive month that pending sales have increased month over month and the Index is now at its highest level since June 2013 when it was 109.4.  The PHSI was up 11.1 percent from the March 2014 level of 97.7.  It has now increased year-over-year for seven consecutive months.
The PHSI is a leading indicator based on executed home purchase contracts. These contracts are generally expected to be reflected in residential sales in about two months.
Lawrence Yun, NAR chief economist, said the encouraging pending sales numbers resulted from more buyers than usual entering this year's competitive spring market. "Demand appears to be stronger in several parts of the country, especially in metro areas that have seen solid job gains and firmer economic growth over the past year," he said. "While contract activity being up convincingly compared to a year ago is certainly good news, the increased number of traditional buyers who appear to be replacing investors paying in cash is even better news. It indicates this year's activity is being driven by more long-term homeowners." 
However, he also said that "Demand in many markets is far exceeding supply, and properties in March sold at a faster rate than any month since last summerThis in turn has pushed home prices to unhealthy levels - nearly four or more times above the pace of wage growth in some parts of the country. Simply put, housing inventory for new and existing homes needs to improve measurably to improve affordability."
The PHSI in the Northeast was down (by 1.5 percent) for the fourth straight month to 80.2 but is still 0.6 percent above a year ago. In the Midwest the index declined 2.5 percent to 107.5 but remained 11.3 percent higher than in March 2014. 
Pending home sales in the South increased 4.0 percent to an index of 126.5, 12.4 percent above last March.  The West was up 1.7 percent for the month and 15.6 percent on an annual basis.

Sunday, April 26, 2015

Mostly Stable

After soaring on Monday by 209 points, the stock market has remained mostly stable and trading in a narrow range for the remainder of the week.  The recovery on Monday was welcome after the selloff on Friday that was stirred by higher than expected inflation indicators.  Fear gripped the markets on Friday regarding the possibility that the Fed may raise interest rates sooner rather than later if inflation continues to increase.  Those fears seemed to be calmed on Monday and the market rebounded.

The two major housing reports for the week were Existing Home Sales and the FHFA House Price Index.

It appears that this winter's heavy snow and extreme cold may very well have held down the housing market.  The good news is that heading into the spring, the market seems to be gaining momentum.  Existing home sales jumped 6.1 percent in March up to an annual rate of 5.190 million. This is near the high end of analyst expectations and the highest level since September 2013. If you look at percentages, the 6.1 percent gain is the strongest since December 2010 and among the very highest in the 16-year history of tracking this specific activity.

Great news for mortgage and real estate professionals is that sales of single-family homes jumped 5.5 percent in the month.  Condominium sales jumped, up 11.1 percent. All regions of the country showed solid gains in total sales led by the Midwest at 10.1 percent with the South at the rear, though still up a solid 3.8 percent.

The median price of homes also showed improvement rising by 5.1 percent to $212,100. Year-on-year, the median price is up by 7.8 percent, which is the best reading since February of last year.

Now that it seems like price improvement is really starting to take hold, it is likely that more sellers will enter the market which will assist in furthering housing activity.  It is not expected at this time that the anticipated number of sellers to join in the market will have a significant impact on the momentum of price appreciation.  Housing inventory is expected to remain tight.

The other significant housing report was released by the Federal Housing Finance Agency.  This report showed an increase of a very strong 0.7 percent gain for the month of February compared to 0.3 percent increase in January. The rate compared to the same time last year is up 5.4 percent, compared to 5.1 percent the month before. 

The Mortgage Bankers Association reported that the spring buying season is showing up in mortgage applications for home purchases.  The index rose 5.0 percent for the week ending April 17th.

Next week’s potential market moving reports:

·        Tuesday April 28th – S&P Case-Shiller Home Price Index
·        Wednesday April 29th - MBA Applications, Pending Home Sales, FOMC Announcement
·        Thursday April 30th - First Time Jobless Claims
·        Friday May 1st - Construction Spending

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Wednesday, April 22, 2015

No Major Surprises

The stock market has been trading in a very narrow range throughout the week.  With virtually no major surprises in any of the economic reports, there has been little for investors to trade on.  It appears that for the time being many investors are attempting to gauge the direction of the economy before making any significant trading decisions.  The government is yelling from the mountain top that the economy is getting better and better, however the latest economic data seems to be indicating that things are slowing down slightly.

The housing market still appears sluggish based on the latest housing starts data for March.  The report released on Thursday morning seemed to disappoint investors in that although the data showed an increase of 2.0 percent after plunging a monthly 15.3 percent in February, it was expected that the report would be much stronger.  Starts are down 2.5 percent from the same time last year.  This is one of the first and few recent housing reports that has actually showed productivity below the same time last year.

The Northeast experienced the most significant increase as the spring thaw occurred and allowed builders to start working.  The Midwest also saw weather related gains.  The large South region declined 3.5 percent and the West fell 19.3 percent.  With the weakness in these two housing reports, it is likely that the Fed will continue to watch closely additional housing data due to be released next week.

A bright spot in housing is that it seems that first time buyers are finally beginning to edge their way back into the market.  The housing market index for March is climbing, although still considered soft, it none the less, is indicating increased optimism for builders.

After 3 straight weeks of strong gains in mortgage applications, the purchase index reported by the Mortgage Bankers Association showed a decline in purchase applications.  The MBA reported that apps for purchase loans declined 3.0 percent and refinance applications dropped 2.0 percent.  Mortgage rates have remained very low and have barely moved in the last couple of weeks.  One possible explanation for the declines is that many areas of the country have been having Spring Recess from school which had many heading on vacation.

A bright spot in the weekly economic data came from the retail sales report released on Tuesday.  Retail sales jumped a greater than expected 0.5 percent for the month of March.  This increase comes on the heels of February’s decline of 0.3 percent.  Even when you take out volatile automobile and gasoline sales, the index showed an increase of 0.4 percent which exceeded analyst’s expectations.

Lastly, first time jobless claims, although increasing by 12,000 from the prior week, remain favorable at 294,000.  Below 300K is still considered a healthy labor department number.

Next week’s potential market moving reports:

·        Wednesday April 22nd - MBA Applications, Existing Home Sales & FHFA House Price Index
·        Thursday April 23rd - First Time Jobless Claims & New Home Sales
·        Friday April 24th – Durable Goods Orders

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Sunday, April 19, 2015

Mortgage Rates Are Really Stuck in a Rut

Mortgage rates barely budged yet again today despite more volatility in underlying financial markets.  This is the 3rd day in a row with similar behavior in interest rates, and part of an even broader trend of minimal movement since the beginning of the month.  If there was a detectable bias today, it was just microscopically higher in rate, but all lenders will still be quoting the same contract rates as yesterday.  Adjustments would be in the form of slightly higher upfront costs.  The most prevalently-quoted conventional 30yr fixed rate for top tier scenarios is 3.625%, though 3.75% is not far behind.
As we discussed yesterday, the longer we go without breaking below this current floor, the more it makes sense to favor locking.  Rates could move quite a bit higher without technically exiting the long-term trend lower.  There's a lot of room for movement between now and the FOMC Announcement on April 29th--the next event that stands the best chance to create more firmly-resolved momentum in rates markets.

Wednesday, April 15, 2015

Homebuilder Sentiment Rises for First Time in Five Months

Confidence among homebuilders rose in April for the first time in five months as prospective buyers returned to the market and sales climbed.
The National Association of Home Builders/Wells Fargo sentiment gauge increased to 56, the highest since January, from a revised 52 in the previous month, the Washington-based group reported Wednesday. Readings above 50 mean more respondents said conditions were good. The median forecast in a Bloomberg survey called for the gauge to climb to 55.
Warmer weather is encouraging builders to start work on more homes at a time when tight inventory has been pushing up housing prices. Sustained improvement in the job market and a long-awaited pickup in wage growth would help to further strengthen demand as the spring selling season begins.
The housing market is "going to show further steady improvement," Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. "There's demand, interest rates are still low, and people are feeling more confident not only in the economic outlook but also in their job security."
Other figures Wednesday showed factory output barely climbed in March. A 0.1% gain in manufacturing was the first advance in four months and followed a 0.2% February decrease, according to the Federal Reserve. Production slumped at a 1.2% annualized rate in the first three months of the year, the biggest drop since the second quarter of 2009, just as the recession was ending.
Estimates in the Bloomberg survey for the homebuilder index ranged from 51 to 57 after a previously reported 53 in March.
Builder confidence increased in three of the four U.S. regions, with the biggest improvement coming from the Northeast. Sentiment also rose in the West and reached a five-month high in the South.
The group's gauge of prospective buyer traffic increased to 41 from 37 last month, while the index of current single-family home sales rose to 61 from 58. The measure of the sales outlook for the next six months climbed to a four-month high of 64 in April from 59.
"This uptick shows builders are feeling optimistic that the housing market will continue to strengthen throughout 2015," David Crowe, the association’s chief economist, said in a statement.
A stronger pace of job growth that's accompanied by fatter paychecks may help persuade more Americans to take the plunge. Payrolls climbed by 126,000 in March, the smallest gain since December 2013, according to Labor Department data.
Hourly pay increased 2.1% from a year earlier, in line with the average since the expansion began in June 2009.
"As the spring buying season gets under way, homebuilders are confident that current low interest rates and continued job growth will draw consumers to the market," NAHB Chairman Tom Woods, a homebuilder from Blue Springs, Mo., said in a statement.
As the Fed considers raising interest rates for the first time since 2006, the threat of higher borrowing costs may prompt some hesitant buyers to commit. The average 30-year, fixed-rate mortgage fell to a nine-week low of 3.66% in period ended April 9, according to data from Freddie Mac.
A Commerce Department report Thursday will probably show housing starts rose to a 1.04 million pace in March from an 897,000 rate a month earlier, according to the median estimate in a Bloomberg survey.
Hovnanian Enterprises Inc., a Red Bank, N.J.-based builder, is upbeat about the market's prospects entering the busy selling season.
"The trend has been very positive, it's picking up steam," Chief Executive Officer Ara Hovnanian said in a March 25 interview. "It feels a little stronger than last year."


Sunday, April 12, 2015


Since Monday, the stock market has been trading in a relatively narrow range.  “Narrow” is a relative term in that a swing of 100 or 150 points these days does not seem out of the ordinary.

In a week of light economic data the only major announcement that could have significantly moved the markets was delivered on Wednesday.  The Fed released the FOMC Minutes from their last meeting.  Surprisingly the release of the minutes had minimal impact on the markets.

What is surprising is that there appears to be more division amongst the board members as to when an interest rate hike should occur.  Some members are in favor of seeing a small increase as early as June.  Other members indicate that they think that rates may have to remain where they are into late 2015 and even possibly all the way into 2016.

Investors, who would normally cheer any language in the FOMC Minutes that indicate a delay in an interest rate increase, remained on the sidelines.  It appears that investors are starting to focus more on the corporate profit data rather than interest rates.

The profit concerns stem from the fact that despite interest rates remaining unchanged at a very low lever, corporate profits seem to be thinning.  There are indications the economy may be slowing and that has investors somewhat spooked at the present time.

Great news in the housing market is taking place.  The Mortgage Bankers Association Purchase Index has been flat all year but is now moving higher at a quick pace.  Mortgage applications for home purchases surged for the 3rd week in a row to the highest level since July of 2013.  The index is up 7.0 percent from the prior week and 12.0 percent higher from the same time last year.

The Refinance Index dropped by 3.0 percent.  Mortgage rates have creeped up slightly over the last week and that has had a direct impact on refinance activity.

First time jobless claims are up a more than expected 14,000 from the prior week’s report.  Claims for the week ending April 4th were 281,000.  This number, although an increase, is still below the threshold of 300k which is considered a healthy labor market.

The final piece of economic data for the week was the ISM-Non Manufacturing Index.  Although as of late manufacturing has been showing signs of weakness, the non-manufacturing index, which reflects the service sector of the economy, is showing signs of great strength.

Next week’s potential market moving reports:

·        Tuesday April 14th – Producer Price Index & Retail Sales
·        Wednesday April 15th - MBA Applications & Industrial Production
·        Thursday April 16th - First Time Jobless Claims & Housing Starts
·        Friday April 17th – Consumer Price Index & Consumer Sentiment

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Thursday, April 9, 2015

Attitudes toward Housing Stalled -Fannie Survey

If data from Fannie Mae's March National Housing Survey is any indication, consumers seem to have grown a bit uneasy as many of the positive responses given to survey questions in February deteriorated in March.  As Fannie Mae put it, "Consumer attitudes toward housing appear to have stalled somewhat amid a recent dip in confidence regarding personal finances and income growth."
Survey respondents who felt the economy was on the right track hit an all-time survey high in February only todrop four points to 43 percent in March.  Responses that the economy was on the wrong track rose three points to 48 percent.  
The share of those who expect their financial situation to improve over the next 12 months fell to 41 percent from 44 percent while those who think it will get worse rose three points to 14 percent.   There was also a three point bump in those who reported significantly lower income and four points in those reporting significantly higher household expenses than 12 months earlier.

Monday, April 6, 2015

Mortgage Rates Bounce Higher, Erasing Friday's Gains

Mortgage rates have now given back the ground gained after Friday's big jobs report.  To put that in perspective, rates are now modestly higher than the 2-month lows seen on Friday morning.  Today's rates are more in line with Thursday's, though most lenders are still in slightly better shape.  That said, the most common conventional 30yr rate quote for top tier scenarios is on a fence, and many borrowers may find themselves on a different side today.  Whereas Friday saw widespread availability of 3.625%, many borrowers have moved up to 3.75% today, albeit with lower closing costs.  Borrowers still seeing the same rates as Friday would be seeing the weakness in the form of higher closing costs.
Motivation for today's market movements was in short supply.  It certainly wasn't the kind of day where we have an obvious source of inspiration pushing trading levels in a logical direction.  If anything stands out, it was the huge move in the stock market.  While stocks and rates are, by no means, required to move in the same direction, that sort of relationship is more and more likely to play out when the moves get exceptionally large.  Today's stock market gains were arguably just that.  This can result in bonds being sold to buy more stocks.  Selling pressure in bonds leads to lower prices and higher rates.
The caveat for this entire discussion is that markets still aren't back to firing on all cylinders after the holiday weekend.  We'll get a clearer sense of how the post-jobs-report rate movements will play out starting tomorrow.  For now, this bounce back will remain a cause for concern until/unless rates can break back below Friday's levels.

Friday, April 3, 2015

No Major News Breaking Headlines....

In a week that did not have many major news breaking headlines, investors settled down after their initial enthusiasm on Monday regarding the fact that Fed Chairman Janet Yellen indicated that the economy is showing signs of weakness.  Investors took that as another message that the Fed is not going to raise interest rates any time soon which is perceived as a blessing for corporate profits and stock values.

Good news on the housing front if that the Pending Home Sales index jumped 3.1 percent in February.  This increase was far more than analyst’s expectations and it follows January’s revised 1.2 percent gain.  This is the first back-to-back gain since April and May of 2014.

The largest gains were seen in the Midwest followed by the West.  The South, which is the largest housing market, along with the Northeast, which is by far the smallest region, remained virtually unchanged. 

Another strong factor in the report is that the index is up by 12.0 percent from the same time last year.  This is the sixth consecutive month in which the spread between current numbers and prior years has increased.

The final piece of data from the report was the indication that more first time homebuyers are entering the market.  The lack of this segment of buyers has been a main driver to the slow housing recovery.  First time buyers made up 29 percent of all pending transactions up from 28 percent.

Piggy backing on the pending home sales data, the Case-Shiller Home Price Index shows that prices are becoming more stable.  The index increased 0.9 percent in January which follows the same 0.9 percent increase in December, and a 0.8 percent increase in November.  This is the longest growth streak we have seen in housing since the last quarter of 2013.  Home prices compared to the same time last year are up 4.6 percent.

Mortgage rates have been bouncing up and down however remaining in a narrow range.  The Mortgage Bankers Association reported that applications for refinances and purchases jumped in the week ending March 27th.  Applications for refinances rose 4.0 percent.  Purchase applications, which have been barely rising, jumped 6.0 percent.  Speaking with real estate professionals, they have been seeing not only increased buyer traffic, they are enjoying more purchase transactions going into contract which reinforces the fact that the housing market is improving.

Next week’s potential market moving reports:

·        Monday April 6th - – ISM Non-Manufacturing Index
·        Tuesday April 7th – Job Openings and Labor Turnover Survey
·        Wednesday April 8th - MBA Applications and FOMC Minutes
·        Thursday April 9th - First Time Jobless Claims
·        Friday April 10th – Import and Export Prices

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.