Market Trends

Did You Know?

- 12/10/18

The total net worth of U.S. households rose by 1.9% or $2.07 trillion in the third quarter of 2018 to $109.04 trillion, as higher property and stock prices boosted the wealth of Americans. These figures released by the Federal Reserve are before the 4th quarter's equity market swoon. Household debt also increased at a 3.4% seasonally adjusted annual rate, up from a 2.9% rate in the second quarter. (WSJ)

The housing market comprises a little less than 14% of US GDP yet is a larger part of the overall economy than the oil and gas industry: the mining sector constituted just under 2% of GDP in the second quarter of 2018.

U.S. luxury home builder Toll Brothers reported today a fall in 4th-quarter orders, as demand was hurt by rising interest rates and higher home prices. "In November, we saw the market soften further, which we attribute to the cumulative impact of rising interest rates and the effect on buyer sentiment of well-publicized reports of a housing slowdown." (CNBC)

Mortgage Applications Heat Up After Holiday Lull

- 01/12/18

Mortgage application activity roared out of the gate in the first week of the New Year, as the country got back down to business. Much of the week's gain could probably be attributed to consumers catching up after the usual holiday induced December slowdown. Applications for both refinancing and home purchasing were up substantially during the week ended January 5. It was, in fact, the strongest week for refinancing applications since mid-July.

The Mortgage Bankers Association said its Market Composite Index, a measure of loan applications volume, increased 8.3 percent on a seasonally adjusted basis and rose 46 percent compared with the week ended December 29 on an unadjusted basis. The week's report included an adjustment to account for the New Years Holiday. MBA said there was also a revision of unspecified degree to the December 29 report.

There was a 5 percent increase in the seasonally adjusted Purchase Index compared to the previous week while the unadjusted index was 44 percent higher. The unadjusted index was down 1 percent relative to the same week in 2017.

The Refinance Index increased 11 percent from the previous week. The share of applications that were for refinancing increased from 52.1 percent to 52.9 percent.

The FHA share of total applications increased to 11.1 percent from 10.8 percent the previous week and the USDA share declined to 0.7 percent from 0.8 percent. The VA share was unchanged at 11.4 percent.

New and higher conforming loan limits went into effect on January 1 and were reflected for the first time in this week's report. The average contract interest rate for 30-year fixed-rate mortgages (FRM) with loan balances of $453,100 or less increased to 4.23 percent from 4.22 percent. Points declined to 0.35 from 0.37 and the effective loan rate was unchanged from the prior week.

The average contract interest rate for 30-year FRM with jumbo loan balances higher than $453,100, rose to 4.16 percent with 0.23 point from 4.14 percent with 0.22 point. The effective rate also increased.

Thirty-year FRM backed by the FHA had an average rate of 4.16 percent, down 1 basis point from the previous week. Points increased to 0.42 from 0.40 and the effective rate moved lower.

The average contract interest rate for 15-year FRM rose to 3.66 percent from 3.64 percent and points moved from 0.34 to 0.42. The effective rate increased from last week.

The share of applications submitted for adjustable rate mortgages fell from 5.3 percent the previous week to the lowest level since mid-November 2016, 5.0 percent. The average contract interest rate for 5/1 ARMs decreased to 3.50 percent from 3.53 percent, with points decreasing to 0.51 from 0.53. The effective rate decreased from last week.

MBA's Weekly Mortgage Applications Survey has been conducted since 1990 and covers over 75 percent of all U.S. retail residential mortgage applications. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100 and interest rate information is based on loans with an 80 percent loan-to-value ratio and points that include the origination fee.

Tens of thousands of Harvey-area homeowners may become delinquent on their mortgages in the coming months

- 08/30/17

Houses and cars are seen partially submerged by floodwaters from Harvey in east Houston, Texas on Monday.

Hurricane Harvey could have a more destructive impact on the mortgage market in Texas than Katrina did on the Gulf Coast, according to a report out Wednesday.

Real estate data provider Black Knight Financial Services notes that there are twice as many mortgaged properties in Harvey’s disaster area, with nearly four times the unpaid principal balance — the amount homeowners owe — as in the Louisiana and Mississippi counties declared a disaster area in 2005.

Within two months of Hurricane Katrina’s impact in 2005, the number of homeowners who became late on their mortgage payments surged by more than seven percentage points, from about 8% in July 2005 to nearly 16%, Black Knight said.

The number of homeowners who were severely delinquent — late by 90 or more days — nearly tripled.

Of the approximately 1 million mortgaged homes in the Texas disaster area, about 56% have mortgages backed by Fannie Mae or Freddie Mac, the giant mortgage financiers, according to Black Knight. If Harvey has an impact on the Texas market similar to Katrina’s, it will mean over 75,000 borrowers will be unable to make a mortgage payment in the next two months, and 45,000 will become seriously delinquent or even face foreclosure in the next four months.

Fannie Mae and Freddie Mac on Tuesday announced they would suspend evictions and foreclosures on homes whose mortgages they own, and work with servicers to ensure no property-inspection costs resulting from the hurricane are passed on to borrowers. The two enterprises also waived penalties and late fees against borrowers whose homes have been damaged by Harvey.

But both Fannie and Freddie noted that the situation in Texas and the Gulf Coast is still evolving, and much remains uncertain. And as Black Knight wrote in a release, "The human cost of this storm is obviously immense, with millions of American lives being impacted."

Glimmer of Hope in Rate Stability, But It Could Be a Trap

- 07/11/17

Mortgage rates remained in a very narrow range near their highest levels in roughly 3 months today. If you're into splitting hairs, we could discuss the fact that the average lender is charging microscopically lower closing costs for the same rates quoted yesterday, but most borrowers won't even see a change in rate quotes.

The sideways momentum isn't all too surprising given that the week's biggest potential market movers are all coming out over the next 3 days. The past 2 days, then, have been a nice reprieve from the consistently higher rates seen since June 27th. But undertand the reprieve is not necessarily an indication of a reversal.

Even if the coming days end up helping rates, there are lingering risks regarding the European Central Bank (ECB) policy announcement on July 20th. It's unlikely that rates will be willing to embark on a significant move lower unless that ECB announcement is pleasantly surprising, and there's just as much chance of unpleasantness.

Bottom line: risk-takers have seen a glimmer of hope in the recent stability, but for most borrowers, it's still a good idea to err on the side of caution.

Loan Originator Perspective

Headlines are helping bonds extend yesterday's gains. As of about 1pm, i have only seen 1 lender issue a reprice for the better. If you plan to lock today, it would be best to hold off until late in the day to allow your lender time to pass along some of the gains. If i was within 15 days of closing, i would lock today but if i was closing after that, i would take the gamble and float overnight. - Victor Burek, Churchill Mortgage

Today's Most Prevalent Rates

30YR FIXED - 4.125%
FHA/VA - 3.75%
15 YEAR FIXED - 3.375%
5 YEAR ARMS - 2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

Investors were relatively convinced that the decades-long trend toward lower rates had been permanently reversed after Trump became president, but such a conclusion would require YEARS to truly confirm.
Instead of continuing higher in 2017, rates instead formed a narrow, sideways range, and held inside until April. Investor perceptions are shifting such that fiscal reforms and other policy developments will need to live up to expectations in order to push rates higher. Geopolitical risks would also need to avoid flaring up (more than they already have).
For the first time since the election, we're in a rate environment where you wouldn't be crazy not to lock at every little opportunity/improvement. Until/unless it's broken, the highest rates of early-2017 mark the ceiling, and we're now waiting to see how much lower we can go from here.
Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders. The rates generally assume little-to-no origination or discount except as noted when applicable.