Whats Ahead For Mortgage Rates This Week – February, 24 2014

Last week’s economic data supported recent reports indicating that housing markets are slowing, The National Association of Home builders/Wells Fargo Home Builders Index (HBI) dropped by 10 points to a reading of 46 for February.

Home builder confidence dropped to its lowest reading in nine months,  and fell below the benchmark of 50, which indicates that more builders are pessimistic about current market conditions than not.

Severe weather was blamed for the lower builder confidence reading, which fell below the expected reading of 56.

Regional readings of builder confidence were also lower:

  • Northeast: Builder confidence fell from 41 to 33 points. This suggests that weather is a major concern as this area has experienced a series of nasty winter storms.
  • South: The HBI reading fell from 50 in January to 46 in February and was the smallest decline among the four regions. Fewer index points lost in the South appears to support builder’s concerns about bad weather in other regions.
  • Midwest: Builder confidence dropped from 59 points to a reading of 50.
  • West: Builder confidence fell by 14 points to February’s reading of 57. Desirable areas in the West had been leading the nation in home price appreciation. February’s reading may signal an easing of buyer enthusiasm as rapidly rising home prices have reduced affordable options for first-time and moderate income buyers.

Builders also cited concerns over labor and supplies as reasons for lower confidence readings.

Housing Starts Lower, Mortgage Rates Higher

On Wednesday, Housing Starts for January were released. Although analysts predicted a figure of 945,000 housing starts as compared to an upwardly adjusted 1.05 million housing starts in December, only 880,000 housing starts were reported for January.

The Department of Commerce also cited extreme winter weather as a cause for the drop in housing starts, which reached their fastest pace since 2008 in November. There is some good news. Economists said that housing starts delayed during winter could begin during spring.

According to Freddie Mac’s weekly survey, average mortgage rates rose across the board. The rate for a 30-year fixed rate loan rose by 5 basis points to 4.33 percent. The average rate for a 15-year fixed rate mortgage rose by two basis points to 3.35 percent.

The average rate for a 5/1 adjustable rate mortgage moved up by three basis points to an average rate of 3.08 percent. Discount points for all three products were unchanged with readings of 0.70 for 30-year and 15-year fixed rate mortgages and 0.50 percent discount points for 5/1 adjustable rate mortgages.

The Bureau of Labor Statistics reported that weekly jobless claims came in at 336,000 against expectations of 335,000 new jobless claims. The prior week’s reading was for 339,000 new jobless claims. Analysts said that job growth may be slowing after last year’s growth, but also noted that winter weather had slowed hiring in labor sectors such as construction and manufacturing.

Existing home sales fell by 5.10 percent in January according to the National Association of REALTORS®, which reported a seasonally-adjusted annual rate of home sales at 4.62 million sales against expectations of 4.65 million and December’s reading of 4.87 million sales of pre-owned homes. The national average home price rose to $188,900, which was 10.70 percent higher year-over-year.

January’s inventory of available existing homes was 1.9 million homes; this represented a 4.90 month supply of existing homes for sale. Real estate pros prefer to see at least a six month inventory of available homes for sale.

What’s Ahead

Next week brings a series of economic reports and opportunities for good news. The Case Shiller Home Price Indices, FHFA Home Price Index will be released. Consumer Confidence and the University of Michigan’s Consumer Sentiment report along with New and Pending Home Sales reports round out next week’s scheduled news.

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What’s Ahead For Mortgage Rates This Week – February 18, 2014

What's Ahead For Mortgage Rates This Week - February 18, 2014Last week’s economic news was dominated by the first address by the new Fed chairperson, Janet Yellen.

Tuesday’s news included the Jobs Openings report for December 2013, which matched November’s reading of 4.0 million jobs available.

This information was taken from a gauge of competition for available jobs; in December, competition for job openings fell to its lowest level in five years.

Fed Chair Janet Yellens First Address to House

Janet Yellen addressed the House Financial Services Committee for the first time on Tuesday as Chair of the Federal Reserve.

Ms. Yellen indicated that she expected “a great deal of continuity” in terms of Federal Open Market Committee (FOMC) monetary policy direction, and noted that markets should expect the FOMC to continue its support of low interest rates.

Chairman Yellen emphasized that the FOMC’s current tapering of its quantitative easing program was expected to continue, but is not on a pre-determined course.

If economic conditions change, the Fed’s monetary policy would be adjusted according to such developments.

Mortgage Rates Mixed According To Freddie Mac

According to Freddie Mac’s weekly Primary Mortgage Market Survey (PMMS), the average rate for a 30-year fixed rate mortgage rose to 4.28 percent from the prior week’s 4.23 percent.

The average rate for 15-year fixed rate mortgage mortgages was unchanged at 3.33 percent. The average rate for a 5/1 adjustable rate mortgage dropped from 3.08 percent to 3.05 percent.

Discount points for each category were unchanged at 0.70 percent for fixed rate mortgages and 0.50 percent for 5/1 adjustable rate mortgages.

In other news, Weekly Jobless Claims were higher last week at 339,000 against a forecast of 330,000 new jobless claims and the prior week’s reading of 331,000 new jobless claims.

Analysts cited bad weather and the possibility of slower economic growth as factors, but said that it was too soon to tell if economic growth is slowing down.

The University of Michigan’s Consumer Sentiment Index beat expectations with a reading of 81.2 against expectations for a reading of 80.0. February’s reading was unchanged from January.

Whats Coming Up

This week’s economic news includes the NAHB Home Builder’s Housing Market Index on Tuesday. Wednesday’s events include Housing Starts and the minutes from January’s FOMC meeting.

In addition to Freddie Mac’s PMMS, Thursday’s scheduled reports include Weekly Jobless Claims, the Consumer Price Index (CPI) and Core CPI. Leading Economic Indicators (LEI) for January will also be released.

The National Association of REALTORS® will release data for existing home sales in January on Friday.

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

What's Ahead For Mortgage Rates This Week - February 10, 2014Residential Construction Spending Up

Last week’s mortgage and housing-related reports began with Construction Spending for December, with a reading of 0.10 percent or a seasonally adjusted $930.5 billion. December’s reading fell short of an expected increase of 0.40 percent.

Spending for private sector projects rose by 1.00 percent; of this amount, residential construction spending increased by 2.60 percent and private sector spending for non-residential construction fell by -0.70 percent.

Although construction spending posted a fractional gain, the good news is that construction spending is currently dominated by residential construction and that due to inclement winter weather, any gain in construction spending during December could be considered positive.

Jobs and Unemployment Data Mixed

Employment related reports dominated the week’s economic reports. The ADP employment report for January indicated that only 175,000 new private sector jobs were added for the lowest reading in five months.

December saw 227,000 new jobs. Severe weather conditions were the cause of lower than expected jobs growth. Month-to-month job reports can be unpredictable, but quarterly results provided positive information as the three month period ended in January 2014 saw average monthly job growth of 230,000 jobs as compared to an average reading of 220,000 jobs added during the same period a year ago.

New Jobless Claims came in at 331,000, significantly less than the prior week’s reading of 351,000 new jobless claims, and also lower than the forecasted reading of 337,000 new jobless claims. Analysts said that these readings supported gradual improvement in the economy.

The Bureau of Labor Statistics (BLS) released its Non-Farm Payrolls report for January, which indicated that 113,000 new jobs were added during the first month of 2014.

This reading was better than December’s reported 75,000 jobs added, and suggested to economists that bad weather was not the underlying cause of the dip in jobs growth. Healthcare and government sectors cut jobs in January.

With lower job growth, a higher unemployment rate would seem likely, but the national unemployment rate dropped to 6.60 percent from last week’s reading of 6.70 percent.

The Federal Reserve’s FOMC Committee has established a benchmark reading of 6.50 percent as one of the economic indicators it uses in decisions concerning federal stimulus programs.

Readings for labor and unemployment are important for the overall economy and housing markets; consumers worried about jobs that they might lose or jobs they cannot find likely won’t be buying homes in the near term.

Mortgage Rates Drop

According to last week’s Freddie Mac’s Primary Mortgage Market Survey, average mortgage rates dropped across the board. The reported rate for a 30-year fixed rate mortgage was 4.23 percent, down from the prior week’s 4.32 percent. Discount points were unchanged at 0.70 percent.

The rate for a 15-year fixed rate mortgage fell by seven basis points to 3.33 percent. Discount points ticked upward from 0.60 to 0.70 percent. The rate for a 5/1 adjustable rate mortgage fell by four basis points to 3.08 percent with discount points unchanged.

Whats Coming Up This Week

This week’s scheduled economic news includes Weekly Jobless claims, Freddie Mac’s report on average mortgage rates, along with retail sales and retail sales except automotive sales.

The University of Michigan Consumer Sentiment report will be released Friday.

What’s Ahead For Mortgage Rates This Week – February 03, 2014

Last week brought mixed news; while the Department of Commerce reported a dip in new home sales, mortgage rates also fell. The Federal Reserve’s FOMC statement revealed that quantitative easing would be further reduced by an additional $10 billion monthly.

New Home Sales: Y-O-Y Reading Best Since 2008

December’s reading of 414,000 for new home sales fell short of November’s revised reading of 445,000 new homes sold as well as expected sales of $455,000. The consensus figure was based on November’s original sales reading of 464,000 new homes sold.

The inventory of new homes available rose from last month’s level of 4.70 month supply to a 5 month supply in December. Cold weather was cited as a cause of lower new home sales.

New home sales increased by 4.50 percent year-over-year; this was the highest reading since 2008. The median price of a new home rose by 0.60 percent in December to $270,299.

The national median home price was $265,800 in 2013, an annual growth rate of 8.40 percent and the highest annual growth rate for median home prices since 2005.

Economists cited rising mortgage rates, new mortgage rules and a lagging labor market as signs that slower home sales could be expected in 2014.

Pending home sales echoed the slowing trend in home sales; the index reading fell by -8.70 percent to a reading of 92.4 in December.

All Four Regions Reported A Drop In Pending Sales As Compared To November:

Northeast              -10.30 percent

West                    -9.80 percent

South                   -8.80 percent

Midwest                -6.80 percent

This was the lowest reading for pending home sales since October 2011.

Case-Shiller: Home Prices Up 13.7%

The Case-Shiller 10 and 20 city home price indices for November reported a 13.70 percent gain in home prices year-over-year. This was the fastest annual growth rate in home prices since 2006. Further evidence of slower growth in home prices was evident as nine of 20 cities tracked reported lower home prices.

Fed Continues Stimulus Reduction

Wednesday’s FOMC statement confirmed expectations that the Fed would continue tapering its monthly asset purchases made under its quantitative easing program.

Monthly purchases of mortgage-backed securities and Treasury securities will be reduced from January’s level of $75 billion to $65 billion in February. Economists expected this reduction to occur.

Freddie Mac’s Primary Market Survey reported lower average mortgage rates. The rate for a 30-year fixed rate mortgage fell by 7 basis points to 4.32 percent with discount points unchanged at 0.7 percent.

15-year mortgage rates also fell to 3.40 percent with discount points lower at 0.60 percent. The average rate for a 5/1 adjustable rate mortgage fell by 3 basis points to 3.12 percent with discount points unchanged at 0.50 percent.

This was welcome news as homebuyers and mortgage lenders have felt the effects of higher home prices and new mortgage rules that became effective January 10.

New Jobless Claims Higher

Weekly jobless claims jumped to 348,000 from the prior week’s 339,000 new jobless claims. This was the highest level of new jobless claims in six weeks. Reasons for increased claims were unclear, but were possibly caused by lingering influences of the holiday season or a sinking labor market.

Consumer confidence rose in January to a reading of 80.7 as compared to December’s reading of 77.5 as compared to January 2012′s reading of 58.4.

This Week

This week’s scheduled economic and housing news includes construction spending, non-farm payrolls and the national unemployment rate. Freddie Mac’s PMMS report and weekly jobless claims will be released as usual on Thursday.

2014 FHA Loan Limits

HUD announced the FHA Loan Limits for all FHA Case Numbers assigned between January 1, 2014 and December 31, 2014.  The new limits will be lower for 650 counties across the country, including all counties in the Chicago area.

For the Chicago Metropolitan Area, the FHA limits are as follows:
1-Unit  $365,700
2-Unit  $468,150
3-Unit  $565,900
4-Unit  $703,250

Loan limits for FHA Home Equity Conversions Mortgages (reverse mortgages) remains at $625,500.  However, the maximum loan amounts are determined by the value of the property and the home owner’s age.

To find out the FHA loan limits in other areas, go to: https://entp.hud.gov/idapp/html/hicostlook.cfm

Please contact me with any questions or when you are ready to purchase or refinance a home at jkincaid@avenuemortgage.com.