Category Archives: Mortgage News

retirement

Top States for Retirement

The housing market has many phases from the eager first time homebuyer to upgrading due to a larger family, then downgrading for empty nesters and finally, your last home purchase – retirement.  But where will that last purchase be?

AARP and Wallet Hub has published a list of the Top Ten Places to retire and here is what they found:

From cost of living to climate and health care, many factors go into deciding where to retire. WalletHub is out with a new list of best states for older Americans. The personal finance website looked into 41 key indicators of retirement-friendliness and ranked each of the 50 states.

Topping the list for best overall is Florida. While it ranked No. 1 in affordability and high in other areas, WalletHub ranked it 20th for health care.

There’s a new state in the No. 2 spot this year, Colorado. While it wasn’t in the top 20 for affordability, it ranked No. 2 for health care.

Rounding out the top 10
:
3. South Dakota
4. Iowa
5. Virginia
6. Wyoming
7. New Hampshire
8. Idaho
9. Utah
10. Arizona

Breaking down the states into specific areas, Alaska had the highest percentage of people age 65 and older still in the workforce — followed by Vermont, South Dakota, Nebraska and North Dakota. Alaska also had the lowest percentage of residents over 65 of the 50 states. As for the highest percent of the population 65 and older: Florida, Maine, West Virginia, Vermont, Montana and Pennsylvania.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained just +9 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways for the week.  That’s the good news.  The bad news?  For the month of September, MBS lost -68 BPS which pushed fixed conventional mortgage rats to their highest levels in seven years.

Overview:  We had a big week for economic data with big-hitting reports like GDP,  PCE and Chicago PMI –  all showing solid growth.  The Federal Reserve raised their key Fed Fund rate and reaffirmed that they will continue to raise rates on a gradual path until they get to a “neutral rate” (the theoretical rate where inflation and interest rates are balanced).

The Talking Fed
: You can read the official FOMC statement Here
You can read their Economic Projections here.
Here is an overview of their statement:
– Raised they key Fed Funds Rate from 2.00% to 2.25%
– Only meaningful change in FOMC’s statement is removal of the sentence on maintaining “accommodative” policy.
– The overview of the economy is basically the same as their August statement: labor market continues to strengthen, activity “strong.’
– Fed sees 2018 GDP growth at 3.1%, a noticeable upgrade from the 2.8% it saw in June, without any expected breakout in inflation.
– GDP growth of 2.5% in 2019, up from from 2.4%, suggesting the base case is that trade disputes and tariffs do not detract from growth much at all.
– The “dot plot” chart was relatively the same as June’s projections:

  • 2018 2.375% (range 2.125% to 2.375%); prior 2.375%
  • 2019 3.125% (range 2.125% to 3.625%); prior 3.125%
  • 2020 3.375% (range 2.125% to 3.875%); prior 3.375%
  • 2021 3.375% (range 2.125% to 4.125%)

Inflation Nation: Personal Consumption Expenditures (PCE), the Fed’s key measure of inflation matched market expectations with the Core PCE YOY remaining at 2.0%. The Headline PCE YOY matched expectations at 2.2% but moved a tad lower from July’s pace of 2.3%. Personal Income remained at July’s 0.3% pace and Personal Spending matched expectations at 0.3% but were just off July’s pace of 0.4%.

Manufacturing: The September Chicago PMI data was very robust even though it was lighter than expectations (60.4 vs est of 62.5). Any reading above 50 is expansionary for this bell-weather manufacturing index and a reading above 60 is very strong.

Consumer Sentiment: The final read for the September data set hit 100.1 vs the preliminary release of 100.8. Any reading above 100 is extremely strong, this is the second highest reading of the year.

GDP: We got the third look at the 2nd QTR GDP and it remained at 4.2%. But the Product Price Index was revised higher and beat out estimates (3.3% vs est of 3.0%).

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Household wealth

Household Wealth Hits a New Record High

Homeowners’ real estate holdings minus the change in mortgage debt rose by $320.1 billion (a positive number means that the value of real estate is growing at a faster pace than household mortgage debt).  That and other statistical findings were revealed in the latest Flow of Funds report published by the Federal Reserve.

Their report revealed that with $122.7 trillion in assets and a modest $15.7 trillion in liabilities, the net worth of US households rose to an all time high $106.9 trillion, increasing for 11 consecutive quarters and up $2.2 trillion as a result of an estimated $559 billion increase in real estate values, as well as a $1.7 trillion increase in various financial assets like corporate equities, mutual and pension funds, and deposits as the stock market soared to just shy of new all time highs.

In a separate report, the recent Existing Home Sales report published by the National Association of Realtors showed that August Existing Home Sales were right inline with estimates, hitting 5.34M vs estimates of 5.35M. July remained at 5.34M. Available inventory remained at 4.3 months of supply and the median sales price rose for the 78th straight month and is now $264,800.

The data from the Federal Reserve and the National Association of Realtors both show that owning a home is a great investment.

Source: Federal Reserve

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost -17 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher for the week.  It was the fourth straight week of higher rates.

Overview:  We had a very light week for economic data, with the nothing on the calendar that could impact rates.  It was the “Trade War” that got all of the market attention.  MBS sold off (rates moved higher) on the prospect of higher consumer prices as a result of the latest rounds of tariffs announced by both the United States and China.

Trade War:
 The White House finally unleashed their new $200B in tariffs that they have been dangling for well over a month. However, it was not as bad as the headlines would suggest. Here are some key points:
– Goes into effect today
– Will only be at a 10% rate and then in 2019, goes up to 25%
– 300 products were exempted/stripped out of the tariff package

China’s Response
: $60B in tariffs that will go into effect on 09/24. It will impact 5207 U.S. Products and will be a measly range of 5% to 10%.

Taking it to the House:
 August Existing Home Sales were right inline with estimates, hitting 5.34M vs estimates of 5.35M. July remained at 5.34M. Available inventory remained at 4.3 months of supply and the median sales price rose for the 78th straight month and is now $264,800.

Jobs, Jobs, Jobs:
 Initial Weekly Jobless Claims were lower than expected (201K vs est of 210K). The more closely watched 4 week moving average dropped to 205,750 which is a fresh new 50 year low!

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

What to do with all of those leftover shipping containers?

With trade and tariffs constantly in the news lately, we thought it would be a great idea to focus on what to do with all of those extra shipping containers…..the answer?  Turn them in to housing.

Shipping containers didn’t exist in 1950. Today, roughly seventeen million travel the world on ships, trains, and trucks. Laid end to end, they’d stretch around the globe almost four-and-a-half times. These 40-foot shipping containers can be purchased with prices ranging from $1,500 to $3,500.

While re-purposing these containers has been commonplace in smaller “tiny home” communities, it appears that living in containers has just entered the main stream with multifamily units.

Recently, there was a new listing offering “units” for rent in a brand new container apartment building in Washington, D.C. where each unit costs about $1,099 per month, and in light of DC’s unaffordable rents, this seems like a good deal for heavily indebted millennial’s.

Some pre-fab container homes are more luxurious than others, ranging from $30,000 to $449,000 for a massive luxury duplex. The image below is of a Redondo Beach House showing how container homes can look modern and inviting:

container living

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost -37 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher for the week.  It was the third straight week of higher rates with MBS selling off a total of -76 basis points over the past three weeks.

Overview:  Across the board, we had strong economic data in just about every sector.  We saw inflation in the CPI release, a strong job market in the JOLTS report, a record reading in Small Business Optimism and a very strong Consumer Sentiment reading.  Even Retail Sales were solid when prior revisions were taken into account.  The bond market also shifted to put more probability of a Fed rate hike in September AND December despite the overhang of tariffs.  This combination of growth and inflation pressured long bonds and moved mortgage rates to the highest levels since May.

Retail Sales: At first glance, the August data may look weaker than expected, but not really. The headline reading hit 0.1% vs est of 0.4%. So, it looks light. However, that is only due to the fact that July was much more robust than originally reported and revised upward to a gain of 0.7%. Ex-Autos…same story as the reading was 0.3% vs est of 0.5% but July was revised upward to 0.9%. Gas station sales, restaurants and ecommerce all had solid gains.

Industrial Production:
 Surged the most since 2010, rising by 0.4% in August. July had a major revision upward from 0.1% to 0.4%. Mining jumped (oil production) and utility usage jumped as the nation ran A/C units non stop during the hot months of July and August.

Consumer Sentiment: 
The preliminary University of Michigan survey for September, jumped to 100.8 vs est of 96.6. It is the second highest reading this year.

Inflation Nation:
 The August Consumer Price Index (CPI) was lighter than expected but not as much as Wednesday’s PPI miss. The headline YOY CPI showed a 2.7% increase vs expectations of an increase of 2.8%. The Core (ex food and energy) came in at 2.2% vs est of 2.4%.

The Talking Fed:
 They released their Beige Book. Overall, the report painted a very strong economic picture. Here are some key highlights:
• The word “tariff” was used 41 times compared to 31 times in July.
• Despite concern over tariffs, the U.S. economy is expanding at a “moderate pace” with tight labor market conditions.
• All 12 districts cited major labor shortages and a tight labor market among high-skill workers but also a number of districts noted shortages of lower-skilled workers at restaurants, retailers,etc.
• Wage growth was mostly characterized as modest or moderate, though a number of districts cited steep wage hikes for construction workers.

Small Business Optimism: The August NFIB Index jumped to 108.8 vs est of 108.1. This is now a new all-time record since this index was created 45 years ago. The survey saw gains in plans to increase inventories, to make more capital outlays and to increase employment.

Jobs, Jobs, Jobs: The Job Openings and Labor Turnover Survey (JOLTS) report hit another new all-time record high with a reading of 6.939M Jobs that are unfilled. It is the seventh straight reading above 6M.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

 

Homebuyers are stretching

Homebuyers are Stretching the Most in these Cities

Home prices continue to reach new highs, with the most recent data showing prices for existing homes at a median of $276,900 in June; new homes are even more expensive at a median of $302,100. The annual increase in home prices has been outpacing income growth since 2012. As a result, homebuyers have been stretching more and more to purchase their dream homes. Low interest rates have masked this to some extent, as they have subdued the monthly payment, but the recent increase in interest has reduced this mitigating factor.

A well-known rule of thumb says that the home price should not exceed three times the buyer’s annual income. When a mortgage is used to buy a house, the ratio of amount borrowed to income is the extent to which a borrower is leveraged. In this study, we compared leverage ratios across cities to see where borrowers are stretching the most to purchase a home.

They used Home Mortgage Disclosure Act (HMDA) data that includes over 7 million mortgages originated in 2017 to calculate the leverage rate of borrowers in the 50 largest cities in America. The median amount borrowed was divided by the median borrower income for all purchases in the HMDA database for 2017.

Key findings

  • California is known for its high home prices and high incomes. Unfortunately, the tech boom is not enriching everyone with cash, and 6 of the top 10 cities are in the Golden State, including the top four (Los Angeles, San Diego, San Francisco, and San Jose).
  • Los Angeles leads the way for stretched buyers, with the median homebuyer with a mortgage borrowing 3.75 times their annual income.
  • San Diego has similar income to Los Angeles, but cheaper homes give it the second highest leverage ratio of 3.62.
  • Home prices are much higher in the Bay Area cities which rank 3 and 4 for stretched borrowers, but higher incomes provide some relief and leverage ratios are 3.52 and 3.50 for San Francisco and San Jose.
  • The more affordable cities are clustered in the Rust Belt and southern U.S. states. Pittsburgh and Cleveland have the lowest leverage ratios at just 2.00 times annual income.
  • Houston is the largest city in the bottom 10 and has the highest loan amounts of the affordable cities. High incomes driven by the energy and health care sectors helps it to a benign leverage ratio of 2.17.

This means that the time spent commuting is a major consideration on where to relocate and purchase the next  home, the longer the commuting time – potentially, the less desirable a city or neighborhood becomes.Source: LendingTree Study

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost -23 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher for the week.  It was the second straight week of higher rates with MBS selling off a total of -39 basis points over the past two weeks.

Overview:  We had very strong economic data all week with big readings in Manufacturing (1/3 of our economy0 and Services (2/3 of our economy) and then ended the week with higher wage growth with the Year-over-year Average Hourly Earnings hitting 2.9%.

Jobs, Jobs, Jobs:
Non Farm Payrolls:
August was better than expected, 201K vs est of 191K.
July was revised lower from 157K down to 147K
June was revised lower from 248K down to 208K
The three month rolling average is now 185K
Wages:
The Average Hourly Earnings YOY rose by 2.9% vs est of 2.7%
Earnings on a MOM basis rose by 0.4% vs est of 0.2%.
Average Hourly Wages are now $27.16
Unemployment:
The Unemployment Rate was unchanged at 3.9%
The Participation Rate dropped from 62.9% down to 62.7%

Services: The ISM Non-Manufacturing (2/3 of our economy) was very strong and beat out forecasts with a 58.5 vs 56.8 estimate.

Manufacturing:
 The August ISM Manufacturing Index jumped to 61.3 vs est of 57.7. Its the best reading since January. Any reading above 60 is rare for this report and very robust. ISM Prices Paid
hit 72.1 vs est of 70.2…a very lofty level and yet another report that shows pricing pressures (inflation).

The Talking Fed: NY Fed Pres John Williams (voting member) said that steady inflation and low unemployment have created an economy that is “as good as it gets” for the U.S. but that “we can continue to be relatively patient and allow this economy to continue to grow.”

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

commute

Commuting Time a Consideration in Housing

With the red-hot job market, millions are moving to a new city this year.  The cost of housing is a big consideration in deciding if taking that new job offer is really worth it.  But also, a person’s commuting time is a growing consideration as people are focusing more on their quality of life.

The U. S. Census Bureau compiled the average daily round-trip commute times for almost 1,000 cities and the data is very alarming.  The average American worker spends 52.2 minutes a day commuting to and from work, or 4.35 hours a week. This translates to an average of 408 days of one’s life commuting – and more in large cities.

This means that the time spent commuting is a major consideration on where to relocate and purchase the next  home, the longer the commuting time – potentially, the less desirable a city or neighborhood becomes.

Educateddriver.org put together a great interactive map that you can checkout to determine your local commute time: Click HERE for the interactive map.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost -16 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move slightly higher for the week.

Overview:  We had strong GDP (4.2%), Inflation at 2.3% (Headline PCE), very strong Consumer data and very strong manufacturing data.  All that positive data means growth and that is always something that will pressure long bonds and increase interest rates.  While, Mexico and the U.S. appear to have a deal, the uncertainty of Canada joining in has provided some support for bonds which has diminished the downward pressure from the strong economic data.

PCE: The Fed’s preferred measure of inflation hit a six year high as the Core PCE number FINALLY hit 2.0% (the Fed’s target rate). The Headline PCE number continues to trend above 2.0% with a 2.3% vs est of 2.2% level. Spending picked up by 0.4% on a MOM basis and Income grew by 0.3%, both matched market expectations.

Manufacturing: The bell-weather Chicago PMI continues to deliver very robust readings. The August reading hit 63.6 vs est of 63.0. Any reading above 50 is good and readings above 60 are extremely positive for the economy.

Consumer Confidence: The August reading was very robust, coming in at 133.4 vs est of 126.5. This is the highest reading since 2000.

Consumer Sentiment: The August University of Michigan’s Index was revised to 96.2 from 95.3, a very strong reading.

GDP: The 2nd QTR GDP was revised upward from the originally reported 4.1% to 4.2%, the market was actually expecting a downward revision from 4.1% down to 4.0%, so this was a fairly nice beat to the upside.

The Talking Fed: The Senate confirmed Trump nominee Richard Clarida by a 69-26 vote as the Vice Chairman of the Federal Reserve. He replaced the void left by William Dudley. Clarida was a big fund manager at PIMCO at the time when PIMCO was the world’s largest bond trader.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

college students

Student Loan Debt a Hurdle to Buying a Home

With millions of college students returning to campus this month, student debt and their housing options after graduation are in focus.

Some 45 million people in the United States carry student debt. Almost a fifth owe more than $100,000, according to the National Association of Realtors.

People’s monthly student loan payments can eat up a large slice of their income, threaten to push down their credit scores and make saving nearly impossible — all huge impediments, of course, to landing in a house.

Eighty-three percent of people ages 22 to 35 with student debt who haven’t bought a house yet blame their educational loans, according to the NAR. And while 86 percent of millennials believe that buying a house is a good financial investment, only 15 percent have a mortgage today, according to information services company Experian.

Almost one-fifth of people with student debt who apply for a mortgage are denied because of their “debt-to-income ratio,” which is what a person owes versus how much they make, according to the NAR.

The median income for student loan borrowers is $59,746, according to analysts at the Harvard joint center. For borrowers under 30, the average monthly loan payment is $351, according to Student Loan Hero.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained +13 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move slightly lower for the week.

Overview:  The bond market (specifically Mortgage Backed Securities) continued to trade below our 100 day moving average which has been an extremely strong technical resistance level.  Overall, the message from the Fed last week, was that tax reform and lower regulations have kept our economy growing and will warrant continued and gradual rate hikes.  However, they are concerned about the unknown trade war duration and impact on the economy.

The Talking Fed:
Fed Chair Jerome Powell spoke at the annual Economic Symposium in Jackson Hole, WY.
His take was very solid, here are a few highlights:
– expects the strong economy to continue to grow
– does not see a an elevated risk to overheating
– gradual process of normalization (rate hikes) remains appropriate
– anyone that wants a job can find one

Kansas City Fed President Esther George (non voting member) said she sees two more hikes this year. “Based on what I see today, I think two more rate hikes could be appropriate.”

St. Louis Fed President James Bullard (non voting member) has a more dovish bias and said “If it was just me I’d stand pat where we are and I’d try to react to data as it comes in.”
Cleveland Fed President Loretta Mester (voting member) took the opposite view, saying she still thinks raising rates gradually is appropriate.

We got the Minutes from the last FOMC meeting. Really, there were no surprises there. They certainly made it clear that there would be a rate hike at the next meeting but will see how trade issues impact their growth projections before pushing for a 4th hike this year. They discussed that they would have to drop the “remains accommodative” phrase soon after a couple more rate hikes.

Trade Snore: China and the U.S. concluded their round of meetings in D.C. with no deal, but that was expected as they are on a “road map” to setting things up for a meeting with Presidents Xi and Trump in the fall

Taking it to the House:
 The June FHFA Home Price Index showed a monthly price increase of 0.2% and an annual increase of 6.5%. New Home Sales for July came in at 627K vs est of 645K and a prior revised reading of 638K. The are now 5.9 months of inventory supply. New Home Prices rose 6% to $328,700, which is why more new homes are not being built/sold. The Median Existing Home Price is now $269,600…and there you have it.  July Existing Home Sales came in at an annualized rate of 5.34M units which was very close to market expectations of 5.40M. The median existing-home price for all housing types in July was $269,600, up 4.5 percent from July 2017 ($258,100). July’s price increase marks the 77th straight month of year-over-year gains.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Fannie Mae Upgrades Economic Outlook

Fannie Mae Upgrades Economic Outlook

The Fannie Mae Economic and Strategic Research Group revised upward its full-year 2018 economic growth forecast to 3.0 percent – from 2.8 percent in the prior forecast – on expectations that third and fourth quarter inventory restocking will outweigh slowing consumer spending growth and a decline in net exports, according to its August 2018 Economic and Housing Outlook.

“Breakneck headline growth in the second quarter disguised a detail largely responsible for the latest upward revision to our full-year growth forecast: a need to restock declining business inventories, which we expect will support greater growth amid weakness elsewhere,” said Fannie Mae Chief Economist Doug Duncan.

Duncan went on to say, “While meaningful wage growth remains elusive, the labor market is strong and inflation appears to be gaining additional steam, making a Fed rate hike in September highly likely. Assuming consumer and business confidence can steer clear of escalating trade tensions, we expect the Fed to raise rates two more times in 2018, including next month.”

Source: Fannie Mae 2018 Growth Forecast and Housing Outook

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost just -2 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways for the week.

Overview:  The bond market (specifically Mortgage Backed Securities) was once again range-bound with very solid resistance and support levels that were tested and that held.  The biggest economic report of the week was Retail Sales but it took a back seat to global concern over Trade talks.

Retail Sales: The July was hotter than expected but part of the reason was due to revisions in June more so than a big surge in spending. The Headline Number increased by 0.5% vs est of 0.1%, but June was revised lower from 0.5% down to 0.2%. When you strip out the volatile Automobile market, then Retail Sales hit 0.6% vs est of 0.3%. June was revised lower from 0.4% to 0.2%.

Manufacturing:
 The August Empire Manufacturing Index (NY) crushed it with a 25.6 vs 20.0 estimate. The Preliminary Q2 Non-Farm Productivity report was much better than expected with a 2.9% vs 2.3% improvement. But the Q1 data was revised lower from 0.4% to 0.3%. Q2 Unit Labor Costs actually fell by -0.9% vs est of +0.3% but Q1 was revised higher from 2.9% to 3.4%. The July Industrial Production was lighter than expected (0.1% vs est of 0.3%) but that was due to a revision from 0.6 to 1.0 in May. Capacity Utilization at 78.1% vs est of 78.2%.

Taking it to the House: Housing Starts and Building Permits both improved but remained at low levels as land, labor and raw material costs make it almost prohibitive to build on the lower end of the price range (where all the demand is). Housing Starts hit 1.168M vs est of 1.260M. Permits hit 1.311M vs est of 1.310M. The bright spot in permits is that SFR are up 6.4%.

Consumer Sentiment:
 The Preliminary August Reading was lighter than expected with a 95.3 vs 98.0 estimate which is the lowest since September. This will be revised though.
Leading Economic Indicators: The composite index of 10 components rose to 0.6% in July vs est of 0.4%. Inflation Expectations picked up in the 5 to 10 year horizon.

Trade Snore: The Wall Street Journal reported that Chinese and U.S. negotiators are drawing a “road map” for talks to end the trade deadlock, culminating with meetings between U.S. President Trump and Chinese President Xi at multilateral summits in November, citing officials in both nations. As part of preparation for the November summit, the two nations have scheduled the previously disclosed mid-level talks in Washington next week.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

millennials households

Millennial-led Households are Missing

Just 40% of those ages 25 to 34 led their own household in 2016, and that number has been dropping steadily since 2000 (46%). According to NAHB analysis by economist Natalia Siniavskaia, that missing 6% equates to roughly 2.4 million would-be households.

While all age groups recorded continuous declines of headship rates between 2000 and 2016, none saw a faster drop than the 25-to-34 year olds — once the primary driver behind the big housing boom of the post-World War II era.

Affordability is the big issue, with the high costs of living, escalating rental rates and rising home prices — factors that impact people of all ages, but might seem especially daunting to younger generations with typically fewer resources and lower salaries.

As a result, young adult house sharing has risen significantly: The portion of young adults who choose to live with their parents or other relatives rose from 15.3% in 2000 to 26.3% in 2016. Additionally, the percent of those who live with roommates (non-relatives) jumped from 5.1% in 2000 to 7.5% in 2016.

A clear trend emerges when comparing household formations — or lack thereof — across the country: States with the more expensive housing markets have the lowest headship rates among 25-to-34 year olds. California, New Jersey, Florida, New York and Hawaii are consistently among the least affordable places to live and have the lowest headship rates, some of which are well below 37%.

On the other end of the affordability scale, states such as North and South Dakota, Iowa and Nebraska register the highest headship rates, ranging between 48%-49%.
Source: NAHB Eye on Housing report

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained just +1 basis point (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways for the week.

Overview:  The bond market (specifically Mortgage Backed Securities) was range-bound with very solid resistance and support levels that were tested and that held.  It was a fairly light week for economic data but the data that we did get was solid.

Inflation Nation: The July YOY Consumer Price Index was a smidge hotter than expectations with the Core (ex food and energy) beating expectations with a 2.4%YOY gain vs est of a 2.3% gain. The Headline CPI matched expectations with a YOY gain of 2.9% which also matches last month’s pace. The July YOY Producer Price Index was one tick off of expectations (3.3% vs est of 3.4%) but still at very elevated levels. When you strip out the more volatile food and energy, the YOY Core reading was 2.7% vs est of 2.8% which is well above the Fed’s target inflation rate of 2.0% even though they use PCE instead of PPI to measure inflation.

Jobs, Jobs, Jobs:The job market is still wide open.  The June Job Openings and Labor Turnover Survey (JOLTS) showed that there were 6.662M unfilled jobs which was higher than the market forecasts of 6.646M. For the third straight month, there were actually more jobs available than there are people looking for work.

Economic Optimism: The IBD/TIPP August reading shows that consumers are not scared of the the Trade Snore.  The August reading was higher than expected (58.0 vs est of 57.2) and is one of the highest readings in history.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

land-use

Strict Land Use = Higher Values

Home values in the most restrictive metropolitan areas grew an average of 23.4 percent, more than double the home value appreciation in the least restrictive metros (9.4 percent) and about one third faster than metros in the middle (17.9 percent).

Most land-use regulations in the U.S. are determined locally. For instance, home builders in Houston face a different and generally easier environment in which to build than builders in San Francisco. Metros can be categorized into three groups: the metros with the most restrictive, moderately restrictive, and least restrictive land-useregulations.

Broadly speaking, the most restrictive metro areas include many large coastal markets such as New York, Los Angeles, Boston, and San Francisco. The moderately restrictive metros include several large markets in the interior and Gulf Coast, including Chicago, Dallas, and Houston. The least restrictive metros are mostly Midwestern or smaller markets, including Indianapolis, St. Louis, and Kansas City.

As the economy recovered and employment grew from 2010, the surplus of homes on the market turned into a shortage and home values began to rise. They tended to rise much more in the most restrictive metro areas, despite those places having only modestly higher job growth.
Source: Zillow Research

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained +11 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways for the week after three straight weeks of slowly rising mortgage rates.

Overview:  The bond market focused primarily on the Fed and Jobs.  Both were solid with the Fed keeping their key interest rate unchanged but having a more “hawkish” or “bullish” tone to their commentary.  Job gains were solid as well.  Generally that type of combination would be something that would pressure bond prices (higher rates) but it was offset by continued uncertainty and concern over tariffs and trade war escalations.

Central Bankpaloza: As widely expected the FOMC (Federal Open Market Committee) kept their key Fed Fund rate unchanged in the 1.75% to 2.00% range. Their policy statement had a little more of a “hawkish” tone than their previous statement (when they met and increased rates in June).
Here are some of the more “hawkish” changes in language from their prior statement:
• Economic activity is “rising at a strong rate,” an upgrade from prior wording of “solid rate”
• Most of the minor wording changes are mark-to-market in the first paragraph’s economic assessment
• Job gains “have been strong,” and household spending and business fixed investment “have grown strongly”
• Unemployment has “stayed low” rather than “declined”
• Both headline and core inflation remained “near 2 percent”
• Household spending has “grown strongly” rather than “picked up”
• “Further gradual increases” repeated as expected policy path
• Risks to the outlook still “appear roughly balanced”

Jobs, Jobs, Jobs: Its Big Jobs Friday, and here is the tale of the tape:
Jobs:
Non-Farm Payrolls for July 157K vs est of 190K
Non-Farm Payrolls for June revised from 213K to 248K
Non-Farm Payrolls for May revised from 244K to 268K
The more closely watched rolling three month average is now a very robust 224K
Wages:
Average Hourly Earnings YOY 2.7% vs est of 2.7%
Average Hourly Earnings MOM 0.3% vs est of 0.3%
Unemployment:
The Unemployment Rate 3.9% vs est of 3.9%
The Participation Rate 62.9% vs est of 63.0%

ISM Services: The July Non-Manufacturing data which makes up over 2/3 of our economic engine hit 55.7 est of 58.6. This is a bit of a miss at about 3 points but any reading above 55 is still very strong.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Millennials have different views on Home Ownership

Millennial’s have different views on Home Ownership

Here’s a look at what Millennial’s want in a new home and why:

Contrary to reports that the recession left Millennials disillusioned about owning a home, 75 percent believe homeownership is an important long-term goal and 73 percent see real estate as a good investment. About a quarter already own a home and 60 percent plan to purchase in the future. According to estimates, Millennials aged 25-plus account for 15 percent of new home shoppers. Lending constraints, student debt and down payments are still hurdles, but as the economy and jobs continue to improve, substantially larger numbers of these buyers will shop for homes. Over the next five years, Millennials are expected to account for about two-thirds of new households.

Millennials have long been touted as the generation that prefers city over suburbs, but multiple recent studies show that city living only appeals to a small portion, from 5 to 16 percent (depending on the study), while 55 to 66 percent say they prefer the suburbs. On the other hand, younger Millennials who are renting definitely favor urban settings.

Three-quarters want a single-family home. When asked about home size, 2,475 square feet is what a majority would like to have. Two-story homes (52 percent) and open concept floor plans (78 percent) were also preferences in recent NAHB’s research. For bedrooms, 81 percent said they wanted either three or four and two or two and a half baths would be fine.

“Home design is one of the top motivating factors,” says Mollie Carmichael, a principal in John Burns Consulting. Design emerged as the No. 1 trend for Millennials. Also topping the list was a focus on function over size.

The most desired feature? It’s a laundry room, with 55 percent of Millennials saying they just wouldn’t buy a new home without one. Surprisingly, exterior lighting came in second, with 88 percent saying it was essential or desirable. Storage is also important, with linen closets, a walk-in pantry and garage storage making the top 10 most desired features.

About half of those under 35 report that their current use for outdoor space is limited to grilling, yet a majority want their space to feel like a relaxing retreat for entertaining. And they were more likely than older generations to use their outdoor space for meals and to decorate as they would their living and dining rooms.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost -17 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move slightly higher for the week.

Overview:  MBS dropped for the third straight week which has caused fixed mortgage rates to slowly rise during that period.  GDP and Trade Talk were the main focus of the markets, with the European Central Bank also receiving some attention.

Gross Domestic Product: The 1st QTR GDP had its final revision and it moved up from 2.0% to 2.2%. We got our first look ( we will see this number revised several times) the 2nd QTR GDP, and it basically matched expectations with a 4.1% reading, which is very strong. The surprise came in the Price Index which jumped 3.2% vs estimates of 2.3%. Consumer Spending “popped” with a huge surge of 4.0% vs est of 2.9%.

Consumer Sentiment:
 The final July University of Michigan reading came in at 97.9 vs est of 97.1

Durable Goods: The very volatile report showed that the June data increased and had major upward revisions to May’s data. The Headline reading showed a 1.0% MOM gain vs est of 3.%. But the reason for the miss was the large revision from -0.6% to -0.3% in May. When you strip out the transportation sector, orders rose by 0.4% which was close to expectations of 0.5%. May was revised upward from -0.3% all the way up to +0.3%. So actually that ex-transport number was a beat.

Central Bankpaloza: The European Central Bank and its President Mario Draghi kept their rates unchanged and basically used the exact same policy statement as their last one. They continued to pledge that their QE bond buying program would end this year (unless they needed it to go longer) and that they would keep rates as-is until next Summer. In his live comments, Draghi said that there is still uncertainty over trade issues but that the direct effects of implemented tariffs is limited.

Trade Wars: On the other trade front, President Trump met with Jean-Claud Junker, the EU Commission President face-to-face to talk trade. During their joint press conference Junker said that the only reason that he traveled to the White House was to make a trade deal.  Here are some of the highlights:

  • Europeans agreed to work on more U.S. LNG exports
  • Europeans agree on lowering industrial tariffs
  • EU agrees to align regulator standards on medical products
  • EU agrees to import more U.S. soybeans

China announced a fiscal stimulus plan that is designed to front-run an excepted economic slowdown due to the trade war with the U.S. The fiscal package contains measures that included giving an additional tax cut of 65 billion yuan ($9.6 billion) to companies with R&D expenditure, expediting non-budgeted special bond sales to assist local government infrastructure financing and easing restrictions on banks’ issuance of financial bonds for small firms.

In what seems like a direct response to China’s stimulus plan, the White House announced a $12 billion “short-term” stimulus plan to help US farmers hurt by China’s retaliatory tariffs. The package will consist of direct payments, food purchases and trade development – under a program already authorized under the Commodity Credit Corp act, which means Congressional approval is not required. Further details on the program will come by Labor Day.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.