Blog
2011 - FORECAST:
What's on the horizon for Mortgage Rates, the Housing Market, the Economy, Jobs?
My crystal ball is a little cloudy - but here goes:
- Lower Rates will continue
- Lower Home prices will continue
- Weak, but sustained economic growth
- Don't expect the unemployment #'s to change much for the rest of the year
LAST WEEK:
Mortgages and bonds improved slightly over last week as concerns in the European sector continue to overshadow any bit of positive economic data that may be reflected in early morning data releases. Treasuries continue to climb, even though the stock market has been stuck in a sideways drift. Demand for the safety of fixed income investments has taken the yield on the benchmark 10-year Note down to a new 2011 low of 2.85%.
The resumption of selling pressure amid rekindled concerns over Europe resulted in another weekly loss for stocks. The market has mustered only one weekly gain, which was actually only an incremental move higher, since April. Although last week's move lower was only fractional, it was enough to offset last week's incremental advance, which was the market's first weekly gain since April.
WEEK AHEAD:
This week holds great uncertainty about the Greek debt situation and the removal of the security blanket of Fed easing that could combine for another week of volatility, as the second quarter draws to an end. The three Treasury auctions in the coming week are comprised of $35 billion 2-year notes Monday; $35 5-years Tuesday, and $29 billion 7-year notes on Wednesday.
There is a busy economic calendar, including important ISM manufacturing data and three Treasury auctions totaling $99 billion in new securities, which hit the market next week just as the Fed's quantitative easing Treasury purchase program winds down.
Interest rates remain bullish, however with overbought conditions, we could see some consolidating at current levels which would make it tough to extend improvements in the very near term. There are a number of risk factors as the QE2 winds down and earnings season creeps up on the horizin in July. Consumers are urged to take advantage of the lowest rates of the year - not seen since last November.
NEXT WEEK's ECONOMIC CALENDAR:
Monday, June 27th
8:30ET Personal Income/Spending
1:00ET 2yr Treasury Auctions
Tuesday, June 28th
9:00ET Case-Shiller 20 City Index
10:00ET Consumer Confidence
1:00ET 5yr Treasury Auction
Wednesday, June 29th
7:00ET MBA Mortgage Applications
10:00ET Pending Home Sales
1:00ET 7yr Treasury Auction
Thursday, June 30th
8:30ET Weekly Jobless Claims 420k
9:45ET Chicago PMI
Friday, July 1st
9:55ET U of Michigan Consumer Sentiment
10:00ET ISM Manufacturing
10:00ET Construction Spending
3:00ET Auto Sales
FANNIE/FREDDIE update:
Beginning on April 1, Fannie Mae follow in Freddie Mac's footsteps and formally raise the fees that they charge lenders, which will almost certainly pass these fees on to borrowers. The bottom line is that for virtually all borrowers, obtaining a mortgage is set to become significantly more expensive.
Fannie/Freddie are currently hemorrhaging money at the combined rate of $1-2 Billion per month. While the government hasn't yet determined how these two organizations - which currently underwrite 95% of all new mortgages and without whom, the mortgage financing system would collapse - in the mean time, it will certainly seek to limit their losses. Thus, the expansion of "loan-level price adjustments" should not have come as too much of a surprise.
INDUSTRY NEWS:
Home prices rose slightly in April for the first month-to-month increase since May 2010 - according to new numbers released today by the Federal Home Finance Agency.
Prices rose 0.8 percent on a seasonally adjusted basis from March to April, according to the FHFA's monthly House Price Index. For the 12 months ending in April, U.S. prices fell 5.7 percent.
The FHFA number echo similar data from FNC, Altos. ClearCapital, Move and other sources reporting an uptick in prices in April, following the double dip in prices during the first quarter.
Despite the monthly bump up, the US index is 19.3 percent below its April 2007 peak and roughly the same as the January 2004 index level.
The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.
Applications for new mortgage went down 5.9% from the prior week per data from the Mortgage Bankers Association's Weekly Mortgage Applications Survey for the week ending June 17, 2011. The seasonally adjusted Purchase Index decreased 2.8 percent from one week earlier. The unadjusted Purchase Index decreased 3.9 percent compared with the previous week and was 4.4 percent higher than the same week one year ago.
The MBA moving average for the seasonally adjusted Market Index is up 0.4 percent. The four week moving average is down 0.7 percent for the seasonally adjusted Purchase Index, while this average is up 0.8 percent for the Refinance Index.
The refinance share of mortgage activity decreased to 69.2 percent of total applications from 70.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.9 percent from 6.1 percent of total applications from the previous week.
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.57 percent from 4.51 percent, with points decreasing to 0.91 from 1.04 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also increased from last week.
The average contract interest rate for 15-year fixed-rate mortgages increased to 3.70 percent from 3.67 percent, with points decreasing to 1.05 from 1.06 (including the origination fee) for 80 percent LTV loans. The effective rate also increased from last week.
- Al Rodenburg, Sr. Mortgage Banker - Bank Of Texas