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Tag Archives: Mortgage Rates

Housing And Mortgage : The Experts Make Their 2012 Predictions

What's next for housing in 2012As the new year begins, there are no shortage of stories telling us what to expect in 2012. Housing finished 2011 with momentum and mortgage rates closed at the lowest rates of all time.

Some expect those trends to continue through the first quarter and beyond. Others expect a rapid reversal.

Who’s right and who’s wrong? A quick look through the newspapers, websites and business television programs reveals “experts” with opposing, well-delivered arguments views. It’s tough to know who to believe.

For example, here are some “on-the-record” predictions for 2012 :

The issue for buyers, seller, and would-be refinancers in San Francisco and nationwide is that it can be a challenge to separate a “prediction” from fact at times. 

When an argument is made on the pages of a respected newspaper or website, or is presented on CNBC or Bloomberg by a well-dressed, well-spoken industry insider, we’re inclined to believe what we read and hear.

This is human nature.

However, we must force ourselves to remember that any analysis about the future — whether it’s housing-related, mortgage-related, or something else — are based on a combination of past events and personal opinion.

Predictions are guesses about what might come next — nothing more.

For example, at the start of 2009, few people expected the 30-year fixed rate mortgage to stay below 6 percent, but it did. Then, at the start of 2010, few people expected the 30-year fixed rate mortgage to stay below 5 percent, but it did.

All we can know for certain about today’s market is that both mortgage rates and home values are low, creating favorable home-buying conditions nationwide.

At that start of last year, few people expected mortgage rates to even reach 4 percent. Today, rates “with points” price in the 3s.

What 2012 has in store we just can’t know.

Despite Low Rates, Pending Home Sales Slip In August

Pending Home Sales graphDespite the lowest mortgage rates of all-time, home buyers are slowing the pace at which they’re buying homes.

According to the National Association of REALTORS®, on a seasonally-adjusted basis, the Pending Home Sales Index fell 1 percent in August.

The Pending Home Sales Index measures homes under contract, but not yet sold, nationwide. In this respect, the Pending Home Sales Index is a forward-looking housing market indicator; a predictor of future home sales.

It’s one of the few national indices that “looks ahead” to future market conditions. Most housing data, by contrast, describes past events.

On a regional basis, only the South Region showed improvement in August’s Pending Home Sales Index report : 

  • Northeast Region: -5.8%
  • Midwest Region : -3.7%
  • South Region : +2.6%
  • West Region : -2.4%

That said, even the value of regional data can be questioned. Like all things in real estate, the number of homes going under contract will vary on the local level.

For example, in the Northeast Region where pending home sales slipped in August, there are close to a dozen states. Some of those states performed better than others, and there is no doubt that cities and towns exist in the region in which pending home sales actually climbed.

As a national/regional report, the Pending Home Sales Index cannot show local market data and, for that reason, it’s somewhat irrelevant to everyday buyers and sellers in Santa Rosa. If you’re in the market to buy or sell a home today, it’s your local housing market data that matters to you. 

We watch the Pending Home Sales Index because it paints a broad picture of housing nationwide. To get local market conditions, though, you’ll want to talk with a local real estate professional.

What’s Ahead For Mortgage Rates This Week : May 10, 2010

Non-Farm Payrolls May 2008-April 2010Mortgage markets improved to their best levels of 2010 last week, aided by events half a world away and ongoing safe haven buying.  Greece’s debt problems continue to help mortgage rate shoppers in Los Angeles and around the country.

Conventional mortgage rates dropped last week, ARMs falling more than fixed. FHA mortgage rates also improved.

Global concern for the Greece Situation are so strong that markets even shrugged off April’s blowout job report. On most other days, mortgage rates would soar on better-than-expected jobs data — especially coming out of a recession.

The Department of Labor’s April Non-Farm Payrolls reports:

  • Payrolls have been net positive for 4 straight months
  • Nearly 600,000 jobs have been created thus far in 2010
  • Monthly job growth posted its biggest gain in 4 years in April

Additionally, more than 800,000 Americans re-entered the workforce in April in search of work.  As a result, the Unemployment Rate jumped by 0.2 percent — another positive sign (in a roundabout way).

But again, Wall Street wasn’t watching jobs — Wall Street was watching Greece. And Greece was in riot.

This week, without much new data due on the economy, mortgage markets should continue to take cues from Greece, the IMF and the Eurozone.  If a bailout agreement can be reached that investors feel is effective, the safe haven buying that’s led rates lower will recede and mortgage rates should rise.

Conversely, if an agreement is reached that investors deem ineffective, or no agreement is reached at all, mortgage rates should drop.

Each week for the last four weeks, we’ve talked about Greece and its pending bailout and how it might impact rates because each week the bailout appears imminent.  Even this week, the market opens with the news that the IMF has approved a $40 billion lifeline to Greece.  Maybe this will be the news that finally turns the mortgage market around.

Mortgage rates are unnaturally low right now and should change direction quickly. The problem is nobody knows when that will happen so be careful when rate shopping and keep an eye on the market.

Mortgage rates may fall further, but when they turn higher, they’re going to turn quickly.

What’s Ahead For Mortgage Rates This Week : March 29, 2010

Non-Farm Payrolls Mar 2008-Feb 2010Mortgage markets tanked last week, raising rates in California to their highest levels in a month. 

Most of the losses occurred Wednesday in what was the worst 1-day mortgage market performance in more than 6 months. Even Friday’s rally could barely dent the losses. Most of the movement was tied to geopolitical concerns and worries of a ballooning federal debt load. 

The best time to lock a conventional or FHA mortgage rate last week was Tuesday morning.

This week, markets should remain volatile. There’s a large set of economic data due for release, plus trading volume will thin as the week goes on because markets are closed Friday for Good Friday.

Coincidentally, Friday is also the day that the March jobs report is released.

The non-farm payroll report is expected to show net job growth of 187,000 in March. This is a large number as compared to last month’s net loss of 36,000 job. However, analysts are already dismissing March’s numbers as skewed by both the bad storms of February, and the temporary hiring of Census workers.

In most months, major job growth would be bad for mortgage rates.  This month, that won’t be the case. It will take a figure north of 200,000 to cause rates to rise and the higher the actual number, the more that rates will respond.

Also this week, on Wednesday, the Federal Reserve’s $1.25 trillion program to support mortgage markets sunsets. Fed insiders estimate that the program dropped rates 1 percent since its inception in 2008. It’s reasonable that mortgage rates will rise after its end, therefore.

What’s Ahead For Mortgage Rates This Week : March 8, 2010

Non-Farm Payrolls Mar 2008-Feb 2010Mortgage markets improved last week in low-volume trading.

Between Monday to Thursday, Wall Street focused on the upcoming jobs reports and mortgage markets gained while traders jockeyed for position. Mortgage rates drifted lower through Thursday afternoon. But, then, after a better-than-expected Non-Farm Payrolls report Friday morning, mortgage markets — and mortgage rates — reversed.

Overall, mortgage rates dropped last week, but only by a small margin. Rates were best Thursday afternoon.

It was the second consecutive week in which mortgage rates fell.

Last week was also interesting in that both stock markets and bond markets improved, proving that rates don’t always rise when stock prices do. 455 of the S&P 500 companies posted gains last week.

If you’re shopping for a home or a refinance, though, don’t rest on your laurels. After Friday’s big sell-off, this week opens into a major headwind and, plus, the Federal Reserve’s support for mortgage markets ends in just 3 weeks.

This week, without much data to influence traders, the upward momentum in rates may have little cause to temper. We’ll see the Consumer Confidence numbers on Tuesday and Retail Sales on Friday.  Beyond that, there’s not much else.

After last week’s performance, conforming mortgage rates in California may be poised to rise rather sharply. If you’re waiting for the right time to lock your rate, it may have been this past Thursday. Consider locking your rate early this week to protect against further rate hikes.

What’s Ahead For Mortgage Rates This Week : February 8, 2010

Non-Farm Payrolls Net New Jobs Feb 2008-Jan 2010Mortgage markets improved last week on domestic jobs data and international banking concerns. The news triggered buying in the bond market and, as a result, conventional, FHA and VA mortgage rates in California improved for the 4th consecutive week.

Mortgage rates are now at a 6-week low but probably shouldn’t be.  It underscores just how important global events can be to U.S. mortgage markets.

For example, corporate earnings continue to improve and key elements of the economy are strengthening.  Even the Federal Reserve acknowledges this.  In most circumstances, that would be a boon for the stock markets and bond markets would suffer, including mortgage bonds.

Last week, that wasn’t the case.

Early in the week, as (1) China tightened its monetary policy, (2) Greece did little to quell lingering default fears, and (3) Spain raised its deficit forecasts, global investors sought to reduce their collective risk exposure. For safety of principal, many sold some of their more aggressive positions and moved the cash proceeds into the U.S. bond market — which includes mortgage bonds. 

On Wall Street, this type of trading pattern is called a “flight-to-quality”.  Because mortgage bonds are backed by U.S. government entities, the debt is considered to be ultra-safe.  Last week’s extra demand for bonds helped to push prices up and mortgage rates down.

And that was before Friday’s weak jobs report. Although the Unemployment Rate fell to 9.7%, the government reported a net loss of 98,000 jobs last month and this, too, helped mortgage rates tick lower.

This week, we’ll hope for momentum to continue.

There’s very little domestic news to move rates this week so keep an eye on the global market for similar stories like what we saw last week.  Or, if you’re not sure what to look for, just give me a call or send me an email and I’ll be happy to watch the markets and mortgage rates for you.Post

A Rate-Locking Strategy Ahead Of The Fed’s Meeting Today

Fed Funds Rate (Jan 2007 - Jan 2010)The Federal Open Market Committee ends a scheduled, 2-day meeting today in Washington. It’s the first of 8 scheduled meetings for the policy-setting group in 2010.

The group adjourns at 2:15 PM ET.

As is customary, upon adjournment, the Fed will issue a press release to the markets recapping its views of the country’s current economic condition, and the outlook for the near-term future.

The post-meeting statements from the Fed are brief but comprehensive. And Wall Street eats them up.  Every word, sentence and phrase is carefully disected in the hope of gaining an investment edge over other active traders.

It’s for this reason that mortgage rates tend to be jittery on days the FOMC adjourns. Wall Street is frantically rebalancing its bets.

Today should be no different.

The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent — the lowest it’s been in history.  However, it’s what the Fed says Wednesday that will matter more than what it does.

After the Fed’s last meeting in December, it made several observations:

  1. The jobs market is getting “less worse”
  2. The housing sector is making improvements
  3. Financial markets are stabilizing further

The economy is gradually improving, the Fed told us, but there are still risks to the economy ahead.  Furthermore, inflation remains in check.

As compared to December’s press release, today’s FOMC statement will be closely watched. If the Fed changes its verbiage in any way that alludes to strong growth and/or inflation in 2010, expect mortgage rates in San Francisco to rise as Wall Street moves its money from bonds to stocks.

Conversely, reference to slower growth in 2010 should lead rates lower.

We can’t know what the Fed will say so if you’re floating a mortgage rate right now or wondering whether the time is right to lock, the safe approach would be to lock prior to 2:15 PM ET Wednesday. After that, what happens to rates is anyone’s guess.

Retail Sales Dropped In December And Now So Are Mortgage Rates

Retail Sales December 2009

Mortgage rates are dropping this morning on weaker-than-expected Retail Sales data from December. Lower rates means more bang for your home-buying buck.

Excluding motor vehicles and parts, December’s “ex-auto” sales receipts were down roughly $500 million from November. Analysts had expected receipts to grow.

The relevance of Retail Sales to home affordability isn’t obvious, but it’s definitely logical.

Retail Sales is directly related to consumer spending and consumer spending accounts for the majority of the U.S. economy. When consumer spending slows, the economy often does, too. It leads investors to seek out “safe” investments.

It’s the reason why stock markets often drop on weak economic data — stocks are among the riskiest investment classes available.

Conversely, the best place to find safety is in the market of government-backed bonds.  This world includes products like U.S. Treasuries and many of the mortgage-backed bonds that help set mortgage rates for people in San Francisco.  Weak economic data puts mortgage bonds in demand.

For rate shopper, this is good news.  More demand for mortgage bonds causes mortgage rates to fall.  Mortgage rates are lower this morning because Wall Street is shedding some risk.

December’s Retail Sales report closes out a year of generally-weak data.  2009 marks just the second time that Retail Sales fell year-over-year since the government started tracking it 40 years ago.  The other year was 2008.

For home buyers around the country, though, today may represent an opportune time to lock a mortgage rate.  Housing data is still improving and other economic indicators are showing strength.  Soon, Wall Street will shift from a “safe” mentality and move toward risk.

When it does, mortgage rates will rise.

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