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By Taff Weinstein at

D.I.Y. Loved by Homeowners

Homeowners looking to add personality and individuality to their home are more likely to undertake a do it yourself remodel than hire a professional, according to the National Association of Realtors®’ 2019 Remodeling Impact Report: DIY. The report also shows that cash-strapped millennials are the most likely of any generation to take on a DIY project.

Respondents indicated that the number one reason for undertaking a project was to increase functionality and/or livability of their home (35 percent for DIYers and 41 percent for those hiring a professional). That is followed by increasing the home’s beauty and aesthetics (19 percent and 18 percent, respectively) and adding durable and long lasting materials and appliances (15 percent and 18 percent). Projects which were designed to add personality to a home were twice as popular among DIYers than among those hiring a professional (10 percent and 5 percent).

Nearly three-fourths of Generation Y and Millennial consumers (73 percent,) over half of Generation X (51 percent) and 50 percent of Younger Boomers choose to DIY home projects. Seventy percent of the Silent Generation indicated that they hired a professional to complete their project – the highest of any generation.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) gained +23 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly lower compared to the previous week.

Overview:  We had a holiday-shortened week (New Years) with only three full trading sessions that saw lighter volumes until Friday.  MBS were on the move upward (and therefore mortgage rates were on the move downward) over concerns about the unknown duration of the partial government shutdown and the transition of the House of Representatives to Democratic control and what that might mean for future tax and regulatory policies.  But MBS sold off (and mortgage rates rose) after a very robust jobs report on Friday.

Jobs, Jobs, Jobs: We had a very strong jobs report!
Tale of the Tape:
Jobs.
- December Non-Farm Payrolls (NFP) was much higher than expectations 312K vs est of 177K.
- November NFP revised higher from 155K to 176K
- October NFP revised higher from 237K to 274K.
The more closely watched 3 month rolling average increased to a staggering 254K
Wages.
- December Average Hourly Earnings increased to $27.48. That is a YOY gain of 3.2% vs expectations of a 3.0% gain.
- Average Hourly Earnings on MOM basis improved by 0.4% vs est of 0.3% and is double the 0.2% pace in November.
Unemployment:
- The Unemployment Rate increased from 3.7% to 3.9%. The market expected 3.7%.
- The Participation Rate increased from 62.9% to 63.1%

The Talking Fed:
Fed Chair Jerome Powell and former Fed Chairs Janet Yellen and Ben Bernanke had a cozy panel meeting for the press. Powell made it clear that he would not resign if he were asked to step down and that all Fed Chairs have met with the President during the tenure and he expects to as well but the Fed will remain independent from political influences. He also emphasized that their is no "preset path" for raising rates or adjusting the balance sheet and that they are data dependent. Currently, the economy and labor market are in strong shape.

Manufacturing: The December national ISM Manufacturing Index was a big miss. Coming in at only 54.1 vs est of 57.9. While this is still well above 50.0 which is expansionary, it is much lower than expected. ISM Prices Paid dropped to 54.9 vs 60.7 in November showing little to no inflationary pressure on the manufacturing side.

 

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.
 

By Taff Weinstein at

Median Homeowner Costs Across The US

The costs associated with home-ownership vary across the U.S.  The US Census Bureau recently released statistics from the 2017 American Community Survey, an annual program that asks millions of Americans each year about several social, economic, and demographic attributes. The Bureau publishes figures for each of the 50 states and Washington DC. Using Census information, Insider, Inc has compiled how much the average homeowner pays each month in each state to own a home.

One of the measures on the survey is a set of selected monthly housing costs for homeowners with a mortgage. The costs include mortgage payments, real estate taxes, insurance, utilities and fuel, and, when applicable, condominium or mobile home fees.

Those median monthly costs vary widely across the states and DC. On the lower end are states in Appalachia like West Virginia, with a median homeowner cost of $984, and Arkansas, at $1,025. Coastal states like California, Hawaii, and New Jersey are on the higher end of the scale, and Washington, DC's median homeowner cost of $2,432 was the highest in the country. 

How does your state stack up?  Check out the map above to see the median costs for your state and then check out the surrounding states.  Its easy to see why states like Nevada and Arizona are experiencing a huge influx of people relocating from California with average monthly savings of close to $1,000.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained +20 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly lower compared to the previous week.

Overview:  We had a holiday-shortened week (Christmas) with only three full trading sessions that saw lighter volumes.  Overall, the economic data was one again very strong which is normally negative for mortgage rates but geo-political concern and end-of-year positioning continued to provide plenty of support for our long bonds and kept mortgage rates very low.

Manufacturing: The December Chicago PMI reading was very robust and was much stronger than market expectations (65.4 vs est of 62.0). Any reading above 50 is expansionary and this is yet another reading above 60.0 which is very, very strong and shows that there is no slow down in manufacturing growth.

Taking it to the House: The FHFA Home Price Index for October showed a 0.3% gain vs est of 0.2%. The YOY gain in home prices is now 5.7%. November Pending Homes Sales matched market expectations with a MOM pull back of -0.7%. The October YOY Case-Shiller 20 metro city home price index hit 5.0% vs est of 4.9%.

Consumer Confidence: The December Consumer Confidence report was lighter than expected (128.1 vs est of 134.0) November was revised upward from 135.7 to 136.4. Overall, it is the lowest survey response since July but just about every reading since July has been a new record high or just off of it.

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.

By Taff Weinstein at

Man Ordered to Rebuild Home

A man who illegally demolished a San Francisco house designed by modernist architect Richard Neutra was ordered this week to rebuild it exactly as it was.

The city Planning Commission also ordered Ross Johnston to add a sidewalk plaque telling the entire saga of the house's origins in the 1930s, its demolition and replication.

At first glance, this might be perceived as a local planning commission going too far with telling a homeowner what to do with their property...but in this case, the owner tried to pull a fast one.

Johnston purchased the 1936 residence, known as the Largent House, in 2017 for $1.7 million.

Johnston had planned to remodel the 1,300-square-foot home in the Twin Peaks neighborhood and submitted his plans for the two-story house to the city, which mostly kept the first floor intact. His permit was approved.  But that is not what he did.  

Instead, he just simply demolished his home with the goal of rebuilding on the lot with a 4,000 square foot, $5 million dollar home (which the city would have never approved).  After being "caught" by his neighbors that were shocked to see the landmark house demolished, he applied for a retroactive demolition permit which was denied and instead was ordered to rebuild the house, just as it was!

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained +19 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly lower compared to the previous week.

Overview:  It was a whirlwind of a week with our own Fed raising rates and the never ending speculation on what the dot-plot signals really mean, as well as the a partial government shutdown and another round of economci seemlingliless long bond market was light on volatility as it was on "pause" ahead of the Federal Reserve meeting on December 19th as there is less certainty/consensus over what the Fed will do at that meeting.  Overall, our economic data was once again solid but concern over Brexit, France and Trade Wars kept money seeking safe-harbor in U.S. based bonds.

Inflation Nation: The Fed's main inflation gauge Personal Consumption Expenditures (PCE) for November YOY matched expectations with a 1.8% reading which is back below the 2.0% pace in October. The Core (ex food and energy) YOY matched expectations with a 1.9% rate but that was an increase over October's pace of 1.8%. Spending was way up. Personal Spending MOM hit 0.4% vs est of 0.3%, however October was revised upward significantly from 0.6% to 0.8%. Personal Income looked flat but did see a small 0.1% gain.

Central Bank Palooza: Russia raised their rates 1/4 point, the U.S. raised their rates 1/4 point. Japan (number 3 economy), kept their main interest rate at -0.1% and Great Brittan (number 5 economy), kept their main interest rate at 0.75%.

The Talking Fed: The Federal Reserve raised their Fed Fund rate 1/4 point to the 2.25 to 2.50% range.
Here are some key highlights:
• They added the word 'some' to the `further gradual increases' clause that has been a staple in the last several statements.
• The "dot plot" chart shows 2 rate hikes next year instead of 3 the last time that they were published.
• Household Spending has continued to grow strongly
• Inflation is expected to remain near their target rate of 2.00%
• 2018 median 2.375% (range 2.125% to 2.375%); prior 2.375%
• 2019 median 2.875% (range 2.375% to 3.125%); prior 3.125%
• 2020 median 3.125% (range 2.375% to 3.625%); prior 3.375%
• 2021 median 3.125% (range 2.375% to 3.625%); prior 3.375%
• Longer run Fed funds median at 2.8% compares to previous forecast of 3.0%
• Fed sees 2019 GDP growth 2.3% vs 2.5% in prior est.
• Fed sees unemployment rate 3.5% end-2019, unch vs prior est.
• The NAIRU - the lowest level the unemployment rate can drop without sparking inflation - was cut again, from 4.5% to 4.4%. (note currently we are at 3.7%).

Government Shutdown: The House passed a Bill that included border security but that Bill did not have enough support in the Senate so we have a "partial" government shutdown as a result.

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.

By Taff Weinstein at

A Balanced Outlook for Housing in 2019

Housing juggernaut, Fannie Mae says that unlike the past two years that were mostly a seller's market, 2019 is looking to be a more balanced market.

The housing market should see stability in 2019 as a moderation in higher home prices combined with continued strength in the labor market according to Fannie Mae.

"We expect full-year 2018 economic growth to come in at 3.1% – an expansion high – before slowing markedly to 2.3% in 2019 and 1.6% in 2020," said Fannie Mae Chief Economist Doug Duncan. "Fading fiscal policy, worsening net exports, and moderating business investment all contribute to our projection that GDP growth will begin to slow in 2019.

Duncan added that there could be some good news ahead for homebuyers, although first-time buyers could still face challenges.

“If mortgage rates trend sideways next year, as we anticipate, and home price appreciation continues to moderate, improving affordability should breathe some life into the housing market,” he said. “We also expect residential fixed investment to resume a positive growth trajectory amid continued rising housing starts and stabilizing home sales. However, affordability is likely to remain an industry concern, particularly among first-time homebuyers."

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost -19 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly higher compared to the previous week.

Overview:  The long bond market was light on volatility as it was on "pause" ahead of the Federal Reserve meeting on December 19th as there is less certainty/consensus over what the Fed will do at that meeting.  Overall, our economic data was once again solid but concern over Brexit, France and Trade Wars kept money seeking safe-harbor in U.S. based bonds.

Retail Sales: The November data at first glance was just a little stronger than expected, but when you take into account the major upper revisions to October, the month-to-month comparison is actually quite good. The Headline monthly gain was 0.2% vs est of 0.1%. But October was revised upward from 0.8% to 1.1%. When you strip out Autos, the MOM gain was 0.2% vs est of 0.2% but October was revised upward from 0.7% to 1.0%. The Control Group really beat estimates with a 0.9% vs 0.4% expectation.

Inflation Nation: The November Consumer Price Index was exactly as expected with the Core (ex food and energy) YOY number hitting 2.2% vs est of 2.2%, and a slight increase from October's 2.1% level. When you look at the Headline PPI YOY, it matched expectations with a 2.2% reading which is much lower than October's 2.5% pace. The Atlanta Fed Business Inflation Expectations rose from 2.2% in November to 2.3% in December.

Jobs, Jobs, Jobs: The Job Openings and Labor Turnover Survey (JOLTS) once again showed over 1 million more jobs waiting to be filled then there are people that are unemployed in the U.S. During the financial crisis, our economy had 2 million job openings (still a lot)....now we have been trending at seven million (more than three times that amount)! This October reading is the second highest on record.

Trade War: China will drop tariffs on Autos for 3 months. Basically they are suspending their new 25% tariff that had increased from 15% to a 40% rate.

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.

By Taff Weinstein at

9 out 10 Millennial Renters Want to Purchase a Home

While the millennial home-ownership rate still significantly lags that of previous generations at a similar age, a new study by Aparment List showed that almost 90% would prefer to own than rent.

However, just 4.4% of them plan do so in the next year.  But just a little further out, the numbers get quite encouraging for those wishing to do some "Adulting".  15% more plan purchase in 1-2 years and then add another 15% on top of that for plans to purchase 2 to 3 years from now.  That puts those planning to purchase a home in 1 to 3 years at 34.4% which is a large number of future homeowners hitting the market.  Now, add in another 25% for those that say that they plan to purchase in 3-5 years and now the total in the 1 to 5 year time horizon jumps to 59.4%.  But wait there's more....30% said that they would purchase a home in 5 years or more from now.

Among those millennial renters who plan to eventually purchase a home, 71.5 percent cite affordability as a reason that they have yet to do so. Specifically, we find that saving a down payment is the primary financial obstacle keeping millennial renters from purchasing homes, with 61.7 percent of respondents who plan to buy saying that they can’t afford a down payment (maybe they are simply unaware of many low to no down-payment mortgages). Meanwhile, just 29.1 percent say that they can’t afford a monthly mortgage payment.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained +40 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly lower compared to the previous week.

Overview:  We had very strong manufacturing data but tame inflation.  The bond market made their gains on the back of the Federal Reserve as the top 3 Fed members (Powell, Clarida and Williams) made a point of telling the markets that the Fed's viewpoint is closer to their neutral rate than previously thought.  That caused a shift in trader sentiment to expect fewer rate hikes next year.

Jobs, Jobs, Jobs: The latest Bureau of Labor and Statistics released their big jobs report on Friday. Lets look at the Tale of the Tape:
Jobs:
November Non-Farm Payrolls increased by 155K vs est of 200K.
October NFP was revised from 250K down to 237K.
September NFP was revised up from 118K to 119K.
The more closely watched three month rolling average is 170K.
Wages:
Average Hourly Wages are now $27.35 which is a six cent increase.
The MOM Average Hourly Earnings change increased by 0.2% vs est of 0.3%
The YOY Average Hourly Earnings increased by 3.1% vs est of 3.1%
Employment:
The Unemployment Rate is 3.7% which matches expectations.
The Participation Rate is remained at 62.9%.
The November ADP Private Payroll hit the lower end of estimates which ranged from 161K to 195K with a 175K reading. Initial Weekly Jobless Claims were 231K vs est of 220K and even though that is a low number, it is a 6 month high. The Challenger Grey Job Cuts report showed a big drop from 75K down to 53K.

ISM : The ISM Non Manufacturing report was red-hot with a 60.7 reading. The service sector represents more than 2/3 of our economic output. The national ISM Manufacturing Index for November jumped to 59.3 which is the second best reading since 2004. Prices paid dropped though from a 71.6 pace in October down to 60.7 in this release.

The Talking Fed: St. Louis Fed President James Bullard (non voting member in December, but will be a voting member in 2019) and noted "dove" said that the Fed has already "normalized policy" a lot. and that "inflation is low and looks to be stable". He had previously called for the Fed to "pause" raising rates and as a new voter in 2019, the markets are taking his commentary to mean that there will be fewer rate hikes in 2019 than previously expected.  NY Fed President John Williams (number 3 at the Fed) said “Given this outlook I describe of strong growth, strong labor market and inflation near our goal - and taking into account all the various risks around the outlook - I do continue to expect that further gradual increases in interest rates will best foster a sustained economic expansion and a sustained achievement of our dual mandate.”

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.

By Taff Weinstein at

Conventional Loan Amount Limits will Increase in 2019

The maximum conforming loan limit for mortgages being acquired by Fannie Mae and Freddie Mac will be going up in most parts of the country in 2019, the Federal Housing Finance Agency has announced.

As a result of rising home prices, the maximum conforming loan limit will be higher in 2019 in all but 47 counties in the US, according to the FHFA. In most of the US, the maximum conforming loan limit for one-unit properties will be hiked to $484,350 in 2019, up from 2018’s $453,100.

The Housing and Economic Recovery Act (HERA) requires that the FHFA adjust the baseline conforming loan limit each year to reflect changes in the average US home price. According to the FHFA’s House Price Index (HPI) for the third quarter of 2018, house prices increased an average of 6.9% over the last 12 months.

The FHFA is also increasing loan limits for high-cost areas – areas in which 115% of the local median home value exceeds the baseline conforming loan limit. Under HERA, the maximum loan limit in those areas is a multiple of the area median home value, with a ceiling on that limit of 150% of the baseline loan limit.

According to the FHFA, median home values increased in most high-cost areas in 2018. The new ceiling loan limit for one-unit properties in most high-cost areas will be $726,525, which is 150% of the baseline conforming loan limit of $484,350.

The FHFA uses different loan-limit calculations for Alaska, Hawaii, Guam, and the US Virgin Islands. In these areas, the baseline loan limit for 2019 will be $726,525.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained +39 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly lower compared to the previous week.

Overview:  We had very strong manufacturing data but tame inflation.  The bond market made their gains on the back of the Federal Reserve as the top 3 Fed members (Powell, Clarida and Williams) made a point of telling the markets that the Fed's viewpoint is closer to their neutral rate than previously thought.  That caused a shift in trader sentiment to expect fewer rate hikes next year.

The Talking Fed: The Minutes from the last FOMC Meeting were released. Here are a couple of key highlights:
- Almost all Fed officials saw another rate-hike "warranted fairly soon." But The Fed discussed modifying language on "Further Gradual" hikes while expressing its greater reliance on incoming data.
- Only a "couple" (less than many, less than several, less than a few) participants noted that the federal funds rate might currently be near its neutral level.
- Members also noted that they are worried that companies might struggle to pass on rising input costs, from current or proposed tariffs, onto consumers and create detrimental inflation. 
Fed Chair Jerome Powell spoke at  the Economic Club of New York.  The markets zeroed in on his phrase that interest rates (the Fed Fund Rate) is "near" a Neutral rate.
Vice Chair Richard Clarida said that the Fed want's the smallest balance sheet possible but thinks it will remain above the pre-crisis size of less than $1 trillion. He also said that there is still room to hike rates before hitting their target "neutral" rate but that we are not far from it.
NY Fed President John Williams (the number 3 guy at the Fed) said that the Fed Funds rate is "not far" from the Neutral rate.

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.

By Taff Weinstein at

No Appraisal, No Problem

Fewer loans that use real estate as collateral will need an appraisal under a new proposal.

The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (FDIC) wants to increase the threshold from $250,00 to $400,000.

In a news release, FDIC said it believes raising the threshold could provide meaningful burden relief from the appraisal requirements, without posing a threat to the safety and soundness of financial institutions. The threshold was last increased in 1994.

Under the proposed rule, residential real estate transactions exempted by the threshold would be required to obtain an evaluation consistent with safe and sound banking practices, instead of an appraisal which would speed up the loan process while lowering the costs to consumers.

Evaluations, which have been required for transactions exempted from the appraisal requirement by the current residential threshold since the 1990s, would provide an estimate of the market value of real estate but could be less burdensome than appraisals. The FDIC's appraisal regulations do not require evaluations to be prepared by state licensed or certified appraisers.  In addition, evaluations are typically less detailed and costly than appraisals.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost -18 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly higher compared to the previous week.

Overview:  We had another holiday-shortened week (Thanksgiving's day) with really only 2.5 days of trading last week.  We had a very light week for economic data and there was not any real change in trade negotiations or other geo-political issues that could impact rates.  As a result, MBS moved in a very narrow and tight pattern with low volatility.

Taking it to the House:  October Existing Home Sales beat out estimates with a 5.22M vs 5.20M annualized rate. The median home price moved up again and is now $255,400. Inventory remains VERY tight with only a 4.3 month supply.  New Housing Starts basically matched expectations (1.228M vs 1.230M) and Building Permits just edged out estimates (1.263M vs est of 1.260M). While both of these readings look fairly good....the problem is that the strength is in Multi-family which is where you do not want it to be. For example, multi-family units jumped by 10.3 percent to a 363,000 rate but single-family starts slipped by -1.8 percent to an 865,000 rate. 

Durable Goods: The preliminary (will be revised) October headline reading was much weaker than expected (-4.4% vs est of -2.5%) which was dragged down by a decrease in defense spending. The Ex-transportation number showed a small gain of +0.1% vs est of 0.4%.

Jobs, Jobs, Jobs: Initial Weekly Jobless Claims hit 224K vs est of 215K. The more closely watched 4 week moving average ticked up a bit to 218,500 which is still extremely low.

Consumer Sentiment Index: The final November reading changed the preliminary release of 98.3 down to 97.5 which is a good reading but the lowest since August

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.

By Taff Weinstein at

More and More Luxury Homes Utilizing Auctions

Real estate auctions, once used for foreclosures and distressed sellers, is moving upmarket.

The number of multi-million-dollar homes being sold at auction has nearly doubled in the past year, according to real estate analysts and auction companies.

Concierge Auctions, the biggest player in high-end real estate auctions, said it will sell at least 20 homes this year that were listed for more than $10 million — double last year's total. And next year is already looking even stronger.

"The trend for high-end real estate going to auction is definitely on the rise," said Laura Brady, CEO of Concierge. "We're seeing more sellers across the country more than ever before, especially in the $10 million, $20 million-plus and even $100 million-plus category.

The reason for the surge in high-end auctions is simple supply and demand. Developers and investors have built a vast supply of massive homes aimed at wealthy buyers with sky-high price tags. But the market for those homes remains relatively small, especially since Russian, Chinese and Middle East buyers have faded from the U.S. market.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained +65 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move to their lowest levels not seen since October 2nd.

Overview:  We had a holiday-shortened week (Veteran's day), our domestic economic data was strong with a good beat in Retail Sales that would have "normally" pressured rates higher.  But concern over the Brexit deal falling apart had money flowing into U.S. bonds as investors moved their cash into safety.  The added demand for long bonds drove our mortgage rates lower for the week.

Retail Sales: The October data was much stronger than expected. The headline Retail Sales number came in at 0.8% vs est of 0.5% and Ex-Autos, they were 0.7% vs est of 0.5%.

The Talking Fed:
Fed Chair Jerome Powell said that he is content with the current state of the economy, and was quick to take credit for the ongoing expansion: "I'm very happy about the state of the economy. Our policy is one reason the economy's in such a good place right now." He also confirmed that the tightening process will go on at a "gradual pace", saying that the Fed is avoiding "hiking too slowly or too fast" and is taking "both sides seriously so is gradually raising rates."

The number 2 person at the Fed, Vice Chair Richard Clarida said that rates are nearing the Fed estimates of a "neutral" rate and hinted that a predefined flight path towards a fixed number of rate hikes may not be what the Fed wants and that the Fed is moving back to a "data dependent" view towards the timing of any future Fed action.

Brexit:  The process of Great Brittan separating from the European Union, has been long and arduous.  It also is a major concern for investors as the type of exit (dubbed Brexit) will shape trade, banking, migration and more in Europe for decades.  The British Prime Minister, Theresa May submitted a 585 page plan to her cabinet and then basically suffered a mutiny afterwards as it was an awful deal.  Multiple key committee heads resigned their position and there were at least 22 letters written from parliament members of her party asking for a "no confidence" vote putting her time as their leader into question.

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.
 

By Taff Weinstein at

Home Mortgage Delinquencies Remain Very Low

The newly released National Delinquency Survey by the Mortgage Bankers Association's (MBA) showed that that delinquent mortgage payments were down by 41 basis points compared to a year ago.

The delinquency rate for mortgage loans on one- to four-unit residential properties rose to a seasonally adjusted rate of 4.47% of all loans outstanding at the end of the third quarter. The rate was up 11 basis points from the previous quarter but down 41 basis points from one year ago.

"The healthy economy is overall supporting low mortgage delinquencies and foreclosure inventories," said Marina Walsh, vice president of industry analysis at MBA. "Unemployment is at its lowest level since 1969, wages have grown 3.1% year-over-year – the biggest jump in almost a decade – and job growth is averaging over 212,000 jobs per month thus far."

Meanwhile, foreclosure actions were started on just 0.23% of loans during the quarter, a one-basis-point drop from the last quarter to its lowest level since the fourth quarter of 1985.

Walsh noted that natural disasters are a major factor in determining whether borrowers make timely mortgage payments, adding that it will likely take several quarters for the effects of the most recent storms on the survey results to dissipate.

MBA noted that significant delinquency increases were recorded in states adversely impacted by Hurricane Florence and Tropical Storm Gordon, including North Carolina, South Carolina, Mississippi, Arkansas, and Alabama.

"The impact of the August and September 2017 hurricanes on several states, particularly Texas and Florida, continues to retreat," Walsh said. "Primarily because of the declining effects of last fall's hurricane-related spike, the overall mortgage delinquency rate in the third quarter was down 41 basis points on a year-over-year basis."

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost just  -7 basis points (BPS) from last Friday's close which caused fixed mortgage rates to remain at their their highest levels of 2018.  

Overview:  We had three big events that shaped rates last week:  Election results, the Fed and Inflation.  Inflation has reared its ugly head with PPI at 3.3% in China and 2.9% in the U.S. As a refresher - inflation is Kryptonite to bonds and MBS sold off on Friday as a result. The election results were largely what the markets expected with the Senate remaining with the Republicans and the Democrats taking the house.  We would have seen a lot more volatility if either party won both. The Federal Reserve also did not surprise the markets with setting the stage for a rate hike at their December meeting.

The Talking Fed: The FOMC voted unanimously to keep rates unchanged at this meeting. The Fed seems largely unconcerned with the recent stock market volatility and is signaling "further gradual rate increases ahead" which did nothing to change market expectations for a rate hike in December.

Inflation Nation: The Producer Price Index data for October surged to their highest levels in 6 years. The Headline PPI YOY jumped by 2.9% vs est of 2.5% and the Core (ex food and energy) YOY PPI increased by 2.6% vs est of 2.3%. Margins in Machinery, equipment, parts and wholesale supplies saw a large rise.

Geo-Political: The Republicans picked up a couple of more seats in the Senate to maintain their majority and the Democrats picked up enough seats to claim the house but the house is still fairly evenly split 220 to 193.

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.

By Taff Weinstein at

The "Stork" Often Delivers More than a Baby

An expanding family often leads to needing more space, but it also means more expenses.  That is why there is a growing trend for growing families to seek housing in less-expensive areas to get more.

A recent study by Zillow found that families with newborns are moving to lower-cost housing.  Expecting mothers were found to be more likely to move in any given year than women that are note expecting, despite people generally moving less these days. Among women ages 18 to 50, those who have had a baby in the past year are a quarter more likely than women who did not have a baby to have moved during that year.

Zillow listed the following as possible reasons to explain the data: seeking more space for a growing family; moving closer to family, whether for help with parenthood’s extra responsibilities or for quality time with the grandparents; seeking better job prospects to support a family; or planning ahead to settle in a preferred school district.

The analysis also found that not only do women with newborns move more, they also tend to move to areas with lower housing costs. Zillow found that in 26 of the 35 largest US metro areas, women who both moved and had a baby in the past year tended to move to areas with less expensive homes than where they came from.

The typical new mother moved to an area where homes are valued $11,500 less than where they moved from. Similar-aged women without newborns moved to areas where home values were only about $9,000 less than where they moved from.

Zillow’s analysis found the phenomenon more pronounced in the largest 35 metro areas. New moms from these areas moved to areas where median-valued were $20,100 cheaper than where they moved from. Women from these areas without newborns moved to areas with home values only about $6,300 cheaper.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost -50 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move higher compared to the prior week and actually hit their highest levels of 2018.

Overview:  MBS prices were under gradual pressure all week (higher rates) as we got a steady dose of very strong manufacturing and production data that showed good economic expansion (which causes rates to move higher).  But we saw a large spike in rates on Friday in direct reaction to very strong job growth and wage inflation which pushed mortgage rates to their highest levels of 2018.

Jobs, Jobs, Jobs: Big Jobs Friday showed that our labor sector was doing very well with big job gains and an increase in wages.
Tale of the Tape:
Jobs:
October Non Farm Payrolls 250K vs est of 190K.
September Non Farm Payrolls revised from 134K down to 118K.
August Non Farm Payrolls revised from 270K up to 286K.
The more closely watched rolling three month average is now 218K.
Wages:
Average Hourly Wages YOY moved upward from 2.8% to 3.1% which matched market expectations.
MOM, Average Hourly Wages increased by 0.2%.
The national average hourly wage is now $27.30
Unemployment:
The national Unemployment Rate remained at 3.7% which matched market expectations.
The Participation Rate increased from 62.7% to 62.9%.
The October ADP Private Payroll report showed a huge jump of 227K new jobs compared to estimates of 189K. September was revised downward from 230K to 218K. Still, October saw the largest increase in 8 months. Small businesses added the fewest with only 29K as they struggle to find talent and/or match higher total compensation from larger corporations. In a separate report, the Q3 Employment Cost Indexincreased by 0.8% (QoQ) which is the largest quarterly jump since Q4 2017.

Productivity: Non-Farm Productivity in the 3rd QTR hit 2.0% vs est of 2.2%. Unit Labor Costs matched market expectations with a 1.2% gain.

Manufacturing: The October ISM Manufacturing report was a smidge lower than expected (57.7 vs est of 59.0) but still at a very high level. Internally, the ISM Prices Paid spiked upward to 71.6 vs est of 65.0. The October Chicago PMI was a little lighter than expected (58.4 vs est of 60.0) but still came in at a very robust level. Both Employment levels and Production rose at a fast pace.

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.

By Taff Weinstein at

Consumers' House Buying Power Under Pressure

According to the Real House Price Index released by First American Financial, consumers are still in a strong position to purchase a home but are getting squeezed on just how much home they can afford.

Real house prices increased 0.6% between July and August, while real house prices increased 11.3% year over year. Consumer house-buying power, how much one can buy based on changes in income and interest rates, decreased 0.2% between July and August and declined 4.7% year over year.

First American Financial Chief Economist Mark Fleming noted, however, that average household income increased 3.2% since August 2017.

“Rising mortgage rates, which increased from 3.9% to 4.6% over the last year, reduced consumer house-buying power by nearly $30,000,” Fleming said.

However, he said the figure does not factor in the change in household income since last August.

“Wage growth translates into rising household incomes, which were 3.2% higher in August compared to a year ago. That growth in household income contributed $11,000 to consumer house-buying power, which helped mitigate the negative effects of rising mortgage rates,” Fleming said. “While rising mortgage rates reduced house-buying power by $30,000 over the last year, rising incomes increased consumer house-buying power by $11,000. The net effect? Overall consumer house-buying power fell by $19,000 in August compared with a year ago.”

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained +35 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly lower compared to the prior week..

Overview:  Overall, the week's economic data was strong but basically matched expectations and provided no real surprises.  A "dovish" ECB and concern over Brexit, Italy and Mid-Terms had plenty of money seeking bonds and cause a very slight improvement in rates.

GDP: We got our first look at the 3rd QTR GDP (will be revised several times) and it was basically inline with estimates (3.5% vs est of 3.3%). Estimates on Monday hovered in the 3.1 to 3.2 range and have been gradually moved upward by today to the 3.3 to 3.4 range. Consumer Spending was the major driver and that is encouraging. The next biggest driver was government spending. The only weak spot was a pull back in business investment.

Central Bank Palooza: The European Central Bank kept their main interest rate at 0.0% and their deposit rate at -0.4% which was widely expected. The unknown was what ECB President Draghi would say about Italy and the end of QE. During his press conference, he did not have any major "bombshells". He did say that they have not been purchasing Greek bonds and have been purchasing Italian bonds. He cited Brexit and Italy as key risk areas but that risks to growth in the EU were "broadly balanced".

Taking it to the House: Pending Home Sales were stronger than expected, rising 0.5% in September vs market expectations of a pullback of -0.1% and a nice improvement over August's pace of -1.9%. The good news is that inventory has shaken loose as active listings on the NAR MLS has increased. Weekly Mortgage Applications bounced back 4.9% led by a big jump of 10% in Refinance Applications. Purchase Applications moved upward by 2.0%. September New Home Sales were lighter than expected (553K vs est of 625K) plus, August revised lower below the 600K mark. The August FHFA Home Price Index showed a MOM gain of 0.3% which matched market expectations.

The Talking Fed: We got their Beige Book which is prepared two weeks in advance of the next FOMC policy meeting.
Tariffs and Labor Shortages were the two biggest concerns among banking and business leaders in the Fed's 12 districts. Here are some key takeaways from the release:
- The word "tariff" was used 51 times vs 41 times in the September release and 31 times in the July release
- All 12 districts said that the U.S. economy in their region is expanding at either a "modest" or "moderate pace"
- Firms offered signing bonuses, flexible hours and more vacation time in order to attract and retain workers." Most businesses also expected wage gains to remain “modest to moderate” over the coming six months
- Many firms very concerned over the ongoing trade dispute with China.

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.

By Taff Weinstein at

Household Home Equity nears $15 Trillion (sorry renters you missed out)

According to TransUnion, household home equity is currently nearing $15 trillion and has surpassed its prior housing bubble peak in the first quarter of 2006 by more than $1 trillion. Home equity levels have been rising at a rapid rate each year since hovering around the $6 trillion mark in 2011.

And that means Home Equity borrowing is poised to see a large increase as homeowners use a portion of that equity to pay bills, make home improvements, travel, etc.

Joe Mellman, senior vice president and mortgage business leader at TransUnion said “There are ample signs that the home equity lending market is poised for growth. Home prices have surpassed 2005 boom levels and household home equity has grown even faster.” and that an “increasing consumer debt makes debt consolidation an appealing option and home equity can be the most economically attractive path to do just that. The recession caused a home equity lending pull-back, which all but eliminated consumer marketing and education. We think there’s an opportunity to re-introduce that education to consumers and help them evaluate how and when tapping home equity could make sense.”

TransUnion said the home equity loan market may accelerate given these new market dynamics, noting that HELOCs represented the greatest number of home equity originations in 2017 at 1.2 million. With a 2.3% year-over-year growth from 2016, HELOCs present a market opportunity for lenders. TransUnion also noted that HELOCs have extremely low vintage default rates and that an estimated 70 million homeowners are likely to qualify for a home equity product.

“With rising interest rates and increases in home prices outpacing wage growth, homeowners are more likely to stay in their current homes, rather than ‘move up.’ This leads to a higher likelihood of improving their existing home and home equity can be great tool for that,” Mellman said.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost -25 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move higher.

Overview:  After a brief pause in the sell-off of Mortgage Backed Securities (MBS) two weeks ago, they resumed their downward trend last week which continued to push fixed mortgage rates upward.  The FOMC Minutes gained the most attention of long-bond traders last week and it's consistently "hawkish" tone did provide a little more pressure to pricing.

Taking it to the House: September Existing Home Sales were a little lighter than expected (5.15M vs est of 5.30M). But there were some bright spots. The median sales price reached another new high and is now $258,100 which is up 4.2% from this time last year. Total sales are now up 4.1% on a yearly basis. Inventories got a little relief with 4.4 months of supply vs 4.2 months last year. Weekly Mortgage Applications hit a 17 year low. Mortgage Applications dropped by -7.1% overall, led by a steep drop of -9.0% in Refinance Applications. Purchase Applications dropped by -6.0%. New Housing Starts were lighter than expected (1.201M vs est of 1.237M). Building Permits were also light (1.241M vs est of 1.280M).

The Talking Fed: Former Fed Chair Alan Greenspan said that the 50 year low Unemployment Rate coupled with record number of job openings (JOLTS) will force up wages and inflation. He also said that "This is the tightest market, labor market, I've ever seen."

We got the Minutes from the last FOMC meeting where they raised their Fed Fund rate by 25 basis points and released their economic projections. 
Overall, the tone of Minutes was "hawkish" which really wasn't a surprise given Fed Chair Powell's recent comments since the last FOMC meeting. Here are some key highlights from the Minutes.
• A few participants expected that policy would need to become modestly restrictive for a time
• A number judged that it would be necessary to temporarily raise the federal funds rate above their assessments of its longer-run level in order to reduce the risk of a sustained overshooting of the Committee's 2 percent inflation objective or the risk posed by significant financial imbalances
• "Economic activity rose at a strong rate,'' household spending and business fixed investment "grew strongly,'' and a few participants saw recent data reflecting a stronger economy than they expected
• "Tightening resource utilization and an increasing ability of firms to raise output prices were cited as factors that could lead to higher-than-expected inflation"
• "Some participants commented that trade policy developments remained a source of uncertainty for the outlook for domestic growth and inflation."
• "With regard to upside risks, participants variously noted that high consumer confidence, accommodative financial conditions, or greater- than-expected effects of fiscal stimulus could lead to stronger-than-expected economic outcomes."

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.

By Taff Weinstein at

Homeowners would rather upgrade than buy

Homeowners love their homes, and they would rather upgrade than leave their love nest and purchase a different home.

Given a choice between spending a fixed amount of money on a down payment for a new home or using that same money to fix up their current home, 76 percent of Americans will choose to renovate, according to the new Zillow Housing Aspirations Report.

For people who are 55 years or older, the share is even higher: 87 percent. And retirees are higher still, with 91 percent saying they’d stay put and upgrade rather than use the same money toward a down payment.



Staying put makes sense when 83 percent of homeowners love their homes – a finding from the 2018 Zillow Group Report on Consumer Housing Trends. Indeed, most homeowners – 63 percent – have no plans to sell their homes. The top reasons for not moving are that they love their home and they don’t want to deal with the hassle of moving.

Rising mortgage rates also could be a factor. Since the beginning of the year, rates have risen and homeowners who have a low mortgage rate may not want a new mortgage at a higher rate even though by historical standards, fixed mortgage rates are well below normal.

The desire among homeowners to stay where they are could be contributing to an ongoing inventory shortage. Nationally, the number of homes for sale has fallen on an annual basis for 43 straight months, although the pace of its decline has slowed in recent months. It also can become a self-fulfilling cycle: If homeowners hesitate to sell because they see few options on the market, they stay in their current homes – and inventory remains low.

Among the 20 metros surveyed for the Zillow Housing Aspirations Report, residents of Boston and Detroit were most likely – 80 percent – to choose renovating over buying. In Los Angeles, the smallest share of respondents – just over two-thirds – prefer renovations.

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 which was very welcome after 4 straight weeks of rising rates.  

Overview:  We had a holiday-shortened week but that didn't mean that we did not have any volatility.  MBS had a swing of 42 basis points from our best pricing of the week (lowest rates) to our worst pricing of the week (highest rates).

Inflation Nation: The September Consumer Price Index was a little lighter than expected with the Headline CPI YOY coming in at 2.3% vs est of 2.4% and Core PPI YOY at 2.2% vs est of 2.3%. Import Prices MOM were more than double market expectations (0.5% vs est of 0.2%) and YOY they rose by 3.5% vs est of 3.2%. Atlanta Fed Business Inflation Expectations, the October survey showed a slight increase in expected inflation from 2.2% in Sept to 2.3% in October.

Wholesale Inventories: The Final August Reading was revised upward from the preliminary release of 0.8% to 1.0%. This will cause many to increase their 3rd QTR GDP guestimates. 

Small Business Optimism: The September NFIB Index came in at a very robust 107.9 which is just off of August's all time high of 108.8 and is the third highest reading in history. 38 percent of business owners reported job openings they could not fill in the current period, while 61 percent reported hiring or trying to hire, with 87 percent of those reporting few or no qualified workers. A record net 37 percent of owners reported raising overall compensation, up 5 points from August and surpassing the previous record of net 35 percent set in May.

Economic Optimism: The Investor's Business Daily TIPP report jumped to a reading of 57.8 in October vs expectations of 54.6.

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.
 

By Taff Weinstein at

Could more Homes hit the Market?

The biggest issue with the housing market over the past couple of years is that it has been heavily slanted towards a "sellers' market with very low and in some cases, no inventory available in many areas of the country.

But, could this be the start of some relief for those that have been looking to buy a home?  A recent survey by the National Association of Realtors showed that more and more homeowners think now is a good time to sell.

The survey found that 77% of Americans think now is a good time to sell. Half of the respondents strongly believe now is a good time to sell, up from a 46% share in the second quarter, while 27% moderately believe this is the right time, down from 29% last quarter.

Homeowners in the West (85%) and those who currently own a home (82%) were most likely to have the sentiment. Only 22% believe that now is not a good time to sell, down from 29% in the previous quarter.

NAR Chief Economist Lawrence Yun said several consecutive years of strong home price growth are enticing homeowners to consider selling.

“Though the vast majority of consumers believe home prices will continue to increase or hold steady, they understand the days of easy, fast gains could be coming to an end. Therefore, more are indicating that it is a good time to sell, which is a healthy shift in the market,” he said.

Source: Housing Opportunities and Market Experience Survey - NAR

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost -75 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move higher for the week, they also reached their highest levels in over 7 years.

Overview:  Mortgage backed securities sold off (higher rates) due to a very "hawkish" tone from the Fed, very strong economic data (ISM Services) and very strong Jobs data - even with weather related (hurricane) headwinds.

Jobs, Jobs, Jobs:
Non Farm Payrolls (NFP) September 134K vs est of 185K
NFP August revised from 201K to 270K
NFP July revised from to 147K to 165K
The rolling three month average is now a healthy 190K
Wages:
Average Hourly Earnings YOY 2.8% vs est fo 2.8%
Average Hourly Earnings MOM 0.3% vs est of 03%
Unemployment:
The national Unemployment Rate is 3.7% vs est of 3.8%
The Participation Rate 62.7% is vs est of 62.7%

In a separate report, the September ADP Private Payrolls Employment Report showed a surge of 230K new jobs which beat out forecasts of 185K. August was revised higher from 163K to 168K.

The Talking Fed: 
Chicago Fed President Charles Evans said that he was comfortable with expectations in financial markets that the U.S. central bank will raise interest rates again in December. 
Richmond Fed President Thomas Barkin said that the U.S. economy appears strong but eventually might face shocks such as a “political crisis” or an abrupt and difficult exit by Britain from the European Union.

Fed Chair Jerome Powell spoke just one week after the Federal Reserve raised their Fed Funds Rate. He spoke at the 60th Annual National Association for Business Economics Annual Meeting in Boston. 
Overall, his tone remained "hawkish" as it has for all of his speeches since he became Fed Chair. Here are a few statements/takeaways:
• “Our best estimates, however, suggest that so long as inflation expectations remain anchored, a modest steepening of the Phillips curve would be unlikely to cause a significant rise in inflation or demand a disruptive policy tightening. Once again, the key is the anchored expectations.”
• "This historically rare pairing of steady, low inflation and very low unemployment is testament to the fact that we remain in extraordinary times. Our ongoing policy of gradual interest rate normalization reflects our efforts to balance the inevitable risks that come with extraordinary times, so as to extend the current expansion, while maintaining maximum employment and low and stable inflation.”
• Powell expresses confidence that low unemployment won’t spur a takeoff in prices that would force the Fed to hike interest rates aggressively.
• One key quote: “The rise in wages is broadly consistent with observed rates of price inflation and labor productivity growth and therefore does not point to an overheating labor market"
• Another: "Our course is clear: Resolutely conduct policy consistent with the FOMC’s symmetric 2 percent inflation objective, and stand ready to act with authority if expectations drift materially up or down"
• And finally: "So long as inflation expectations remain anchored, a modest steepening of the Phillips curve would be unlikely to cause a significant rise in inflation or demand a disruptive policy tightening"
• Powell doesn't offer any hints at how high rates might go this cycle 

ISM Services: Can we say "blockbuster"? The September reading hit its highest level in 20 years!!! This report represents MORE than 2/3 of our economic engine.

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.

By Taff Weinstein at

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.

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