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By Taff Weinstein at

New Home Sales Pop

New Home Sales were much stronger than market expectations and consensus forecasts.

February sales jumped to an 11-month high as new home sales hit 667,000 units on an annualized pace, this was 4.9% higher than January's pace and 0.6% from this time a  year ago.

At the current sales rate, it would take 6.1 months to exhaust the available supply of homes. Over many decades, 6 months of supply has been the amount that’s generally considered a sign of a market evenly balanced between supply and demand.  Inventory dropped 0.6 percent from revised January figures to 340,000, and rose 13.3 percent from a year earlier.

The median price of a home sold during the month was $315,300, which is up 3.8% from January.  The Average Sales Price moved up to 379,000.

Lower mortgage rates, low employment and solid wage growth are all factors that are driving up sales for both Existing and New Homes.

Source: U.S. Census Bureau

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) lost just -2 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways compared to the previous week, keeping the lowest rates of 2019 alive and well.

Overview:  Mortgage rates remained at or near their lowest levels of 2019 as concerns over multiple failed votes on Brexit continued to keep money pouring into the safe-haven of U.S. bonds.  That added demand for our debt pushes rates lower.  We had very tame inflationary data (PCE) but very strong manufacturing, GDP and consumer sentiment which would normally be a factor in pushing rates higher.

Inflation Nation: The Fed's Key measure of inflation, PCE (Personal Consumption Expenditures) YOY (Year-over-Year) Core (Ex-Food and Energy) was lighter than expected, coming in at 1.8% vs est of 1.9%. However, the prior month was revised upward from 1.9% to 2.0%, so really it was a match. The Headline PCE YOY matched expectations with a 1.4% increase and the prior month moved up from 1.7% to 1.8%. We had a big miss on Personal Spending which showed MOM increase of only 0.1% vs est of 0.3% and Personal Income hit 0.2% vs est of 0.3%

Manufacturing: The March reading for the bell-weather Chicago PMI was lighter than expected (58.7 vs est of 61.0). However, ANY reading above 55 is VERY robust growth.

Consumer Sentiment: The final reading of the University of Michigan's Consumer Sentiment Index for March was revised upward from 97.8 to 98.4 which is the strongest reading since October.

Taking it to the House:  New Home Sales MOM hit 667K vs est of 620K. Plus, January was revised upward from 607K to 636K. February Pending Home Sales were down -1.0% vs est of 0.7%. Weekly Mortgage Applications jumped up by 8.9%. Refinances increased by 12% and Purchases increased by 6.0%. February New Housing Starts were lighter than expected (1.162M vs est of 1.213M) but January was revised upward from 1.230M to 1.237M. Building Permits were close to the mark with a 1.296M vs est of 1.300M reading. The January Case-Shiller 20 Metro City Home Price Index showed a YOY gain 3.6% of vs est of 4.0%. The more comprehensive FHFA Home Price Index showed a MOM gain 0.6% of vs est of 0.3%

GDP: We got the final revision to the 4th QTR GDP and it was revised lower from 2.6% to 2.2%, however 2.2% is exactly what the market was expecting. As the BEA notes, measured from the fourth quarter of 2017 to the fourth quarter of 2018, real GDP increased 3.0 percent during the period. That compared with to an increase of 2.5 percent during 2017.

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

Existing Home Sales Jump

Existing home sales increased strongly in February, experiencing the largest month-over-month gain since December 2015, according to the National Association of Realtors®. Three of the four major U.S. regions saw sales gains, while the Northeast remained unchanged from last month.

Total existing home sales are completed transactions that include single-family homes, townhomes, condominiums and co-ops.  Total sales shot up 11.8 percent from January to a seasonally adjusted annual rate of 5.51 million in February. 

Lawrence Yun, NAR's chief economist, credited a number of aspects to the jump in February sales. "A powerful combination of lower mortgage rates, more inventory, rising income and higher consumer confidence is driving the sales rebound."

The median existing-home price for all housing types in February was $249,500, up 3.6 percent from February 2018 ($240,800). February's price increase marks the 84th straight month of year-over-year gains.

Total housing inventory at the end of February increased to 1.63 million, up from 1.59 million existing homes available for sale in January, a 3.2 percent increase from 1.58 million a year ago. Unsold inventory is at a 3.5-month supply at the current sales pace, down from 3.9 months in January but up from 3.4 months in February 2018.

Properties remained on the market for an average of 44 days in February, down from 49 days in January but up from 37 days a year ago. Forty-one percent of homes sold in February were on the market for less than a month.

Source: NAR

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) gained +50 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move lower compared to the previous week.

Overview:  Mortgage rates dropped to their lowest levels due to three main factors: Weak manufacturing data out of Asia and Europe, a very "dovish" Federal Reserve on Wednesday, and the continued train wreck that is Brexit.  The weak economic data and geo-political instability had money flowing into the safe-haven of our U.S. bonds.

 

The Talking Fed:  As expected, they kept their key interest rate unchanged.  However, they certainly had a more "dovish" tilt to their outlook compared to their last projections in December.
They had three key releases last week:
Read the Official Fed Policy Statement 
Read their Economic Projections here.
Read their Balance Sheet Normalization plans here.
Here are some key points:

  • Fed leaves rates unchanged, says economic growth has slowed form Q4, even as labor market still strong, job gains solid
  • As expected, the Fed will taper its balance-sheet rolloff, sees it ending by the of September
  • Fed signals no rate hike this year with one increase in 2020
  • 11 officials for zero 2019 hikes, four for one hike
  • Federal Open Market Committee still sees a sustained economic expansion, strong labor market conditions, and inflation near 2% objective as the most likely outcomes; will be “patient” in determining what rate moves may be appropriate, given global economic and financial developments and “muted” inflation pressures.
  • Says overall inflation on a 12-month basis has declined, largely due to lower energy prices, while core gauge remains close to 2 percent; now says market-based measures of inflation compensation have remained low in recent months; continues to see survey-based measures of longer-term inflation expectations as little changed
  • The Committee intends to continue to allow its holdings of agency debt and agency mortgage-backed securities (MBS) to decline, consistent with the aim of holding primarily Treasury securities in the longer run.
    • Beginning in October 2019, principal payments received from agency debt and agency MBS will be reinvested in Treasury securities subject to a maximum amount of $20 billion per month; any principal payments in excess of that maximum will continue to be reinvested in agency MBS.
    • Principal payments from agency debt and agency MBS below the $20 billion maximum will initially be invested in Treasury securities across a range of maturities to roughly match the maturity composition of Treasury securities outstanding; the Committee will revisit this reinvestment plan in connection with its deliberations regarding the longer-run composition of the SOMA portfolio.
    • It continues to be the Committee's view that limited sales of agency MBS might be warranted in the longer run to reduce or eliminate residual holdings. The timing and pace of any sales would be communicated to the public well in advance.

Taking it to the House: A block-buster Existing Home Sales Report for February with one of the largest monthly gains on record. 5.510M annualized units beat out estimates of 5.10M and represents a 11.2% MOM gain. The March NAHB Housing Market Index remained at 62, the market was expecting 63. Any reading above 50 is positive and above 60 is 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.

By Taff Weinstein at

Rents Move Higher Making Owning more Attractive

Monthly rental payments for both single-family homes and multifamily apartments are now rising at the fastest pace in nearly a year, according to Zillow.

The median monthly rent in February came in at $1,472, an increase of 2.4 percent compared with February 2018. For the typical renter, this means about $400 more a year. 

Of course all real estate is local, with rents now significantly higher than a year ago in Orlando, Florida (+7.0 percent), Phoenix (+6.8 percent), Riverside, California (+6.2 percent), Tampa, Florida (+5.5 percent) and Pittsburgh (+4.9 percent). Rents in New York City have seen no effect from Amazon’s decision not to build a new headquarters there. Rents in Northern Virginia, where Amazon is still on track to hire thousands of employees, are expected to rise, as home sales and prices are already getting a boost from investors.

The priciest major metro in the country remains San Jose, Calif., at $3,547 in February, up 1.4 percent from a year earlier. It’s followed by San Francisco at $3,448 a month (up 1.6 percent), Los Angeles at $2,835 a month (up 3.5 percent), San Diego at $2,643 a month (up 4.2 percent) and New York at $2,419 (up 1.2 percent).

Source: Zillow Research

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) gained +10 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways compared to the previous week.

Overview:  Once again, we had some moderate to very strong domestic economic data that would normally be a force that causes MBS to sell off and cause mortgage rates to rise.  But geo-political concerns provide enough global fear to keep demand levels for our bonds at very lofty levels which kept rates at very low levels.  Great Brittan couldn't get their Brexit plans passed and the best they could do after two failed votes last week was to delay their divorce from the Eurozone.

Jobs, Jobs, Jobs: Wow...another new record! The January Job Openings and Labor Turnover Survey (JOLTS) showed 7.581M unfilled positions which beat out estimates calling for a very high level of 7.310M. Per the BLS, the number of Unemployed is 6.2M...so there are 1.381M MORE JOBS THAN THERE ARE PEOPLE LOOKING FOR JOBS.

Inflation Nation: The Feb Headline Consumer Price Index YOY was lighter than expected (1.5% vs est of 1.6%). Core (Ex Food and Energy) YOY hit 2.1% vs est of 2.2%. Prices fell in prescription drugs and auto prices but shelter costs moved up 3.4% YOY. 

Consumer Sentiment: The Preliminary March University of Michigan's Consumer Sentiment Index was much higher than expected (97.8 vs est of 95.3) and a big improvement over Feb's final reading of 93.8

Central Bank Palooza: The Bank of Japan kept their key interest rate at -0.1%.

Taking it to the House: New Home Sales for January hit 607K vs est of 620K. But December was revised upward fro 621K to 652K. Weekly Mortgage Applications rose by 2.3%. Purchases increased by 4.0% but Refinances fell by -0.2%.

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

Which Time Zones Have the Most Affordable Housing?

Every year when some states "spring forward" like they did this weekend, the national conversation always turns to "daylight savings time" and if we should keep that system in place.   But we thought it would be a good opportunity to focus on housing affordability in the different time zones.

What is "Affordability"?  Well Nerd Wallet calculated it by comparing median household incomes and median home prices, assuming a 20% down payment. A place with high incomes and low home prices is more affordable for buying a home than an area with low incomes and high home prices.

Each quarter, NerdWallet calculates the home affordability for 178 metropolitan areas, matching the list of metros for which the National Association of Realtors publishes median home prices. This quarter, NerdWallet sorted the metro areas by time zone, slicing the contiguous United States roughly into fourths. There were big differences in affordability of homes among time zones.

No surprise as cities in the Pacific time zone have the least-affordable housing in the country, and the Central time zone has the most-affordable housing.  

Here is a great example of a least affordable area:
San Jose-Sunnyvale-Santa Clara, California - Pacific Time Zone
Median home price: $1,250,000
Median household income: $117,474
Principal and interest payment: $5,313 (54.3% of monthly income)
This is the only one of the 178 metro areas with a median house price in the seven figures. A buyer of a typical home, after making a 20% down payment, would get a mortgage of $1 million. Just the principal and interest on the mortgage would cost the typical family more than half its monthly income.

Here is an example of a most affordable area:
Most affordable: Decatur, Illinois - Central Time Zone
Median home price: $89,300
Median household income: $51,970
Principal and interest payment: $380 (8.8% of monthly income)
This central Illinois city had the lowest median house price among the 178 metro areas that the National Association of Realtors tracks. Decatur’s population declined 5.2% from 2010 to 2017, and buyers don’t seem to be in a hurry to take advantage of low house prices. Those factors make Decatur more of a buyer’s market than other metros mentioned in this article. At the end of the fourth quarter of 2018, half the homes listed for sale in Decatur had been on the market for more than 108 days. For the entire United States, the median number of days on market was 80.

Source: Nerd Wallet, WCPO Cincinnati

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) gained +44 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move lower compared to the previous week.

Overview:  We had very strong economic data with ISM Services (2/3 of our economy) hitting their 4th best level in 20 years and Average Hourly Earnings beating out estimates with a YOY gain of 3.4%.  But concern over Brexit, China Trade and very weak economic data out of Europe, pushed MBS prices higher which inversely pushes mortgage rates lower.

Jobs, Jobs, Jobs: We got the Big Jobs report on Friday and while the headline Non-Farm Payroll missed, overall it was very strong.
Here is the tale of the tape:
Jobs: February Non Farm Payrolls (NFP) were much lighter than expected with a reading of 20K (not a typo) vs estimates in the 180K range. However, everyone expects that to be revised upward by 50K to 100K next time around.
January NFP were revised upward from 304K to 311K
December NFP were revised upward from 222K to 227K
The more closely watched rolling three month moving average is now 186,000 which is extremely solid.
Wages:

Average Hourly Earnings YOY rose by 3.4% vs est of 3.3%
Average Hourly Earnings MOM rose by 0.4% vs est of 0.3%
The national average hourly rate rose by 11 cents and is now $27.66
Employment:
The Unemployment Rate dropped from 4.0% in January to 3.8% in February, the market was expecting 3.9%.
The number of unemployed persons decreased by 300,000 to 6.2 million.
The Labor Force Participation Rate remained at 63.2%

ISM Services: Wow, the February ISM Non Manufacturing had the 4th best reading in 20 years and handily beat market expectations (59.7 vs est of 57.3). This is more important than last week's ISM Manufacturing release as this represents more than 2/3 of our economy.

Taking it the House: January Building Permits were higher than expected (1.345M vs est of 1.289M) and New Housing Starts also beat out estimates (1.230M vs est of 1.197M).

Central Bank Palooza: The European Central Bank kept their key interest rate at 0.00% but came out with a much more dovish approach. ECB President Mario Draghi went full-dove and admitted that its forecasts were way off and revised 2019 growth expectations "substantially" lower (from 1.7% to +1.1%) and slashed all inflation forecasts with 2019 GDP at 1.1% vs their original expectations of 1.7% and inflation of 1.2% vs original "guestimates" of 1.6%.

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

Pending Home Sales Jump

Pending home sales rebounded strongly in January, according to the National Association of Realtors®. All four major regions saw growth last month, including the largest surge in the South.

The Pending Home Sales Index is a forward-looking indicator based on contract signings.  It increased 4.6 percent to a reading of 103.2 in January which is up significantly from December's reading of 98.7.

Lawrence Yun, NAR chief economist, had expected an increase in January home sales. “A change in Federal Reserve policy and the reopening of the government were very beneficial to the market,” he said.

Yun also said “Homebuyers are now returning and taking advantage of lower interest rates, while a boost in inventory is also providing more choices for consumers.”

Additionally, Yun noted year-over-year increases in active listings from data at realtor.com to illustrate the potential rise in inventory. Denver-Aurora-Lakewood, Colo., Seattle-Tacoma-Bellevue, Wash., San Diego-Carlsbad, Calif., Los Angeles-Long Beach-Anaheim, and Nashville-Davidson-Murfreesboro-Franklin, Tenn., saw the largest increase in active listings in January compared to a year ago.

Yun says positive pending home sales figures in January will likely continue. “Income is rising faster than home prices in many areas and mortgage rates look to remain steady. Furthermore, job creation will help lift home buying.”

Source: National Association of Realtors

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) lost -33 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move higher compared to the previous week.

Overview:  We had a very big week for economic data with stronger than expected 4th QTR GDP and very solid manufacturing and income readings.  Mortgage backed securities moved lower (higher mortgage rates) due to some perceived positive momentum in U.S./China trade talks, strong economic data and the Federal reserve which continued to make it clear that they are open to raising rates if economic growth continues (the markets had discounted any interest rate hikes for all of 2019)

GDP: We finally got the Preliminary (will be revised several times) GDP report for the 4th QTR which was delayed due to the government shutdown and it came in much better than expected with a solid growth rate of 2.6% vs estimates in the 1.8% to 2.3% range. 4th QTR 2017 to 4th QTR 2018 is now 3.1% and the calendar year is at 2.9%. Either way you slice it, its a solid 3.0% growth rate for 2018.

Inflation Nation: The Fed's primary measure of inflation was released and it remained just a smidge below their 2% target rate with a reading of 1.9%. The December Personal Income was more than double the market estimates (1.0% vs est of 0.4%). Personal Spending for December was -0.5% vs est of 0.3%. No one believes that number as it coincides with the same department that released the awful Retail Sales report for that same period which has been proven to be wrong by every possible metric available. 

Manufacturing: The bell-weather Chicago PMI was a block-buster, coming in at 64.7 vs est of 57.0. Any reading above 50 is expansionary and readings above 60 are extremely strong.The February ISM Manufacturing reading was lighter than expected (54.2 vs est of 55.5) and a pull back from January's level of 56.6. But any reading above 50.0 is expansionary.

Taking it to the HouseWeekly Mortgage Applications increased by 5.3%. Purchase applications were up 6.0% and Refinances were up 5.0%. January Pending Home Sales were much better than expected with a nice gain of 4.6% vs est of only 0.4%.

The Talking Fed: Fed Chair Powell gave his semi-annual monetary report to the Senate and House committees on Tuesday and Wednesday. There were really no surprises as the Fed Chair basically reminded everyone that we are at or near full employment and are at nor near their target interest rate and that the economy is growing at a moderate pace. The only two points that he made that were interesting (but did not move bond prices) were:
- “The idea that deficits don’t matter for countries that can borrow in their own currency I think is just wrong,” (which was a jab at the MMT "Modern Monetary Theory" that the government can just borrow at will to fund Social Security and free college for everyone, etc).
- "We will continue to use our administered rates to control the policy rate, with an ample supply of reserves so that active management of reserves is not required. Having made this decision, the Committee can now evaluate the appropriate timing and approach for the end of balance sheet runoff." (which follows the same trend as recent remarks about lightening up on the pace of shrinking the balance sheet).

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

Mortgage Delinquency Rates Continue to Drop

In yet another sign of a stable and even vibrant housing market, more and more homeowners are current on their mortgage payments.

According to Black Knight Inc.'s First Look at January 2019 mortgage data, mortgage payment delinquencies continued to improve with a 3.45% drop month-over-month and a 12.93% decline year-over-year down to a rate of only 3.75% (based on loans 30 days or more past due but not in foreclosure). That represents a total of 1,945,000 homes.

The highest non-current percentages were in Mississippi (10.10%), followed by Louisiana (7.96%), Alabama (6.75%), West Virginia (6.42%), and Arkansas (6.04%). These states, except West Virginia, are also in the top 5 for serious (90+ days) delinquencies along with Delaware.

The states with the largest deterioration of non-current percentage in the past 6 months are DC, Nebraska, Illinois, South Dakota, and Iowa.

Colorado posted the smallest non-current percentage at 1.82% followed by Oregon (2.03%), Washington (2.15%), Idaho (2.20%), and Utah (2.45%).

Source: Black Knight First Look

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) gained just +10 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways compared to the previous week.

Overview:  Mortgage backed securities moved in a very well defined and tight range. We had strong housing data but the markets focused on the Fed and on Trade.  The Federal Reserve released their Minutes from their last FOMC meeting and it really didn't contain any surprises for bond traders.  Trade meetings in D.C. appeared to be making progress, particularly near the end of the week.

Taking it to the House: January Existing Home Sales came in at 4.94M units vs est of 5.00M. So a slight miss but December was upgraded from 4.99M to 5.00M. The median existing-home price for all housing types in December was $253,600, up 2.9 percent from December 2017 ($246,500). December’s price increase marks the 82nd straight month of year-over-year gains.  The February NAHB Housing Market Index was much stronger than expected, shooting up from 58 in Jan to 62 in Feb. The market was expecting a reading of 59. Any reading above 50.0 is positive. All regions, with the exception of the North East, had positive gains.

The Talking Fed: We got the Minutes from the last FOMC meeting. Here are a few highlights:
• Almost all participants thought that it would be desirable to announce before too long a plan to stop reducing the Federal Reserve's asset holdings later this year.
• The Fed will remain patient in light of ambivalent economic and market data.
• The Fed's outlook for the economy and the policy rate have both become more uncertain
• Keeping the current policy rate for now "posed few risks"
• As various Fed speakers noted recently, higher than expected inflation may be a requirement for more rate hikes
• The Fed was worried that the dot plot -which has become a Fed forecasting farce - is being "misinterpreted."
• Many participants commented that upward pressures on inflation appeared to be more muted than they appeared to be last year despite strengthening labor market conditions and rising input costs for some industries.

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

Millennials Would Do Anything To Own A Home (Literally)

There isn't a lot American millennials wouldn't do to have a chance at owning a home some day.

According to a survey of 500 millennials conducted by OnePoll, nearly half of millennials would swear off Instagram forever, and one in four would be willing to spend a week in jail, if it would help them one day achieve the American dream of owning their own home.

So how badly do they want to own a home?  Well, check out this complete rundown of responses from the survey:

In a sign of how desperately out of reach most millennials consider homeownership to be, some 30% of respondents said they felt they had a better chance of dating an A-list celebrity than ever owning their own home. Meanwhile, 40% of respondents said they felt homeownership is "completely out of the question" unless they inherit property from their parents, and 42% said they would like to buy a home, but they simply can't afford it. Nearly half of respondents believe that buying a home would be more difficult now than it was 30 years ago. In a similar vein, only 8% of millennials disagreed with the belief that life is harder now than it was for Baby Boomers.

Source: OnePoll

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) lost -21 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move higher compared to the previous week.

Overview:  We had very robust jobs data with a record setting JOLTS report but a big miss in Retail Sales.  But it wasn't the economic data that moved pricing lower, it was news that another government shut down was averted as well as positive momentum with the trade talks with China.

Consumer Sentiment: The February University of Michigan's Consumer Sentiment Index was much stronger than expected, hitting 95.5 vs est of 93.0 and a nice rebound from January's final reading of 91.2

Retail Sales: This is data that was supposed to be released during the government shutdown...they should not have let it out at all as it was awful. December headline Retail Sales dropped by -1.2% vs est of a gain of 0.2%. When you strip out autos, Retail Sales were down by -1.8% vs est of 0.1%.

Inflation Nation: The January Consumer Price Index was a little hotter than expected with the Headline YOY reading coming in at 1.6% vs est of 1.5%. However, that is a decline from December's pace of 1.9%. The Core (Ex food and energy) YOY CPI reading also edged out estimates (2.2% vs est of 2.1%) and matched December's pace.The January Producer Price Index was a mixed bag, certainly very tame though. PPI YOY Ex Food and Energy was higher than expected (2.6% vs est of 2.5%), but the headline PPI YOY was only 2.0% vs est of 2.1% and a lot lower than the last reading of 2.5%.

Jobs, Jobs, Jobs: The December Job Openings and Labor Turnover Survey (JOLTS) had its highest reading ever on record showing more than 7.335M open positions....just waiting for someone with the right skill set. There are now 800K more jobs avail then their are people unemployed in America. 

Small Business Optimism: The January NFIB Index dropped from 104.4 in December down to 101.2 in January but that is still positive territory for the index. The 35 day government shutdown was cited as the main contributor to the decline in optimism.

The Talking Fed: Fed Chair Jerome Powell said “Data at the national level show a strong economy. Unemployment is near a half-century low, and economic output is growing at a solid pace,” Powell said. “But we know that prosperity has not been felt as much in some areas, including many rural places,” like the counties of the Mississippi Delta where he was speaking.

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 Big Reason Inventory is Low

While home sales have been very steady and strong, there is one key roadblock that is keeping a lid on further gains in sales.  Inventory.  The lack of available homes for sale has severely restricted the ability for many to find a home (at any price).   There are many reasons for such a tight supply, in today's article, we will focus on Seniors....yes Seniors.

With people living longer and more productive lives, they are choosing to stay in their homes longer than ever before with Freddie Mac estimating that over 1.6 million homes that would otherwise be available as inventory....is locked up by older generations.

Freddie Mac found that seniors born after 1931 are staying in their homes longer, and aging in place. The result is higher homeownership rates for this group relative to previous cohorts. They estimate that this trend accounts for about 1.6 million houses held back from the market through 2018, representing about one year’s typical supply of new construction, or more than half of the current shortfall of 2.5 million housing units estimated in Freddie Mac's December’s Insight. This additional demand for homeownership from seniors will increase the relative price of owning versus renting, making renting more attractive to younger generations. However, a shortfall of new construction puts upward pressure on both house prices and rental rates.

Why are seniors holding on to their homes? The pattern is explained by a few key factors, such as better health and higher levels of education in more recent cohorts. This pattern is likely to increase over time as improvements in health care and technology make aging in place easier (for example, the ability to Skype with a doctor).

Source: Freddie Mac

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) gained +13 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways compared to the previous week.

Overview:  We had a fairly quite week with rates holding steady and at very low levels.  The biggest economic report of the week (ISM Services) showed solid growth but several key members of the Federal Reserve had speeches which more than indicated that the Fed would stand pat on taking any action in the near term. 

ISM Services: The January ISM Non-Manufacturing PMI representing about 2/3 of our economic output hit 56.7 vs est of 57.1. It is one of the lower readings in 2 years but still considered very robust since it is above 55.0. Part of the miss is due to the nice upper revision to December from 57.6 to 58.0

The Talking Fed: Fed Chair Powell said income inequality and sluggish productivity are the biggest challenges of the next decade but he did not discuss anything new about monetary policy. Dallas Fed President Robert Kaplan said that U.S. interest rates are currently “in the neighborhood” of a neutral level, and the Fed should not be using monetary policy to stimulate the economy, or to slow it, at this point. St. Louis Fed President James Bullard said that the U.S. Federal Reserve’s interest rate increase in December likely tipped monetary policy into slightly restrictive territory, a step beyond the neutral level policymakers had hoped to hit.

Factory Orders: The November U.S. Factory Orders were lighter than expected (-0.6% vs est of +0.2%) but were a nice improvement over October's pace of -2.1%.

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

New Home Sales Jump

Sales of new single-family houses in the United States jumped 16.9 percent from the previous month to a seasonally adjusted annual rate of 657 thousand in November of 2018.

It is the strongest reading since March 2018, supported by higher sales in the South, the Midwest and the Northeast. New Home Sales in the United States averaged 650.36 Thousand from 1963 until 2018, reaching an all time high of 1389 thousand in July of 2005 and a record low of 270 thousand in February of 2011.

The median sales price of new homes sold was $302,400 in November, below $ 343,400 in the same month of the previous year. The average sales price also fell to $362,400 from $388,500 a year ago.

The stock of new houses for sale edged up 0.6 percent to 330 thousand in November. This represents a supply of 6 months at the current sales rate.

Source: U.S. Census Bureau

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) gained +47 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move lower compared to the previous week.

Overview:  Mortgage backed securities which control mortgage rates, moved higher for the week (mortgage rates moved lower) on concern over a second government shutdown and a much more "dovish" Fed that market participants interpreted that they would not move on rates for at least six months (but that is not what the Fed said).  But bonds moved off of their best levels in response to a very strong jobs report as well as a very strong manufacturing report on Friday.

Government Shutdown Showdown: President Trump reached an agreement with the Democratic leadership and announced that he would agree to temporarily reopening the government for only 3 weeks and back pay would be going to government employees very quickly. Whether the 3 weeks turns into longer depends on the works of a new commission that is required to be formed as part of this deal to review all the data and proposals from agencies involved in border security. If the works of this commission lead to a new homeland security budget/bill that does include enhanced (wall) security then most likely the government will remain open past the three week period. But if not, it could be another shutdown ahead.

The Talking Fed: The FOMC kept their key interest rate unchanged in the 2.25% to 2.50% range. 
They also spent a lot of time communicating to the markets their view of using their balance sheet as a monetary policy tool. 
Here are a couple of key highlights from the policy statement:
• They are and are going to be "patient" on any further action. "In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.''
• The case for raising interest rates has "weakened" 
• The Fed removes a statement about "some further gradual increases."
• The line about "balance of risks" is also removed, replaced by a line about policy "patience amid muted inflation and global economic and financial developments."
• The Committee continues to view changes in the target range for the federal funds rate as its primary means of adjusting the stance of monetary policy.....but
• The Committee would be prepared to use its full range of tools, including altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate. 
• The U.S economy is growing well but there are headwinds from overseas.
• Labor market strengthened, unemployment remained low
• Spending grew strongly, investment moderated
• Core and Headline inflation "muted" and likely to remain near 2% 
During Fed Chair Powell's live press conference, he said the government shutdown will have an "imprint" on the 1st QTR GDP but that “We don’t know the ultimate resolution of it. If that’s all there is and the shutdown is gone and there isn’t another shutdown, we’ll get most of [the lost growth] back in the second quarter.” He also said that the Brexit outcome could have major market implications.

Jobs, Jobs, Jobs: Big Jobs Friday is here. Lets look at the Tale of the Tape!
Jobs: 
Non Farm Payrolls for January hit 304K vs est of 165K.
December was revised from 312K down to 212K
November was revised from 176K up to 196K
The more closely watched 3 month moving average is a robust 241K!!!
This is now the 100th consecutive month of job gains!!!

Wages:
The Average Hourly Earnings YOY remained at 3.2% which matched December's pace and market estimates.
The Average Hourly Earnings rose by 3 cents and is now $27.56 
Unemployment:
The survey rate ticked up from 3.9% to 4.0%. The market was expecting 3.9%
The Participation Rate increased from 63.1% to 63.2%

Manufacturing: The January ISM Manufacturing Index hit 56.6 vs est of 54.2. Prices Paid came in at 49.6 vs est of 54.5.

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

Thinking of Donating a House?

Donating a house comes with a bunch of benefits not only to the charity of your choice, but to you, too. Here are the main ones to consider:

  • Getting a major tax deduction: This one's the biggie. According to Chris DiLorenzo, a certified public accountant with Nussbaum Yates Berg Klein & Wolpow in New York City, you may be able to use the cost basis of your home (its value when you purchased it originally) as the amount of your charitable deduction. This allows you to take a deduction of up to 60% of your adjusted gross income. If you take your deduction based on the appreciated basis, which is the value of your home right now, your deductions are limited to 30% of your adjusted gross income. It's a bit complicated, so talk to your trusted financial advisers before moving forward.
  • Avoiding capital gains taxes: "You can avoid capital gains taxes on the appreciated value of the house, and the charity can also avoid those taxes," says Josh Zimmelman, president of Westwood Tax & Consulting in Rockville Centre, NY. "Your donation is worth more than if you sold the home yourself and donated the proceeds after taxes."
  • Minimizing estate taxes: Transferring your property to a charity instead of leaving it to someone in your will removes your property from your estate, saving money on estate taxes, according to Zimmelman.
  • Making a difference: Donating a house allows you to make a sizable donation that might not otherwise be possible, and you can do it without the hassle and stress that typically goes with a home sale.


How to donate a house

Donating a house is a bit more complex than other types of donations, but it doesn't need to be daunting. Here are the steps to ensure you have a smooth home donation process:

  1. Talk with your donor organization. To take a tax deduction from donating a house, it would need to go to a 501(c)(3) organization. Once you confirm your organization's status, ask if it would like a home donation. Some organizations will be thrilled to receive your home donation. For other organizations, though, a home donation may not be a good fit due to the cost involved in maintaining or selling the home.
  2. Get a professional appraisal. "You want an appraisal in order to give credence to the value of the home you would be giving," says James G. Aaron, attorney and partner at Ansell Grimm & Aaron in Ocean, NJ. "You're going to want to take [the donation] as a tax deduction, and you want it to pass muster with the IRS." Although you can look up your property value online or through your local municipality, a professional appraisal may give you a higher value and lends your appraisal more weight if your donation comes under scrutiny. Your donor organization may require a professional appraisal as well.
  3. Talk to your advisers. A tax adviser can guide you regarding the potential tax benefits of your deduction. DiLorenzo recommends taking an estimate of the fair market value, a record of your purchase date and the original cost of the property, and the amount you've spent on capital improvements to your adviser meeting.
  4. Pay off your mortgage. If you haven't already, consider paying off your mortgage. This simplifies the donation process immensely and keeps the receiving organization from having to pay unrelated business income tax if they sell the property. In general, it's best for all parties involved to donate a home with a clear mortgage, but if this isn't possible or realistic, talk to your advisers and the donor organization to find out the best path for proceeding with the donation.
  5. Sign over the property and get a receipt. Once everyone is on the same page, proceed with the property transfer. Coordinate with the donor organization regarding utilities and any belongings that need to be removed from the home. Be sure to get documentation of your transaction from the donor organization.
Source: Realtor.com

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) lost just 3 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways compared to the previous week.

Overview:  We had a holiday-shortened week with very little economic data that was released.  Bond across the board moved sideways as uncertainty over the Government Shutdown, China trade talks and a looming Fed meeting kept traders in a tight range, unwilling to move out of their positions (or add to them).

Government Shutdown Showdown: President Trump reached an agreement with the Democratic leadership and announced that he would agree to temporarily reopening the government for only 3 weeks and back pay would be going to government employees very quickly. Whether the 3 weeks turns into longer depends on the works of a new commission that is required to be formed as part of this deal to review all the data and proposals from agencies involved in border security. If the works of this commission lead to a new homeland security budget/bill that does include enhanced (wall) security then most likely the government will remain open past the three week period. But if not, it could be another shutdown ahead.

Central Bank Palooza:  Both the Bank of Japan and the European Central Bank held their respective interest rates and announced no new significant policy changes.

Jobs, Jobs, Jobs: Initial Weekly Jobless Claims were much lighter than expected (199K vs est of 220K). This was one of the lowest readings in 50 years...despite furloughed Federal Workers up 15K to a total of 25K. The more closely watched 4 week moving average dropped to 215K.

Taking it to the House: December Existing Home Sales were lighter than expected (4.99M units on an annualized basis vs est of 5.25M). But that doesn't mean it was a bad report. Actually, there were many very strong components of the report. The median existing-home price for all housing types in December was $253,600, up 2.9 percent from December 2017 ($246,500). December’s price increase marks the 82nd 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.

By Taff Weinstein at

Foreclosures at lowest level since 2005

In yet another encouraging housing report, foreclosure filings are down by 78% from a peak in 2010, hitting its lowest level since 2005.

According to a new study released by ATTOM Data Solutions, foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 624,753 US properties in 2018, down 8% from 2017 and down 78% from a peak of nearly 2.9 million in 2010.

“Plummeting foreclosure completions combined with consistently falling foreclosure timelines in 2018 provide evidence that most of the distress from the last housing crisis has now been cleaned up,” said Todd Teta, chief product officer at ATTOM. “But there was also some evidence of distress gradually returning to the housing market in 2018, with foreclosure starts increasing from the previous year in more than one-third of all state and local housing markets.”

“Some of that distress was driven by natural disasters, most notably in Houston, where foreclosure starts increased 61%. But natural disasters do not explain the increase in markets such as Detroit, Minneapolis-St. Paul, Milwaukee and Austin — all of which posted double-digit percentage increases in foreclosure starts in 2018.”

Source: ATTOM Data Solutions

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) lost -26 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly higher compared to the previous week.

Overview:  Overall, the continued Government shutdown and the resounding defeat of the Brexit vote were very bond-friendly and supportive of low rates.  But the heightened optimism of a China/U.S. trade deal pressured bond pricing and pushed global interest rates a little higher last week.

Consumer Sentiment: The Preliminary University of Michigan's Consumer Sentiment Index was much lower than expected with a 90.7 vs 97.0 reading which is the lowest since October 2016. But this is just a preliminary reading and will be revised.

Trade War: Reports hit that at the last meeting between Chinese and U.S. trade representatives in early January, that China offered to erase the trade deficit by upping its purchase of goods from the U.S. by one trillion dollars through 2024. However, it does not appear that they have addressed/agreed to change their rampant intellectual property theft.

Taking it to the House: Weekly Mortgage Applications improved by big numbers for the second consecutive week. This time by 13.5% led by a big jump of 19.0% in Refinance Applications. Purchase Applications improved by 9.0%. The NAHB Home Builders Housing Market Index was stronger than expected with a 58 vs 56 reading.

The Talking Fed: We got the Fed's Beige Book that is prepared specifically for the use of this month's FOMC Interest Rate meeting. 
Overall, it the 12 individual Fed districts showed that the U.S. economy continues to show growth albeit at a slower clip than some recent quarters. Here are some key highlights:
- All districts noted that labor markets were tight and that firms were struggling to find workers at any skill level, the report said adding that wages gained throughout the country and across skill levels, with most districts reporting moderate pay increases.
- Economic activity increased in most of the U.S., with eight of twelve Federal Reserve Districts reporting modest to moderate growth.
- Nonauto retail sales grew modestly, as several Districts reported more holiday traffic compared with last year. Auto sales were flat on balance.
- The word "tariff" was used less times in this report. It was only mentioned 20 times vs December's count of 39 and October's level of 51.

 

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 Safest Affordable Metro Areas are........

Looking to find a safe place to live where you can still afford a great home? And wouldn't it be nice if there were even fun stuff to do after work and on weekends? Yes, indeed.

Realtor.com set out to find these seductive strongholds where you can have it all. And we're not talking about the boonies: They zeroed in on metropolitan areas, which include cities and the surrounding suburbs. 

The places that made their affordable safe harbor ranking are a mix of smaller metros that never really struggled with high crime, and cities once riddled with problems that have successfully pulled off a turnaround. Their list is concentrated on resurgent Midwest, Southern, and Rust Belt cities. No Western metros were included because home prices are simply too high.

They analyzed crime data provided by NeighborhoodScout, a website that tracks community data, focusing on America's 150 largest metros. Then, they eliminated those with high rates of violent or property crime, and with home prices above the (roughly) $300,000 national median. Next, they zeroed in on cities with great extracurricular's—running the gamut from nightlife, to kayaking, to great indie bookstores.

And the winners are:

  1. Grand Rapids, MI
  2. Pittsburgh, PA
  3. Port S. Lucie, FL
  4. El Paso, TX
  5. Syracuse, NY
  6. Hartford, CT
  7. Fayetteville, AR
  8. Springfield, MA
  9. Cincinnati, OH
  10. Fort Wayne, IN

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) lost -7 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways compared to the previous week.

Overview:  We had a week filled with Fed speak as we heard from Fed Chair Powell and several Governors and district Presidents as well as the Minutest form their last meet.  Overall, the tone was that they all still expected solid economic growth but are likely to pause for now as they wait to see how some geo-poplitical uncertainties unfold.

Inflation Nation: The December Consumer Price Index was bang-inline with market expectations with the Core (ex food and energy) YOY CPI remaining at 2.2%. The headline CPI YOY matched expectations of 1.9% which is a decline from November's pace of 2.2% but that decline was due to oil/fuel prices.

The Talking Fed: 
We got the Minutes from the last FOMC meeting there really were not any surprises as we have heard from Powell and other Fed members several times since its release. There were a "few" that argued for leaving rates alone at the December meeting but obviously they were not voting members. Discussion centered on global concern and recognition that our own economy was solid but could face some headwinds from global and national geopolitical events as well as prolonged trade war. They expressed that their rate was close to if not at neutral and that they were solidly in the "data dependent" camp now.

Small Business Optimism: The December NFIB Small Business Optimism Index remains very high, coming in at 104.4 which is very close to November's reading of 104.8. Plans to increase employment rose 1 point to a net 23 percent, while a record 39 percent of small business owners reported job openings they could not fill in the current period, up 5 points from November.

Jobs, Jobs, Jobs: The November Job Openings and Labor Turnover Survey (JOLTS) showed that there were 6.888M unfilled jobs. The market was expecting 7.063M. October was revised upward from 7.079M to 7.131M. Once again, the trend continues of having more open positions vs those looking for work.

 

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

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.

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