Entries by Taff Weinstein

By Taff Weinstein at

Top Ten Metro Migration Locations

Twenty-six percent of home searchers looked to move to another metro area in the third quarter of 2019, up from 25 percent the year before, according to a new report from Redfin. This is a new all-time high for the national share of home-searchers looking to relocate, likely driven by those leaving expensive metros in search of more affordable homes.

Moving In — Metros with the Highest Net Inflow

After two quarters at the top of our list of metro areas with the highest net inflow, Phoenix fell to number three in the rankings in the third quarter, passed by Boston at number one and Sacramento at number two. A net inflow means more people are looking to move in than leave, while a net outflow means there are more people looking to leave than people looking to move in.

Seventeen percent of homebuyers searching in the Boston metro area were looking from other metro areas in the third quarter, up from both a year earlier (12.0%) and the second quarter (14.1%). New York continues to be the top origin city for people looking to move to Boston, and Boston is the top destination for people looking to leave New York.

Moving Out — Metros with the Highest Net Outflow

The list of metros people most-often looked to leave was once again topped by New York, San Francisco, Los Angeles and Washington, D.C. in the third quarter. Net outflow is defined as the number of people looking to leave the metro minus the number of people looking to move to the metro.

Source: RedFin

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.500 MBS) lost just -7 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways compared to the prior week.

Overview:  Mortgage backed securities (which directly controls mortgage rates) moved in a very narrow range, testing an key technical support level located at the 100 day moving average all week.  This kept mortgage rates nice and steady for the week.

Retail Sales:  The headline reading for September was much lower than expected (-0.3% vs est of +0.3%).  Part of that miss was due to an upward revision to August from 0.4% to 0.6%.  When you strip out Autos, Retail Sales were down -0.1% vs est for a gain of +0.2%.  August was revised higher from 0.0% to 0.2%.

The Talking Fed: We got the Fed's Beige Book on Wednesday. You can read the official release here. 

Here are a few key highlights:

  • The economy expanded at a slight to modest pace since the prior report

  • Household spending was solid on balance.

  • Employment rose slightly amid reports of persistent worker shortages. Labor market tightness across skill levels and occupations was widely cited as a factor restraining hiring.

  • Wages rose moderately in most Districts, with upward pressure noted for lower-skill workers in the retail and hospitality industries and for higher-skill professional and technical workers.

  • Agricultural conditions deteriorated further due to the ongoing impacts of adverse weather, weak commodity prices, and trade disruptions.

Taking it to the House: Weekly Mortgage Applications increased by just 0.5%.  Refinance Applications popped by 4.0% but Purchase Applications tanked by -4.0%.  The October NAHB Housing Market Index hit 71 vs est of 68.  September New Housing Starts were lighter than expected (1.256M vs est of 1.320M) but the weakness was in multifamily.  The key housing market SFR actually made gains to 918K on an annualized basis. Building Permits were stronger than expected (1.387M vs est of 1.335M). SFR permits rose to 882K.

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

Locations Close to Public Transit Boost Home Values

Neighborhoods located within a half-mile of public transit services outperformed those in areas farther from public transit based on a number of factors, according to a report released today by the American Public Transportation Association (link is external) and the National Association of Realtors®. “The Real Estate Mantra – Locate Near Public Transportation” highlighted the critical role public transportation plays in determining real estate values, revealing that commercial and residential real estate market sales thrive when residents have mobility options close by.

The report explored seven metropolitan regions – Boston; Hartford; Los Angeles; Minneapolis-St. Paul; Phoenix; Seattle; and Eugene, OR – that provide access to heavy rail, light rail, commuter rail and bus rapid transit. Residential properties within these areas had 4-24% higher median sale prices between 2012 and 2016, the report found. Commercial property near public transit also witnessed value gains in the studied cities, where four of the regions saw median sales prices per square foot increase between 5-42%.

Transportation costs in transit-oriented areas are significantly lower than in other regions, with an average annual savings of $2,500 to $4,400 for the typical household. One in four households in close proximity to transit does not own a vehicle, according to the study.

The seven sample areas were examined by residential and commercial sales performance, rent, neighborhood characteristics, local government interventions and housing affordability.

“Public transit’s benefits go beyond moving people from point A to point B,” said APTA President and CEO Paul P. Skoutelas. “Public transportation is a valuable investment in our communities, our businesses, and our country. Public transportation gets people to jobs and educational opportunities and helps businesses attract employees and customers.”

“Access to public transportation is an extremely valuable community amenity that increases the functionality and attractiveness of neighborhoods, making nearby communities more desirable places to live, work and raise a family,” said NAR 2019 First Vice President Charlie Oppler, who spoke at Monday’s press conference along with 2019 New York State Association of Realtors® President Moses Seuram. “The results of our report, conducted over multiple years alongside the American Public Transportation Association, should reiterate to policymakers at all levels of government the importance of investing in modern, efficient infrastructure that facilitates growth and helps our nation keep pace in a rapidly evolving world.”

Neighborhoods with high-frequency public transportation are in high demand. While property values and rents have risen, contributing to healthy local economies, the rapidly increasing demand for housing near public transit has resulted in constrained housing supplies.

“As the conversation surrounding housing affordability continues, public transportation agencies are critical allies in working with elected officials and community leaders in the effort to increase housing opportunities and maximize value around stations,” said Skoutelas.

Source: National Association of Realtors

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.000 MBS) lost -72 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move higher compared to the prior week.

Overview:  Mortgage rates moved higher on "hopium".  Hope of a trade deal, and hope over a Brexit negotiation.  While both saw a lot of progress, neither one really materialized last week.

Trade War:  On Friday afternoon, President Trump said that a "substantial" Phase I deal had been reached with China and that it will be written over the next 3 week period leading up to the meeting in Chile. The Phase I deal includes major agricultural purchases by China and the tariff hike scheduled for October 15th will not happen now.  They have an agreement for transparency in FX currency. Phase II will begin right after Phase I is actually signed. 

Inflation Nation: The headline Consumer Price Index (CPI) YOY kept the same pace as last month.  The YOY number came in at 1.7% which was the same as last month.  The Core (ex food and energy) also matched last month's YOY pace with a reading of 2.4%.

Consumer Sentiment: The Preliminary UofM Consumer Sentiment Index was much higher than expected (96.0 vs est of 92.0) and is the best reading since July.

Brexit:  Hopes of a compromise increased after positive comments from after Donald Tusk, EU council president, said he had seen “promising signals” about the chance of a fresh Brexit agreement between the UK and the EU.

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 10 Zip Codes for House Flipping

According to ATTOM Data Solutions’ newly released Home Flipping Report, there were 59,876 U.S. single family homes and condos flipped during the second quarter of 2019. That number is up 12.4 percent from Q1 2019, but down 5.2 percent from Q2 2018.

The report revealed that homes flipped in Q2 2019 represented 5.9 percent of all home sales during the quarter. That number is down from a post-recession high of 7.2 percent in Q1 2019, but up from 5.4 percent in Q2 2018.

Also noted in the report, homes flipped in the second quarter of 2019 generated a gross profit of $62,700 (which is the difference between the median sales price and median paid by investors). That number is up 2 percent from Q1 2019, but down 2 percent from Q2 2018.

On a national level, the gross flipping profit of $62,700 in Q2 2019 translated into a 39.9 percent ROI compared to the original acquisition price. That number is down from a 40.9 percent gross flipping ROI in Q1 2019 and from a margin of 44.4 percent in Q2 2018. Returns on home flips have dropped six quarters in a row and eight of the last 10, now standing at the lowest level since Q4 2011.

The report states that among the 149 metro areas analyzed in the report with at least 50 home flips in Q2 2019, five had gross ROI flipping profits of more than 100 percent: Scranton, PA (134 percent); Pittsburgh, PA (132.5 percent); Reading, PA (129.3 percent); Kingsport, TN (104.1 percent) and Augusta, GA (101.1 percent).

On the zip code level, the top 10 zips to flip in Q2 2019 based on gross ROI, with at least 10 more flips during the quarter, included 49426-Ottawa County, MI (324.9 percent); 48205-Wayne County, MI (317.4 percent); 19134-Philadelphia County, PA (303.8 percent); 60617-Cook County, IL (292.9 percent); 37771-Loudon County, TN (289.5 percent); 60628-Cook County, IL (287.9 percent); 37716-Anderson County, TN (277.6 percent); 60619-Cook County, IL (262.1 percent); 32254-Duval County, FL (260.0 percent); and 19139-Philadelphia County, PA (259.7 percent).

The Q2 2019 gross flipping profit for these top 10 zips were as follows: 49426-Ottawa County, MI ($227,100); 48205-Wayne County, MI ($36,500); 19134-Philadelphia County, PA ($79,000); 60617-Cook County, IL ($123,000); 37771-Loudon County, TN ($127,375); 60628-Cook County, IL ($118,750); 37716-Anderson County, TN ($110,993); 60619-Cook County, IL ($152,000); 32254-Duval County, FL ($78,000); and 19139-Philadelphia County, PA ($120,750).

Source: ATTOM Data Solutions

 

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.000 MBS) gained +42 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move lower compared to the prior week.

Overview:  Mortgage rates moved lower after the one-two punch of weaker than expected manufacturing and services data which raised expectations for the potential of two more rate cuts by the Federal Reserve this year.  We had a very solid jobs report on Friday with a new 50 year low for Unemployment (3.5%).

Services:  The National ISM Services PMI was weaker than expected (52.6 vs est of 55.0).  While any reading above 50 is still expansionary (meaning that the services sector which accounts for 85% of our economic output, grew last month) it is the slowest rate of growth since 2016.

Manufacturing: The September National ISM Manufacturing PMI hit 47.8 vs est of 50.1 which is the lowest (worse) level since 2009.  Prices Paid hit 49.7 vs est of 45.5.

Jobs, Jobs, Jobs: We got the Big Jobs report on Friday. You can read the official BLS release here.

Here is the tale of the tape:
 

Jobs:
September Non-Farm Payrolls (NFP) increased by 136K vs expectations in the 140K to 145K range.
August NFP was revised upward from 130K to 168K
July NFP was revised upward from 159K to 166K

The more closely watched rolling three month average is 157K which is very attractive.

Wages:
The Average Hourly Earnings are $28.09
The MOM change is 0.0% vs. market expectations of 0.3%
The YOY change is 2.9% which is lower than the recent trend of 3.2%

Unemployment:

The headline Unemployment Rate dropped to 3.5%, the lowest in 50 years. The market was expecting it to remain at 3.7%.
The U6 Unemployment Rate dropped to 6.9% in a very rare appears below the 7.0% mark.  The last month was at 7.2%
The Participation Rate remained at 63.2%

The Talking Fed:  Fed Chair Powell spoke on Friday. You can read his prepared statement here.

Here are a few key sentences from the speech:

  • “Unemployment is near a half-century low, and inflation is running close to, but a bit below, our 2% objective,” Powell says without directly addressing Friday’s jobs report.
  • “While we believe our strategy and tools have been and remain effective, the U.S. economy, like other advanced economies around the world, is facing some longer-term challenges -- from low growth, low inflation, and low interest rates”.
  • “Low can be good, but when inflation -- and, consequently, interest rates—are too low, the Fed and other central banks have less room to cut rates to support the economy during downturns”.

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 Stronger than Expected

Pending home sales increased in August, a welcome rebound after a prior month of declines, according to the National Association of Realtors®. Each of the four major regions reported both month-over-month growth and year-over-year gains in contract activity.

The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, climbed 1.6% to 107.3 in August, reversing the prior month’s decrease. Year-over-year contract signings jumped 2.5%. An index of 100 is equal to the average level of contract activity.

“It is very encouraging that buyers are responding to exceptionally low interest rates,” said Lawrence Yun, NAR chief economist. “The notable sales slump in the West region over recent years appears to be over. Rising demand will reaccelerate home price appreciation in the absence of more supply.”

All regional indices are up from July, with the highest gain in the West region. The PHSI in the Northeast rose 1.4% to 94.3 in August and is now 0.7% higher than a year ago. In the Midwest, the index increased 0.6% to 101.7 in August, 0.2% higher than August 2018.

Pending home sales in the South increased 1.4% to an index of 124.4 in August, a 1.8% bump from last August. The index in the West grew 3.1% in August 2019 to 96.4, an increase of 8.0% from a year ago.

Yun noted that historically low interest rates will affect economic growth, especially home buying, going forward.

“With interest rates expected to remain low, home sales are forecasted to rise in the coming months and into 2020,” said Yun. “Unfortunately, so far in 2019, new home construction is down 2.0%. The hope is that housing starts quickly move into higher gear to meet the higher demand. Moreover, broader economic growth will strengthen from increased housing activity.”

Source: The National Association of Realtors

Mortgage backed securities (FNMA 3.500 MBS) lost just -1 basis point (BPS) from last Friday's close which caused fixed mortgage rates to remain unchanged from than the prior week.

Overview:  Mortgage rates moved sideways as speculation and sentiment towards a trade deal with China pressured rates higher while offsetting that was the geo-political uncertainty of a potential impeachment that pressured rates lower.  These two opposing forces squeezed rates to move sideways.

Inflation Nation:  The Fed's key measure of inflation, Core PCE YOY matched market expectations with a 1.8% reading in August. The pace was 1.7% in July.  The headline PCE was 1.4% vs est of 1.3%.

Income and Spending:  Personal Income continues to grow, this time by 0.4% in August.  Personal Spending grew by 0.1% which was below estimates of 0.3%.

Durable Goods:  The August Headline Durable Goods Orders was better than expected (0.2 vs est of -1.2).  Ex Transportation it grew at 0.5% vs est of 0.2%. 

Consumer Sentiment:  The final reading for the September UofM Consumer Sentiment Index was revised higher from 92.0 to 93.2

Taking it to the House:  August Pending Home Sales MOM were much better than expected with a 1.6% vs est of 0.9%. YOY they came in at +2.5% vs est of -1.9% which is a huge beat. Weekly Mortgage Applications decreased by -10.1%  led by a big drop of -15.0% in Refinance Applications.  Purchase Applications were more level at -3.0%.  New Home Sales in August shot up and beat out estimates (713K vs est of only 660K).

Gross Domestic Product: The third and final release of the 2nd QTR GDP remained at 2.0% which was widely expected.  The Price Index was revised higher from 2.5% to 2.6%, the markets were expecting it to be revised lower to 2.4%.

What to Watch Out For This Week:

Mortgage backed securities (FNMA 3.500 MBS) lost just -1 basis point (BPS) from last Friday's close which caused fixed mortgage rates to remain unchanged from than the prior week.

Overview:  Mortgage rates moved sideways as speculation and sentiment towards a trade deal with China pressured rates higher while offsetting that was the geo-political uncertainty of a potential impeachment that pressured rates lower.  These two opposing forces squeezed rates to move sideways.

Inflation Nation:  The Fed's key measure of inflation, Core PCE YOY matched market expectations with a 1.8% reading in August. The pace was 1.7% in July.  The headline PCE was 1.4% vs est of 1.3%.

Income and Spending:  Personal Income continues to grow, this time by 0.4% in August.  Personal Spending grew by 0.1% which was below estimates of 0.3%.

Durable Goods:  The August Headline Durable Goods Orders was better than expected (0.2 vs est of -1.2).  Ex Transportation it grew at 0.5% vs est of 0.2%. 

Consumer Sentiment:  The final reading for the September UofM Consumer Sentiment Index was revised higher from 92.0 to 93.2

Taking it to the House:  August Pending Home Sales MOM were much better than expected with a 1.6% vs est of 0.9%. YOY they came in at +2.5% vs est of -1.9% which is a huge beat. Weekly Mortgage Applications decreased by -10.1%  led by a big drop of -15.0% in Refinance Applications.  Purchase Applications were more level at -3.0%.  New Home Sales in August shot up and beat out estimates (713K vs est of only 660K).

Gross Domestic Product: The third and final release of the 2nd QTR GDP remained at 2.0% which was widely expected.  The Price Index was revised higher from 2.5% to 2.6%, the markets were expecting it to be revised lower to 2.4%.

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

Foreclosure Starts Hit 18 Year Low

Fintech company Black Knight has released their latest review of mortgage delinquency and foreclose starts, and the news is very positive:

  • August’s 36,200 foreclosure starts made for the lowest single-month total since December 2000

  • The number of loans in active foreclosure inventory also fell; at 253,000, it’s the fewest since 2005

  • Prepayment activity – typically a good indicator of refinance activity – continues to press upward, increasing 5% from July to reach a three-year high

  • August’s prepayment rate was up 62% from the same time last year and 2.5 times the 18-year low hit in January

Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure): 3.45%, Month-over-month change: -0.15%,Year-over-year change: -1.49%

Total U.S. foreclosure pre-sale inventory rate: 0.48%,Month-over-month change: - 2.42%,Year-over-year change: -11.46%

Total U.S. foreclosure starts: 36,200 Month-over-month change: -7.65%,Year-over-year change: -23.14%,

Monthly prepayment rate (SMM): 1.50% Month-over-month change: 5.45%, Year-over-year change: 61.77%

Foreclosure sales as % of 90+: 1.81%, Month-over-month change: 3.20%,Year-over-year change: -6.80%

Number of properties that are 30 or more days past due, but not in foreclosure: 1,813,000,Month-over-month change: 6,000,Year-over-year change: 4,000

Number of properties that are 90 or more days past due, but not in foreclosure: 444,000,Month-over-month change: 0, Year-over-year change: -62,000

Number of properties in foreclosure pre-sale inventory: 253,000,Month-over-month change: -5,000,Year-over-year change: -28,000

Number of properties that are 30 or more days past due or in foreclosure: 2,066,000 Month-over-month change: 1,000Year-over-year change: -23,000

Mortgage backed securities (FNMA 3.000 MBS) gained +35 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move a smidge lower than the prior week.

Overview: As expected, the Federal Reserve lowered their key interest rate.  However, mortgage rates were unchanged on Fed day.  This was a very "hawkish" rate cut as the Fed stated strong economic growth and actually raised their economic projections.  The biggest volatility of the week came on Friday on "news" that a Chinese Trade delegation would not be touring some American Farmer operations when they visit in October, the markets took that as a sign that negotiations were going poorly and caused mortgage rates to improve slightly on a flight to quality.

Taking it to the House: August Exiting Home Sales were stronger than expected with an annualized sales pace of 5.49M units vs expectations of 5.37M.  The median sales price rose by 4.7% on a YOY basis and is now $278,000. Housing inventory at the end of August decreased to 1.86 million, down from 1.90 million existing-homes available for sale in July, and marking a 2.6% decrease from 1.91 million one year ago. Unsold inventory is at a 4.1-month supply at the current sales pace, down from 4.2 months in July and from the 4.3-month figure recorded in August 2018. Properties typically remained on the market for 31 days in August, up from 29 days in July and in August of 2018. Forty-nine percent of homes sold in August were on the market for less than a month. Weekly Mortgage Applications were basically flat at -0.1%.  Purchase Applications jumped by 6.0% while Refinance Applications fell by -4.0%.  August New Housing Starts were much stronger than expected (1.364M vs est of 1.250M). SFR rose 4.4% for a rate of 919K. Building Permits also beat out estimates (1.419M vs est of 1.300M). SFR rose by 4.5% to an annualized rate of 866K.

The Talking Fed: You can read the Fed's official policy statement here.

They also released their Economic Projections You can read the official release here.

Here is a summary of their action:

  • They lowered their Fed Fund Rate from 2.25% to 2.00%

  • They lowered their Interest Rate  on Excess Reserves 30BPS to 1.80%

  • The vote was 7-3.  With the 2 dissenting votes wanting NO rate change and 1 dissenting vote for a larger rate cut of 50BPS instead of the 25BPS.

  • According to the “dot plot chart” of individual expectations, five members thought the FOMC should have held its previous range of 2% to 2.25%, five approved of the 25 basis point cut but keeping rates there through the rest of the year (which means that 10 out of 17 "dots" see no more cuts this year), and seven favored at least one more cut this year.

  • The committee "hung their hat" once again on “the implications of global developments for the economic outlook as well as muted inflation pressures” as the primary rationale for the cut.

  • Members actually raised their expectations for growth since the last summary of economic projections in June. The committee now sees GDP rising at a 2.2% pace this year, compared with 2.1% in June, though the longer-run expectations remain at 1.9%.

  • Inflation projections were unchanged at 1.8% for 2019 and 2.5% over the longer run.

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

Homes to be Built by Robots in the Future?

A group of Swiss researchers have their proof of concept in the DFAB House, described as "the first habitable building designed and planned using a choreography of digital fabrication methods."

The DFAB House is 3 levels and features 3D printed ceilings, energy efficient walls, timber beams assembled by robots and an intelligent home system. The house is near Zurich and was developed by a team of experts at ETH Zurich University with help from thirty industry partners. It took four years to develop and build the house, which measures 2,370 square feet and required 60% less cement than a traditional building. The DFAB House also passed stringent Swiss building codes.

This isn't the first digital fabrication project to come about, either. Chinese company WinSun demonstrated 3D printing for architectural purposes in 2014 by manufacturing 10 single story houses in one day. The next year, it printed an entire apartment building and a neoclassical mansion. The projects remain in development stages.


What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.000 MBS) lost -132 basis points (BPS) from last Friday's close which caused fixed mortgage rates to rise to their highest levels since July 11th.

Overview: Yet another round of very solid domestic economic data (Retail Sales, CPI) caused long bond traders to shift their expectations from a 50BPS Fed rate down to a 25BPS to 0BPS range.  We also saw some rare positive momentum in trade talks between the U.S. and China.  The ECB kept their interest rate the same but did announce a new round of QE but the markets don't believe that they have the ability to actually carry out their new bond buying program.  Those three areas hammered MBS pricing and drove mortgage rates higher.  

Trade War: President Trump has agreed, as a gesture of good will, to move the increased Tariffs on 250 Billion Dollars worth of goods (25% to 30%) back from October 1st to October 15th. Beijing announced that it would indeed encourage state-owned companies to begin "goodwill" purchases of US soybeans, pork and other farm goods (desperately needed by China) by issuing waivers from trade-war tariffs.  Beijing also waived import tariffs on more than a dozen US goods. Beginning Sept. 17, China will remove 25% tariffs on 16 types of US exported goods for one year - a sign of good will ahead of talks between US and Chinese trade delegations.

Retail Sales: Headline August Retail Sales came in a double market expectations of 0.4% vs est of 0.2%.  Plus the big beat in July of 0.7% was not a fluke as it was revised even higher to 0.8%.  Ex-Autos, Retail Sales were flat at 0.0%.

Inflation Nation: The August Headline Consumer Price Index (CPI) YOY increased by 1.7% vs est of 1.8%. The Core (ex food and energy) CPI YOY increased by 2.4% vs est of 2.3%

Central Bank Palooza:  The European Central Bank (ECB) kept their key interest rate at 0.0%,  However, they did lower their Deposit Rate from -0.4% down to -0.5%.  This was widely expected but the unknown was the announcement of a NEW bond buying program of $20B Euros per month of net asset purchases "for as long as it deems necessary".

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 Largest Private Land Owners Hold 40+ Million Acres

The 100 largest private landowners in the US own a combined 40 million acres, an area roughly the size of Florida.  The top ten landowning families control an area roughly equivalent in size to the state of West Virginia.

In a recent story, Bloomberg matches some of the largest landowning families with some of their flagship parcels of land.

According to BBG, the top 100 private landowners own property in 39 states. Their parcels suit a number of purposes, from investment, conservation, tax benefits or simply the bragging rights that come with owning large chunks of the US.

Their names are (units in acres):
John Malone: 2.20 million
Emmerson family: 1.96 million
Ted Turner: 1.92 million
Stan Kroenke: 1.38 million
Reed family: 1.33 million
Irving family: 1.25 million
Brad Kelley: 1.15 million
Singleton family: 1.10 million
King Ranch heirs: 0.93 million
Peter Buck: 0.93 million

Media moguls John Malone and Ted Turner own more than 4 million acres in 12 states, much of it ranch-land out west. Turner owns a herd of 51,000 bison, the largest privately owned bison herd in the world.

A popular category among the largest property owners is ranch land, which represents 58% of the property owned by the top 100, or more than 23 million acres, mostly concentrated near the Texas-Mexico border.

King Ranch, a south Texas institution founded in 1835, is bigger than Rhode Island. More than 400 miles to the north is the country’s largest ranch behind a single continuous fence, belonging to LA Rams co-owner Stan Kroenke.

What Happened to Rates Last Week? 

 


Mortgage backed securities (FNMA 3.500 MBS) lost just -5 basis points (BPS) from last Friday's close which caused fixed mortgage rates to remain at their best (lowest) levels of 2019 for the sixth week in a row.

Overview: We had a solid round of domestic economic data with very strong ISM Services and a rock-solid jobs report on Friday.  The Fed left the door open for a rate decrease in September but appears to be in the 1/4 point camp rather than the 1/2 point camp.  Their commentary was actually fairly positive on our economy.  

Jobs, Jobs, Jobs: We had Big Jobs Friday!  You can read the official BLS report here.
Lets look at the Tale of the Tape:
 

Jobs:
August Non Farm Payrolls (NFP) 130K vs est of 158K
July NFP revised from 164K to 159K
June NFP revised from 193K to 178K
The more closely watched 3 month rolling average is now 156K (anything above 130K is good and above 150K is very, very strong).
 

Wages:
The average hourly earnings increased to $28.11.
Average Hourly Earnings MOM increased by 0.4% vs est of 0.3%
Average Hourly Earnings YOY increased by 3.2% vs est of 3.1%
 

Unemployment:
The Unemployment Rate remained at 3.7% vs est of 3.7%
The Participation Rate ticked up from 63.0% to 63.2%, estimates were 62.9%

The Talking Fed: Fed Chair Jerome Powell said that “Political factors play absolutely no role in our process, and my colleagues and I would not tolerate any attempt to include them in our decision-making or our discussions,” and "we are going to act as appropriate to sustain the expansion.” He also said “Our obligation is to use our tools to support the economy, and that’s what we’ll continue to do,” and that "we are clearly at a time where there is a range of views”

The Fed's Beige Book hit Wednesday. You can read their official release HERE.

Here are some key takeaways:

  • The Fed described economic activity as "continuing to expand at a modest pace overall" with output generally stable and certainly not in need of urgent Fed intervention.
  • Concerns regarding tariffs and trade policy uncertainty continued.
  • Home sales remained constrained in the majority of districts due primarily to low inventory levels, and new home construction activity remained flat
  • Districts continued to report strong upward pressure on pay for entry-level and low-skill workers, as well as for technology, construction, and some professional services positions.
  • On net, districts indicated modest price increases since the last report.


Employment grew at a modest pace, on par with the previous reporting period.


Services: Representing more than 2/3 of our economic output, the August ISM Non-Manufacturing Index hit 56.4 vs est of 54.0

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.

 

By Taff Weinstein at

Migration Patterns Important to Housing Demand

Bloomberg has completed an analysis of U.S. Census and other data and has determined that people are fleeing the New York City area in droves. New York City leads all US metro areas as the largest net loser with an estimated 277 people moving out of the area every single day. This is more than twice the 132 people who left the metropolis one year ago. Los Angeles and Chicago have also seen a triple digit net loss of 201 and 161 residents leaving in 2019, respectively.

These numbers were sourced from 2018 census data on migration flows to (and from) the largest 100 US metropolitan areas.

On the other side of the coin, cities like Dallas, Phoenix, Tampa, Orlando, Atlanta, Las Vegas and Austin all saw substantial inflows as a result of both domestic and international migration. Houston and Miami also saw enough inflows to rank them eighth and ninth, while Seattle rounded out the top 10 and was the only cold weather destination on the list.

Phoenix was the greatest beneficiary of domestic migration, passing Dallas and adding more than 62,000 residents between July 1, 2017 and July 1, 2018. Dallas saw an influx of 46,000 domestic migrants while Las Vegas, Tampa and Austin rounded out the top five.

Why is this important to housing?  Housing bubbles start in areas where demand slumps, causing prices to fall.  In the cities with net losses of residents, there is clearly less demand and those cities are the most likely to face a downturn in the housing market.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.500 MBS) gained just +7 basis points (BPS) from last Friday's close which caused fixed mortgage rates to remain at their best (lowest) levels of 2019 for the fifth week in a row.

Overview:  We had another week of positive economic data with better than expected manufacturing data and a very strong consumer with high Consumer Confidence and strong Personal Income and Personal Spending data.  This would normally caused mortgage rates to rise but the strong economic data was offset by concern and uncertainty over the trade war and a fast approaching Fed meeting. 

Consumer Confidence:  Another fantastic reading!  The block-buster July reading was revised even higher from 135.7 to 135.8 and the August reading beat out expectations (135.1 vs est of 130.0).

Personal Consumption: July Personal Income increased by 0.1% which at first glance looks a lot lighter than the consensus estimates of 0.3%.  However June was revised upward from 0.4% to 0.5% which is quite strong.  Personal Spending continues to show major strength with a monthly gain of 0.6%. The headline PCE YOY came in at 1.4% vs est of 1.3% and the closely watched Core PCE YOY data was tame at 1.6% vs est of 1.6%.

Manufacturing:  The Bell Weather Chicago PMI showed a big rebound from 44.4 in July to 50.4 in August and right back into expansionary territory.  The market was expecting a contractionary reading in the 47 range.

Taking it to the House: July Pending Home Sales Index fell by -2.5%, the market was expecting -0.3%. Weekly Mortgage Applications dropped by -6.2%,led by Refinances which plunged by -8.0%. The Case-Shiller 20 city metro Home Price Index showed a YOY gain of 2.1% in June.  The May pace was 2.4%.  The FHFA June Housing Price Index (takes into account every Fannie, Freddie and Ginnie mortgage) showed a national MOM gain of 0.2% which matched the pace in May.

GDP: The previously released 2nd QTR GDP was revised from 2.1% to 2.0% which is exactly what the market expected.

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 Continue to Impress

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 2.5% from June to a seasonally adjusted annual rate of 5.42 million in July. Overall sales are up 0.6% from a year ago (5.39 million in July 2018).

The median existing-home price for all housing types in July was $280,800, up 4.3% from July 2018 ($269,300). July’s price increase marks the 89th straight month of year-over-year gains.

Total housing inventory at the end of July decreased to 1.89 million, down from 1.92 million existing-homes available for sale in June, and a 1.6% decrease from 1.92 million one year ago. Unsold inventory is at a 4.2-month supply at the current sales pace, down from the 4.4 month-supply recorded in June and down from the 4.3-month supply recorded in July of 2018.

Properties typically remained on the market for 29 days in July, up from 27 days in June and up from 27 days in July of 2018. Fifty-one percent of homes sold in July were on the market for less than a month.

Source: National Association of Realtors


What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.500 MBS) lost -15 basis points (BPS) from last Friday's close which caused fixed mortgage rates to remain at their best (lowest) levels of 2019 for the fourth week in a row.

Overview:  We had a very limited amount of economic data that hit, but what did get released was strong.  The markets focused on our Federal Reserve and the continued soap opera that is the trade negotiations between the U.S. and China.  On the Federal Reserve front, both the Minutes from the last Fed meeting and live speeches from Fed Chair Powell and numerous district Fed Presidents made it clear that the Fed is not on a predefined path to lower their Fed Fund Rate (which are NOT mortgage rates). 

The Talking Fed: Fed Chair Jerome Powell spoke at the Fed's Jackson Hole WY Economic Symposium. You can read the official release HERE
Here are few key highlights from his speech:

  • He said “based on our assessment of the implications of these developments, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective."
  • He cited/highlighted three negative developments since the last FOMC meeting: New Tariffs on China and from China, Further evidence of a global slowdown, notably in Germany in China and A sharp downward move of long-term bond rates around the world “to near post-crisis lows”
  • Fitting Trade Policy Into Risk-Management Framework Is a New Challenge
  • U.S. Economy Has Continued to Perform Well Overall
  • Monetary Policy Cannot Provide Settled Rulebook for Trade

We also got the Minutes from the last FOMC meeting where the Fed cut their interest rate by 1/4 point but saw 2 dissenting votes which is rare. You can read the official release HERE.
Here are a few key observations from reading the Minutes:

  • 2 voting members voted for NO rate decrease
  • 2 voting members wanted a LARGER decrease from -25 to -50 basis points
  • The Fed Minutes confirm that "most Fed officials see the July rate-cut as a 'mid-cycle adjustment" and not the beginning of an epic easing cycle that investors are demanding.
  • The rate cut was not to boost the economy but to mitigate risk
  • Participants continued to view a sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective as the most likely outcomes
  • A number of participants observed that overall inflation had continued to run below the Committee’s 2 percent objective, as had inflation for items other than food and energy
  • More QE? "the Committee could proceed more confidently and preemptively in using these tools in the future if economic circumstances warranted."
Taking it to the House: Weekly Mortgage Applications were basically flat with a small net change of under 1%.  Refinance Applications improved by 0.4% but Purchase Applications fell by -4.0%.  The July Existing Home Sales report was very strong with 5.42M units on an annualized basis vs est of 5.39M.  It also marks the first time in 17 months that the YOY data was on the plus 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

Foreclosure Rates on Vacant Homes Drops

Vacant properties in the United States totaled 1,530,563, according to the results of ATTOM Data Solutions’ Vacant Property and Zombie Foreclosure Report. The figure represents 1.6% of all homes.

Meanwhile, more than 304,000 homes faced foreclosure in Q3 2019, and 3.2% of these properties were in the process of "zombie" foreclosures. Owners have abandoned over 9,600 zombie homes nationwide.

"The blight of vacant, decaying properties facing foreclosure has declined dramatically across the United States – another good-news offshoot of the housing boom that's gone on for eight years," said ATTOM Chief Product Officer Todd Teta.

Washington, D.C., had the highest share of zombie foreclosures (12.5%). Maine (8.5%), Kansas (7.6%), and New Mexico (7%) rounded out the list of the states with the greatest number of homes facing foreclosure.

New York still had the highest number of vacant properties at 2,428, followed by Florida (1,634), Illinois (985), Ohio (891), and New Jersey (463).

"A handful of areas still face notable problems with homes abandoned by owners after they get hit with foreclosure claims," Teta said. "But with the economy improving and the housing market still hot, an expanding number of neighborhoods across the country face little or no problem with these so-called zombie properties."

Source: ATTOM Data Solutions

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.500 MBS) gained +16 basis points (BPS) from last Friday's close which caused fixed mortgage rates to remain at their best (lowest) levels of 2019.

Overview:  The major economic reports for the week are actually quite positive and therefore negative for rates with much stronger than expected Retail Sales data and an uptick in inflation (CPI).  However, this was more that offset with concern over the trade war between the U.S. and China.  Which continued to make U.S. bonds very desirable as a safe-haven during this uncertain time.  This strong need for safety (preservation of capital) keep demand high for our bonds which in turn, kept our rates low for yet another week.

Retail Sales:  The July data set was a block-buster at more than double the market expectations.  Headline Retail Sales hit 0.7% vs est of 0.3%.  Ex-Autos, Retail Sales were up 1.0% vs est of 0.3%. The Control Group saw a 1.0% MOM increase vs est of 0.3%.  Very strong data.

Inflation Nation: The July Consumer Price Index was a little hotter than expected.  The headline CPI YOY hit 1.8% vs est of 1.7% and when you strip out food and energy, the Core CPI YOY was 2.2% vs est of 2.1%

Taking it to the House: New Housing Starts were lighter than expected (1.191M vs est of 1.257M) but the good news is that Single Family Residences actually increased by 1.9% to an annualized pace of 876K.  Building Permits were higher than expected (1.336M vs est of 1.270M). Again, the bright spot is the SFR sector with a solid rise to 838K on an annualized basis. The August NAHB Home Builders Market Index came in at 66 vs est of 65. A very robust reading.  Weekly Mortgage Applications shot up by a whopping 21.7%. Refinance Applications led the way with an increase of 37.0%. Purchase Applications increased by 2.0%

Consumer Sentiment:  The University of Michigan's Consumer Sentiment Index Survey was very low for their preliminary August reading (92.1).   However, what is interesting is that inflation expectations among consumers moved higher to 2.7% over the next 12 months.

Inflation Nation: The Headline Producer Price Index matched market expectations with a 1.7% pace. But the Core (ex food and energy) was lighter than expectations with a 2.1% vs 2.4% reading. It was still above 2% though.

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

Wealthy Gen X-ers Are Moving To These States

Baby boomers, ages 55-75, have long been migrating to Southern states as they enter retirement years. Now a new study shows wealthy Generation X, ages 40-54, are doing much of the same.

SmartAsset.com, published a new study reveals how wealthy Gen X-ers are moving to Southern states.

According to the study, six of the top ten states where wealthy Gen X-ers are moving to are in the South, with Washington as the outlier.

Northeast has become widely unpopular with wealthy Gen X-ers. Most of the outflow is coming from Northeast states, four of which are New Jersey, Massachusetts, Pennsylvania, and New York.

To determine the relocation of rich Gen X-ers, SmartAsset examined inflow and outflow data of people ages 35 to 54 with adjusted gross incomes of at least $100,000.

SmartAsset didn't discuss the cause behind the Gen-Xer exodus from the Northeast. But one of the factors could have something to do with the removal of state and local tax (SALT) deductions, disproportionately affecting high-tax, or Democrat, states (in the Northeast).

This has direct implications on regional housing dynamics as property tax also falls under the cap. Capping the deduction will mean reduced tax incentives for home-ownership. Indirectly, households will want to live in lower-income tax states (in the South) as they approach or enter their retirement years to hang on to more of their savings.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.500 MBS) gained lost -22 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly higher from the prior week, but we are still at the second best (lowest) levels of the year for rates.

Overview:  Global concern over the trade war between U.S. and China remained very elevated which continued to make U.S. bonds very desirable as a safe-haven during this uncertain time.  This strong need for safety (preservation of capital) keep demand high for our bonds which in turn, kept our rates low for another week.

Trade War:  Treasury Secretary Steven Mnuchin has designated China as a Currency Manipulator.  It is the first time in 25 years that the Treasury Department has labeled a major trade partner as a currency manipulator.  Meanwhile the PBOC says that it was not responsible for the fall of the Yuan and blamed external factors.  White House Chief Economic Advisor, Larry Kudlow, says that the White House is hosting face-to-face trade talks in September.

Jobs, Jobs, Jobs: The June Job Openings and Labor Turnover Survey (JOLTS) was better than expected with a 7.348M vs 7.317M estimate.  This marks the 15th straight month of a reading above 7M unfilled jobs which is a record.

Inflation Nation: The Headline Producer Price Index matched market expectations with a 1.7% pace. But the Core (ex food and energy) was lighter than expectations with a 2.1% vs 2.4% reading. It was still above 2% though.

Central Bank Palooza:  The Reserve Bank of New Zealand lowered their key interest rate from 1.50% down to 1.00%. The market was expecting a decrease down to 1.25%. The Reserve Bank of Australia kept their key interest rate at 1% which was expected.

 

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

1/3 of Consumers Do Not Shop Mortgage Rates

Consumers can be picky when it comes to every day shopping, often times buying something online or from a different store just to save a few dollars.  But when it comes to comparing and shopping for mortgage rates, consumers appear to be less picky.

According to a new Fannie Mae survey, around a third of homeowners are not taking the time to look around for the best mortgage loans on the market.

In the first quarter of 2019, only 28% of buyers measured three mortgage quotes, Fannie Mae’s survey said. And the numbers drop dramatically for those who compared four loans (7%) and five loans (2%).

The report’s data reinforced Fannie Mae’s prior findings, which showed that many consumers “lack knowledge about mortgage basics.” A 2018 survey revealed that many consumers overestimated the minimum credit score and down payment needed to qualify for a mortgage.

According to Fannie Mae, two thirds of home-buyers sought multiple mortgage quotes in the first quarter. Breaking down those numbers showed how rate-shopping helped a significant portion of consumers to get more favorable outcomes.

Of that number, 47% of homeowners were able to negotiate their interest rates—and 36% were successful in that regard. Mortgage loan searchers also found success in negotiating discount points, with 20% engaging in negotiations while 13% successful.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.500 MBS) gained just +47 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move lower from the prior week and hit their lowest levels of the year.

Overview:  The shock of the proposed tariffs on China (the remaining $300B that are not already taxed would now be taxed at 10% effective September 1) put upward pressure on MBS for some great pricing. The Fed also cut their key interest rate but that little to no impact on mortgage rates. 

The Talking Fed:  The much awaited Fed action finally happened.  You can read their official policy statement here.

Here is a summary:

  • They lowered their key Fed Funding rate a 1/4 point
  • The Vote was 8-2 with the 2 "No" votes against any cuts and wanted the Fed to stand pat (Esther George and Eric Rosengren).  Compare that to the last FOMC meeting which was 9-1 where they left rates alone and had one "NO" vote that wanted rates to be lowered
  • Overall, the tone of the statement actually was a little more positive about our economy than the last FOMC statement where they left rates alone.  The Fed hung its hat on "In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 2 to 2-1/4 percent"
Jobs, Jobs, Jobs: Big Jobs Friday!  You can read the official BLS report here.
Here is the tale of the tape:
Jobs:
July Non Farm Payrolls 164K vs est of 164K
June Non Farm Payrolls revised from 224K down to 193K
May Non Farm Payrolls revised from 72K down to 62K
This makes the more closely watched rolling three month average 140K
Wages:
The Average Hourly Rate moved upward by 8 cents to $27.98.
The MOM change is 0.3% vs est of 0.2%
The YOY change is 3.2% vs est of 3.2%
Unemployment:
The U3 Unemployment Rate remained at 3.7% which was expected
The Participation Rate moved from 62.9% to 63.0%
The number of long-term unemployed dropped by 248K
The U6 Unemployment Rate dropped to 7.0% which is very low.
Overall, this was a very solid report.

 

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

Where Are Millennial's Moving?

Haven Life Insurance Agency LLC (Haven Life), an online life insurance agency, conducted a new study that reveals from 2012 to 2017, millennials moved to large metropolitan areas that already had large concentrations of them.

The survey noted that millennials are living a life of luxury in expensive neighbors with higher wages, rising home prices, and an overall increase in the cost of living. In these areas, the experiences are abundant, and some districts even cater to the lifestyle of these youngsters.

Millennials flocked to large metro areas that have a high concentration of their fellow comrades despite higher home prices and cost of living. The data showed these folks aren't moving to rural America nor the suburbs.



The reason for an extended stay in the city could be due to the delay in marriage and starting families -- thanks to insurmountable student loan debts, high-interest credit card payments, and 72/84 month auto loans -- has made their financial mobility limited.

Millennials are less price-conscious than any other generation, despite the fact that the 2008 financial crash was a little over a decade ago.

Haven Life examined data from the Census Bureau to compile a list of the top 50 cities. The life insurance agency also examined data from Zillow to determine its median home prices and data from the Bureau of Economic Analysis's Regional Price Parity dataset for the cost of living figures.

Portland, Seattle, Denver, San Francisco, and Austin metropolitan areas were some of the hottest regions where millennials were moving to over the period.

Source: Haven Life

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.500 MBS) gained just +5 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways from the prior week and remained near their lowest levels of the year.

Overview:  We continued to see very strong economic data which caused market participants to begin to question the need for a Fed rate cut this week.  2nd QTR  GDP beat out estimates with a solid growth rate of 2.1% and Durable Goods Orders were almost three times higher than expected.

GDP: We got our first look at the 2nd QTR GDP and it was much better than expected. The Headline number grew at 2.1% pace vs est of 1.8%.  The Price Index broke well above 2.0% with a 2.5% reading which is a significant movement from the Q1 pace of 0.8%.  PCE QoQ were at 2.3% vs est of 0.6%.  Core PCE QoQ hit 1.8% vs est of 2.0%.

Durable Goods Orders.  The June Headline Durable Goods Orders were much higher than expected (2.0% vs est of 0.7%). When you strip out the volatile transportation sector, it was up 1.2% vs est of 0.2%. The most important reading is the  Ex-Defense  which was up 3.1% vs est of 1.3%

Central Bank Palooza:  The European Central Bank kept their key interest rate at 0.0% and their deposit rate at -0.4%.  President Mario Draghi said that the ECB is waiting for new economic forecasts before pressing the button on new stimulus that would require preparation in a situation that remains complex.

Kick the Can: President Donald Trump and congressional leaders struck a two-year U.S. debt ceiling and budget deal. The budget deal would raise U.S. discretionary spending to $1.37 trillion in fiscal year 2020, up from $1.32 trillion this year. The deal moves the U.S. closer to dodging the threat of debt default and automatic, across-the-board spending cuts. It also could prevent a government shutdown when funding expires after Sept. 30, though lawmakers will have to pass separate appropriations bills for that measure.

Brexit: Boris Johnson is the new British Prime Minister which was widely expected over the past month.  Most likely not much will happen with Brexit until the cabinet and parliament return from their Summer break in September.

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

Rising Home Prices, A Mixed Blessing

Median home prices have been steadily rising since the end of the housing crises.  In fact, median home prices are up 35% since 2009 which is representative of a very healthy and vibrant housing market.  As home prices continue their slow and steady march upward, investing in real estate has never made more sense.  But it also means that the ability to participate in the housing market is becoming more difficult for one key segment - First Time Home Buyers.

Point2Homes analyzed data from the National Association of Realtors and the US Census and found some compelling facts:
    • The share of first-time buyers has been on a downward trend – entry-level buyers represented 50% of the total sales numbers in 2010, whereas in 2018 this share dropped to 33%;
    • The price difference between a home bought by a first-timer and a home purchased by a move-up buyer is also decreasing, going from 31% in 2009 to 27% in 2018;
    • The median age of a first-time buyer increased from 30 years old in 2009 to 32 years old in 2018, but the median age of repeat buyers has really gone up: from 48 years old in 2009 to 55 in 2018;
    • The average size of a new home increased from 1,580 sq.ft. in 2008 to 1,670 sq.ft. in 2013, only to start dropping again, settling at 1,600 sq.ft. in 2018.

MEDIAN HOME PRICE CHANGES: These rapidly increasing prices put a lot of pressure on prospective homebuyers from both segments, but demand is bound to increase for more affordable homes, which are, of course, starter homes and condos. As a response to the growing demand, between 2009 and 2018, the median price of an entry-level home has risen faster than home prices in the move-up buyer segment. Currently, a first-time homebuyer needs to pay 31% more for a home, compared to a repeat buyer, who is looking at a smaller increase of 25%.

PRICE GAP: The price gap between starter homes and homes bought by repeat buyers is slowly closing. According to their analysis of NAR and US Census numbers, in 2009 there was a 31% difference between the median price of a starter home and the median price of a home from the repeat buyer segment. By 2018, that difference fell to 27%, pointing to a slow but insidious trend.

SHARE OF FIRST-TIME BUYERS: As a consequence, since 2009, when the share of first-time buyers reached 47% of total sales, and especially since 2010 when this share hit 50%, the percentage of first-timers has been in free fall. In the total number of sales, first-time buyers represented only 32% in 2015, and that share only crawled back to a meager 33% in 2018.
Source: Point2Homes

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.500 MBS) gained +22 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly lower from the prior week and remained near their lowest levels of the year.

Overview:  Overall, the economic data was very solid with better than expected readings in key Retail Sales and Manufacturing that continue to point solid growth.  The Fed's Beige book also showed an aggregate economy that is growing at a moderate pace in most districts.  Usually, strong economic data like we had last week would be negative for MBS (higher mortgage rates) but the rising tension in Iran, a sputtering China-U.S. trade negotiation and a looming showdown on the debt ceiling provided plenty of support for long bonds and kept rates low for the week.

Retail Sales:  The June Headline came in at 4 X the market expectations (0.4% vs est of 0.1%).  Retail Ex-Autos had the same reading.  The Control Group for Retail Sales increased by 0.7% vs est of 0.3%.

Manufacturing:  We got a couple of regional reports that were significantly stronger than expected.  The Philly Fed came in at 21.8 vs est of 5.0. The July regional Empire Manufacturing Index was much stronger than expected, coming in at 4.3 vs expectations of only 0.8 and quite a large swing from June's contraction of -8.6

 

The Talking Fed:  The Fed's Beige Book was released Wednesday. You can read it here.
Here are a few highlights:

Among the various indicators suggesting a solid, stable, expanding economy, the Beige Book notes that:

  • In most Districts, sales of retail goods increased slightly overall,
  • Activity in the non-financial services sector rose further
  • Tourism activity was broadly solid, with Atlanta and Richmond recording robust growth in this sector,
  • Some Districts continued to report healthy expansion in the transportation sector.
  • Home sales picked up somewhat, but residential construction activity was flat.
  • Nonresidential construction activity increased or remained strong in most re-porting Districts, and commercial rents rose
  • A modest pickup in manufacturing activity since the last reporting period was observed in a few Districts
  • Increased demand for loans was broad-based, with all but two Districts noting some growth in financing activity
  • Employment grew at a modest pace, as labor markets remained tight; contacts across the country experiencing difficulties filling open positions.
    • The reports noted continued worker shortages across most sectors, especially in construction, information technology, and health care.
  • Compensation grew at a modest-to-moderate pace, similar to the last reporting period, although some contacts emphasized significant increases in entry-level wages.
  • Rate of price inflation was stable to down slightly from the prior reporting period. Districts generally saw some increases in input costs, stemming from higher tariffs and rising labor costs.
  • Reduced supply boosted prices for some agricultural goods; some Districts noted increased upward transportation pricing pressures, while others highlighted price declines due to reduced demand for shipping services.

 

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 Best and Worst States to Start a Small Business

A strong local housing market is very closely tied to the strength of the local economy and small businesses are one of the of the biggest driving forces in many local economies.

In a recent study, WalletHub compared the 50 states across 26 metrics for startup success, assigning each state a number in each category, then computing which states are the most business-friendly overall.

The results are hardly surprising: High-tax states in the northeast offer some of the worst conditions for businesses, while low-tax states in the Sun Belt have some of the best conditions.

States that offer the right conditions for success, such as access to cash, skilled workers, affordable office space and other factors, can be critical in helping a business thrive.

See the complete ranking below:

  1. Texas 
  2. Utah   
  3. Georgia   
  4. North Dakota 
  5. Oklahoma   
  6. Florida   
  7. Arizona   
  8. California   
  9. Montana   
  10. Colorado   
  11. Idaho   
  12. Washington   
  13. Mississippi
  14. North Carolina
  15. Louisiana
  16. Kansas
  17. Minnesota
  18. Michigan
  19. Nebraska
  20. Tennessee
  21. Kentucky
  22. South Dakota
  23. Maine
  24. Indiana
  25. Nevada
  26. Oregon
  27. New Mexico
  28. Alaska
  29. Alabama
  30. Wisconsin
  31. Arkansas
  32. Missouri
  33. Wyoming
  34. Ohio
  35. Illinois
  36. Massachusetts
  37. Iowa
  38. South Carolina
  39. Virginia
  40. Maryland
  41. West Virginia
  42. New York
  43. Vermont
  44. Delaware
  45. Pennsylvania
  46. Connecticut
  47. Hawaii
  48. New Hampshire
  49. New Jersey
  50. Rhode Island


What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.500 MBS) lost -20 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly higher but remained near their lowest levels of the year.

Overview:  We saw an uptick in inflation (CPI and PPI), and that coupled with the prior week's strong jobs data has bond traders pulling back their hedges for a 50 BPS rate cut from the Fed this month down to a 25BPS.  This pulled a little premium out of bond yields.

 

Inflation Nation: The headline June Core CPI (ex food and energy) YOY broke back above 2.0% and was a little higher than expectations (2.1% vs est of 2.0%).  CPI YOY hit 1.6% vs est of 1.6%. (ex food and energy) YOY broke back above 2.0% and was a little higher than expectations (2.1% vs est of 2.0%).  CPI YOY hit 1.6% vs est of 1.6%. The headline June Core PPI (ex food and energy) YOY was higher than expected (2.3% vs est of 2.2%) and the PPI YOY was also higher than expected (1.7% vs est of 1.6%).  These readings do not get the same weight as the CPI data does but these do show upward pricing pressure.

The Talking Fed:  Fed Chair Jerome Powell gave his semi-annual monetary policy report to the House Financial Services Committee and the Senate Banking Committee.  Here is the statement that he read to them: You can read them here.

Here are a few bullet points from his statement:

  • Hawkish "The economy performed reasonably well over the first half of 2019, and the current expansion is now in its 11th year."
  • Hawkish "Our baseline outlook is for economic growth to remain solid, labor markets to stay strong, and inflation to move back up over time to the Committee's 2 percent objective."
  • Dovish "Inflation has been running below the Federal Open Market Committee's (FOMC) symmetric 2 percent objective, and crosscurrents, such as trade tensions and concerns about global growth, have been weighing on economic activity and the outlook."
  • Dovish "Growth in business investment seems to have slowed notably, and overall growth in the second quarter appears to have moderated. The slowdown in business fixed investment may reflect concerns about trade tensions and slower growth in the global economy."

The Minutes from the last FOMC meeting certainly pointed to a rate cut at the July meeting. You can read the official Minutes here.  While once again the markets are focusing on the most dovish of notes, but there was actually a mixed bag.

  • Many Fed Officials saw a stronger case for a rate-cut amid rising risks
  • Several officials didn't yet see a strong rate-cut case
  • A few Fed officials saw a rate cut risking financial imbalances
  • Many Fed officials in June saw risks weighted to the downside

 

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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