Hazy Economic Outlook Leaves Mortgage Rates Adrift

Mortgage rates have held steady after a week when the spread of new COVID-19 variants and debate over federal pandemic relief efforts clouded the near-term economic picture. So reports Moneywise.

According to Freddie Mac, the average for a 30-year fixed rate mortgage was unchanged for the week ending February 4 at 2.73%. The average for a 15-year fixed rate loan edged higher by one basis point to 2.21%.

Zillow economist Matthew Speakman noted that “economic data and pandemic-related developments paint a conflicting picture of the economy’s path forward.”

Read the full article from Moneywise. 

Source: themortgageleader.com

Mortgage rates shoot up to highest levels since mid-November – The Washington Post

Freddie Mac, the federally chartered mortgage investor, aggregates rates from around 80 lenders across the country to come up with weekly national average mortgage rates. It uses rates for high-quality borrowers with strong credit scores and large down payments. Because of the criteria, these rates are not available to every borrower.

Because the survey is based on home purchase mortgages, rates for refinances may be higher. The price adjustment for refinance transactions that went into effect in December is adding to the cost. The adjustment, which applies to all Fannie Mae and Freddie Mac refinances, is 0.5 percent of the loan amount. That works out to $1,500 on a $300,000 loan.

The 15-year fixed-rate average rose to 2.21 percent with an average 0.7 point. It was 2.19 percent a week ago and 2.99 percent a year ago. The five-year adjustable rate average slipped to 2.77 percent with an average 0.2 point. It was 2.79 percent a week ago and 3.25 percent a year ago.

“Mortgage rates surged higher this week, rising at their fastest pace in months,” said Matthew Speakman, a Zillow economist. “In a way, this uptick was inevitable. Rates had been holding firm in recent weeks, even as Treasury yields — which generally dictate mortgage rate movements — gradually pushed higher, leaving them with very little cushion should a strong upward move in yields occur.”

After a big spike at the start of the year, mortgage rates were lulled into place for much of the past month. The 30-year fixed-rate average was stuck at 2.73 percent for three consecutive weeks. Then the yield on the 10-year Treasury had its biggest one-day increase since November on Tuesday, rising to 1.3 percent — its highest level in nearly a year. Yields move inversely to prices. The huge jump was caused by investors’ fears about inflation.

“Rates really spiked in recent days as both mortgage-backed securities and Treasurys sold off on rising inflation expectations,” said Michael Becker, branch manager of Sierra Pacific Mortgage in Lutherville, Md. “The sell-off was rather dramatic and perhaps a bit overdone. Bonds may now be a bit oversold and because of that, I expect the sell-off will abate in the coming week.”

Inflation is bad for bonds because it erodes the value of their fixed payments. Higher inflation could possibly lead the Federal Reserve to raise interest rates and place more upward pressure on yields and mortgage rates, Speakman says.

“While that remains to be seen, as mortgage rates remain very low by historic standards, this shift in the market’s outlook seems to suggest that the days of all-time low rates may be a thing of the past,” he said.

Bankrate.com, which puts out a weekly mortgage rate trend index, found nearly two-thirds of the experts it surveyed predicted rates would continue to go up in the coming week.

“It’s hard to ignore the … sharp trend of the 10-year Treasury causing many to frantically re-price and brace for impact,” said Jennifer Kouchis, senior vice president of real estate lending at VyStar Credit Union in Jacksonville, Fla. “I have a feeling that this could get worse before it gets better, but I am not convinced that this is our final fate, and we won’t see rates level back down in the weeks or months to come.”

Meanwhile, mortgage applications retreated again last week. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — decreased 5.1 percent from a week earlier. The purchase index fell 6 percent from the previous week but was 15 percent higher than a year ago. The refinance index was down 5 percent but was 51 percent higher than a year ago. The refinance share of mortgage activity accounted for 69.3 percent of applications.

“Demand for buying a home exceeds supply in most of the country this winter — especially at the lower end of the market,” said Bob Broeksmit, MBA president and CEO. “Although purchase applications continue to outpace year-ago levels, activity has declined slightly in recent weeks because of a lack of inventory and the upward pressure that it is putting on home prices. The slow rise in mortgage rates over the past month has modestly dampened refinancing activity. Refinances are still up considerably compared to last year, but their share of total applications last week dipped below 70 percent for the first time since last October.”

Source: washingtonpost.com

Mortgage Rates Hold Steady Again, But for How Long?

After rebounding somewhat to start the year, mortgage rates have settled into a narrow range in the past few weeks, raising uncertainty about whether they could go even lower. So reports MarketWatch.

According to Freddie Mac, the average on a 30-year fixed-rate mortgage for the week ending February 11 was 2.73%, the same level as in the prior two weeks.

Zillow economist Matthew Speakman cited the offsetting influences of uninspiring jobs data and a mild inflation report.

Read the full article from MarketWatch.

Source: themortgageleader.com

Mortgage Rates Dip Again As Fed Keeps Money Supply Loose

After trending upward to start 2021, mortgage rates have declined once again, following the Federal Reserve’s expected announcement that it would keep its benchmark rate near zero. So reports MoneyWise.

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 2.73% for the week ending January 28, down four basis points from a week earlier.

“The continued spread of the virus, the introduction of new, more virulent variants, and a thus-far sluggish rollout of the vaccine all injected fresh uncertainty into markets,” said Zillow economist Matthew Speakman, according to the publication.

Read the full article from MoneyWise.

Source: themortgageleader.com

Homebuilders preparing for big 2021, data suggests

Overall housing starts in January totaled 1.58 million units, a decline of 6% from December, according to the latest statistics from the U.S. Census Bureau. But there’s reason for optimism from homebuilders – a huge spike in building permits.

“Despite a modest month-over-over decline, single-family housing starts are up 17.5% from one year ago,” said Odeta Kushi, deputy chief economist at title insurance firm First American. “Single-family permits, a leading indicator of future starts, are up nearly 30% from one year ago. It’s still not enough to significantly narrow the gap between supply and demand, but it’s a step in the right direction.”

A total of 1.881 million residential building permits were issued last month to homebuilders, roughly 1.2% above December’s tally but more than 22% greater than were issued a year ago.

Interestingly, the overall decrease in housing starts last month was driven by single-family starts, which decreased by 12.2% from the prior month, while multi-family starts increased by 17.1% from last month. A seasonal dip was to be expected, experts said, but the widespread distribution of a COVID-19 vaccine should give the economy – and the housing industry – a shot in the arm in 2021.

Doug Duncan, Fannie Mae’s senior vice president and chief economist, said the vaccine combined with President Joseph Biden’s $1.9 trillion fiscal stimulus will drive consumer interest in locking-in historically low mortgage rates, thus driving the amount of home sales upward.


Making housing more affordable by bridging the affordable supply gap

In the last few years, the number of existing single-family homes for sale has decreased. But home prices have increased. To make homeownership a possibility for everyone, there needs to be a higher supply of affordable homes.

Presented by: Fannie Mae

“We assume that the proposed fiscal stimulus of around $1.9 trillion will be passed in mid-March, and that growth will accelerate sharply beginning in the second quarter,” Duncan said. “If 2020 was the year of the virus, then 2021 will more than likely be the year of the vaccine. Whether the vaccines are effective, including with the new virus strains, and how broadly and timely they can be distributed remain key questions.”

Economists are wary, Duncan said, of a potential boom-or-bust scenario for the housing industry in the new year: the combination of rising interest rates from record-low levels, a high national debt, and the risk of rising inflation.

“Very strong growth in the second half of 2021 could push inflation, and thereby rates, up significantly in 2022, thus invoking a Fed response of tightening and a significant deceleration later in 2022,” Duncan said. “This is not our base case scenario, but we see it as a significant risk moving forward.”

Added John Pataky, TIAA Bank executive vice president: “With rates creeping up and homebuilding still partially restricted by the pandemic, the housing market’s next phase of growth may be much more of a grind.”

Privately-owned housing starts in January hit an adjusted rate of 1.336 million, down 2.3% from December but up 2.4% from January 2020.

Single-family authorizations in January were at 1.269 million, up 3.8% from December.

January housing starts increased in the Northeast (+2.3%), but decreased in the Midwest (-12.3%), the West (-11.4%), and the South (-2.5%).

Where homebuilders go from here is of great interest to industry experts: Construction rates are expected to climb in the opening quarter of 2021 and possibly into the summer thanks to high-lumber prices and low land inventory, but the demand for homes is expected to remain high thanks to low interest rates and the hope of President Joseph Biden’s $15,000 first-time homebuyer tax credit.

“Lumber now costs more than double what it did this time last year – a fact that that has reportedly caused some builders to stop some projects mid-way,” said Matthew Speakman, Zillow economist. “Land and labor shortages also continue to hinder the ability to take on new projects.”

Still, Speakman noted, homebuilders’ earned some benefit of the doubt with the way they handled hurdles in 2020.

“Home construction was a source of strength in the U.S. economy in 2020, as builders strove to keep up with robust demand for housing and put up homes at the strongest pace in a decade and a half,” he said.  

Source: housingwire.com

Mortgage rates drift lower as investors worry about pandemic – The Washington Post

Freddie Mac, the federally chartered mortgage investor, aggregates rates from about 80 lenders nationwide to come up with weekly national average mortgage rates. It uses rates for high-quality borrowers with strong credit scores and large down payments. These rates are not available to every borrower.

Because the survey is based on home purchase mortgages, rates for refinances may be different. This is especially true since the price adjustment for refinance transactions went into effect in December. The adjustment is 0.5 percent of the loan amount (e.g., it is $1,500 on a $300,000 loan) and applies to all Fannie Mae and Freddie Mac refinances.

The 15-year fixed-rate average dipped to 2.20 percent, with an average 0.6 point. It was 2.21 percent a week ago and 3 percent a year ago. The five-year adjustable-rate average was unchanged at 2.80 percent, with an average 0.3 point. It was 3.24 percent a year ago.

“After spiking in early January, mortgage rates have spent the last couple weeks trending consistently lower, as the continued spread of the virus, the introduction of new, more virulent variants, and a thus-far sluggish rollout of the vaccine all injected fresh uncertainty into markets,” said Matthew Speakman, a Zillow economist. “Uncertainty surrounding the latest proposed fiscal relief plan also lowered investors’ expectations for higher bond yields, and thus mortgage rates.”

No major policy changes came out of the Federal Reserve’s meeting this week. The Fed kept its benchmark rate at zero and renewed its commitment to purchase $120 billion in bonds each month. Since it began its bond-buying program early in the pandemic, the central bank has increased its balance sheet to nearly $7.5 trillion.

Investors were watching to see if the Fed signaled it would begin to taper its purchases in the near term. In 2013, when then-Federal Reserve Chair Ben S. Bernanke testified before Congress about a reduction in the government’s bond-buying program, the resulting “taper tantrum” in the market sent mortgage rates soaring.

Fed Chair Jerome H. Powell dismissed speculation about a reduction in the bond-buying program.

“In terms of tapering, it’s just premature,” he told reporters.

He said the economy is a “long way” from the Fed’s monetary policy and inflation goals, and he expects it to take some time for progress to be achieved.

“The Fed has promised to keep interest rates low through 2021, and after this week’s meetings, it’s great to see the Fed [has] fulfilled this promise and held the interest rates at near zero,” said Alec Hartman, chief executive and co-founder of Welcome Homes, an online home-building company. “As a result, we’re going to continue to see record mortgage volumes in 2021.”

Low interest rates won’t be the only thing driving the housing market. Hartman expects President Biden to enact policies that encourage home-buying.

“The administration has signaled its willingness to create an environment to foster homeownership, especially for first-time home buyers,” he said. “In addition to low interest rates, we can anticipate there will be many bonus programs available until inflation passes 2 percent per year.”

Bankrate.com, which puts out a weekly mortgage rate trend index, found nearly half the experts it surveyed predict rates will move lower in the coming week. James Sahnger, a mortgage planner at C2 Financial, is one who is predicting rates will fall.

“The froth on the 10-year Treasury has come off a bit after peaking at 1.18 percent two weeks ago after a quick run-up of 26 basis points in just a week earlier,” he said. “Stocks have been selling off a bit, with the torrid exception of GameStop. As money has left stocks, bonds have been the beneficiary and rates have improved. … Look for rates to drift a little lower as stocks should continue to do the same.”

Meanwhile, mortgage applications pulled back last week. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — decreased 4.1 percent from a week earlier. The purchase index fell 4 percent from the previous week, but was 16 percent higher than a year ago. The refinance index dropped 5 percent, but was 83 percent higher than a year ago. The refinance share of mortgage activity accounted for 70.7 percent of applications.

“Applications for refinances in early 2021 are outpacing the fast start seen in 2020, even as a slight rise in mortgage rates pulled activity lower last week,” said Bob Broeksmit, MBA president and chief executive. “Home-buyer demand is also very strong, but home shoppers are competing for a limited number of homes on the market. The supply-and-demand imbalance is accelerating home-price appreciation and continues to push up the average loan balance of purchase applications.”

Source: washingtonpost.com

Mortgage rates spike to highest levels in nearly two months – The Washington Post

Freddie Mac, the federally chartered mortgage investor, aggregates rates from about 80 lenders nationwide to come up with weekly national average mortgage rates. It uses rates for high-quality borrowers with strong credit scores and large down payments. These rates are not available to every borrower.

Because the survey is based on home purchase mortgages, rates for refinances may be different. This is especially true because the price adjustment for refinance transactions took effect in December. The adjustment is 0.5 percent of the loan amount (e.g., it is $1,500 on a $300,000 loan) and applies to all Fannie Mae and Freddie Mac refinances.

The 15-year fixed-rate average also moved higher, to 2.23 percent with an average 0.7 point. It was 2.16 percent a week ago and 3.09 percent a year ago. The five-year adjustable rate average grew to 3.12 percent with an average 0.4 point. It was 2.75 percent a week ago and 3.39 percent a year ago.

“Mortgage rates headed higher this week, continuing the strong upward trend that followed last week’s election results” in the Georgia Senate race, said Matthew Speakman, a Zillow economist. “The upward movements over the past couple weeks were a long-awaited deviation from the glacial, downward trend that rates have followed for the past few months. Rates have risen in the past week at their fastest pace since the spring and recently touched their highest level since mid-November.”

Until it fell back Wednesday, the 10-year Treasury yield had been on a steady climb as fears of rising inflation pushed long-term bond yields higher. By Tuesday, the yield had reached 1.15 percent, the highest it has been since March. But then it retreated to 1.1 percent on Wednesday on weakened inflation concerns. Mortgage rates typically follow the same path as the 10-year Treasury yield but have done so less lately.

“After several days of the sharpest increases in rates in months, Treasury and MBS markets should calm,” said Dick Lepre, senior loan officer at RPM Mortgage. “One-party control of D.C. triggered belief that fiscal stimulus would increase and lead to inflation. Once we have a new occupant in the White House, the discussion is likely to turn to tax increases to address the deficit. Markets will then ponder the effects of those and volatility will increase as uncertainty increases. The next six months will be trying.”

Bankrate.com, which puts out a weekly mortgage rate trend index, found that nearly half the experts it surveyed predicted rates will rise in the coming week. More than a third expected them to fall. Elizabeth Rose, sales manager at AmCap Mortgage in Dallas, anticipates rates will move higher.

“Inflation concerns and added supply are weighing heavily on the bond market, setting the stage for higher rates,” she said. “Inflation is the enemy of mortgage bonds and added supply doesn’t help matters any.”

Meanwhile, the dip in mortgage rates to start the year caused applications to soar last week to their highest level in 10 months. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — increased 16.7 percent from a week earlier to its highest level since March. The purchase index climbed 8 percent from the previous week and was 10 percent higher than a year ago. The refinance index jumped 20 percent and was 93 percent higher than a year ago. The refinance share of mortgage activity accounted for 74.8 percent of applications.

“The mortgage market got off to a fast start in the first full week of 2021, with both applications to refinance and buy a home solidly increasing on a weekly and annual basis,” said Bob Broeksmit, MBA president and chief executive. “With mortgage rates well below 3 percent but expected to rise slowly this year, many homeowners are acting now. Refinancing … represented three-quarters of all applications.”

The MBA also released its mortgage credit availability index (MCAI) that showed credit availability decreased in December. The MCAI slid 0.1 percent to 122.1 last month. A decrease in the MCAI indicates lending standards are tightening, while an increase signals they are loosening.

“Credit availability in December remained essentially unchanged, with an increase in government credit offset by a decrease in conventional credit,” Joel Kan, an MBA economist, said in a statement. “The decline in conventional credit availability was the first in three months and was driven by fewer ARM offerings. ARM loans have increasingly seen a smaller share of the market, given the historically low rates for fixed-rate mortgages. Availability for government loans and jumbo loans [has] increased for four months and three months in a row, respectively.”

Source: washingtonpost.com

New home sales historically high in 2020

Sales of newly built homes in December occurred at a seasonally-adjusted rate of 842,000 – up 1.6% over the revised November rate of 829,000, according to the Census Bureau’s report on Wednesday. Even with inventory at record-low numbers, that’s still 15.2% higher than the same period last year.

The median sales price of new houses sold in December 2020 was $355,900, up from $335,300 in November. The average sales price was $394,900 in December.

John Pataky, executive vice president at TIAA Bank, said the historically high prices of lumber – pushing overall construction and lot costs up – is partly to blame for the lag in December sales. Indeed, construction continued to play catch-up in December, as new-home inventory rose to a 4.3-month supply.

“While demand is robust, supply is not, and the imbalance will inevitably harm affordability and dissuade buyers from buying,” Pataky said. “Unless we get more existing sellers in the market, I foresee this shortage to continue well into the new year.”

A slow December did not dampen what was a historically successful year for new home sales – the best since 2006, according to Zillow Economist Matthew Speakman. An estimated 811,000 new homes were sold in 2020, 18.8% above the 2019 figure of 683,000.

“Historically low mortgage rates and an ongoing shortage of existing homes for sale stoked demand for new homes in 2020, and it’s likely that the continued spread of COVID-19 also added to the allure of a brand new, never-lived-in home for many buyers,” Speakman said in a statement on Thursday. “The supply of new homes for sale has been picking up lately, but remains low compared to historic norms –– which is likely to incentivize builders to increase their activity, particularly when demand for housing remains solid. Expect the future permit and starts pipeline to be quite full this year. With a banner year in the books, today’s new home sales report set the stage for a solid start to 2021.”

Regionally, the Midwest saw a robust 30.6% increase in new home sales in December, while the West reported a modest 8.8% increase. The Northeast and South both saw declines, with drops of 6.1% and 5.1%, respectively.

Source: housingwire.com