Interest rates, especially mortgage rates, are so low and have remained there!

Interest rates, especially mortgage rates, are so low and have remained there!

The gas pedal on the stock market has been almost to the floor in recent weeks as the indices have been hitting record highs almost daily.  The foot came off the accelerator on Wednesday when the Federal Open Market Committee Minutes were released.  In the minutes it shows that more and more of the Fed board members are starting to consider when they government is going to step back from their bond buying program because the economy is improving at a faster pace than anticipated.

The bond buying program is the reason that interest rates, especially mortgage rates, are so low and have remained there for so long.  Everyone knows that when the Fed stops buying bonds, or at least reduces the amount of bonds they are purchasing from $85 billion a month, mortgage rates will jump.

Even though the Fed has not given a time table to when they will start to taper down their bond purchases, that has not stopped bond investors from being spooked and they are dumping their bonds on the market which causes bond yields to increase.  The bottom line is that mortgage rates in the last 2 weeks have jumped in the area of ½% because of concern about the Fed existing their bond purchases.

The rate increases are starting to be felt in mortgage activity on the purchase side but nowhere near as much as on refinances.  Mortgage applications for purchases were down 3% in the prior week where refinances dropped 12%.  It is likely that next week’s MBA report will show further declines in mortgage activity.  The one bright spot is that purchase loan activity is still 10% higher than a year ago.

Existing home sales caught fire last month with a jump of .6%.  Single family home sales which is the most important component of the report jumped 1.2% in the month.  Supply of homes which has been very tight increased dramatically in April.  It appears that home owners that have been sitting on the fence waiting for the market to improve are now jumping into the market to sell.  Inventory increased from 4.7 months to 5.2 months which is one of the largest inventory increases we have seen in a single month.  Existing home sales are up 9.7% from the same time last year.

Even in the new home sales section of the market activity is rising.  There is a limited amount of inventory in this sector however as fast as the builders can construct homes, they are being sold.  New home sales rose 2.3% in April and there appears to be no sign of this letting up.  Pent up demand for housing still remains very strong.

JJ Mack
916-517-1800
jj.mack@apmortgage.com
www.apmcroseville.com

Purchase applications still remain at the highest point since the real estate meltdown!

Purchase applications still remain at the highest point since the real estate meltdown!

Who should we believe about housing…the economic reports released this week…or the real estate and mortgage professionals in the field every day throughout the United States?

This week three different housing reports were released indicating that the real estate market is not as strong as people think.  However…when you speak with most real estate and mortgage professionals you will find that they are busier than they have been in quite a few years working with buyers.

The first housing report of the week was the housing market index.  The index shows some improvement this month which is an indicator that the new home market is improving slightly.  The contrast to this is when you speak to an agent working at a new home construction site they will tell you that the volume of buyers coming is relentless.

The irony of the housing report is that it indicates that buyer traffic has slowed dramatically yet in every market I have checked, nothing could be further from the truth.  I may not have access to all the data these so called experts have…buy I cannot find a single market in the U.S, that has anything but a dramatic increase in buyer traffic.

The second housing report was for April housing starts which indicated a slow down.  However housing permits increased more than expected.  April housing starts declined 16.5 percent after rising 5.4 percent in March. The bright side to the report is that April starts are 12.1 percent higher than the same time last year.  The key indicator to focus on in this report is that multifamily construction was responsible for the majority of the reported decline.  Multifamily construction dropped 38.9 percent after a 25.6 percent gain in March. The single-family aspect of new construction only slipped 2.1 percent in April after declining 4.4 percent the month before.

Mortgage rates have quickly reversed direction and have been rising for just over a week.  The recent upward movement has negatively impacted mortgage applications for purchases and refinances.  Mortgage applications for purchases and refinances both declined by 4.0 percent and 8.0 percent respectively.  The good news is that despite the decline, mortgage applications for purchases still remain at the highest point since the real estate meltdown.

JJ Mack
916-517-1800
jj.mack@apmortgage.com
www.apmcroseville.com

The real estate market is improving at a rapid rate!!

The real estate market is improving at a rapid rate!!

Existing home sales have remained flat however don’t let this fool you into thinking the real estate market is not improving at a rapid rate.  Pending home sales, which is a fairly accurate predictor of future existing homes sales, rose 1.5% in March to an index level of 105.7.  This is the highest level for the index so far this year.   (In case you were wondering what does the index represent…it is an index developed by the National Association of Realtors to indicate housing activity)

Reports from all over the United States reinforce the future of housing is strong in that demand for existing homes and new construction is rising rapidly.  Real estate professional and builders are reporting huge increases in buyer traffic at open houses and builder locations.

Wow did the experts ever get this one wrong (including me)…almost every expert in real estate predicted that housing values would not increase at a pace of more than 5% per year for many years post recession.  On Tuesday the Case-Shiller Home Value Index indicated boom-time housing gains with an increase of 1.2 percent for February.  This is on top of the prior months 1.0 percent gain.  When we do the math that would come out to over a 12% home value increase on an annualized basis. 

Although there are no guarantees that this pace will continue, the amount of activity happening in markets throughout the country indicates that there is a tremendous amount of pent up home buyer demand.   As of this month’s report home prices are up 9.3% from the same time a year ago and that includes periods that had much slower housing demand than we have today.

The Mortgage Bankers Association reported that despite interest rates once again hitting record lows, especially the 15 year fixed, purchase applications declined 1.4% in the prior week.  Do not read into this report too much in that although mortgage applications for purchases may have declined, that does mean that purchase activity has slowed.  The reality is that there is a lot of cash in the housing market today and more buyers than we have ever seen are purchasing without financing.  Additionally as reported by mortgage companies and loan officers throughout the U.S. the number of pre-approved buyers searching for homes is at record levels.

First time jobless claims for the week of April 27^th dropped unexpectedly to 324,000 which is the lowest point since the beginning of the recovery.  National unemployment declined .1% to 7.5% in March.  The economy added 165,000 jobs following a revised increase from the prior month of 138.000.  Both numbers exceeded analyst expectations and it appears that the labor market may be improving slightly faster than most experts think.

JJ Mack
916-517-1800
jj.mack@apmortgage.com
www.apmcroseville.com