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
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