mortgage rates
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Jan. 31st 2016 – 12pm-3pm
New Home Sales Avg. Fastest Sales Pace Since 2008 but China’s Economy and Interest Rates A Concern!
We certainly need no lengthy explanations concerning what’s doing in the new home market. In July new single-family home sales headed up 5.3%, to a 507,000 unit annual rate, and are now up 25.8% over a year ago. These sales cooled off in June, but looking at the past year, new home sales averaged their fastest sales pace since 2008. Consequently, inventories gained by 4,000, yet the months’ supply dropped from 5.3 in June to 5.2 in July. That faster selling pace gives builders a nice opportunity to step up construction activity and inventories. Remember, new home sales are still well below historic levels.
Meanwhile, the Case-Shiller Home Price index edged up 1.0% in June and now stands 4.5% ahead of a year ago. Prices are up in all 20 major metro areas the index tracks. The Federal Housing Finance Agency (FHFA) index of prices for homes financed with conforming mortgages went up 0.2% in June and registered a 4.5% hike over a year ago. For those questioning existing home sales, what Pending Home Sales did in July provided a nice short answer. This measure of contracts signed on existing homes went up 0.5% for the month, following its 1.7% dip in June. That dip means existing home sales may slip in August, but they gained almost 10% the three prior months.
Check this out. The Dow Jones Industrial Average drops almost 600 points Monday, then sinks another 34 Tuesday. Wednesday it shoots UP over 600 points, followed by an almost 400 point hike on Thursday. Friday ends flat after all the tumult, leaving a modest weekly gain for the Dow and the broadly based S&P 500, but a bigger boost for the tech-heavy Nasdaq. What caused this whirlwind of volatility? Analysts put it to investor uncertainty about China’s troubled economy, plus worries over when the Fed might start raising interest rates. The central bankers met at Jackson Hole, but comments from officials were hard to interpret.
U.S. economic data painted the now familiar picture of a plodding recovery. Positive moves included the housing reports covered above and a 2% gain in Durable Goods Orders for July. The best news was the second estimate of GDP for the second quarter, which had the economy growing at a 3.7% annual rate. Personal Income and Spending were up in July, both good reads, and Core PCE Prices went up just 0.1%. This is bad news to the Fed, which wants to see higher inflation before raising rates. University of Michigan Consumer Sentiment slipped in July, but this contrasted sharply with the Consumer Confidence Index, which hit a 6-month high in August!
The week ended with the Dow UP 1.1%, to 16643; the S&P 500 UP 0.9%, to 1989; and the Nasdaq UP 2.6%, to 4828.
Bonds had a mixed week, with investors buying because of worries over China and selling over concerns a Fed rate hike will come soon. The 30YR FNMA 4.0% bond we watch finished the week down .05, at $106.11. National average fixed mortgage rates dipped to their lowest levels since May in Freddie Mac’s Primary Mortgage Market Survey for the week ending August 27. This was put to Chinese financial market instability. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.
DID YOU KNOW?… A recent survey reports that out of 75.3 million millennials, age 18 to 29, 93% want to own a home in the near future.
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Aug 31 – Sep 4
| Date | Time (ET) | Release | For | Consensus | Prior | Impact |
| M Aug 31 |
09:45 | Chicago PMI | Aug | 54.7 | 54.7 | HIGH |
| Tu Sep 1 |
10:00 | ISM Index | Aug | 52.6 | 52.7 | HIGH |
| W Sep 2 |
08:30 | Productivity-Rev. | Q2 | 2.7% | 1.3% | Moderate |
| W Sep 2 |
08:30 | Unit Labor Costs-Rev. | Q2 | -0.8% | 0.5% | Moderate |
| W Sep 2 |
10:30 | Crude Inventories | 8/29 | NA | -5.452M | Moderate |
| W Sep 2 |
14:00 | Fed’s Beige Book | Sep | NA | NA | Moderate |
| Th Sep 3 |
08:30 | Initial Unemployment Claims | 8/29 | 273K | 271K | Moderate |
| Th Sep 3 |
08:30 | Continuing Unemployment Claims | 8/25 | 2.261M | 2.269M | Moderate |
| Th Sep 3 |
08:30 | Trade Balance | Jul | -$43.1B | -$43.8B | Moderate |
| Th Sep 3 |
10:00 | ISM Services | Aug | 58.4 | 60.3 | Moderate |
| F Sep 4 |
08:30 | Average Workweek | Aug | 34.6 | 34.6 | HIGH |
| F Sep 4 |
08:30 | Hourly Earnings | Aug | 0.2% | 0.2% | HIGH |
| F Sep 4 |
08:30 | Nonfarm Payrolls | Aug | 217K | 215K | HIGH |
| F Sep 4 |
08:30 | Unemployment Rate | Aug | 5.2% | 5.3% | HIGH |
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months… A growing minority of economists see a rate hike in September or October, while a slim majority expect it in December. Note: In the lower chart, a 28% probability of change is a 72% certainty the rate will stay the same.
July Press Conference?
Generally we aren’t ones to criticize the Fed – post crisis they have done an excellent job supporting a recovery through zero rates and unconventional measures, and have begun to step back without causing the panic and damage that was predicted. It’s an incredibly difficult job, with huge importance.
That said, our view is that the Fed has pretty much hit the mandate, the data supports that, and an end to zero rates is warranted soon. The drop in Q1 GDP looks increasingly like a quirk. In reading the dueling Fed blogs as to the cause of this drop (New York FED says winter and San Francisco FED says residual seasonality), we can’t help but think that either way, Q1 is not a true reflection of the economy now or going forward. Do you think productivity fell 3% in the first quarter? Although the Fed has consistently been too…
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Should You Lock When Mortgage Rates Go Higher?
Should You Lock When Mortgage Rates Go Higher?
For some homebuyers, the 4.00 percent 30-year fixed mortgage rate is a line in the sand they have no intention of crossing. As of June 2, 2015, some lenders are already charging 4.125 percent for a benchmark conventional 30-year fixed rate mortgage, according to Mortgage News Daily’s Chief Operating Officer Matthew Graham. READ MORE
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30-Year vs. 15-Year Mortgage: Four Questions to Ask When Comparing Your Options
30-Year vs. 15-Year Mortgage: Four Questions to Ask When Comparing Your Options
Here are four questions that can help you make a more informed decision when comparing a 30-year fixed rate mortgage vs. a 15-year fixed rate mortgage.
1 – What will I do with the difference in cash flow?
There are two main benefits that a 15-year mortgage has vs. a 30-year mortgage:
- 1 – Fifteen year mortgages often carry lower interest rates vs. thirty year mortgages. This could save you some money over time. (See Figure 1 that illustrates what would happen if the interest rate on a 15-year mortgage was 0.5% less than the interest rate on a 30-year mortgage.)
- 2 – Fifteen year mortgages are paid off in half the time of thirty year mortgages. This results in less interest over time and no monthly payments after 15 years. (See Figure 1.)
Even so, you could…
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