Housing Bright Spot: Construction Spending Rises

Construction Spending Rises

U.S. construction spending rose 0.3 percent in April as private residential construction increased at the fastest pace in six months. Overall construction spending was up 6.8 percent compared with April 2011.

Construction spending rose to an annual rate of $820.7 billion, the Commerce Department said on Friday, after an upwardly revised 0.3 percent increase in March.

Also on Friday, the Institute for Supply Management said its index of national factory activity slipped to 53.5 from 54.8 in April, just missing expectations for 53.9. But, while the pace of growth in U.S. manufacturing slowed modestly in May, according to the report, a gauge of new orders rose to its highest in over a year. A reading above 50 indicates expansion in the manufacturing sector.

What Happened to Rates Last Week?


Mortgage backed securities (MBS) gained +105 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to reach a new all-time low.
Mortgage rates moved lower throughout the week on heightened concerns over the banking issues in Spain and Italy as their bond yields soared to new all-time highs.  This made the quality and safety of U.S. bonds very attractive to foreign investors.  This added demand caused bond prices to increase and interest rates (which move in the opposite direction) to decrease.
Mortgage backed securities shot upward (causing mortgage rates to hit new all-time lows) on Friday in reaction to the much weaker than expected jobs data.  The Unemployment Rate increased from 8.1% to 8.2%, but the real story was the big miss in the Non-Farm Payroll data.  The market was expecting the economy to add around 150,000 new jobs but instead, it only added 69,000.
This much weaker than expected employment data caused a big-time buying spree of 10 year U.S. Treasuries and the higher yield paying Mortgage Backed Securities.

What to Watch Out For This Week:

The following 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.

Date Time (ET) Economic Release Actual Estimate Prior
4-Jun 10:00 AM Factory Orders 0.10% -1.90%
5-Jun 10:00 AM ISM Services 53.1 53.5
6-Jun 7:00 AM MBA Mortgage Index NA -1.30%
6-Jun 8:30 AM Productivity-Rev. -0.80% -0.50%
6-Jun 8:30 AM Unit Labor Costs-Rev 2.30% -2.00%
6-Jun 10:30 AM Crude Inventories NA 2.213M
6-Jun 2:00 PM Fed’s Beige Book
7-Jun 8:30 AM Initial Claims 375K 383K
7-Jun 8:30 AM Continuing Claims 3250K 3242K
7-Jun 3:00 PM Consumer Credit $12.7B $21.4B
8-Jun 8:30 AM Trade Balance -$49.7B -$51.8B
8-Jun 10:00 AM Wholesale Inventories 0.50% 0.30%

 

The Housing Market Update – What to Look for

 

Consumer Sentiment Jumps to Four Year High:

While historically low mortgage rates and attractive home prices are important to make the housing market attractive, it is actually how a consumers feels about the economy and their own situation that drives demand.

U.S. consumer sentiment rose to its highest level in more than four years in May as Americans stayed optimistic about the job market, while higher income households expected to see bigger wage increases, a survey released on Friday showed. The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment rose to 79.3 from 76.4 in April, topping forecasts for 77.8 and an initial May reading of the same.

It was the highest level since October 2007.

Half of all consumers said the economy had improved during the past year, while buying plans for vehicles and household durables also improved. The gauge of buying plans rose to 132 from 126.

It looks like a strong season for housing now that we have strong consumer sentiment and historically low rates and excellent home prices.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) lost -18 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to increase slightly.
The highest rates of the week were on Wednesday and the lowest rates of the week were on Tuesday.
MBS traded in a fairly tight range, supported by continued fears of Greece leaving the EU and over Spain’s banks.
We received more good news in the housing market with both Existing Home Sales and New Home Sales rising and beating market forecasts.
We had luke warm Durable Goods Orders but saw a spike in Consumer Sentiment.
We also saw some very strong demand for our 5 year and 7 year Treasury auctions.

What to Watch Out For This Week:

The following 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.

Date Time (ET) Economic Release Actual Estimate Prior
29-May 9:00 AM Case-Shiller 20-city Index –2.6% -2.80% -3.50%
29-May 10:00 AM Consumer Confidence -64.9 69 69.2
30-May 7:00 AM MBA Mortgage Index NA 3.80%
30-May 10:00 AM Pending Home Sales -1.00% 4.10%
31-May 7:30 AM Challenger Job Cuts NA 11.20%
31-May 8:15 AM ADP Employment Change 145K 119K
31-May 8:30 AM Initial Claims 370K NA
31-May 8:30 AM Continuing Claims 3265K NA
31-May 8:30 AM GDP – Second Estimate 1.90% 2.20%
31-May 8:30 AM GDP Deflator – Second Estimate 1.50% 1.50%
31-May 9:45 AM Chicago PMI 57.5 56.2
31-May 11:00 AM Crude Inventories NA 0.883M
1-Jun 8:30 AM Nonfarm Payrolls 155K 115K
1-Jun 8:30 AM Nonfarm Private Payrolls 172K 130K
1-Jun 8:30 AM Unemployment Rate 8.10% 8.10%
1-Jun 8:30 AM Hourly Earnings 0.20% 0.00%
1-Jun 8:30 AM Average Workweek 34.5 34.5
1-Jun 8:30 AM Personal Income 0.30% 0.40%
1-Jun 8:30 AM Personal Spending 0.30% 0.30%
1-Jun 8:30 AM PCE Prices – Core 0.20% 0.20%
1-Jun 10:00 AM ISM Index 54 54.8
1-Jun 10:00 AM Construction Spending 0.50% 0.10%
1-Jun 2:00 PM Auto Sales NA 5.0M
1-Jun 2:00 PM Truck Sales NA 6

 

REFINANCE UPDATE if your home is under water

This morning, FHFA announced their enhancements to the HARP refinancing program. Operational details of the plan are to be released on November 15. Only loans that were purchased or guaranteed by Fannie Mae or Freddie Mac on or before May 31, 2009 and have a current LTV over 80% are eligible. In addition, the loan must be current, no late payments in the last six months and no more than one late in the last 12 months. There are no restrictions on who may refinance these loans.

Program guidelines include:

–              No limit on LTV, if new loan is a fixed rate loan (current LTV must be above 80%)

 

–              Loans previously refinanced under HARP not allowed

 

–              Certain agency fees will be waived if new loan is a shorter term loan

 

–              Appraisals not required where Agency AVM is available

 

–              Certain originator Reps and Warrants will be  waived

Borrowers can determine if their loan is owned or guaranteed by Fannie or Freddie at http://www.fanniemae.com/loanlookup/ or http://www.freddiemac.com/corporate/

 

 

 

 

 

 

The Volley on the Market Continues

WOW. What a roller coaster on Wall street. Markets experienced extreme volatility once again today especially after the Fed announced its statement at 2:15pm ET. The Fed did not say that it would add any additional stimulus to the economy but Stocks bounced back after the horrific sell-off in recent days. Mortgage Bonds also rose today – our new focus is the 3.5% coupon rising 131bp to end at 101.22. The Monthly Bond Rollover will occur after the close of trading and will be reflected tomorrow. The Dow surged 429.92 to 11,239.77, the S&P 500 jumped 53.07 at 1,172.53 while the Nasdaq soared 124.83 to 2,482.52. Oil in after hours trading was $82.14/barrel down $2. There is no economic data tomorrow. The Treasury will sell $24B 10-yr notes tomorrow.

FDIC’s Bair suggests time right for rate hikes.

Outgoing Federal Deposit Insurance Corp. Chairman Sheila Bair on Friday said it may be time to think about implementing a slow increase in interest rates to make bank lending more profitable. Bair’s comments come as some bankers have been criticizing the Federal Reserve’s zero interest rate policy, insisting that it is hurting bank profitability and is that it is impeding the lending environment. The Fed on Wednesday held interest rates at record-low levels as its controversial $600 billion bond-buying program came to an end. The central bank said it planned on keeping rates low for an “extended” period of time.

“That is an interesting debate, and I hear that from a lot of bankers that a gradual increase in interest rates could make lending more profitable and therefore provide more incentives for lending,” Bair said to reporters at the National Press Club after her last official speech as chairman of the agency. “It is an argument that the Federal Reserve board is very aware of and there is the counter argument in terms of economic impact [of raising interest rates]. Maybe it’s time to think about it a little more.”

With Mortgage Interest Rates at an all time low of 2011, the window to refinance may soon be closing.

 

 

Maine Mortgage Market Wrap

MARKET WRAP: MBS had a great day finishing up 66bp settling at 101.25. Unfortunately, the reason for this rally is due to bad economic news. This morning’s ADP Report was poor, ISM very weak, and also a downgrade of Greek debt caused Bonds to improve throughout the trading day. As seen on the Bond Chart, prices did get halted at resistance. Stocks had a rough go today on the aforementioned news. The Dow lost 279.65 to end at 12,290.14, the Nasdaq dropped 66.11 to 2,769.19 while the S&P 500 fell 30.65 to 1,314.55. Oil fell $2.41 to $100.29/barrel. Tomorrow’s data includes Initial Claims and Productivity. 

Look What’s New for Maine Real Estate Financing!

Happy Friday the 13th,

It’s still a great time to refinance and the purchase market couldn’t be better for a buyer.

These rates are based on no points, rate and term refinance or a purchase, with qualifying income, loan to value and fico scores. **

FHA 30 Year Fixed 4.50%

FHA 15 Year Fixed 3.875%

30 Year Fixed 4.75%

15 Year Fixed 4.125%

Jumbo 15 year Fixed 4.50%

Jumbo 30 year Fixed 5.125%

What’s New?

Here’s a couple of neat things we can do or do better!

With the current economy and a lot of people struggling, some new products have become available to help these borrowers.

1. FHA loans with FICO scores as low as 540.

2. FHA loans with up to 2 mortgage late payments in last 12 months.

3. Conventional loans 620 minimum fico, 1 mortgage late in last 12 months

4. Conventional loans with only 3% down or 97% LTV, NO monthly mortgage insurance

5. Jumbo Loans In house at great rates (see above)

6. We now have Maine State Housing

7. We now do everything under one roof! Appraisal Ordering, Processing, Title, Underwriting and Closing!

For a FREE evaluation contact me today!

-Seth