Mortgage Rates Set to Go Up

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 the 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 exiting 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.

Economic reports for next week are:

• Tuesday May 28^th – S&P Case-Shiller Home Price Index & Consumer Confidence
• Wednesday May 29^th - MBA Report
• Thursday May 30^th - First Time Jobless Claims ad GDP
• Friday May 31^st – Consumer Sentiment 

I appreciate your business and look forward to talking to you soon! Have a great day!!!
 

Sincerely,

Cindy Tomlinson
Loan Officer

USLending Company

DRE Lic # 01520422
NMLS # 214851   

 

PS… FOLLOW ME on Facebook for the latest Mortgage updates

Report: High Sold-to-List Price Ratio Confirms Bidding War Activity

By: Esther Cho, DSNews.com

Last year, some analysts were speculating the large supply of REOs and shadow inventory would keep the market depressed, but instead, the market is dealing with a lack of inventory available for sale,  Pro Teck Valuation Services noted in its May Home Value Forecast (HVF).

“In reality, the shortage of housing inventory has led buyers to bid more competitively against one another leading to significant home price increases and tighter housing conditions,” said Tom O’Grady, CEO of Pro Teck. “Aside from anecdotal stories, Home Value Forecast shows that one of the most reliable leading indicators to support this theory is the Sold-To-List Price ratio.”

According to the report authors, the sold-to-list price ratio tends to land somewhere in the range of 92 and 98 percent, but in high demand markets, the ratio can exceed 100 percent.

For example, in the San Francisco Bay area, nearly all ZIP codes showed sold-to-list price ratios close to or above 100 percent, confirming stories of bidding wars, according to Pro Teck’s analysis,
On the other hand, the Chicago area’s sold-to-list price ratio pointed to more normal conditions, with much fewer ZIP codes with ratios close to or above 100 percent.

To Read more of this article…

Market Set to 'Bloom' as Spring Buying Season Begins

By: Tory Barringer, DSNews.com

While a few stumbling blocks remain, Freddie Macinsists the economy is finally headed “from gloom to bloom” this spring.

The GSE released Wednesday its U.S. Economic and Housing Market Outlook for March, showing that low mortgage rates, rising prices, and gradually improving consumer confidence will bolster home sales as the homebuying season starts.

Compared to 2012, experts at Freddie Mac expect home sales to increase 8 to 10 percent this year, coming to about 5.4 million units sold by year’s end.

With inventory remaining tight and home sales picking up in many markets, the demand for new single- and multifamily housing should result in more construction, higher new home sales, and greater construction employment. Housing starts are forecast to increase to 950,000 units for 2013, up from 780,000 last year.

On the topic of prices, Freddie Mac expects an average 4.0 percent appreciation in 2013, with 0.8 percent price growth in Q1 being cut down by 0.8 percent depreciation in Q4. The two middle quarters are each expected to see 2.0 percent appreciation.

The news isn’t all good, however. On the economic front, the enactment of the sequester in March spurred the GSE to slice half a percentage point off its economic growth projections. Budget cuts will also likely result in lower employment growth, which in effect will dampen housing somewhat.

With spending reductions going into effect throughout the year, Freddie Mac predicts the unemployment rate will average about 7.8 percent for 2013, essentially flat for the year but about 0.25 percentage points higher than it would have been otherwise.

With modest growth and high unemployment, long-term interest rates will creep up at a more gradual pace and will likely remain below 4 percent throughout 2013.

Flagging consumer confidence is another concern. March’s preliminary release of the Thomson Reuters/University of Michigan consumer sentiment measure shows the sentiment index coming in at 71.8, well below consensus expectations of 78.0. While the stock market has shown improvement—boosting confidence for higher-income families—slow employment growth continues to exert downward pressure on confidence for lower-income households.

Regardless, experts insist the long-term picture looks brighter as the economic recovery starts to reach more and more areas of the United States.

“History shows us not all economic recoveries are created equal and consumer confidence mirrors this fact. With the spring homebuying season upon us, the recent highs in the stock market are a welcome signal of better times ahead,” said Frank Nothaft, VP and chief economist for Freddie Mac. “But it will be the gradually declining unemployment rate and steadily improving housing market that will deliver broad-based economic benefits for Americans and, in turn, support the overall recovery.”

Market News Update - Housing Market Index Down But Home Sales Slightly Up

The housing market index, to almost everyone’s surprise, fell lower for the second straight month.  The issue seems to be more about builders having difficulty locating available lots to build and a lack of credit for new home construction than buyer demand.  The positive side to the report is that, although present conditions seem challenging for builders, sales traffic seems to be quite robust and shows no signs of slowing down.

Housing starts made a partial comeback in February; however, what many consider important for the future is that housing permits made a significant gain. Housing starts in February rebounded 0.8 percent after they had dropped 7.3 percent in January.  The report also reinforces that the market is in a much better place than a year ago, as housing starts are up a whopping 27.7 percent from the same time last year.  Housing permits continue on an upward trend, increasing by 4.6 percent.

The final piece to the housing reports for the week came on Thursday with the existing home sales report.  An unexpected rise in existing home sales inventory occurred in February with a reported increase from 4.3 months up to 4.7.  Additionally, exiting homes sales also improved, rising .8 percent with January being revised upward to .8 percent as well.

Low supply of available homes for sale had been holding down sales, but that appears to be changing as higher prices are bringing more homes into the market. Although the media has not been talking a whole lot about rising house prices, it appears that homeowners are beginning to do their own research and are finding that their homes are worth more than they initially thought.  The west coast appears to have the greatest shortage of available inventory of existing homes for sale.

Outside of housing reports for the week, the Federal Open Market Committee dominated mid week headlines.  The FOMC announced to no one’s surprise that they are leaving interest rates unchanged.  To go along with the no change rate policy, the FOMC reiterated their desire to keep interest rates low for mortgages by keeping their bond and mortgage backed securities purchase program in place. 

Mortgage rates continue to remain low but the expected news from the FOMC had only a slight impact in lowering mortgage rates.  Overall, mortgage rates continue to remain higher than their historic lows and it does not appear that they will return to set any new records.  In fact, many experts state that because the economy, and especially the real estate market are improving, if it were not for the Fed’s bond buying program, mortgage rates would probably be at least 1/2 to 1 percent higher.

A few more housing reports on tap for next week:

• Tuesday March 26^th – Durable Goods Orders and New Home Sales
• Wednesday March 27^th - MBA Applications and Pending home Sales
• Thursday March 28^th - First Time Jobless Claims and GDP
• Friday March 29^th – Good Friday…U.S. Banks and Equity Markets are Closed

I appreciate your business and look forward to talking to you soon! Have a great day!!!
 

Sincerely,

Cindy Tomlinson
Loan Officer

USLending Company

DRE Lic # 01520422
NMLS # 214851   

 

PS… FOLLOW ME on Facebook for the latest Mortgage updates

More than One-Third of Listed Homes Sold Within 2 Weeks

By: Esther Cho, DSNews.com

More than one-third of homes were taken off the market in two weeks or less last month, Redfin revealed in its most recent monthly housing report.

On average, 34 percent of homes were under contract within 14 days of their debut in February, an increase from 30.3 percent in January, the online real estate broker reported.

In addition, a handful of metros, especially in California, saw an even greater share of homes get taken off the market within two weeks.

In San Jose, 63.1 percent listings were sold within two weeks, the most out of the 19 metros the report covers.

Other California metros with a much higher percentage were San Francisco (56.8 percent), Ventura (52.6 percent), Los Angeles (51.3 percent), and Inland Empire (49.8 percent).

Redfin also reported a continued year-over-year decrease in inventory, which has fallen 32 percent from February 2012. Though, inventory did inch up 1.1 percent from January 2013.

As inventory stayed low, home prices ended last month with a 13.2 percent year-over-year increase and 2.4 percent month-over-month gain.

Sales, constrained by a lack of inventory, were up just 2.3 percent from a year ago and 0.7 percent from last month, Redfin reported.

Redfin’s analysis is based on local databases used directly by real estate agents to list properties and record sales.

(Go to Cindytomlinson.net for Rates and Purchase Applications!)