by Victor Burek - Nov 24 2009, 10:32am
While day trading occupied the minds of fixed income market participants yesterday, prices of mortgage backed securities managed to tick higher, despite considerable gains in stocks. Rates moved higher in the opening hours of the session, however as losses were recovered later in the day, several lenders reissued rate sheets, passing along better pricing, by day's end.
The economic calendar really picked up today.
First report to be released was revised third quarter Gross Domestic Product data. GDP is the broadest measure of total economic activity, covering every sector of our economy. In other words, it is the report card for our economy. The advanced reading, which we received last month, showed a stronger than expected gain of 3.5%. This was the first positive reading since 2008. Economists’ surveyed for today's release were expecting a 2.9% growth rate. The 8:30 release indicated that the preliminary read of 3Q GDP was slightly below expectations at +2.8%. So, our economy did not grow as fast as originally forecast last month.
The S&P/Case Shiller Home Price index was released this morning. This report tracks the monthly change in values of residential real estate in 20 metropolitan regions across the country. Many economists believe that until home prices firm, it will be extremely difficult for our economy to recover from the current recession.
The data shows home prices improving les than expected with a month over month gain of 0.3%.
The Conference Board released their Consumer Confidence report today. This is a survey of consumer attitudes on current economic conditions and their outlook on the future. An optimistic consumer is much more likely to spend money while a pessimistic consumer is more likely to save. Since our economy is driven by consumer spending, a more optimistic consumer is better for stocks while the fixed income sector generally moves higher with more pessimism. Recent readings have shown improving consumer attitudes, but high unemployment remained a concern. Economists surveyed were expecting this month’s report to show a slight pullback in consumer confidence to a reading of 47.0 after last month’s 47.7. The report showed that consumers continue to improve as as the data came at a better than expected 49.5.
At 1pm eastern, the Department of Treasury will auction $42billion 5 year notes. Strong demand for our nation’s debt is one of the many factors that have attributed to keeping mortgage rates at or near historic lows.
Finally, at 2pm eastern, the Federal Open Market Committee will release the minutes from its last meeting that occurred three weeks ago. Market participants will scour the minutes for any hint at future monetary policy and the Fed’s outlook for the economy.
Reports from fellow mortgage professionals indicate rate sheets to be marginally improved this morning. The par 30 year conventional rate mortgage has fallen to the to the 4.75% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year fixed rate, you should expect a par interest rate in the 4.375% range with similar costs.
Today’s rate sheets are as good as they have been for quite some time. LOCK, LOCK, LOCK!!!!
Tuesday, November 24, 2009
Friday, November 13, 2009
Mortgage Rates Inch Lower. Favor Locking Over Floating. Take Your Profits!
by Victor Burek - Nov 13th at 10:29am
It was a busy day in the rates market yesterday. Although several data releases needed to be digested, the main event was the 30 year bond auction. Recently, while demand for shorter maturity Treasury notes has proven stable in the "post-November 4 FOMC statement" environment, the market has forced yields higher in the long end of the yield curve. Specifically the benchmark 10yr note and the 30 year bond have taken a beating over the past two weeks. Yesterday was the first chance we had to really test market's appetite for longer dated debt investments, which have more of an influence over mortgage rates. Unfortunately, while specific buyers supported the bidding, overall demand was weak compared to previous auctions. Following the release of the auction results, MBS prices plummeted and a few lenders with itchy trigger fingers repriced for the worse. However, soonthereafter the rates market recovered all losses and prices went green on the day! By the end of the day, MBS prices were at their highest levels in quite some time. Most lenders repriced for the better as the gains held until close. To remind readers, as the price of MBS move higher, lenders are able to pass along lower mortgage rates. That momentum has carried over into today as MBS prices are once again slightly higher.
The morning started with data on US Import and Export Prices. This data measures the change in the price of items our nation imports and exports which provides market participants a gauge on inflation. Last month’s report showed export prices declining 0.3% while import prices rose 0.1%, mainly due to the increase in the price of oil. Year over year, last month’s report showed export prices down 5.6% and import prices down a whopping 12%.
In today's release, export prices rose 0.3% and import prices rose 0.7%. Year over year, prices for both imports and exports are -3.4% and -5.7%, respectively. This data put our inflation outlooks on alert as next week we get two more reports on inflation with the release of the Producer Price index on Tuesday and Consumer Price index on Wednesday. Higher inflation can lead to higher mortgage rates.
The next report to be released is a measure of the United State's trade balance with other countries: the International Trade report. This data has a two month lag so today’s report shows the difference between what we imported and exported in September. In August, our trade gap narrowed to -$29.5 billion. For September, economists surveyed expected the trade deficit to increase to $32.5 billion. However it widened more than expected. The release indicated our nation’s trade deficit widened by 18.2% to $36.5 billion. Imports rose by 5.8% mainly due to higher oil prices while exports rose 2.9%.
The final report of the week gave us a read on consumer attitudes: Consumer Sentiment . The Reuters/University of Michigan’s Consumer Survey Center questions 500 households each month on their personal financial conditions and attitudes about the economy. Since our economy is driven by consumer spending, market participants want to know how the consumer is feeling. An optimistic consumer is much more likely to spend money while a pessimistic consumer is more likely to save money. Last month’s report came in lower than expected and economists surveyed expect this month’s survey to show a small uptick in consumer attitudes. The release indicates that consumers continue to show less optimism with the report coming in much lower than expected. AQ's MBS MORNING post discussed why this data is more important than usual.
I have been receiving questions regarding the Fed ending their MBS buying program next year. Many believe once they exit, mortgage rates will have to substantially rise due to removal of the Fed from the market. Already, the Fed has substantially slowed the amount of mortgages they purchase, yet mortgage rates remain near historic lows. This is due to less loan production. Many people have already refinanced to these record low rates, so there will be less loans done next year which should help offset the Fed exodus. AQ wrote a commentary about this in the MND Newswire section.
Reports from fellow mortgage professionals indicate mortgage rates to be improved. The par 30 year conventional rate mortgage is now in the 4.875% range for well qualified consumers. To secure a par rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.
Currently, MBS are at the top of the trading range which I have used to give lock/float recommendations. The strategy of lock at the price highs and float the price lows has worked very successfully over the last few months. With MBS holding at the top of the range that they have been unable to break for months, I am recommending that clients and consumers lock in today. If you have been floating since last week, you have picked up about .25% in rate, take advantage of the lower rates, and lock in.
I hope everyone has a great weekend.
It was a busy day in the rates market yesterday. Although several data releases needed to be digested, the main event was the 30 year bond auction. Recently, while demand for shorter maturity Treasury notes has proven stable in the "post-November 4 FOMC statement" environment, the market has forced yields higher in the long end of the yield curve. Specifically the benchmark 10yr note and the 30 year bond have taken a beating over the past two weeks. Yesterday was the first chance we had to really test market's appetite for longer dated debt investments, which have more of an influence over mortgage rates. Unfortunately, while specific buyers supported the bidding, overall demand was weak compared to previous auctions. Following the release of the auction results, MBS prices plummeted and a few lenders with itchy trigger fingers repriced for the worse. However, soonthereafter the rates market recovered all losses and prices went green on the day! By the end of the day, MBS prices were at their highest levels in quite some time. Most lenders repriced for the better as the gains held until close. To remind readers, as the price of MBS move higher, lenders are able to pass along lower mortgage rates. That momentum has carried over into today as MBS prices are once again slightly higher.
The morning started with data on US Import and Export Prices. This data measures the change in the price of items our nation imports and exports which provides market participants a gauge on inflation. Last month’s report showed export prices declining 0.3% while import prices rose 0.1%, mainly due to the increase in the price of oil. Year over year, last month’s report showed export prices down 5.6% and import prices down a whopping 12%.
In today's release, export prices rose 0.3% and import prices rose 0.7%. Year over year, prices for both imports and exports are -3.4% and -5.7%, respectively. This data put our inflation outlooks on alert as next week we get two more reports on inflation with the release of the Producer Price index on Tuesday and Consumer Price index on Wednesday. Higher inflation can lead to higher mortgage rates.
The next report to be released is a measure of the United State's trade balance with other countries: the International Trade report. This data has a two month lag so today’s report shows the difference between what we imported and exported in September. In August, our trade gap narrowed to -$29.5 billion. For September, economists surveyed expected the trade deficit to increase to $32.5 billion. However it widened more than expected. The release indicated our nation’s trade deficit widened by 18.2% to $36.5 billion. Imports rose by 5.8% mainly due to higher oil prices while exports rose 2.9%.
The final report of the week gave us a read on consumer attitudes: Consumer Sentiment . The Reuters/University of Michigan’s Consumer Survey Center questions 500 households each month on their personal financial conditions and attitudes about the economy. Since our economy is driven by consumer spending, market participants want to know how the consumer is feeling. An optimistic consumer is much more likely to spend money while a pessimistic consumer is more likely to save money. Last month’s report came in lower than expected and economists surveyed expect this month’s survey to show a small uptick in consumer attitudes. The release indicates that consumers continue to show less optimism with the report coming in much lower than expected. AQ's MBS MORNING post discussed why this data is more important than usual.
I have been receiving questions regarding the Fed ending their MBS buying program next year. Many believe once they exit, mortgage rates will have to substantially rise due to removal of the Fed from the market. Already, the Fed has substantially slowed the amount of mortgages they purchase, yet mortgage rates remain near historic lows. This is due to less loan production. Many people have already refinanced to these record low rates, so there will be less loans done next year which should help offset the Fed exodus. AQ wrote a commentary about this in the MND Newswire section.
Reports from fellow mortgage professionals indicate mortgage rates to be improved. The par 30 year conventional rate mortgage is now in the 4.875% range for well qualified consumers. To secure a par rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.
Currently, MBS are at the top of the trading range which I have used to give lock/float recommendations. The strategy of lock at the price highs and float the price lows has worked very successfully over the last few months. With MBS holding at the top of the range that they have been unable to break for months, I am recommending that clients and consumers lock in today. If you have been floating since last week, you have picked up about .25% in rate, take advantage of the lower rates, and lock in.
I hope everyone has a great weekend.
Thursday, November 5, 2009
House Passes Home Buyer Tax Credit Extension. Obama to Sign as Soon as Friday
by Adam Quinones on Nov 5, 2009 at 2:57pm
The House of Representatives has voted to pass legislation extending the home buyer tax credit until April 30, 2009.
Last night the Senate voted 98-0 to pass the legislation. Next the bill will head to President Obama to be signed into law.
While the bill extends the $8,000 tax credit for first time home buyers, it also makes available a tax credit to homeowners who have lived in their current residence for at least five years. The credit for these buyers will be capped at $6,500.
Income levels will be extended from the current limits of $75,000 for a single purchaser and $150,000 for couples to $125,000 and $225,000 respectively. Above those limits there are diminishing credits available.
Housing interests, especially the National Association of Home Builders and the National Association of Realtors, has pushed strongly for the extension and the Obama administration has also lobbied heavily for its passage. However, not everyone was in favor of it.
Some critics have charged that the tax credit has merely moved sales that would have occurred sooner or later to an earlier date and that, when the credit finally does go away, the market will experience another severe downturn. A diametrically opposed opinion would have it that, while 1.4 million claims have been made, few sales were actually inspired by the credit. Others have argued that the current interest rates and low housing prices are enough of an incentive without spending tax money. The extension is expected to cost an estimated $11 billion on top of the $10 billion that has been spent to date.
There have also been charges of fraud in the operation of the program. To combat this the new law has some expanded safeguards including a minimum age of 18 for obtaining the credit, a requirement that a settlement statement accompany the tax return claiming the credit and a prohibition on non-arms length transactions.
Another criticism of the extension has been that it ends just as the "spring market" is getting underway. Diane Olick writing for CNBC's RealtyCheck said it "is sort of like offering cheap snow boots in July."
Robert E. Story, Jr., CMB, Chairman of the Mortgage Bankers Association (MBA), today issued the following statement in response to the passage in the U.S. Congress of legislation to extend and expand the homebuyer tax credit.
"At a time when we are finally starting to see some signs of life in the housing and mortgage markets, extending and expanding the homebuyer tax credit is a critical step to keeping the momentum. This has been one of MBA's top single family legislative priorities, and we are very glad to see that policymakers on both sides of the aisle see the importance of this measure.
"The existing credit for first-time homebuyers has helped move a segment of potential homebuyers off the sidelines and into their first homes. By expanding it to qualified existing homeowners, we can help stimulate even more home purchases for qualified buyers. I also want to applaud measures in the bill that will help eliminate fraudulent use of the tax credit."
The Homebuyer Tax Credit is Net Positive, But Not the Universal Solution.
The House of Representatives has voted to pass legislation extending the home buyer tax credit until April 30, 2009.
Last night the Senate voted 98-0 to pass the legislation. Next the bill will head to President Obama to be signed into law.
While the bill extends the $8,000 tax credit for first time home buyers, it also makes available a tax credit to homeowners who have lived in their current residence for at least five years. The credit for these buyers will be capped at $6,500.
Income levels will be extended from the current limits of $75,000 for a single purchaser and $150,000 for couples to $125,000 and $225,000 respectively. Above those limits there are diminishing credits available.
Housing interests, especially the National Association of Home Builders and the National Association of Realtors, has pushed strongly for the extension and the Obama administration has also lobbied heavily for its passage. However, not everyone was in favor of it.
Some critics have charged that the tax credit has merely moved sales that would have occurred sooner or later to an earlier date and that, when the credit finally does go away, the market will experience another severe downturn. A diametrically opposed opinion would have it that, while 1.4 million claims have been made, few sales were actually inspired by the credit. Others have argued that the current interest rates and low housing prices are enough of an incentive without spending tax money. The extension is expected to cost an estimated $11 billion on top of the $10 billion that has been spent to date.
There have also been charges of fraud in the operation of the program. To combat this the new law has some expanded safeguards including a minimum age of 18 for obtaining the credit, a requirement that a settlement statement accompany the tax return claiming the credit and a prohibition on non-arms length transactions.
Another criticism of the extension has been that it ends just as the "spring market" is getting underway. Diane Olick writing for CNBC's RealtyCheck said it "is sort of like offering cheap snow boots in July."
Robert E. Story, Jr., CMB, Chairman of the Mortgage Bankers Association (MBA), today issued the following statement in response to the passage in the U.S. Congress of legislation to extend and expand the homebuyer tax credit.
"At a time when we are finally starting to see some signs of life in the housing and mortgage markets, extending and expanding the homebuyer tax credit is a critical step to keeping the momentum. This has been one of MBA's top single family legislative priorities, and we are very glad to see that policymakers on both sides of the aisle see the importance of this measure.
"The existing credit for first-time homebuyers has helped move a segment of potential homebuyers off the sidelines and into their first homes. By expanding it to qualified existing homeowners, we can help stimulate even more home purchases for qualified buyers. I also want to applaud measures in the bill that will help eliminate fraudulent use of the tax credit."
The Homebuyer Tax Credit is Net Positive, But Not the Universal Solution.
Subscribe to:
Posts (Atom)
