Housing Analysis Archives - Page 15 of 59

What's Ahead For Mortgage Rates This Week - September 9, 2013 Last week was relatively calm due to the Labor Day Holiday on Monday providing little mortgage and housing related news. However, there were several positive indicators for overall economic conditions.

Construction spending rose by 0.60 percent in July and surpassed economists’ expectations of 0.30 percent and June’s zero percent growth. While this may seem a small increase, any indication that construction spending is increasing could indicate that residential construction is ramping up.

This would be good news for home buyers, who’ve been facing a shortage of available homes in many areas of the U.S.

The Fed Released Its Latest Beige Book Report

Federal Reserve districts reported rising consumer spending in most districts, modest expansion in manufacturing and moderate residential real estate sales. Higher mortgage rates may have dampened home buyer enthusiasm, but an ongoing shortage of available homes is also likely to have contributed to slower sales.

Mortgage rates will likely rise if the Fed tapers its $85 billion monthly purchase of mortgage-backed securities and Treasury bonds as demand for bonds is expected to decrease. When bond prices fall, mortgage rates usually rise.

ADP released its report on private sector jobs added for August; 176,000 jobs were added against expectations of 185,000 jobs added and July’s 198,000 jobs added. The three-month rolling average of private sector jobs added shows steady job growth as jobs added rose from 140,000 in May to 188,000 jobs for August.

Freddie Mac’s Primary Mortgage Market Survey reported that the average rate for a 30-year fixed rate mortgage rose by six basis points to 4.57 percent with discount points unchanged at 9.70 percent.

The average rate for a 15-year fixed rate mortgage rose by five basis points to 3.59 percent with discount points unchanged at 0.70 percent. The average rate for a 5/1 adjustable rate mortgage rose by four basis points to 3.28 percent with discount points unchanged at 0.50 percent.

According to the Bureau of Labor Statistics Non-Farm Payrolls Report for August, 169,000 jobs were created, which fell shy of expectations of 173,000 new jobs. Expectations were based on the original number of 162,000 jobs created in July, but July’s number was revised downward to 104,000 jobs created.

The unemployment report for August was 7.30 percent, down 0.10 percent from July’s reading of 7.40 percent.

The combination of higher mortgage rates, persistently high unemployment and fewer jobs created could signal the Fed to postpone its plan to start reducing its monthly securities purchases.

What’s Coming Up

This week’s scheduled mortgage and housing news is relatively flat, but Freddie Mac’s Primary Mortgage Market Survey will provide the last indication of mortgage rates’ direction before the FOMC meeting on September 18.

The Fed will also likely be watching the Weekly Jobs report and the University of Michigan’s Consumer Sentiment Index as part of its decision-making process on whether to taper or maintain current QE securities purchases.

Pending Home Sales The National Association of REALTORS reported Wednesday that pending sales of existing homes fell by 1.30 percent in July.

According to the organization’s Pending Home Sales Index, this was the second straight month that pending home sales dropped. July’s Pending Home Sales Index reading was 109.50.

Signed Purchase Contracts For Existing Homes Tracked In The U.S.

·Northeast: – 6.60 percent
·Midwest: – 1.00 percent
·West: – 4.90 percent
·South: + 2.60 percent

Pending home sales were 6.70 percent higher year-over-year on a national basis. This indicates that the housing recovery is progressing, but at a slower pace.

Short supplies of available homes have also impacted sales. In some areas homebuyers are facing competition from multiple buyers for individual homes.

Another report released earlier in the week showed that the pace of rising home prices also slowed. This connects with fewer pending home sales, as when demand for homes cools, prices are likely to fall as well.

Pending home sales serve as an indicator for future home sales, as purchase contracts typically lead to completed home sales within two to three months.

Housing Market Developments Could Delay Fed Stimulus Decision

The Federal Reserve has indicated that it may begin reducing its stimulus program of buying $85 billion per month in U.S. Treasury bonds and mortgage-backed securities.

The Fed has repeatedly stated that continued monitoring of economic trends would weigh heavily on its decision if and when to modify its current stimulus program.

Mortgage rates have risen more than a percentage point since May when the Fed began discussing potentially “tapering” its monthly bond purchases.

The Fed may interpret the slower pace of rising home prices and pending home sales as a sign that it’s not yet time to reduce its stimulus program. This could help with lowering mortgage rates, which are expected to rise when the Fed reduces its monthly securities purchases and eventually ends its stimulus plan.

Housing has led the economic recovery; faltering indicators in the housing sector suggest that the overall recovery is a fragile process.