Sunday, October 30, 2016

Mortgage rates pull back ahead of Federal Reserve meeting

After two weeks of spikes, mortgage rates retreated this week, falling back to where they had hovered most of the summer.
With long-term bonds trading in a narrow band, home loan rates likely have settled in ahead of the Federal Reserve meeting next week. While most observers do not expect the Fed to raise rates in November, they are anticipating a rate hike in December.
At the same time, the financial markets appear reluctant to make any moves ahead of the presidential election, which means mortgage rates are likely to hold steady at least until after Nov. 8., which puts out a weekly mortgage rate trend index, found that 80 percent of the experts it surveyed believe rates will remain unchanged in the coming week, moving less and plus or minus two basis points. (A basis point is 0.01 percentage point.)
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average tumbled to 3.47 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.52 percent a week ago and 3.76 percent a year ago. The 30-year fixed rate, which had jumped 10 basis points in two weeks, dropped back below 3.5 percent, where it has spent all but two weeks of the past four months.
The 15-year fixed-rate average slipped to 2.78 percent with an average 0.5 point. It was 2.79 percent a week ago and 2.98 percent a year ago.
The five-year adjustable rate average inched down to 2.84 percent with an average 0.4 point. It was 2.85 percent a week ago and 2.89 percent a year ago.
“Mortgage rates continue to be relatively stable and at near record lows,” Sean Becketti, Freddie Mac chief economist, said in a statement. “The 30-year fixed-rate mortgage fell 5 basis points week-over-week to 3.47 percent, erasing last week’s increase. At the same time, the 10-year Treasury yield ended the week relatively flat – up about 2 basis points.”
Meanwhile, mortgage applications declined this week, according to the latest data from the Mortgage Bankers Association.
The market composite index — a measure of total loan application volume — fell 4.1 percent from the previous week. The refinance index fell 2 percent, while the purchase index decreased 7 percent.
The refinance share of mortgage activity accounted for 62.7 percent of all applications.

Sunday, October 2, 2016

Will California real estate experience the toughest year yet in 2017?

Projected to have lowest housing affordability in six years

Los Angeles
The trials that plagued the California housing market in 2016 aren’t expected to get too much better in 2017 as the real estate market is projected to face another year of supply shortages and affordability constraints, according to the "2017 California Housing Market Forecast" released by the California Association of Realtors.
CAR predicted that 2016 would face a shortage of available inventory and continued high costs that would limit the state’s improvement, a predication that ultimately came true according to the state’s real estate agents.
Affordability is only projected to get worse, which is currently already California real estate agents' No. 1 concern for the market.
"Next year, California's housing market will be driven by tight housing supplies and the lowest housing affordability in six years,” said CAR President Pat "Ziggy" Zicarelli.
However, he added, "The market will experience regional differences, with more affordable areas, such as the Inland Empire and Central Valley, outperforming the urban coastal centers, where high home prices and a limited availability of homes on the market will hamper sales.”
“As a result, the Southern California and Central Valley regions will see moderate sales increases, while the San Francisco Bay Area will experience a decline as homebuyers migrate to peripheral cities with more affordable options," said Zicarelli.
The CAR predicts existing home sales will modestly increase and rise 1.4% next year to reach 413,000 units, up slightly from the projected 2016 sales figure of 407,300 homes sold. 
Sales in 2016 also will be virtually flat at 407,300 existing, single-family home sales, compared with the 408,800 pace of homes sold in 2015.
Interest rates aren’t estimated to change significantly, with the average 30-year, fixed mortgage interest rates to only rise to 4% in 2017, up from 3.6% in 2016.
Meanwhile, California home prices are forecast to slow down in pace, with the median home price to increase 4.3% to $525,600 in 2017, following a projected 6.2% increase in 2016 to $503,900, representing the slowest rate of price appreciation in six years.
The state’s overall U.S. Gross Domestic Product is projected to grow 2.2% in 2017, after a projected gain of 1.5% in 2016, while California's nonfarm job growth will rise 1.6%, down from a projected 2.3% in 2016.
"With the California economy continuing to outperform the nation, the demand for housing will remain robust even with supply and affordability constraints still very much in evidence. The net result will be California's housing market posting a modest increase in 2017," said CAR Vice President and Chief Economist Leslie Appleton-Young.
"The underlying fundamentals continue to support overall home sales growth, but headwinds, such as global economic uncertainty and deteriorating housing affordability, will temper stronger sales activity," Appleton-Young continued.

Bobby Darvish of Platinum Lending Solutions offers best market rates for Residential & Commercial mortgage in California.

Sunday, May 1, 2016

Mortgage Rates Are Plummeting and Here's Why You Should Care as an Investor

Here's your strategy to take advantage of today's dropping interest rates.

Over the past month, mortgage rates have plunged dramatically lower, reaching levels not seen since Nov. 22, 2012, when the conventional 30-year fixed rate hit an all-time low of 3.31%.
For homebuyers and refinancers, this is a welcome change. However, the forces driving rates down today are based on serious concerns about the global economy. Read on to learn why rates are plunging, what could drive them even lower, and how investors should react.
What's happening?
The low rates today have emerged from a much different macroeconomic context than in the aftermath of the financial crisis. In 2012, the Fed was rapidly expanding its balance sheet with purchases of Treasuries and mortgage-backed securities, actively forcing rates lower. Today, the Fed is no longer making those purchases and is instead working to unwind its near-zero interest rate policies put in place following the financial crisis.
US 30 Year Mortgage Rate Chart
Without the Fed actively pushing rates lower with asset purchases, I think it is unlikely that mortgage rates will fall much farther than they already have. In 2012, the Fed's buying was able to significantly raise prices -- and therefore lower yields. Absent that force pushing the balance of supply and demand, today's near-historic low rates are likely temporary.
The 10-year Treasury yield -- a common harbinger for changes in mortgage rates -- has supported that theory as rates have moved lower. Twice in the last month, the 10-year has approached its lows from 2012 and both times the market has quickly sent its yield back higher. Had the 10-year continue to sink below those 2012 lows, then it would be much more likely that mortgage rates would follow suit.
If it's not the Fed, why are rates dropping again?
If it isn't the Fed tipping the scales of supply and demand, what would it take for rates to drop to a new low? The most likely driver of such a drop would be a global event causing a scare in the markets. In other words, it's market psychology as much as it's hard economics.
If such an event were to occur, the markets would likely price in the chance that central banks would increase or prolong easy-money policies in response to a slowdown. That would push rates lower in the same way as 2012.
What could such an event look like? It could be in the form of a deterioration in the U.S. labor market or GDP. It could be spurred by bad news out of China, much like the market experienced in Aug. 2015 and Jan. 2016. In both of those cases, mortgage rates dropped sharply and immediately as fear rippled through the market.
US 30 Year Mortgage Rate Chart
Or, more tangibly, it could be sparked by the U.K. referendum to potentially leave the eurozone, scheduled for a vote on June 23. If the U.K. votes to exit, economists predict that rates could fall some more over fears of negative economic repercussions impacting Europe and the U.S.
Here's what investors should expect
To me, the best way to figure out the optimal plan for investors is to understand what happened the last time rates were this low and then determine how today's economics could change the outcome.
In the years immediately following the financial crisis, low interest rates spurred a refinancing boom to the benefit of banks around the country. Leading mortgage lenders like Wells Fargo and Bank of America relied on the fees and loan volume from this surge to offset weaknesses in commercial real estate, legacy mortgage assets, and tumultuous trading in the markets. It also helped to generate the capital needed to pay the billions of dollars in fines and settlements levied for misconduct that led to the crisis.
On the other side of the coin, builders like Toll Brothers (NYSE:TOL) suffered through the refinancing boom, as low rates did little to drive new home sales. Toll Brothers' 2012 annual revenue was about two-thirds below its peak in 2007, a drop of more than $4 billion. The company's revenue has since doubled from that level, but even still remains well below the 2007 highs.
Low rates today should help to spur higher real estate activity and lending as they did in 2012. However, this activity today is based on much more stable overall real estate market. Home purchases are increasingly driving the market, rather than the refinances that characterized the market in 2012. It's no coincidence that home price increases have coincided with the decreased share of refinancing.
US Mortgage Originations, Refinance Share Chart
For Bank of America, Wells Fargo, and other lenders, this means that today's low rates could be doubly as potent toward their consumer and home loan businesses pushing both purchase money and refinance loans higher at the same time. Driven by its mortgage business, Wells Fargo was the only mega bank to increase its revenues in the first quarter, and Bank of America's consumer banking unit saw its profits jump $324 million, 22.2%, compared to the 2015 first quarter. I think these improvements are just the start if rates stay low or decrease further.
Economic data supports the opportunity. Mortgage applications so far in April are up over 13% compared to the same time in 2015. Housing starts are up 31% over the same period, along with 17.5% and 18.5% jumps in completed homes and under construction homes, respectively.
Toll Brothers is also poised for fundamental improvements, even if the stock market has yet to recognize the potential. The stock is down over 21% in the last 12 months, compared to the S&P 500's 1.2% drop. And yet, Toll Brothers management is predicting 2016 revenue to grow about 25% annually along with solid growth in efficiency and profits.
Bob Toll, the company's executive chairman, told investors on the first-quarter conference call that "the stock market seems to be pricing in a steep decline in the economy, and along with it, our sector. We, on the other hand, are seeing signs that reflect strength and positive momentum in our business based on six consecutive quarters of year-over-year contract growth in both units and dollars." It is, of course, in Toll's self-interest to promote the stock as an investment, but to me, the numbers support his position.
If some unknown event does spur economic problems and spook the market, I think that the market's volatility would be a reasonable buying opportunity for the stock of a lender or builder that stands to benefit from low rates driving new sales in the domestic real estate market in the U.S. The key is to not panic, stay focused on quality companies, and, as always, wait for the market to offer you a chance to buy at a discount.

Sunday, April 24, 2016

Fixed mortgage rates hold steady, hovering at three-year lows

Mortgage rates were flat this week, continuing to hover at lows not seen in the past three years.
With the markets seemingly waiting for the outcome of the Federal Reserve’s meeting next week, home loan rates have barely budged.
If the Fed indicates it is considering bumping up its benchmark rate again that may push rates higher, but that seems unlikely at this point., which puts out a weekly mortgage rate trend index, found that more than two-thirds of the experts it surveyed believe rates will remain relatively unchanged in the coming week.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average inched up to 3.59 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.58 percent a week ago and 3.65 percent a year ago. The 30-year fixed rate has hovered between 3.59 percent and 3.58 percent the past three weeks.
The 15-year fixed-rate average edged down to 2.85 percent with an average 0.5 point. It was 2.86 percent a week ago and 2.92 percent a year ago.  The 15-year fixed-rate has fallen 14 basis points in the past five weeks.
The five-year adjustable rate average dropped to 2.81 percent with an average 0.5 point. It was 2.84 percent a week ago, the same as it was a year ago.
“Volatility in financial markets subsided over the past week, allowing Treasury yields to stabilize,” Sean Becketti, Freddie Mac chief economist, said in a statement.
“As a result, the 30-year mortgage rate was mostly flat, up only 1 basis point to 3.59 percent. The release of March’s existing-home sales report, which shows monthly growth at 5.1 percent, suggests homebuyers are taking advantage of low mortgage rates as the spring homebuying season gets underway.”
Meanwhile, mortgage applications were slightly higher, according to the latest data from the Mortgage Bankers Association.
The market composite index — a measure of total loan application volume — rose 1.3 percent from the previous week. The refinance index increased 3 percent, while the purchase index crept up 1 percent.
The refinance share of mortgage activity accounted for 55.4 percent of all applications.

Sunday, April 17, 2016

Mortgage rates hit lows not seen in three years

0-year mortgage rates hit 3-year low


What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.
From Freddie Mac’s weekly survey: The 30-year fixed rate improved again, averaging 3.58 percent. Even though that’s just 1 basis point lower than last week’s 3.59 percent, it was the lowest rate since May 2013.
By comparison, the all-time low in Freddie Mac’s records was 3.31 percent reported in November 2012.
The 15-year fixed likewise improved, dropping 2 basis points from last week’s average to 2.86 percent.
BOTTOM LINE: Assuming a borrower gets the average 30-year conforming fixed rate on a $417,000 loan, last year’s rate of 3.67 percent and payment of $1,912 was $21 more than this week’s payment of $1,891.
The Mortgage Bankers Association reports a 10 percent jump in loan application volume from the previous week.
WHAT I SEE: From rate sheets hitting my desk that are not part of Freddie Mac’s survey: Locally, well qualified borrowers can get the following fixed rate mortgages for zero cost: A conventional 10-year loan at 2.875 percent, a 15-year at 3.0 percent, a 20-year at 3.50 percent, a 30-year at 3.625 percent, a high balance ($417,001 to $625,500) conventional 15-year at 3.25 percent, and a high-balance 30-year at 3.875 percent.

Monday, April 11, 2016

Mortgage rates dip to annual low: Will they stick?

Mortgage rates dip to annual low: Will they stick?

When the Federal Reserve raised its interest rates late last year, most mortgage rate prognosticators saw it as a sure sign that home-loan rates would finally rise meaningfully. In fact, just the opposite has happened. The average rate on the popular 30-year fixed loan is now at its lowest level of the year and could potentially head lower into new record territory.
"It's impossible to know how timing will play out, but I definitely see the ingredients in place for new all-time lows sometime soon," said Matthew Graham, chief operating officer of Mortgage News Daily. "It actually concerns me how convinced I am that this will happen eventually."
Mortgage dips market dips
Ken Murray | NY Daily News Archive | Getty Images
A potpourri of political and economic factors are behind the fall in mortgage rates, which follow loosely the yield on the U.S. 10-year Treasury. Both the Fed and the European Central Bank expressed concern this month about the trajectory of the global economy. Consumers and investors are on edge because of three factors: Oil prices can't seem to make a decided move higher; some analysts are concerned about a stock correction; and the race for the White House has been highly volatile.
"You have the makings for quite the rate-friendly environment," Graham said.
Lower rates did prompt a reboot in mortgage refinances last week, but did nothing to spur homebuyers. Mortgage applications to purchase a home continue to weaken. Buyers and sellers think now, the height of the spring market, is a bad time to make a deal, according to Fannie Mae, which just recorded its worst monthly home purchase sentiment in 18 months.
"Growing pessimism over the last three months about the direction of the economy seems to be spilling over into home purchase sentiment," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "The gap between the share of consumers who think the economy is on the wrong track and the share who think it is on the right track has widened, nearly matching its reading last August, when concerns regarding China and oil prices led to the biggest stock market plunge in years. In turn, we saw dips this month in income growth perceptions, attitudes about the home selling climate, and job confidence."

While rates may be low, mortgage credit availability actually tightened in March, according to the Mortgage Bankers Association. The tightening came largely in conventional loans, while government programs such as FHA and VA lending relaxed slightly.
Homebuyer traffic did ramp up in March, driven by lower rates and warmer weather, according to analysts at Credit Suisse. Affordability and supply, however, could keep that traffic from translating into closed sales.
Domestic economic data could drive rates in either direction this week, with reads on retail sales and producer prices on Wednesday and the all-important consumer price index Thursday.

Monday, April 4, 2016

Interest Rates May Rise Faster Than You Think, Boston Fed Chief Says

Interest Rates May Rise Faster Than You Think, Boston Fed Chief Says

Sure, everyone agrees that the Federal Reserve will raise interest rates in the U.S. only gradually. But maybe not quite as gradually as traders are betting.
Federal funds rate futures that indicate the central bank will boost rates just once this year and next year appear "unduly pessimistic," Boston Federal Reserve Bank President Eric Rosengren, a voting member of the monetary policy committee, said in a speech Monday. "I personally expect that a stronger economy, at essentially full employment and with gradually rising inflation, will lead to more tightening."
Committee members had indicated in December that they might raise rates as many as four times this year after boosting them by 25 basis points for the first time since they were slashed to nearly zero during the 2008 financial crisis. Gyrations in global financial markets during January and February, however, coupled with a slowdown in China and tumbling oil prices, derailed that plan. At one point, markets were pricing in no increases at all in 2016.

Oil prices began rebounding from a low around $26 a barrel in March, though, and U.S. economic indicators continued to show strength, with the unemployment rate dipping as low as 4.9%, compared with a 2009 peak of 10%. An average of 230,000 jobs a month have been added in the past three months and consumer spending has grown, Fed Chair Janet Yellen noted in a speech last week.
Must Read: Bill Gross Says Low Rates Are Stretching Markets to the Breaking Point
Indeed, an increase of 215,000 jobs in March outpaced economists' expectations while the unemployment rate rose only slightly, to 5%.

The bump "was for good reason, as the labor force participation rate rose for the sixth consecutive month," Bank of America Merrill Lynch global economist Ethan Harris said in a note to clients on Friday.
Oil prices, meanwhile, topped $40 a barrel in March before paring gains, though they remain more than 60% below their 2014 peak of above $107.

 "With financial market volatility subsiding since earlier this year, it is to me surprising that the expected path of monetary policy embedded in futures markets is so low," Rosengren said. "The risks seem to be abating that problems from abroad would be severe enough to disrupt the U.S. recovery."
Monetary policy committee members themselves indicated in March that rates may be increased twice this year, ending the year at between 0.75% and 1%.

"The Fed's communicated path for policy looks at least remotely achievable for the first time in quite some time, though we have argued it may only be able to deliver one hike this year," Morgan Stanley economist Ellen Zentner said in a note to clients Friday. "Over the medium term is where we believe a more significant reality check is in store."

In short, to keep interest-rate policy at a level that supports maximum employment and 2% inflation, the central bank will likely have to raise rates in both 2017 and 2018 fewer than the four times a year it now projects, she said.

While lower rates tend to bolster the markets as a whole, they do the opposite for banking and finance stocks. The finance industry has been pressured by seven years of near-zero interest rates, which reduce net interest income, a key revenue stream made up of the difference between what banks such as JPMorgan Chase (JPM - Get Report) and Citigroup (C - Get Report) charge to lend money and what they pay to depositors.