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What's Ahead For Mortgage Rates This Week – April 14, 2014

What's Ahead For Mortgage Rates This Week 4-14-14While little housing-related news was released, last week’s economic news showed signs of a brighter economic picture.

Labor statistics were stronger, with job openings up and new jobless claims filed lower than expected.

Mortgage rates fell, and the University of Michigan’s Consumer Sentiment Index was higher than expected.

More Jobs Available, Fewer New Jobless Claims

The Bureau of Labor Statistics (BLS) reported that February job openings rose to 4.20 million, which exceeded January’s reading of 3.9 million jobs. New jobless claims were lower than expected with 300,000 new jobless claims filed against expectations of 316,000 new jobless claims and the prior week’s reading of 332,000 new jobless claims filed.

The Federal Open Market Committee (FOMC) of the Federal Reserve released minutes of its meeting held March 18 and 19. The minutes noted that payroll jobs expanded, but the unemployment rate remained elevated, and inflation was below the committee’s goal of 2.00 percent. Indicators of longer-run inflation expectations were seen as stable.

Severe winter weather was viewed as a cause for slowing economic activity. FOMC noted that it would be difficult to determine the effects of winter weather on the economy as opposed to slower economic growth caused by unemployment or other negative factors.

Housing Starts and Building Permits were lower, but FOMC noted the impact of winter weather on these reports. FOMC asserted its intention to continue reducing its monthly asset purchases by $10 billion per month as economic conditions permit.

The FOMC emphasized its commitment to continuous review of financial and economic news as it makes month-to-month decisions concerning asset purchases.

Mortgage Rates Fall, Consumer Sentiment Rises

Freddie Mac reported lower average mortgage rates last week. The rate for a 30-year fixed rate mortgage fell from 4.41 to 4.34 percent. The rate for a 15-year fixed rate mortgage dropped from 3.47 to 3.38 percent, and the rate for a 5/1 adjustable rate mortgage fell by three basis points from 3.12 percent to 3.09 percent.

Discount points were unchanged at 0.70, 0.60 and 0.50 percent respectively. Lower mortgage rates may encourage more buyers into the market as the spring and summer buying season gets under way.

The University of Michigan’s Consumer Sentiment Index for April rose to 82.60 percent against the March reading of 80.00 percent and the projected reading of 80.80 percent. If expectations prove correct, this week’s economic reports are expected to bring more good news.

Whats Coming Up This Week

This week’s scheduled economic news includes Retail Sales for March, which are expected to show a gain, the Consumer Price Index which is expected to hold steady, and the Home Builder Index, which is expected to rise.

Projections for Housing Starts are also higher. Fed Chair Janet Yellen is set to give a speech in New York on Wednesday, and the Fed Beige Book report will also be released. This week’s economic reports will wrap up Friday with Leading Economic Indicators. 

 

What's Ahead For Mortgage Rates This Week – March 24, 2014

What's Ahead For Mortgage Rates This Week - March 24, 2014Last week’s economic news included several housing-related reports including the Housing Market Index (HMI) for March, a report on housing starts, and building permits for February.

The National Association of REALTORS® also released its Existing Home Sales report for February and the Federal Reserve issued its first FOMC statement under the helm of Fed Chair Janet Yellen.

Home Builders Conservative On Housing Market Conditions

The National Association of Home Builders Wells Fargo Housing Market Index rose by one point to a reading of 47 in March against a reading of 46 in February and against an expected reading of 50. Readings above 50 signify that more builders have a positive view of housing market conditions than not.

Conditions contributing to the sluggish reading included a lack of lots for development and labor shortages. The NAHB also cited rising home prices and mortgage rates as reasons for builders’ conservative outlook.

Commerce Department: Housing Starts And Building Permits

The U.S. Commerce Department released reports on Housing Starts and Building Permits Issued for February. Housing starts dipped to 907,000 in February against expectations of 908,000 expected housing starts and January’s reading of 909,000 housing starts. Severe winter weather froze construction and transport of building supplies.

Building permits issued increased to 1.02 million on a seasonally adjusted basis against January’s reading of 945,000 building permits issued.

February’s reading represents a 7.70 percent increase over January’s permits issued and was attributed to a sharp rise in plans for condominiums and rental housing projects.

407,000 permits for multi-unit buildings were issued in February and represented a 24.3 percent increase on an annualized basis. Analysts saw the increase in building permits as a sign that construction will pick up as warmer weather arrives.

Existing Home Sales Fall, Rising Home Prices And Mortgage Guidelines Cited

The National Association of REALTORS® reported a decrease of 0.40 percent in sales of existing homes from January’s reading. February’s reading of 4.60 million homes sold on a seasonally-adjusted annual basis was lower than January’s reading of 4.62 million existing homes sold, but exceeded expectations of 4.58 million existing homes sold.

Analysts identified familiar causes such as high mortgage rates and home prices, bad weather and a short supply of available homes for the dip in existing home sales. New standards for “qualified mortgages” became effective in January and were seen as a possible obstacle to would-be home buyers as mortgage lenders keep a tight rein on mortgage credit policies.

Federal Open Market Committee Statement Details $10 Billion Dollar Change

Reports indicate that Fed Policy is expected to stay much the same as it was under its previous chairman. FOMC approved an additional $10 billion reduction in asset purchases designed to keep long term interest rates low.

The Fed will now purchase $55 billion monthly in mortgage-backed securities and treasury bonds as compared to its original level of $85 billion monthly.

Wall Street did not respond well to FOMC’s revised projections for short-term interest rates, which were revised from 1.75 percent by the end of 2016 to a possible short-term rate of 2.25 percent.

FOMC removed the benchmark 6.50 percent national unemployment rate for raising the federal funds rate, which is currently 0.250 percent. Instead, the Fed will review a wide range of economic indicators before changing monetary policy.

Janet Yellen, in her first press conference as fed chair, said that the Fed may consider rising short-term interest rates a few months before its original target of October to December of 2015.

Mortgage Rates Drop

Mortgage rates dropped last week according to Freddie Mac. Average mortgage rates fell from 4.37 percent to 4.32 percent for 30-year fixed rate loans. Rates for 15-year mortgages dropped from 3.38 percent to 3.32 percent.

The average rate for a 5/1 adjustable rate mortgage fell from 3.09 percent to 3.02 percent. Discount points were unchanged at 0.60 percent for fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

What’s Ahead This Week

Scheduled economic reports for this week include the Case-Shiller and FHFA Home Price Indexes for January. New Home Sales and Pending Home Sales will also be released.

What's Ahead For Mortgage Rates This Week : February 4, 2012

Freddie Mac Mortgage RatesMortgage rates worsened last week amid evidence of an improving economy. Conforming mortgage rates climbed in Texas and nationwide, rising to a 4-month high.

Freddie Mac has the average 30-year fixed rate mortgage rate at 3.53% for borrowers willing to pay 0.7 discount points plus a full set of closing costs.

There was plenty of news on which for rates to move last week.

First, the Federal Open Market Committee (FOMC) met and voted to hold the Fed Funds Rate in its current target range near 0.00 percent. The Fed also recommitted to purchasing mortgage-backed securities (MBS) and Treasury securities on the open market until such time as the national Unemployment Rate reaches 6.5%, or until inflation rates rise.

Then, Friday, it was shown in the Non-Farm Payrolls report that the national jobless rate had climbed to 7.9 percent, a statistic Wall Street pinned to Hurricane Sandy. In addition, it was shown that 157,000 net new jobs were added to the U.S. economy in January.

This was a slight improvement from the month prior’s revised figures, and marked the 27th consecutive month of U.S. job growth. 

Also last week, the National Association of REALTORS® reported the December Pending Home Sales Index to be lower than expected; largely the result of shortages of available homes in many areas.

In addition, Durable Orders for December were more than twice what investors expected; a further indication of a strengthening U.S. economy.

Lastly, the ISM Index for January surpassed Wall Street’s expectations. This manufacturing index is considered an indicator of future inflationary trends. An upward trend in this index suggests rising mortgage rates. While current mortgage rates remain relatively low, they can be expected to continue rising as the economy improves.

This upcoming week will be quieter with fewer economic series scheduled for release. Factory Orders for December will be announced, as will the ISM Services Index and Jobless Claims. Mortgage rates may continue to rise.

Breaking Down The Federal Reserve Statement (January 2013 Edition)

FOMC statementThe Federal Reserve’s Federal Open Market Committee (FOMC) voted to maintain the Federal Funds Rate within its current range of zero to 0.25 percent, and to continue its current stimulus program of purchasing $85 billion monthly in Treasury bonds and mortgage-backed securities (MBS).

Citing weather-related events such as Hurricane Sandy and drought in the Midwest, the committee said in its statement that information received since its December 2012 meeting “suggests that growth in economic activity has paused in recent months in large part because of weather-related disruptions and other transitory factors.”

Concerns over the then-looming fiscal cliff crisis may have also contributed to the economic contraction during the last quarter of 2012. Positive economic trends observed by the Fed included:

  • Improved household spending
  • Improving housing markets
  • Growth in business fixed investments

The Fed initiated its third round of quantitative easing (QE3) in September as part of an ongoing effort to hold down interest rates and to encourage business spending. The benchmark Federal Funds Rate will remain between zero and.0.25 percent until the unemployment rate falls to 6.5 percent and provided that inflation remains stable.

The Fed Funds Rate has stayed near zero since December 2008.

The national unemployment rate was 7.8 percent in December, and Wall Street expects it to be 7.7 percent for January. The Department of Labor will release its monthly jobs report on Friday; this report includes the monthly unemployment rate. Inflation is expected to remain at or below the Fed’s target level of 2.0 percent or less for the medium-term.

While noting that “strains on global financial markets have eased somewhat,” the FOMC said that it “continues to see downside risks to the economic outlook.” Low overall interest rates and gradual inflation work in favor of home buyers as home prices and mortgage rates are likely to rise at a gradual pace.

Mortgage rates in Port Aransas improved slightly after the FOMC release.

What's Ahead For Mortgage Rates This Week : January 28, 2013

FOMC meeting this weekMortgage rates rose last week as investors gained confidence in the global economy. China and Europe posted better-than-expected manufacturing rates, U.S. Jobless Claims fell for the second straight week, and the worst of the European debt crisis appears to have passed.

Last week’s economic news provided further evidence of a strengthening U.S. economy.

The National Association of REALTORS® released its Existing Home Sales report, which indicates that existing home sales improved by 13 percent on a year-over-year basis and are now at their highest point since 2007. The group expects sales of existing homes to increase by 9 percent in 2013.

The Commerce Department released its monthly New Home Sales report; while new home sales for December fell short of Wall Street’s expectations, sales of new homes are almost 20 percent higher than they were one year ago.

Growing demand for homes coupled with lower inventories of available homes suggests that the days of rock-bottom home prices and low mortgage rates are dwindling.

According to Freddie Mac, the average mortgage rate for a 30-year fixed rate loan was 3.42 percent with borrowers paying 0.7 percent in discount points plus closing costs. The average rate for a 15- year fixed rate mortgage was 2.71 percent with borrowers paying 0.7 percent in discount points plus closing costs.

While slight, the week-over-week increase in mortgage rates in Port Aransas could become a trend.

Weekly Jobless Claims fell below Wall Street forecasts for the second week in a row. 330,000 new jobless claims were filed; far fewer new claims were filed than the 360,000 new jobless claims expected by investors. New jobless claims also fell below the prior week’s 335,000 new jobless claims. Fewer jobless claims are a sign of a stabilizing economy.

Mortgage rates typically rise as investors gain confidence in the economy and financial markets.

This week’s economic news calendar is jam-packed.

Investors await the outcome of the  Federal Open Market Committee’s first scheduled meeting of 2013, treasury auctions are scheduled for Tuesday, Wednesday and Thursday, and the Pending Home Sales Index will be released.

Plus, the Department of Labor’s Non-farm Payrolls Report and Unemployment Report will be released Friday morning.

What's Ahead For Mortgage Rates This Week : January 7, 2013

Jobs data moves mortgage rates higherMortgage rates in Corpus Christi rose during the first week of 2013.

The fiscal cliff crisis was resolved prior to the market’s opening Wednesday, when legislators voted to approve a deal. While many tax cuts were extended for taxpayers earning less than $450,000 annually, other facets of the fiscal cliff issue are yet to be addressed, including budget cuts for federal government agencies.

Investors were surprised to learn that the Fed may end its third round of quantitative easing (QE3) sometimes in 2013. The FOMC meeting minutes for December 2012 suggested that Fed support for its QE3 program has waned as the economy has improved.

First-time jobless claims increased for the week ending December 29, 2012 to 372,000 from the prior week’s 350,000, worse than Wall Street’s consensus opinion of 360,000 new jobless claims.

The December 2012 Non-Farm Payrolls surpassed analyst expectations, posting 155,000 net new jobs for the month. The report also showed the national Unemployment Rate rising one-tenth of one percentage point to 7.8%. When the jobless rate falls to 6.5%, the Federal Reserve is expected to begin raising the Fed Funds Rate from its current target range near zero percent.

Overall, mortgage rates rose by as much as 0.25 percentage points last week. However, because the increase occurred wholly between Wednesday and Friday, Freddie Mac’s weekly mortgage rate survey failed to include it.

Freddie Mac reported the previous week’s average rate for a 30-year fixed rate mortgage was 3.34 percent for borrowers paying 0.7 percent discount points plus closing costs. The average rate for a 15-year fixed rate mortgage was 2.64 percent for borrowers paying 0.7 discount points plus closing costs.

As this week opens, mortgage rates are considerably higher.

This week’s scheduled economic news includes Treasury auctions on Tuesday, Wednesday and Thursday; weekly Jobless Claims report on Thursday; and not much else. There will be planned speeches, however, from five members of the Federal Reserve, including Richmond Federal Reserve President Jeffrey Lacker.

Fed President Lacker was the lone dissenting vote among voting FOMC members in each of last year’s policy votes. 

What's Ahead For Mortgage Rates This Week : December 17, 2012

Mortgage rates drop, according to Freddie MacMortgage bonds worsened last week, moving mortgage rates higher. Economic news was mostly positive and the Federal Open Market Committee (FOMC) changed some of Wall Street expectations for future monetary policy.

Freddie Mac reported the average 30-year fixed rate mortgage rate at 3.32 percent nationwide for borrowers willing to pay an accompanying 0.7 discount points plus closing costs. The average 15-year fixed rate mortgage rate was listed at 2.66 percent nationwide with an accompanying 0.6 discount points plus closing costs.

Both mortgage rates had climbed by week’s end, however. Mortgage rates made their best levels Monday afternoon. Between Tuesday and Friday, mortgage rates in North Padre Island climbed.

Also last week, the National Association of Homebuilders/First American Improving Markets Index (IMI) reported 201 improving metropolitan economies nationwide. This index uses data including local employment statistics and home values to determine whether an area’s economy is “improving”.

76 new areas were added to the IMI list in December as compared to November. The geographic diversity the newly-added markets suggests an overall improvement in the national economy.

Last week’s major event, however, was the 2-day Federal Reserve meeting, which adjourned Wednesday.

The post-meeting press release after included the Fed’s commitment to hold the Fed Funds Rate near zero percent where it’s been since December 2008. However, the Fed announced a change to in its plans to raise the Fed Funds Rate from near-zero at a future date.

Previously, the Fed had said it would raise the Fed Funds Rate beginning in mid-2015. Now, the Fed says it will start to raise rates when the national unemployment rate reaches 6.5 percent.

This week, mortgage rates have a lot to move on including Housing Starts (Wednesday) and Existing Home Sales (Thursday) from the housing sector; Jobless Claims (Thursday) from the Labor Department; and a key inflation reading from the Department of Commerce. Each has the capability to move mortgage rates.

Markets will respond to Fiscal Cliff discussions, too.

Simple Explanation Of The Federal Reserve Statement (December 12 , 2012)

Putting the FOMC statement in plain EnglishThe Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent Wednesday.

For the tenth consecutive meeting, the FOMC vote was nearly unanimous. Richmond Federal Reserve President Jeffrey Lacker was the lone dissenter in the 9-1 vote.

The Fed Funds Rate has been near zero percent since December 2008.

In its press release, the Federal Reserve noted that, since its last meeting in late-October, the U.S. economy has expanded “at a moderate pace” despite “weather-related disruptions”. It also acknowledged that “strains in global financial markets” remain a threat to U.S. economic growth.

This comment is in direct reference to the Eurozone, its sovereign debt concerns, and its nation’s economies.

The Fed included the following observations in its statement, too :

  1. Growth in employment is expanding but unemployment is elevated
  2. Inflation pressures are stable, and below the Fed’s target range of 2%
  3. Business spending on equipment and structures has slowed

In addressing the housing market, the Fed said that there has been “further signs” of improvement and the group re-affirmed its commitment to the $40-billion monthly QE3 bond buying program.

QE3 is meant to suppress U.S. mortgage rates from rising too high, too quickly.

Lastly, the Federal Reserve announced an explicit economic target for when it will begin to consider raising the Fed Funds Rate from its current target range near 0.000%. When the national Unemployment Rate reaches 6.5%, the Fed said, it will likely move to start raising its benchmark borrowing rate. 

Previously, the Fed had provided only a date-based target of mid-2015.

The 6.5% Unemployment Rate target may be pre-empted by rising inflation rates. The Fed does not expect price pressures to mount prior to jobless rates dropping from the current 7.7% levels, however.

Mortgage rates in North Padre Island are rising post-FOMC announcement. Many lenders raised mortgage rates mid-day Wednesday in response to the Fed’s statement. 

The FOMC’s next scheduled meeting is a two-day event scheduled for January 29-30, 2013.

The Federal Reserve Begins A 2-Day Meeting Today

Fed Funds RateThe Federal Open Market Committee (FOMC) begins a 2-day meeting today, its last of 8 scheduled meetings this year.

The Federal Open Market Committee is a 12-person subcommittee within the Federal Reserve. It’s the group which votes upon U.S. monetary policy. 

The monetary policy action for which the FOMC is most well-known is its setting of the Fed Funds Funds. The Fed Funds Rate is the interest rate at which banks borrow money from each other overnight.

Since late-2008, the Fed Funds Rate has been near zero percent.

Prime Rate, a business and consumer interest rate used in lines of credit and credit card rates, is based on the Fed Funds Rate. Prime Rate has been similarly unchanged since 2008.

One rate which the Federal Reserve does not set is the 30-year fixed rate mortgage (FRM) rate.

Like all other mortgage rates, the 30-year FRM is based on the market value of mortgage-backed bonds; securities bought and sold by investors.

There is no correlation between the Federal Reserve’s Fed Funds Rate and the everyday homeowner’s 30-year fixed rate mortgage rate. Some months, the two rates converge. Other months, they diverge. Since 2000, they’ve been separated by as many as 5.29 percentage points.

They’ve been as close as 0.52 percentage points.

However, although the Federal Reserve does not set U.S. mortgage rates, that doesn’t mean that it can’t influence them. The Fed’s post-meeting press release has been known to make mortgage rates get volatile.

If, in its post-meeting press release, the Fed notes that the U.S. economy is slowing and that new economic stimulus is warranted, mortgage rates will likely fall throughout TX. This is because additional Fed stimulus would likely lend support to U.S. mortgage markets which would, in turn, boost demand for mortgage-backed bonds.

Conversely, if the Fed acknowledges stronger-than-expected growth in the U.S. economy and no need for new stimulus, mortgage rates are expected to rise.

Either way, mortgage rates will change Wednesday upon the FOMC’s adjournment — we just don’t know in which direction. Rate shoppers may see fluctuations of as much as 0.250 percent.

The FOMC adjourns at 12:30 PM ET.

Federal Reserve : New Economic Stimulus May Be Warranted

Is more Fed stimulus in store for 2013?The Federal Reserve released its October Federal Open Market Committee (FOMC) meeting minutes last week, revealing a Fed in disagreement about the future of the U.S. economy and about what, if any, stimulus may be warranted in the next 12 months.

The “Fed Minutes” recaps the conversations and debates that transpire during an FOMC meeting, and is published 3 weeks after the meeting adjourns. 

According to the October minutes, FOMC members “generally agreed” that a housing recovery is under way nationwide, citing increased housing prices, higher sales volume, and rising construction in many parts of the country.

FOMC members made no major policy changes at their last meeting, but agreed that a continuation of additional asset purchases would likely be necessary in 2013, in order to achieve a substantial improvement in the labor market.

Other notes from within the Fed Minutes included:

  • On housing: Signs of improvement are “encouraging”, and mortgage rates are at historic lows
  • On inflation: Essentially “unchanged”, notwithstanding recent increases in energy prices
  • On Europe: Production indicators signal contraction in business activity and expansion
  • On employment: Employment is rising, and unemployment remains high

The economic forecast prepared by the FOMC staff shows an uptick in consumer spending, residential construction, and labor market conditions which more than offset recent downgrades in the business fixed investment and the industrial production outlooks.

Through 2013, economic activity is projected to accelerate gradually, supported by a lessening in fiscal policy restraints. The Fed also anticipates that North Padre Island home buyers will benefit from looser credit standards.

Low mortgage rates are helping home buyers, too.

According to Freddie Mac, the average 30-year fixed rate mortgage rate was 3.34% last week, down from 3.55% in September. This has given a boost to buyer purchasing power nationwide and the year-end housing market may reflect it. Demand for homes remains strong.

The next FOMC meeting is scheduled for December 11-12, 2012.