Shelter Six: Home Sales Remain Hot Despite Lower Inventory

1. January Existing Home Sales were hot and rose to the highest level since February 2007!

2. Sales would have been even stronger if inventory levels had been higher.  The total inventory of existing homes for sale remains near record low levels with just a 3.6-month supply.

3. There is a lot of market uncertainty about the outcome of upcoming elections in several European countries.  Investors are very focused on the presidential election in France, which will take place on April 23 and polls show a close race between Marine Le Pen and Emmanuel Macron.

4. Le Pen’s campaign has been centered on plans for France to leave the European Union (EU) and to stop using the Euro currency, while the centrist Macron has run on a more traditional platform.  It is not clear what would happen to the EU if France decided to exit.  Expect rates to drop if Le Pen wins and vice versa if Macron does.

5. The Fed was a source of volatility last week but rates stabilized when Fed Meeting minutes made little mention of a plan to reduce Fed holdings of Mortgage-Backed Securities.

6. We now have a 90% Jumbo loan (> $424,100) that does not require PMI!  Loan amounts go up to $1.5M, with credit scores starting at 720.

Rate Update

It was another volatile week for mortgage rates.  Uncertainty about the outcome of the elections in Europe influenced rates lower while the Fed minutes and economic data had little net effect.  As a result, mortgage rates ended the week lower.

This Week

Pending Home Sales and Durable Orders are due out on Monday, the Core PCE Price Index and the ISM National Manufacturing Index on Wednesday, and the ISM National Services Index on Friday.  Fed Chair Yellen is also scheduled to speak on Friday as well.  The next Employment Report will come out on March 10 (due to February being a shorter month).

February 27, 2017 by · Leave a Comment

Shelter Six: Strong Economic Data Puts Upward Pressure on Rates

1. Strong economic data dominated the news last week as the economy appears to be hitting on all cylinders early in the year.

2. Retail Sales in January were much higher than expected. This is important as consumer spending accounts for about 70% of economic output.

3. January Housing also surpassed expectations as did two regional manufacturing indexes, which not only beat estimates by a wide margin but one reached the highest level since 1984.

4. Federal Reserve Chair Janet Yellen also last week delivered a very optimistic outlook in her semi-annual testimony to Congress.

5. Yellen said that the Fed expects that strong economic progress will lead to increases in short-term rates in the near future.

6. She also said that the Fed will soon begin reducing the Fed’s portfolio of mortgage-backed securities (MBS). Although the process will be gradual, rates will rise most likely rise as this happens.
Rate Update
The stronger than expected economic data, the optimistic comments from the Fed, and the stock market rally all contributed to rates pushing slightly higher last week. Rates did settle back down toward the end of the week and, surprisingly, didn’t go up more than they did.

This Week
The minutes from the February 1st Fed meeting will come out on Wednesday. These minutes provide additional insight into the debate between Fed officials and have the potential to significantly move markets. Existing Home Sales will be released on Wednesday and New Home Sales on Friday.

February 20, 2017 by · Leave a Comment

Shelter Six:  Trump Attacks Dodd-Frank Regulation

1. President Trump signed an executive order on Friday to begin unraveling the rules and regulations of the Dodd-Frank Act put in place in response to the 2008 financial crisis.

2. Trump called the existing regulation “a disaster” and said that “we expect to be cutting a lot out of Dodd-Frank.”  Expect a big political battle around this over the months ahead.

3. VA has clarified how it requires a student loan payment to be calculated for qualification purposes.  If a student loan is scheduled to begin repayment within 12 months of closing, a monthly payment must be established at an amount of 5% of the outstanding loan balance.

4. If a lower student loan payment is shown on the credit report, it can be used in conjunction with a statement from the student loan servicer that reflects the actual loan terms.

5. If the student loan payment is deferred at least 12 months beyond the date of closing, a monthly payment does not need to be considered.

6. expected, the Fed did not change the Federal Funds Rate last week nor did it change expectations around the pace of future rate hikes.

Rate Update

The January ISM National Manufacturing Index surged to the highest level in over two years.  Although this was viewed as inflationary and put upward pressure on rates, Friday’s Employment Report showed earnings data lower than expected.  This offset fears about future inflation and caused mortgage rates to actually end the week slightly lower.

This Week

The Job Openings and Labor Turnover Report is due out on Tuesday with Consumer Sentiment due out on Friday.  There will be several Fed speakers this week as well.

February 6, 2017 by · Leave a Comment

Shelter Six:  Home Sales Up to Highest Level Since 2006

1. Although down 3% from November, December Existing Home Sales finished up 2016 at the highest level since 2006.

2. Inventory continues to be the biggest issue.  Existing Homes Available for Sale at the end of December fell 11% from November to a 3.6-month supply and 6% lower than a year ago.

3. The 2016 Median Existing-Home Price finished the year 4% higher than the previous year.

4. December New Home Sales declined 10% from November and much more than expected.  However, total 2016 Home Sales were up 12% over 2015.

5. The appraisal remains one of main things that can wreck a real estate transaction, especially when the mortgage company relies on a national Appraisal Management Company.

6. At Shelter, we have long-standing relationships with the best, full-service appraisers who work only the local markets they know.  Our appraisers always go the extra mile.

Rate Update

The European Central Bank appears to be close to winding down its bond purchase program, which most likely will put pressure on U.S. mortgage rates.  Last week, the net effect of comments from the Trump administration and economic data was small, and mortgage rates did not change.

This Week

It’s a very busy week with the Fed meeting on Wednesday and the Employment Report due out on Friday.  Pending Home Sales and the Core PCE Price Index are due out today, the ISM National Manufacturing Index on Wednesday, and the ISM National Services Index on Friday.

January 30, 2017 by · Leave a Comment

Shelter Six:  HUD Suspends Reduced FHA Mortgage Insurance Premiums

1. The Department of Housing and Urban Development (HUD) has suspended the reduced FHA Mortgage Insurance premiums announced just last week.

2. HUD sent out an announcement just an hour after President Trump was sworn in on Friday stating that the cuts are suspended indefinitely.

3. Apparently, no loans will be able to close with the lower premiums.

4. Last week, Federal Reserve members expressed support for tighter monetary policy due to progress in meeting the Fed’s labor market and inflation goals.

5. Fed Chair Yellen also said that most Fed officials expect to raise the Federal Funds rate gradually until it reaches 3% by the end of 2019, a faster pace than many investors had expected.

6. December Housing Starts rose 11% from November and last year was the best year for starts since 2007 with starts 5% higher than in 2015.

Rate Update

Comments from Fed officials and stronger than expected economic data were negative for mortgage rates last week.  Renewed concerns about the United Kingdom’s exit from the European Union offset a little of the increase, but mortgage rates ended the week slightly higher.

This Week

Additional information about policy changes under the Trump administration could continue to affect mortgage rates.  Existing Home Sales are due out on Tuesday, New Home Sales on Thursday, and Durable Orders on Friday.

January 23, 2017 by · Leave a Comment

Shelter Six:  Nonbanks Surpass Banks in Mortgage Origination Volume

1. Banks no longer reign over the U.S. mortgage market.  According to Inside Mortgage Finance, nonbank lenders have surpassed banks in mortgage volume originated for the first time in 30+ years.

2. Shelter has a new “bank statement program” for self-employed borrowers that uses bank statement deposits only to calculate income and does not require tax returns.

3. The rate is higher for this program as are the qualification standards with 20% down, strong credit, and healthy cash reserves in the bank after closing all required.

4. After an annual report indicating that FHA is the healthiest it has been in years, there is growing talk of another FHA MIP reduction of as much as .30% sometime in 2017.

5. December’s Employment Report came in as expected with both job gains and the unemployment rate coming in right on target.

6. Wage growth, however, was much higher than expected with average hourly earnings 2.9% higher than a year ago, up from 2.5% last month, and the highest level since 2009.

Rate Update

From the presidential election until the last few days of 2016, mortgage rates pushed higher.  Last week, the trend finally reversed and we saw mortgage rates fall back to the best levels in a month.  Friday’s strong economic data halted the rally, however, and mortgage rates ended the week with little change.

This Week

The Job Openings and Labor Turnover Rates Report is due out on Tuesday with Retail Sales due out on Friday.

January 9, 2017 by · Leave a Comment

Shelter Six: Optimism Abounds for Housing and the Economy in 2017

1. Despite the rise in mortgage rates since the election, there are many reasons to be optimistic about the housing market and overall economy heading into 2017.

2. Just last week, the Consumer Confidence Index revealed that consumers are more confident about their future than at any time over the last 15 years.

3. Low unemployment, rising wages, record stock market values, home price appreciation, and growth-friendly economic policies all point toward strength in 2017.

4. Even though inventories are still low, home sales ended 2016 at the highest levels since the 2008 recession, and demand from home buyers remains high.

5. There is also reason to be optimistic that home builders may pick up their pace as a December survey of home builders showed a surge in optimism since the election.

6. Single-family housing starts and building permits are also near multi-year highs.  Confident consumers and builders bode well for the future!

Rate Update

It was a quiet end of the year on the mortgage front with little economic news.  The 30 Year Fixed-Rate ended 2016 in the mid 4’s and about .25% higher than where it started the year.

This Week

The ISM National Manufacturing Index is due out on Tuesday, the minutes from the December 14th Fed Meeting on Wednesday, the ISM National Services Index on Thursday, and the next Employment Report on Friday.

January 2, 2017 by · Leave a Comment

Shelter Six:  Home Sales Highest Since 2007

1. November Existing Home Sales were up to the highest level since 2007 and also 15% higher than a year ago (thanks to TRID).

2. The November inventory of existing homes available for sale nationally was 9% lower than a year ago and down to a 4-month supply.

3. The November median existing-home price was 7% higher than a year ago.

4. Durable goods are products which are expected to last more than three years.  November Durable Orders declined 4.6% from October, but the decline was mostly due to a drop in aircraft orders.

5. The core Durable Goods indicator, however, excluding aircraft, showed a healthy increase of .9% from October.

6. In another sign that we have mostly recovered from the Great Recession, as of Dec 10, no appraisal is now required on some Conforming refinances when the Fannie Mae automated valuation model approves of the borrower’s estimate of value.

Rate Update

The economic data released last week had little impact on mortgage rates.  Tuesday’s Bank of Japan meeting also caused little reaction in U.S. markets and mortgage rates ended the week slightly lower.

This Week

It is a light week for economic data with only Pending Home Sales due out on Wednesday.  During the last couple of weeks in December, trading volume tends to be lighter than usual, which can lead to exaggerated price swings.  Mortgage markets will be closed on Monday in observance of Christmas.

December 26, 2016 by · Leave a Comment

Shelter Six: Conforming Limit Increases to $424,100

1. As announced in November, the maximum Conforming loan limit is increasing to $424,100 for 2017, but Shelter is able to begin originating loans at this limit immediately.

2. As widely expected, the Fed raised the Federal Funds rate by .25% last week.

3. Fed officials also raised their outlook for the pace of 2017 rate hikes and now forecast three rate hikes next year instead of two. The faster pace has negatively affected mortgage rates.

4. The U.S. Dollar is at the highest level since 2003 and stocks continue to hit all-time highs. This strong economic activity has also contributed to higher mortgage rates.

5. The December NAHB Housing Index showed that home builder confidence jumped to the highest level since 2005.  Much of this was due to optimism that costly regulatory burdens will soon be lifted.

6. Rising mortgage rates are not curbing demand but real estate inventory remains stubbornly low. Constrained supply is expected for at least four more years, according to NAR.

Rate Update

Wednesday’s Fed meeting turned out to be negative for mortgage rates. Recent economic data had little impact.  The net last week was slightly higher rates.

This Week

There will be a meeting of the Bank of Japan on Tuesday which could influence rates.  Domestically, U.S., Existing Home Sales will be released on Wednesday, Durable Orders and Core PCE on Thursday, and New Home Sales on Friday.

December 17, 2016 by · Leave a Comment

Shelter Six: Further Evidence of a Strengthening Economy

1. The economy continues to chug along evidenced by the November ISM National Securities Index, which increased to the highest level of the year.

2. The November ISM National Manufacturing Index also greatly exceeded expectations.

3. According to CoreLogic, 548K+ homeowners regained equity in just the Second Quarter of 2016, bringing the homes with positive equity to almost 93%.

4. Foreclosure inventory continues to dwindle. CoreLogic reports that foreclosure inventory was down 29.1% in July and 16.5% year-over-year.

5. The Shelter “Foreign National” Program now goes up to $1,000,000 with 35% down.

6. The program requires 24 months of payment reserves at closing with at least six months of to be held in a U.S. bank account. Funds to close must also be in a U.S. depository for 15 days prior to closing

Rate Update

Rate volatility last week was the lowest since the election. The main market mover was the European Central Bank (ECB) meeting.  Sunday’s referendum vote in Italy had little impact on U.S. markets, and the U.S. economic data also caused little reaction.  While it was another good week for the stock market, mortgage rates ended the week with little change.

This Week

The Federal Reserve meeting will take place on Wednesday, and it is widely expected that the Fed will raise the Federal Funds rate.  Also Retail Sales is due out on Wednesday, the Consumer Price Index on Thursday and Housing Starts on Friday.

December 11, 2016 by · Leave a Comment

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