Shelter Six:  Inventory and Home Sales Both Down

February 26, 2018 by · Leave a Comment 

1. Existing Home Sales were down 3% in January from December and 5% from last year.

2. The main reason for slower sales is a lack of inventory, which is down 10% from a year ago and now sits at a 3.4 months supply (6 months is considered healthy).

3. Fannie Mae now gives a discounted rate on a Conforming cash-out refinance if the cash is being used to consolidate student loans.

4. In the aftermath of the Great Recession, Congress voted to make Private Mortgage Insurance (PMI) tax deductible for the first time.

5. Over the last decade, Congress has continued to vote at the end of each year to make PMI tax deductible for the subsequent year.

6. Tax deductible PMI was not initially reinstated for 2017 taxes but Congress finally approved this deduction on February 9.

Rate Update

For the first time in 2018, mortgage rates did not increase last week but rather stayed flat after the economic data of the week came in as expected.

This Week

Investors will be focused on Jerome Powell’s first speech as Fed Chair on Wednesday.  Also, Durable Orders will be released on Tuesday, Core PCE Price Index on Thursday, and ISM National Manufacturing Index on Friday.

Shelter Six:  Expect Short-Term Rates to Increase by .25% in March

February 19, 2018 by · Leave a Comment 

1. Federal Funds futures contracts imply an 83% chance of a rate-hike at the Fed’s March meeting.  The general consensus is that there will be three rate hikes this year.

2. Interest on second mortgages is still tax deductible if the proceeds from the loan go toward “substantial home improvements” and the combined 1st and 2nd mortgage balances do not exceed $750,000.

3. Good News:  Housing Starts were up 4% in January and are 8% higher than a year ago.

4. Not So Good News:  January Retail Sales figures were lower than expected while the Consumer Price Index was higher than expected.

5. Great News:  According to a released internal memo, the CFPB will pull back its enforcement actions and act with “humility and moderation” moving forward.

6. The memo also said that the CFPB will work toward “free, innovative, competitive, and transparent consumer finance markets where the rights of all parties are protected.

Rate Update

For the first time this year, it was a relatively quiet week for mortgage rates.  The major economic data was mixed and mortgage rates ended the week with little change.

This Week

It is a very light week for economic data.  On Wednesday, Existing Home Sales will be released as will the minutes from the January 31 Fed meeting.

Shelter Six:  Government Shutdown Averted

February 12, 2018 by · Leave a Comment 

1. Last week another government shutdown was averted as the Senate passed a two-year budget deal.

2. Economic data is the number one reason mortgage interest rates move daily.  Rates move in relation to the deviation from expectations.

3. Last week, the ISM National Services Index came in much higher than expected with one of best readings in over a decade.

4. The ongoing strong economic data is continued proof that the economy is healthy, but also the reasons rates keep pushing up a little each week.

5. Fannie Mae’s Home Purchase Sentiment Index (HPSI) rose in January to an all-time high.  This 100 question survey of 1000 consumers measures expectations of job security, if it is a good time to buy or sell, and if home prices will increase in 2018.

6. Mortgage delinquencies were up slightly in the 4th Qtr of 2017.  The increase in the National Delinquency Survey conducted by the Mortgage Bankers Association was attributed primarily to last year’s hurricanes.

Rate Update

Massive swings in the stock market caused tremendous rate volatility last week.  Mortgage rates pushed up for the fifth straight week mostly due to inflation concerns stemming from the budget deal as well as optimistic comments from European central bankers.

This Week

Retail Sales and the Consumer Price Index (CPI) are both due out on Wednesday, Industrial Production on Thursday, and Housing Starts on Friday.

Shelter Six:  Mortgage Rates Continue to Surge Higher

February 5, 2018 by · Leave a Comment 

1. Mortgage rates continue to surge in 2018 out of concerns over inflation pushing above targeted levels due to a growing economy fueled by recent tax cuts.

2. Another reason rates are trending higher is simply less potential demand for bonds if the U.S. budget deficit grows and both China and Europe buy less.

3. Friday’s Employment Report came in mostly as expected but annual wage growth was well above the consensus forecast, adding to the recent inflationary concerns.

4. Home Sales finished 2017 at the highest level since 2006 despite inventory being at only a 3.2 month supply, the lowest since tracking began in 1999.

5. The Fed, meeting for the last time last week under the leadership of Janet Yellen, left rates unchanged setting the stage for an increase in March under her successor Jerome Powell.

6. Powell is being officially sworn in this week as speculation grows that the Fed may pick up the pace of future rate hikes, which have been bumped up five times since late 2015.

Rate Update

News that the European Central Bank may end its bond repurchase program along with strong wage growth data led to a jump in rates to the highest level in four years.

This Week

The ISM National Services Index is due out on Monday with the JOLT Survey due out on Tuesday. Investors will also be watching to see if an agreement is reached to fund the government past Feb 8.