Mortgage in America

Daily Rate Update: July 13th-17th

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Friday – July 17, 2020

The housing sector has rebounded from the brief dip it took during the pandemic induced shutdown. June Housing Starts jumped 17% from May to an annual rate of 1,186,000 units versus the 1,180,000 expected. Starts are down 4% from last year which is attributed to the declines seen during the shutdown. Building Permits, a sign of future construction, rose 2% to 1,241,000. The housing sector continues to be a bright spot in the U.S. economy.

Hopes of fresh stimulus from Congress along with strong housing data is offsetting the big surge in virus cases as the week comes to a close. Congress will be back from its July recess on Monday and with Democratic and Republican leaders agreeing that some type of coronavirus stimulus needed, they are $2 trillion apart. Many Americans are still unemployed and the enhanced $600 federal benefit is set to expire at the end of this month so Congress will have to act quickly before its August recess. The U.S. financial markets are on the quiet side today, typical for a summer Friday.

Courtesy of Mortgage Market Guide 

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Thursday – July 16, 2020

Americans filing for first-time unemployment benefits continue to decline but remain at high levels as the country reopens while some states reclose. Weekly Initial Jobless Claims rose by 1.3 million falling for the 15th straight week after the 6 million-plus new claims were seen in late March and early April. The enhanced $600 federal unemployment insurance is set to end on July 25 while the regular state benefits will continue. The bright spot this morning was news that consumer remains resilient as the economy slowly reopens and Americans opening their wallets for goods and services. June Retail Sales rose by 7.5% versus the 5.2% expected while May was revised higher.

Home borrowing costs continue to hit record lows in the latest survey from Freddie Mac. The 30-year fixed-rate mortgage fell to 2.98% this week with 0.7 in points and fees. It was the lowest rate since Freddie Mac began tracking the data in 1971. A year ago the rate was 3.81%. A Freddie Mac spokesperson said, “The drop has led to increased homebuyer demand and, these low rates have been capitalized into asset prices in support of the financial markets. However, the countervailing force for the economy has been the rise in new virus cases which has caused the economic recovery to stagnate, and this economic pause puts many temporary layoffs at risk of ossifying into permanent job losses.”

Home builder confidence declined sharply in April as the pandemic induced shutdown closed off virtually every sector of the economy. But there has been a sharp reversal in sentiment in June and July after the big decline seen in April. The NAHB Housing Market Index jumped 14 points in July to 72 and up from the 30 registered in April. “Builders are seeing strong traffic and lots of interest in new construction as existing home inventory remains lean,” said NAHB Chairman Chuck Fowke.

Courtesy of Mortgage Market Guide 

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Wednesday – July 15, 2020

Mortgage rates continued to hit record lows in the latest survey falling sharply since the recent highs seen in late March. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage fell seven basis points to 3.19% with 0.33 in points for the week ending July 10, 2020. The Market Composite Index, a measure of total mortgage loan application volume, increased 5.%, the Purchase Index fell 6% while the Refinance Index rose nearly 12%.

In its July 2020 Economic Outlook, Fannie Mae reports that economic growth expectations have improved slightly but will remain fixed to the COVID-19 recovery. Housing has demonstrated resilience and is to increase substantially in Q3 2020. And while still bad numbers, annual GDP is expected to decline 4.2% from negative 5.6% in the last outlook. Fannie Mae sees an uptick of 200,000 in existing home sales for the year with purchase mortgage origination volumes of around $40 billion. Doug Duncan, Fannie Mae Senior Vice President and Chief Economist said, “At the current mortgage rate, we estimate that nearly 60 percent of all outstanding loan balances have at least a half-percentage point incentive to refinance.”

Courtesy of Mortgage Market Guide 

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Tuesday – July 14, 2020

Positive news was delivered from the small business sector of the economy after the pandemic induced shutdown severely cut into sales while many employees were laid off. The NFIB Small Business Optimism Index rose 6.2 points to 100.6 after the sharp declines seen in March an April. Owners anticipate improving sales as the economy continues to re-open and continue to be optimistic about future business conditions and indicate they expect the recession to be short-lived.

In economic news, consumer prices rose in June as pent-up demand for goods and services resumed after the pandemic induced shutdown. Prices were impacted by higher food and gasoline costs. The June inflation reading Consumer Price Index rose 0.6% versus the 0.5% expected and up from a decline of 0.1% in May and the steep drop of 0.8% in April. However, underlying inflation is still muted and will be for some time, says the Federal Reserve, the Fed’s favorite inflation gauge, the annual Core PCE, was 1.0% in May, well below the Fed’s target range of 2.0%.

Low mortgage rates coupled with a lack of housing supply are producing bidding wars for homes across the nation. Redfin reports that a little than half of offers for homes were in bidding wars in June for the second straight month. The company said that nationwide, nearly 54% of Redfin offers faced bidding wars in June, up from almost 52% in May and 44% in April. Redfin economist Taylor Marr said, “It’s like a game of musical chairs where only the best bidders get a seat.”

Courtesy of Mortgage Market Guide 

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Monday – July 13, 2020

As the economy continues to reopen and Americans slowly returning to work, the housing sector has picked up some steam. In the forbearance sector, filings continued to decline in the latest numbers Black Knight reports that there were 4.14 million homeowners in active forbearance or 7.8% of all active mortgages, as of July 7. That number is down from 8.6% in the previous week with the biggest decrease seen in GSE loans (Fannie Mae/Freddie Mac). The 4.14 million of active forbearances is the lowest number since April 28.

Mortgage credit availability declined in June from May as investors further reduced their willingness to purchase jumbo loans and those with lower credit scores. The MBA reports that its Mortgage Credit Availability Index fell 3.3% to 125. A decrease indicates that lending standards are tightening, while gains in the index are indicative of loosening credit. Lenders are navigating a gradual economic and housing market recovery that is still facing headwinds from the ongoing COVID-19 pandemic,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.

U.S. stocks are higher as the week kicks off following recent gains. The Dow and S&P registered back-to-back weekly gains when trading ended last Friday while the NASDAQ continued to hit fresh record highs with three consecutive weekly gains. The near 11% surge in the tech-heavy NASDAQ index in July has been fueled by soaring shares of Amazon, Apple, Netflix, Alphabet, which are at all-time highs. The Dow and the S&P 500 have risen 1.0% and 2.7% this month, respectively.

Courtesy of Mortgage Market Guide 

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