Mortgage Weekly Update

Stable Rates The story of the week is stable rates.   Economy is still not bursting at the seems so the pressure on rates(thanks to FED bond purchases) remains low. Read the entire newsletter for more great insights!!!!

Jim Belote Branch Manager, MBA Union Mortgage Group Phone: (757) 395-LOAN Fax: (757) 257-2909 License: 254207 jim@jimbelote.com

In This Issue   Last Week in Review: The Jobs Report for March was released, along with important housing news. Forecast for the Week: Look for the minutes from March's Federal Open Market Committee meeting, plus news on wholesale inflation and consumer sentiment. View: This simple tip can make a big difference in client meetings. Last Week in Review   Not too hot. Not too cold. Just right. While Goldilocks from the famous children's story may have been referring to porridge, the sentiment also applies to the Jobs Report for March. Read on for the details. The Labor Department reported that 192,000 jobs were created in March, as much of the country thaws out from the extreme harsh winter weather. This was in line with expectations, and it's a strong number given the amount of job creations reported in recent months. In addition, the figures for January and February were revised higher by 37,000 jobs. The Unemployment Rate ticked up to 6.7 percent from 6.6 percent, while the more important Labor Force Participation Rate (LFPR) rose to 63.2 percent from 63 percent. Though it's good that the LFPR increased, it is still near 35-year lows. The LFPR measures the proportion of working-age Americans who have a job or are looking for one, and it should be moving higher in a recovery. In housing news, CoreLogic reported that home prices (including distressed sales) rose by 12.2 percent from February 2013 to February 2014. This represents 24 months of consecutive year-over-year increases. In addition, from January to February, prices were up 0.8 percent. However, despite the rosy gains, prices are still nearly 17 percent below their peak set in April 2006. The big gains from 2013 are starting to cool and return to more normal historical levels. What does this mean for home loan rates? The Fed is now purchasing $30 billion in Treasuries and $25 billion in Mortgage Bonds (the type of Bonds on which home loan rates are based) to help stimulate the economy and housing market. This is down from the original $85 billion per month that the Fed had been purchasing. The Fed will be closely watching upcoming reports, especially in the labor and housing markets, as it evaluates the timing of further tapering. These decisions will continue to impact our economy and home loan rates as we move ahead this year. The bottom line is that now remains a great time to consider a home purchase or refinance, as home loan rates remain attractive compared to historical levels. Let me know if I can answer any questions at all for you or your clients. Forecast for the Week   After last week's busy economic calendar, economic reports don't begin until Thursday this week. As usual, weekly Initial Jobless Claims will be released on Thursday. Last week's claims jumped unexpectedly by 16,000, reaching a one-month high. On Friday, look for news on inflation at the wholesale level with the Producer Price Index. The Consumer Sentiment Index will also be released. In addition, the minutes from the March FOMC meeting will be released on Wednesday, and they could provide more insight regarding tapering and the Fed's Bond buying program. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based. When you see these Bond prices moving higher, it means home loan rates are improving and when they are moving lower, home loan rates are getting worse. To go one step further a red "candle" means that MBS worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning. As you can see in the chart below, the markets have been volatile this year but home loan rates remain near historic best levels. I'll continue to monitor them closely. Chart: Fannie Mae 4.0% Mortgage Bond (Friday April 4, 2014) The Mortgage Market Guide View...   The Power of "Listening Slowly" As a sales professional or service provider, you often meet with new clients and referral partners. But even if your questions are thorough, people may occasionally give vague or incomplete answers that, when left unexplored, could significantly impact both the advice and service you give them. In the book, Change-Friendly Leadership, management coach Rodger Dean Duncan suggests you try a technique called listening slowly, which Duncan learned directly from PBS NewsHour anchor Jim Lehrer. "He urged me to ask a good question," says Duncan, "listen attentively to the answer, and then count silently to five before asking another question. At first that suggestion seemed silly. I argued that five seconds would seem like an eternity to wait after someone responds to a question. Then it occurred to me: Of course it would seem like an eternity, because our natural tendency is to fill a void with sound, usually that of our own voice." So, how can this technique help you in meetings? When people are left with a few moments of silence, you'll be amazed at how often and how quickly they will offer more information that can help you better serve them. Of course, you don't want to pause for five seconds after every single question – strictly factual and yes-or-no questions are fine as they are. But when you're looking for a deeper-level answer, an opinion, or an expanded view into a person's thoughts or needs, then try incorporating the magic of listening slowly into your client meetings. Please feel free to pass this tip along to your team, clients, and colleagues. Economic Calendar for the Week of April 7 - April 11 Date ET Economic Report For Estimate Actual Prior Impact Wed. April 9 02:00 FOMC Minutes 3/19 NA NA HIGH Thu. April 10 08:30 Jobless Claims (Initial) 4/05 NA 326K Moderate Fri. April 11 08:00 Core Producer Price Index (PPI) Mar NA -0.2% Moderate Fri. April 11 08:00 Producer Price Index (PPI) Mar NA -0.1% Moderate Fri. April 11 10:00 Consumer Sentiment Index (UoM) Apr NA 80.0 Moderate The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is without errors. As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you. Mortgage Market Guide, LLC is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated.   Mortgage Market Guide, LLC does not grant to you a license to any content, features or materials in this email.   You may not distribute, download, or save a copy of any of the content or screens except as otherwise provided in our Terms and Conditions of Membership, for any purpose.

Perspective on 2013/2014 Housing Market

Here is a great update summarizing a Mortgage Company's view of 2013 and preview for 2014.

It is always refreshing to hear a honest assessment of one's own prediction, especially when they are perfect.  Yet, an accurate prediction of any year's economy has odds close to winning the Powerball Lottery!   So many variable go into the U.S. let alone the World economy that impacts us all.

As Jim properly notes in this update, all markets are local.  Thus, everyone needs to speak with a local Realtor in his/her market to really know how the local market is faring at any given time.

Yet, Jim's summary of the recent mortgage rates rise in context of the economy could be broadly applied:  

To be sure, mortgage rates are on the rise, but this shouldn't be feared as long as the trend in the mitigating factors – income growth and job growth, in particular – continue to trend in the right direction.

As you read the 2014 comments, you can see the trend is expected to continue!!

HAPPY NEW YEAR!!!

Keeping you updated on the market! For the week of  December 30, 2013 MARKET RECAP Perception Finally Becomes Reality After the Federal Reserve announced tapering would commence in 2014, interest rates stood pat. They didn't move meaningfully higher, though they had moved meaningfully higher in anticipation of the announcement. Now it appears rates are moving higher on the announcement itself. We saw rates on most mortgage products move higher this past week. On a national level, Bankrate.com reports the average rate on the 30-year fixed-rate loan increased five basis points to 4.63% to hit a three-month high. Interestingly, the rate on the five-year ARM also moved meaningfully higher, rising 10 basis points to 3.43% on average. Last week we noted that ARM rates should be muted. Fed officials have stated they will continue to support low short-term rates. Despite the Fed's stated support, though, it appears market participants are questioning the Fed's ability to actually maintain these rates. That said, rates on short-term Treasury securities continue to hold lows established earlier this year, which suggests that we could see a pullback in ARM rates this coming week. As for the 30-year fixed-rate mortgage, we don't anticipate a pullback. When we're not following mortgage-backed security yields, we're following the yield on the 10-year Treasury note, which is a good proxy for where the 30-year fixed-rate mortgage is headed. As the 10-year note goes, so goes the 30-year fixed-rate mortgage. Because so many homes are financed, rising rates obviously impact affordability. Freddie Mac recently delved into the relationship. As to be expected, rising rates are hurting affordability. But it's not a universal phenomenon. Real estate markets, as we all know, are local markets. National numbers are frequently irrelevant to any particular market. That said, Freddie is finding more local markets are becoming unaffordable, though most of these markets are concentrated on the East Coast. Freddie Mac is quick to note (as are we) that rising rates are offset by rising income. Fortunately, incomes are taking flight in many sectors of the economy. As long as incomes continue to rise, and as long as job growth continues to gain momentum, the impact of rising rates on the real estate market will be muted. Low household debt is another mitigating factor to rising rates. After the 2008-2009 recession, many households reduced their debt. Average household debt is currently at a multi-year low. This means many households are in a position to support more debt and a higher monthly payment for big-ticket items like a house. To be sure, mortgage rates are on the rise, but this shouldn't be feared as long as the trend in the mitigating factors – income growth and job growth, in particular – continue to trend in the right direction. Economic Indicator Release Date and Time Consensus Estimate Analysis Pending Home Sales (November) Mon., Dec. 30, 10:00 am, ET 0.5% (Increase) Important. Rate increases and low inventory continue to weigh on sales growth. S&P/Case-Shiller Home Price Index (October) Tues., Dec. 31, 9:00 am, ET 0.6% (Increase) Important. Expect to see some weakening in price growth based on data from other price providers. Mortgage Applications Thurs., Jan. 2, 7:00 am, ET None Important. Rising rates and fee increases will likely restrain overall activity through early 2014. Construction Spending (November) Thurs., Jan. 2, 10:00 am, ET 0.9% (Increase) Moderately Important. Residential spending continues to power overall spending gains. The Year that Was, The Year that Will Be This time last year we forecast that the rate on the 30-year fixed-rate loan would be at or above 5%. We also forecast a significant increase in economic growth. The market didn't quite conform to our expectations: The rate on the 30-year loan didn't hit 5% and economic growth was anemic, at least through the first nine months of 2013. Perhaps we were 12 months ahead of the curve. We say that because we see 5% on the 30-year loan for 2014. We also see stronger growth, which is already materializing, in both the overall economy and the labor market. We also forecast that 2013 would be a good year for housing. We were right. What's more, we reiterate that forecast for 2014. We see more activity, particularly in the new-home market. The trend in sales through the second half of 2013 has been strong. We expect that trend to continue deep into 2014 based on home-builder optimism. As for existing-home sales, we expect they will stagnate through the first quarter of 2014. The dearth of inventory continues to plaque the sector. The good news here is that inventory appears to have bottomed and should improve as 2014 progresses. As for prices, we still believe the pace of appreciation will slow. We've mentioned many times this year that double-digit price gains are simply unsustainable. Low-to-mid single-digit increases are the norm – and are what's sustainable in a healthy market. The bottom line is that 2014 will be another good year for residential real estate, which should give us another reason to celebrate the new year.