Chesapeake, VA Market Update...Another View

Great Recap on recent impacts on mortgage rates and the view from one of my recommended mortgage officers on the present state of the market.

Weekly Review

A decline in manufacturing activity in China coupled with a disappointing Durable Goods Orders release for February was instrumental in a declining stock market this past week.  The Commerce Department reported February's Durable Goods Orders fell 1.4%, missing expectations of a modest pick-up of 0.4%.  The Durable Goods Orders excluding transportation (aircraft), a closely watched proxy for business spending plans, fell 0.4% last month and was below the consensus estimate of 0.3%.  This was the sixth straight month of declines in Durable Goods Orders and is likely due to the combined effects of a strong dollar and weaker global demand.  January’s number was also revised lower from 2.8% to 2.0%.  This report was the latest indicator that U.S. economic growth stalled earlier this year.

In the bond market, weak demand at a couple of Treasury note auctions during the week resulted in higher yields.  Intermediate and long-term U.S. Treasury debt prices fell, pushing yields higher to end a two-week rally.  The Treasury Department brought additional supply to the bond market on Wednesday with a $35 billion five-year note auction that had a high yield of 1.387%.  The bid-to-cover ratio was 2.35 indicating weaker demand, and was the lowest bid-to-cover ratio for a five-year auction in the past four years.  Indirect bidders, which include foreign central banks, took 55.7% of the supply while direct bidders took 4.7%.  The average over the prior 12 auctions had a high yield of 1.63% and a bid-to-cover ratio of 2.66.

On Thursday, the Treasury auctioned off $29 billion in seven-year debt, but the auction drew the least demand since May 2009.  The mediocre bid-to-cover ratio was 2.32 versus an average of 2.40 over the past four auctions of similar maturity securities.  Indirect bidders took 50.5% of the supply while direct bidders took 12.3%.  The prior 12 auction average saw a bid-to-cover ratio of 2.52.  CNBC’s Rick Santelli graded the auction a “D+” and selling in the bond market accelerated to the downside following the auction.

From the week’s housing news, it appears the real estate market is on the mend.  Existing Home Sales improved by 1.2% during February to 4.88 million from an unrevised 4.82 million in January.  The consensus forecast had called for Existing Home Sales to increase to 4.90 million.  The lower than expected sales number may have been negatively impacted by severe winter weather conditions, but supply problems probably have a greater impact as inventories remain at a 4.6 month supply at the current sales rate.  A more normal inventory level is maintained at a 6.0 month supply.

The lower inventory level is pushing prices higher with the median existing home price increasing 7.5% year-over-year in February to $202,600.  February marked the 36th consecutive month of year-over-year home price increases.  Higher home prices make it more difficult for first-time home buyers to enter the market and this is evident from the 29% of February purchases made by first-time buyers.  Although this was a percent higher than January’s 28%, it is well below the 40% level that is seen under normal housing market conditions.

February New Home Sales increased to 539,000 units, annualized, surpassing analyst expectations of 465,000.  February’s sales number also exceeded January’s upwardly revised 500,000 units from the 481,000 units first reported.

Also, the Federal Housing Finance Agency reported their House Price Index increased by 0.3% in January from the previous month.  From January 2014 to January 2015, house prices were up 5.1%.  Jonathan Smoke, chief economist at realtor.com, stated “…the FHFA numbers appear to be showing a moderation in price increases which we aren’t seeing in listing prices or median existing home prices.  On the contrary, other metrics are showing acceleration in year-over-year prices that started in December and coincided when inventories started getting super tight.  The FHFA number may be weaker because it is based only on government backed purchase mortgages and therefore doesn’t reflect jumbo mortgages on higher priced homes.”

For the week, the FNMA 3.0% coupon bond lost 18.8 basis points to end at $101.94 while the 10-year Treasury yield gained 2.8 basis points to reach 1.96%.  Stocks ended the week with the NASDAQ Composite losing 135.20 points, the Dow Jones Industrial Average dropping 414.99 points, and the S&P 500 decreasing 47.08 points.

To date for 2015, and exclusive of any dividends, the NASDAQ Composite has gained 3.17%, Dow Jones Industrial Average has lost 0.62%, and the S&P 500 has gained 0.10%.  The national average 30-year mortgage rate rose to 3.79% from 3.74% while the 15-year mortgage rate increased to 3.08% from 3. 30%.  The 5/1 ARM mortgage rose to 3.16% from 3.10%.  FHA 30-year rates rose to 3.50% from 3.30% and Jumbo 30-year rates rose to 3.67% from 3.64%.

Mortgage Rate Forecast with Chart

The FNMA 3.0% coupon bond ($101.94, -18.8 bp) opened the week 9 basis points higher on Monday at $102.22 and ended up trading within a range between a weekly high of $102.63 and a low of $101.61 before settling at $101.94 on Friday.  The bond traded significantly lower on Wednesday and Thursday resulting in a new sell signal from a negative stochastic crossover.  The move dropped the bond below its intermediate lower trend line and back below the key 50-day moving average support level located at $101.99, which now becomes technical resistance.  Nearest support is now located at the 25-day moving average at $101.56.  Unfortunately, the bond remains close to “overbought” levels even with the losses on Wednesday and Thursday, and appears destined to test the next levels of support at $101.56, $101.40.  The bond did manage to bounce back a little on Friday to create a two-day Harami Japanese Candlestick candle pattern that can be a potential reversal signal, but this will require confirmation from a positive candlestick on Monday.

With the March employment report looming in the background on Friday, technical signals will likely take a backseat to economic news.  If the week’s economic news proves to be bond market friendly we should see an improvement in bond prices and lower yields.  Conversely, if the economic news is more favorable for stocks, we could see bond prices fall further to test support levels and see yields and mortgage rates rise slightly.

Chart:  FNMA 30-Year 3.0% Coupon Bond

Jim Belote NMLS # 254207   MLO #:  22270VA

Branch Manager/Senior Loan Officer

Old Point Mortgage, LLC

Branch Manager/Senior Loan Officer

1613 Laskin Road, Suite 300

Virginia Beach, VA 23451

Office:  757-690-8047 or 757-395-LOAN(5626)

Cell:  757-287-3873

eFax:     757-605-4982

Email:    jim@jimbelote.com or jim@oldpointmortgage.com

Housing Trends Update

Every month, I and other Realtors respond to the HousingPlus Survey.  Questions are asked about what we see going on in the market.

As a result, the Newsletter that results has the "on the ground" perspective of Realtors that help buyers and sellers everyday.  We gain a view of the market that is specific and unique to those reports that simply report the numbers

Click HERE for your copy of our special four-page newsletter – Housing Trends Update Got questions??  Give me a call  757 580-6546

Market Update---Growing Stronger

Another perspective on the home financing market and home sales.  Jeff
notes all the very positive trends in home sales, stock market, employment numbers, etc.


As you can tell, the improvement is very broad across the economy.  Sequestration may eventually impact the Hampton Roads market.  Yet thus far, both in what Jeff is sharing and in what I am seeing, the strength of the housing market and the general economy may be a force too great.

Only time will tell.

Having trouble viewing this email? Click here to view web version visit my website    email me now Jeff Hurd Loan Officer780 Lynnhaven Parkway #420 Virginia Beach, VA 23452 Mobile: 757-329-1115 Fax: 866-396-6422 For the week of May 13, 2013 – Vol. 11, Issue 19 >> Market Update  QUOTE OF THE WEEK... "Saints are sinners who kept on going" --Robert Louis Stevenson, Scottish novelist, poet, and essayist INFO THAT HITS US WHERE WE LIVE... Home prices also keep on going, and in a decidedly upward direction. The National Association of Realtors (NAR) reported that for Q1 of this year, the median existing home price jumped 11.3% over last year, the largest annual gain since Q4 of 2005. But Q1 inventory was down 16.8%. The NAR's chief economist expounded: "Inventory conditions are expected to remain fairly constrained this year, so overall price increases should be well above the historic gain of one-to-two percentage points above the rate of inflation."  A leading research analytics firm reported that home prices in March jumped 10.5% year over year, posting their biggest annual gain in seven years. Plus, the 1.9% price increase over February was the 13th monthly gain in a row. These analysts expect April to register a 12% annual and a 2.7% monthly price hike, if you exclude distressed sales. Finally, Fannie Mae reported a milestone in consumer optimism about home prices: the majority of Americans they surveyed now expect home prices to increase over the next year. BUSINESS TIP OF THE WEEK... From Warren Buffett: "...the biggest thing that kills [businesses] is complacency. You want a restlessness, a feeling that somebody's always after you, but you're going to stay ahead." >> Review of Last Week BREAKING RECORDS AGAIN... Investor enthusiasm pushed U.S. stocks to their third week of record-setting gains. Friday the Dow ended solidly above 15,000, at its highest close ever. Not to be outdone, the S&P 500 also hit an all-time high, well north of 1600. There wasn't much economic data or financial news to distract investors and quite a few Q1 corporate earnings reports continued to surprise to the upside. Other points to ponder included a steep decline in commodity prices and the dollar's surge in value over the Japanese yen. Weekly Initial Unemployment Claims came in at 323,000, a five-year low. Continuing Unemployment Claims were barely above 3 million. The final source of good feelings came Friday, when the Treasury reported its monthly budget statement. In April, the U.S. registered the largest budget surplus in five years: $113 billion. Of course, income tax payments usually make April a surplus month. But, hey, through the first seven months of the government's 2013 fiscal year, the deficit is down to $488 billion, 32% lower than the same period last year. The week ended with the Dow up 1.0%, to 15118; the S&P 500 up 1.2%, to 1634; and the Nasdaq up 1.7%, to 3437.  With stocks soaring and the week bereft of worrisome news or disappointing data, bond prices suffered. The FNMA 3.5% bond we watch ended the week down .86, at $105.18.After five weeks of declines, national average mortgage rates rose in Freddie Mac's weekly Primary Mortgage Market Survey, but remain near historical lows. The Mortgage Bankers Association (MBA) reported purchase loan applications were up 2% for the week and UP 12% compared to a year ago. DID YOU KNOW?... The NAR reports: "Most Americans believe a housing recovery is truly occurring throughout the country. The share of Americans who think it is a good time to sell has doubled during the last year." >> This Week’s Forecast RETAIL DOWN, MANUFACTURING UP, INFLATION SIMMERS, BUILDERS COOL... This week is packed with economic data, starting with Monday's Retail Sales for April, expected down for another month. Nonetheless, factories are humming, according to bothNY Empire Manufacturing and Philadelphia Fed forecasts. Staying on simmer, inflation did not heat up in April, with wholesale PPI and consumerCPI numbers predicted slightly down overall and up only a tick in Core readings that exclude food and energy. Although the housing market is recovering, builder enthusiasm cooled off in April, with Housing Starts expected to dip below the 1 million annual rate. >> The Week’s Economic Indicator Calendar Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.  Economic Calendar for the Week of May 13 – May 17  Date Time (ET) Release For Consensus Prior Impact M May 13 08:30 Retail Sales Apr –0.3% –0.4% HIGH M May 13 10:00 Business Inventories Mar 0.3% 0.1% Moderate W May 15 08:30 Producer Price Index (PPI) Apr –0.5% –0.6% Moderate W May 15 08:30 Core PPI Apr 0.1% 0.2% Moderate W May 15 08:30 NY Empire Manufacturing Index May 3.5 3.1 Moderate W May 15 09:15 Industrial Production Apr –0.2% 0.4% Moderate W May 15 09:15 Capacity Utilization Apr 78.3% 78.5% Moderate W May 15 10:30 Crude Inventories 5/11 NA 0.230M Moderate Th May 16 08:30 Initial Unemployment Claims 5/11 330K 323K Moderate Th May 16 08:30 Continuing Unemployment Claims 5/4 3.005M 3.005M Moderate Th May 16 08:30 Consumer Price Index (CPI) Apr –0.2% –0.2% HIGH Th May 16 08:30 Core CPI Apr 0.2% 0.1% HIGH Th May 16 08:30 Housing Starts Apr 970K 1.036M Moderate Th May 16 08:30 Building Permits Apr 950K 902K Moderate Th May 16 10:00 Philadelphia Fed Index May 2.5 1.3 HIGH F May 17 09:55 Univ. of Michigan Consumer Sentiment May 78.5 76.4 Moderate F May 17 10:00 Leading Economic Indicators (LEI) Apr 0.3% –0.1% Moderate >> Federal Reserve Watch    Forecasting Federal Reserve policy changes in coming months... Economists expect the Fed to keep the Funds Rate at the present exceptionally low level at least through Q3 of this year. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same. Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: Consensus Jun 19 0%–0.25% Jul 31 0%–0.25% Sep 18 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Jun 19      <1 span=""> Jul 31      <1 span=""> Sep 18      <1 span=""> UIE

 

 



 

 April is in the books!!!

 

REIN's Press Release is titled:

 

                        Second Quarter Sales off

                          to a Good Start

 

 

 





 

No real surprise to me with the results!   Here are the summary facts:

 

 

                                                  April 2013 vs April 2013

 

Homes for Sale               Down 7.64%    

 

Supply of Inventory       Down 15.4%       Currently 6.48 Months

 

Closed Home Sales       Up       13.4%

 

Pending Home Sales     Up       21.98%

 

Short Sale/Foreclosed   Down    1.14%      23.89% of homes listed

    Homes Listed                                          (Lowest in 18 months)

 

Short Sale/Foreclose     Down    3.21%      27.7% of homes sold

  Closed Home Sales                                   (Lowest in 6 months)

 

 

You should expect the Short Sale/Foreclosed homes numbers to continue to improve as the market values increase.  The increase in home values will driven by the shortage of home on the market.

 

In given cities in Hampton Roads and in given price ranges,  the reduced home inventory caused by fewer homes listed, increased closed home sales and increased pending home sales will put increased pressures for rising home values. 

 

If you are on the sidelines,  it is time to get in the game!

 

Would you agree....why or why not??



The Fed Hold Off Again

Bernanke to the Rescue


In his presentation to Congress, Bernanke once again re-iterated the Fed's willlingness to continue to Bond purchases.  The stock market responded with over 150 point gain on Wednesday.

The Market was bouyed by the thought of continued low interest rates.  If you run a business, low interest rates mean cheaper equipment purchases, low rates on building expansions and purchases as well as lines of credit at banks for every day expenses and corporate bonds for financing big ticket purchases.

So do you know that you run a "business" everyday also?  Its called 'Corporation "Me"'.    The life and vitality of "Me" depends on funds to provide a roof over "Me"'s head, food in the belly, and clothing at a minimum.  Most business owners of "Me" can conjure up other needs for funds.

Thus, if your "Me" corporation(which may have a few subsidaries running about the house) needs more space or must downsize(due to casting off a few subsidaries in the past few years), Bernanke's speach should have you dancing in the streets also!!!

Though bond rates and mortgage rates don't track perfectly(but what in the financial market ever tracks with anything else!), these two rates do respond to one another in general ways.  If bond rates are going down(reduced yields is market term), mortgage rates tend to stay lower with less pressure to rise.

Why?   Great question....could be that both are traded on public market.  Though the investor wants the highest return, safety is important.  So if government bonds and corporate bonds are bought with a given rate of return, mortgage bonds/securities must compete to garner investments.

Do you need to worry about the intricacies of this dynamic?  Only if you plan to invest directly in these securities. 

You only really need to know that Bernanke's pronouncement means rates will remain constrained.   Thus, "Me" Corporations can still get insanely low rates to purchase a home.   Yet for how long is not known.

But don't miss that it is great news for the "Me" corps that need to unload property.  If you were a top 100 corporation in the U.S., you would realize low rates means that you can sell off a subsidary with good value at a good price because the buyer will have reduce long term cost due to low interest rates.  Likewise, any buyer for a "Me" corp. looking to change locations will also save lots of money over 30 years with a 3.5% mortgage rate versus historical over 7% average mortgage rate.

SO DON'T MISS OUT!!!