Consumer Sentiment Moves Off Of Highs:

Americans turned less optimistic about the economy in early February on worries about falling income even as their outlook on the jobs market rose to a record high, a survey released on Friday showed.

The Thomson Reuters/University of Michigan Index of Consumer Sentiment fell back in February with a preliminary score of 72.5 that is 2.5 pts lower than January’s score of 75.

Current conditions, and more precisely a negative tone towards current finances, was the heaviest drag. Even though optimism towards the job market kept up, the CSI was unable to hang on to sentiment expressed last month. Market expectations averaged to 74.5.

The optimism in their job outlook is encouraging though and is certainly reflective of the steady string of better than expected Initial Weekly Jobless Claims and the recent decline in the national Unemployment Rate.  As these trends in lower Unemployment continue, look for the Consumer Sentiment to regain some ground.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) lost -26 basis points from last Friday to the prior Friday which moved mortgage rates higher on a week-over-week basis.  That also marked a -68 basis point drop in MBS pricing from our all time high on 02/02/12.

Mortgage backed securities (and therefore mortgage rates) moved sideways during the week with only minor movements in reaction to the 10 year and 30 year U.S. Treasury auctions.  But MBS did sell off on Friday on news that Greece would come through with another austerity package that would qualify them for additional bailout funds.

The Greek story has been an important one for mortgage rates.  Mortgage rates are artificially too low due to increased demand for U.S. bonds as a pure “safety play” against a European financial collapse.  A default by Greece would start a “domino effect” of other countries defaults too.  So, any positive news that a default is postponed will cause our rates to increase.

Today? 

Fed Releases Orders Related to Banks in Mortgage Settlement

The Federal Reserve Board released today the orders related to the previously announced monetary sanctions against five banking organizations for unsafe and unsound processes and practices in residential mortgage loan servicing and processing. The Board reached an agreement in principle with these organizations for monetary sanctions totaling $766.5 million on February 9, 2012.

ABA: Statement on Proposed Bank Tax

“The banking industry strongly opposes the $61 billion bank tax included in President Obama’s budget proposal. Despite claims to the contrary, the facts on TARP are very clear: Taxpayers have profited $13 billion from their investments in banks through the program and Treasury predicts they will see a lifetime positive return of more than $20 billion. Given that non-bank programs are responsible for all of TARP’s losses, this would simply be an arbitrary tax with no regard to where losses actually occurred.

Related articles

• Foreclosure Filings Hit 4 Year Low: (michael-mcdevitt.com)
• Consumer Sentiment Increases Again: (michael-mcdevitt.com)
• Pending Home Sales Hit 19 Month High: (michael-mcdevitt.com)

Weekly Rate Watch & Housing Update: Existing Home Sales Up Strongly

Existing-home sales increased in August, even with ongoing tight credit and appraisal problems, along with regional disruptions created by Hurricane Irene, according to the National Association of Realtors®. Monthly gains were seen in all regions.

Total Existing Home Sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 7.7 percent to a seasonally adjusted annual rate of 5.03 million in August from an upwardly revised 4.67 million in July, and are 18.6 percent higher than the 4.24 million unit level in August 2010.

Investors accounted for 22 percent of purchase activity in August, up from 18 percent in July and 21 percent in August 2010. First-time buyers purchased 32 percent of homes in August, unchanged from July; they were 31 percent in August 2010.

All-cash sales accounted for 29 percent of transactions in August, unchanged from July; they were 28 percent in August 2010; investors account for the bulk of cash purchases.

Total housing inventory at the end of August fell 3.0 percent to 3.58 million existing homes available for sale, which represents an 8.5-month supply at the current sales pace, down from a 9.5-month supply in July.

Mortgage backed securities (MBS) gained 178 basis points last week which helped to move mortgage rates much lower from last Friday to the prior Friday. Mortgage rates moved lower in response to the Fed‘s announcement that they would move from purchasing shorter term Treasuries to buying longer term Treasuries. They also announced that they would purchase more mortgage backed securities with the principal that they are receiving on their current mortgage backed security holdings. The best interest rates were on Thursday afternoon.  On Friday, mortgage rates started to climb back up from their lows.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises:

Date	Time	Economic Event
26-Sep	10:00	New Home Sales (MoM)
26-Sep	10:00	S&P/Case-Shiller Home Price Indices (YoY)
27-Sep	9:00	Consumer Confidence
27-Sep	10:00	Richmond Fed Manufacturing Index
27-Sep	10:00	Fed’s Lockhart speech
27-Sep	12:30	MBA Mortgage Applications
28-Sep	7:00	Durable Goods Orders
28-Sep	8:30	Durable Goods Orders ex Transportation
28-Sep	8:30	EIA Crude Oil Stocks change
28-Sep	10:30	Continuing Jobless Claims
29-Sep	8:30	Gross Domestic Product Annualized
29-Sep	8:30	GDP Price Index
29-Sep	8:30	Initial Jobless Claims
29-Sep	8:30	Real Pers. Consumption Exp. (QoQ)
29-Sep	8:30	Pending Home Sales (MoM)
29-Sep	10:00	Core Pers. Expenditure – Price Index (MoM)
30-Sep	8:30	Core Pers. Expenditure – Prices Index (YoY)
30-Sep	8:30	Pers. Consumption Exp – Price Index (YoY)
30-Sep	8:30	Pers. Consumption Expenditures (MoM)
30-Sep	8:30	Personal Income (MoM)
30-Sep	8:30	Chicago Purchasing Managers’ Index
30-Sep	9:45	Reuters/MI Consumer Sentiment Index
30-Sep	9:55	Fed’s Bullard speech

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Related articles:

• Pending Home Sales Jump: (michaeltmcdevitt.wordpress.com)
• Existing Home Sales Continue Upward Climb: (michaeltmcdevitt.wordpress.com)
• Mortgage Delinquency Rates Decline: (michaeltmcdevitt.wordpress.com)

Mortgage Rates Rise Slightly Heading Into The Weekend

After two days of significant improvements, Mortgage Rates took a measured step back today.  Best-Execution rates rose about an eighth of a point, but in some cases, your rate may not have changed at all today-merely your closing cost quote (temporary caveat that we’ll probably repeat a few more times):

Please keep in mind that lenders simply cannot move mortgage rates lower at the same pace as a rapid rally in Benchmark Treasuries.  Although you might hear talking heads on TV or read articles saying that mortgage rates are tied to Treasuries, THEY ARE NOT, and you’ll be perennially frustrated if you expect them to be.  We explained that in greater detail earlier in the month:(Why aren’t rates getting lower as fast as Treasuries). 

Today’s Rates:  The current market is in a state of flux at the moment and mortgage rates moving up and down around ALL TIME LOWS.  BestExecution 30yr Fixed rates were mostly near 3.875% today, with a higher than normal degree of variation around there.  FHA/VA deals are in a bit of a predicament that’s keeping them blocked off below 3.75% (there’s no secondary market for rates any lower than that right now!).  For similar reasons, 15 year fixed conventional loans may be stuck at 3.25%.  5 year ARMS remain near 3.125%, but with variations from lender to lender.

GUIDANCE:  Yesterday’s guidance was really excellent.  As feared, we saw plenty of “pipeline control” price changes among lenders, and that was exacerbated today by weakness in the bond market.  Strategically (longer term, bigger picture), locking when the Best-Execution rate is 3.875% makes a ton of sense.  Even on a shorter term outlook, the broader shift that’s taken place behind the scenes in the secondary mortgage market suggests a range of rates between 3.75 and 4.125.  So right now it’s leaning slightly to the more aggressive side.  If there was any better time in history to lock a loan than today, it was yesterday.  We don’t know what sort of opportunities will be available next week, and although we think rates will be relatively low for a while, we’re not sure it’s worth the risk to float for marginal gains when we’re only an eighth or two away from some of the most aggressive offers yesterday (and consequently, of all-time).

Fed: Risk of Recession “Quite Low”

According to William Dudley, the president of the Federal Reserve Bank of New York, the risk of a double-dip recession is still quite low.

Dudley said that only some of the the restraints on growth, such as high oil prices and Japan‘s earthquake in the first half of the year, can be considered temporary.

“The risks have risen a little bit, but I think we very much still expect the economy to recover. We expect … growth to be significantly firmer than it was during the first half of the year,” he said. “But obviously there is some concern.

The central bank‘s policy-setting Federal Open Market Committee (FOMC) took the unprecedented step last week of promising to keep interest rates near zero for a set period of time—at least until mid-2013. The Fed also said it was weighing other options to help strengthen a weak recovery.

Dudley said that market interest rates fell after the announcement, “which should help provide some additional support for economic activity and jobs.” The president of the New York Fed has a permanent voting position on the FOMC and plays a prominent role within the U.S. central bank.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +21 basis points last week which helped to move mortgage rates lower from last Friday to the prior Friday.  We did pull back from our our best levels of 2011 which occurred in the middle of the week.  The gains were primarily due to much weaker than expected economic news as well as continued concern over weakness in Europe.