Don’t Just Sit There

The Federal Reserve Housing Survey released today shows that the expected appreciation rate for a home in the U.S. for 2015 is 4.4%.  That’s not super stellar, but it does still show that prices are still rising.  I am seeing many deals now sell for above the asking price.  What does that have to do with the above picture?  Those individuals who want to move into a bigger home (or want to get back into the housing market at all) but are waiting for the right opportunity are going to find it more and more difficult as prices continue to increase–to say nothing of rising interest rates.

To drive the point home, though home prices are up, the latest report out today show that out nation’s Gross Domestic Product dropped 0.7% last quarter.  Just as it’s been over the last 40 years, home prices have outpaced inflation by a factor of two.

Seeing Red

Have a hodgepodge of news that isn’t amounting to much market action today:

While I was soundly sleeping last night, China’s Stock Market, the Shanghai Composite, dropped 6.5% and trading was halted.

Pending Home Sales are up 3.4% from last month, now at a nine-year high.

The latest GDP report in the UK was weaker than expected.

And lastly, Weekly Jobless Claims rose 7,000, precisely 8,000 higher than analysts thought.

Overall, our domestic stock market and mortgage bond funds are down, though only marginally about halfway through the trading day.  The rain has blown through and the sun is shining back through my windows; looks like today just might shape up after all.

The 5% Appreciation Track

The Federal Housing Finance Agency (FHFA is Fannie/Freddie’s parent) reports that home prices rose 1.3% in the first quarter of 2015.  That’s an annualized increase of 5.2% across the country.

Outside of our little housing world and across the globe, Greece is again facing a series of debt payments coming due this month.  Analysts do not expect that Greece has the resources to make those payments, and some concessions will need to be made. Why does that matter?  A debt default would keep our mortgage rates low.

Stocks lost and Bonds gained throughout the day yesterday, but the trend is reversing so far this morning.  Interest rates look to be holding steady here.

Shallow But Useful

Despite a fair amount of news this week, the overreacting media commentary has been refreshingly subdued.  Perhaps the critics, with the traders, are capitalizing instead on the upcoming holiday weekend to extend a seven into a ten day vacation.

Meanwhile the S&P quietly hit another all-time high and reports show that home building has made a spectacular comeback to levels not seen since the pre-bust housing boom.  Sales of existing homes slouched slightly and unemployment filings rose a touch.  At the same time, the mortgage bond pool pricing has stabilized after that 200bps jab to the face that caused 30 year interest rates to rise 1/4% earlier in the month.

Have a happy Memorial Day weekend and let me know how I can help you with your financing needs.

Janet and Butthead

There are no economic reports being reported today so Traders are looking ahead to the important Fed Minutes released in a few hours, which may provide some clues as to the timing of the first Fed Rate Hike in 9 years. Author/Artist’s note: I have never actually seen an episode of Beavis and Butthead so perhaps the alluded analogy of the dimwitted duo to a meeting of the Board of Governors of the Federal Reserve is unsuitable.  The illustration is an attempt at humor, not hostility.  Huh huh.

Building Up

Building Permits were up 10% and Housing Starts rose 20% last month, a welcome correction after several months of a declining trend.  Housing Starts have not been this string since 2007.  Remember 2007?  It was chaos.  The difference between then and now with regards to finance though is night and day.

“The Thrill is Gone”

Legendary guitarist and tireless performer BB King died last night.  As a guitarist and closet performer myself, I am an admirer of Mr. King’s playing style and work ethic.

The thrill also appears to be gone for those seeking to push interest rates higher.  After a three-week-long scare where pricing on mortgages declined significantly and interest rates on some products rose as much as 3/8%, we have seen welcome stabilization the last two trading sessions and a sign of a minor reversal this morning.  I am not forecasting that we’ll see rates drop from here, but it’s nice–as I am sure that BB has discovered–to have some rest.

Serenity Now

All day long, I get asked what pattern I am seeing with interest rates and what is coming next.  When Bonds fall beneath long-term solid support as they have during the month of May, the trading activity typically becomes volatile due to everyone’s uncertainty of the next directional price move–which is typically swift.  The Bears, who just pushed prices below resistance, keep selling in an attempt to capitalize further, AKA “shorting” the market.  Conversely, the Bulls are trying to pull Bonds back higher to increase their gains–or regain their losses.  The Bears currently have the upper hand as the 200-day Moving Average now acts as a strong ceiling of resistance. Clients should understand that rates will not improve unless the Bond can bust back above what is presently a strong resistance layer–the last penetration of the 200-day MA was in March 2014.  But rather than bore you with another chart showing all of that, I thought that it might be refreshing to insert yourself into this peaceful scene for a moment.

Home Ownership Percentages Down

This graph is both interesting and alarming at the same time.  It shows that across the country, there are roughly 5% more households now than there were almost 20 years ago.  Don’t strain your brain just yet; that’s not the alarming part. Since 2005, home ownership has declined about a percent while at the same time, the percentage of renter households has risen over 16%.  Perhaps this is a reflection on our non-committal society as a whole.  It could be that people are scared to invest in a house after the market crashed, or another possibility is that with all of the increased regulation, a growing percentage of our countrymen just can’t qualify for financing, regardless of low interest rates.

The End of an Era?

You know that relaxing, euphoric feeling you have on vacation and then you come home, reality sets in and the weight of the world is again on your shoulders?  Well it’s worse today because I haven’t even been on vacation.  The pink line in the above graph represents the average price for a pool of mortgages sold on the open market over the last 200 days and serves as the largest and most stable level of psychological support for banks and fund managers with regard to the future.  This morning, we blew past it.  In my mind, if we do not see a rapid and convincing rebound today or tomorrow, interest rates will rise above 4.0% in the next fortnight (I think that’s still a word). Another bit of rain on your parade this morning: Loan To Own is out of down payment assistance money for the Utah County program until September.