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Mortgage Rates Defy Jobs Report Again

Last week’s monthly jobs report proved to be quite strong, adding 292,000 jobs. This exceeded the predicted 211,000, and makes for a grand total of 2.65 million for the ear. At this point, we can see that 2015 was the second best year since 1999.

Usually, economic data like this is likely to send mortgage rates higher. In fact, a report this exceptional should have been a sure bet for a significant uptick. However, once again, mortgage rates are defying expectations. On the Friday following the report, rates actually moved down to achieve a two-month low.

Much of this can be attributed to weakness in other areas of the economy. Specifically, investors are concerned about the lack of income growth, the losses in global stock prices, the downturn of oil prices, and continued concerns about the implications of the Fed rate hike. They are therefore moving away from risky stocks to buy bonds, which moves mortgage rates lower. There is no telling how long this can last, though, so locking into current lows may be advisable.

Favorable Rates Bring About Lows in Delinquency

Black Knight Financial Services has good news for the US economy. According to their assessment of distressed properties, the national delinquency rate has dropped down to a level that the nation hasn’t seen in fifteen years. Meanwhile, the serious delinquency rate, representing the number of mortgages that are ninety days or more past due, is lower than it has been since March of 2007. Even loans that are only thirty days or more past due dropped to 4.08% of total mortgage loans in March, representing a decrease of 8.37% from the month before and 12.42% from March of 2015.

It would seem that the recent decline in interest rates is the driving force behind much of this activity. The company reports that low rates have brought about a significant surge in prepayments. The Single Monthly Mortality, or SMM rate, was 1.3% in March, representing an increase of 46% over February. This rate, which gives us the percentage of the principal number of mortgages that were prepaid in the month, is generally a reliable indicator of refinance activity.

The Construction Season Gets Off to a Weak Start

March is the beginning of the construction season for builders in much of the country. Unfortunately, as we look back at this last month, we’re not getting a very positive outlook on this year’s residential construction.

According to the data recently released by the U.S. Census Bureau and the Department of Housing and Urban Development, permits and housing starts fell from February levels, far below what analysts were anticipating. Permits for the month came out to a seasonally adjusted annual rate of 1,086,000, which comes in 7.7% shy of the February estimate. This also represents the fourth consecutive month of declines in permits. Here in the West, there was a decline in permitting of 15.4% over the previous month, and 6.1% over March of 2015.

There was, however, an improvement in housing completions last month. This figure came in at a seasonally adjusted annual rate of 1,061,000, representing a 3.5% improvement over February and a 31.6% increase over March of 2015.

Mortgage Rates See Strongest Friday in Over a Year

Last Friday didn’t see much in the way of improvement in terms of mortgage rates. In fact, some lenders were quoting higher rates over Thursday. All the same, the average rate remained fairly low, representing the lowest rate that many lenders have been quoting for the end of the week in almost three years.

With rates as strong as they are, it’s not a bad idea to lock in. However, it would definitely seem that we are experiencing a downward trend, and it’s not overly optimistic to expect to see even better rates in the future. Trends can change at any moment, but as long as you are prepared to lock in at the first sign of a reversal, you should be in pretty good shape.

As far as this week goes, you can likely not expect much movement early on. Wednesday is the day to look forward to, with the Retail Sales and Producer Prices data released in the morning and the 10-Year Treasury auction in the afternoon. After that, Thursday will bring us the 30-Year bond auction and the CPI release.

Home Sales Still on the Rise, but Year-Over-Year Gains Slowing Down

According to the National Association of Realtors, its Pending Home Sales Index went up by 3.5% in February. This soundly reverses the disappointing decline reported last month and puts current rates of home sales up to its highest levels in seven months. These figures are based only on signed home purchase contracts, but such contracts generally result in transactions closing within about two months and are a fairly reliable wan to predict upcoming home sales.

The bad news is that the gains in home sales seem to be shrinking. Compared to February of 2015, it would appear that sales are up by only 0.7%. Though year-over-year sales have been up for over the last eighteen months, these most recent figures represent the smallest annual gain.

A silver lining in these weakening sales is that we are looking at a similar slow down in price appreciation. Home prices were up by 4.4% last month. Though this is still outpacing wage growth and doing little to counteract rising mortgage rates, it is far more favorable than the 8.1% increase experienced in January.

High Rents Boost Home Sales Despite Low Affordability

It is projected that the economy will continue to grow throughout the rest of 2016, bringing increased household income and only small increases in mortgage rates. Unfortunately, this may not be enough to combat the declining affordability of homes. Low inventory continues to plague the market, driving up prices and inciting bidding wars on desirable units throughout the country.

Meanwhile, though the Millennial generation has thus far been slow to embrace homeownership, increasing home values have been inspiring young professionals to make the transition. As rents go up faster than income, it is getting more and more viable to take on a mortgage as an alternative. However, with over 60% of millennials working full-time earning less than the national median income of $46,480, this remains a dream that will remain frustrated for many would-be homeowners for a while yet.

The sustained demand for apartments has brought about an influx of apartment inventory. An increased number of units are added every year, more than sixty percent of which are rented within three months of completion.

Mortgage Rates Improve Slightly Before Fed Announcement

Mortgage rates inched lower going into the third week of March as bonds leveled off. Unfortunately, this improvement was not enough to fully reverse the recent upward trend. Rates last Friday were at their highest levels the market had seen since late January, and we’re currently not much better off.

The question right now is whether this downward movement represents a new trend, or a one-time anomaly. Though it is possible that we will continue to see more improvement in the short term, it is also possible that this recent improvement is due to financial markets calming down on the week of the big Federal Reserve statement coming up on Wednesday. Once this announcement is made, we can expect a big reaction from the financial markets. If the economic outlook is positive enough, we could easily see mortgage rates jump significantly higher by the end of the week. If the data is weak, mortgage rates may ease a bit. There’s no way to anticipate in which direction they will move at this point.

Strong Jobs Report Fuels Upward Trend in Mortgage Rates

The recent jobs report came out significantly stronger than was initially expected. February experienced a payroll growth of 242k, compared to the projected 190k. Meanwhile, the national unemployment rate held at 4.9%; considering that there are more people entering the workforce, this is a favorable figure. All in all, it would seem that the economy is doing better than was indicated by the popular opinions of the past two months.

Since this employment data is one of the most important factors influencing the bond markets underlying mortgage rates, good news in the jobs report often equals bad news in the mortgage market. It is therefore that, on the fourth, we observed a moderate jump in rates. However, relative to the recent upward movement that the market has been experiencing, the move wasn’t terribly dramatic. In fact, it’s the steady upward momentum of mortgage rates that may have prevented a sharper reaction to the recent jobs report.

Many experts are surprised that rates are not higher than they are right now, and are projecting further increases in the near future. If you are looking to secure a new mortgage loan, the good money is on locking into current rates.

Mortgage Rates Jump Going Into Long Weekend

Mortgage rates jumped rapidly on Friday, with losses among the worst so far in the year. However, as young as the year is, the outright levels are only the fourth lowest in the past twelve months.

It’s no mystery why we’re experiencing such a dramatic upturn. After all, with the prodigious moves toward lower rates we have experienced in the past months, it’s only natural that we should experience a bounce-back. The question that is on many investors’ minds right now is whether this represents the start of a long-term trend, or if this is simply the product of the caution that is so often practiced heading into a three-day weekend, combined with the activity of stock and oil traders covering short positions.

If you failed to lock into rates before this reversal, don’t worry too much. It is entirely possible that rates will recover to their 2016 lows in the near future. However, considering the relative overall strength of mortgage rates, it’s not the worst thing in the world to lock in.

Mortgage Rates Drop to Lowest in Twelve Months

This week opened with a sharp drop in mortgage rates. Most lenders have been offering their lowest quotes in almost a year. While many others have been sticking with Friday’s rates, they have been pairing these with lower closing costs.

Generally, you can’t expect rates to move this dramatically more than twenty times throughout a single year. In this case, the drop can be attributed to MBS, or “mortgage-backed securities”, representing the bonds that are most closely related to mortgage rates. When trading is calm, such bonds behave like you might expect from the interest rate world, but when the rest of the interest rate world is rapidly moving lower, they have a tendency to underperform. Therefore, when ten-year treasuries were down 10bps on Monday, lenders adjusted their mortgage rates accordingly.

Should market trading levels hold their ground, mortgage rates could very well drop even further. Of course, the risk of a significant bounce offset the possible benefits of floating. Locking into the current lows is the best choice for most people.