Mortgage rates dip this week

Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.08 percent with an average 0.7 point for the week ending September 3, 2009, down from last week when it averaged 5.14 percent. Last year at this time, the 30-year FRM averaged 6.35 percent.

The 15-year FRM this week averaged 4.54 percent with an average 0.6 point, down from last week when it averaged 4.58 percent. A year ago at this time, the 15-year FRM averaged 5.90 percent.

“Bond yields pushed mortgage rates slightly lower this week,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Low mortgage rates are helping to keep housing very affordable. Seven of the top eight most affordable months occurred during this year, according to the National Association of Realtors’® (NAR) Housing Affordability Index, which dates back to 1971. As a result, pending sales of existing homes rose for the sixth straight month in July, a trend not seen since the NAR began reporting data in 2001. Moreover, July’s sales were the strongest since June 2007.

“Overall, inflation remains in check while certain sectors of the economy are experiencing some improvement. The core price index on consumer expenditures, a key indicator tracked by the Federal Reserve, rose 1.4 percent in July from the same time a year earlier and represented the smallest 12-month increase since October 2003. Meanwhile, the manufacturing industry expanded for the first time in 19 months, according to the Institute of Supply Management.”

SOURC: FREDDIE MAC

Low mortgage rates fueling increase in sales

Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 5.14 percent with an average 0.7 point for the week ending August 27, 2009, up from last week when it averaged 5.12 percent. Last year at this time, the 30-year FRM averaged 6.40 percent.

The 15-year FRM this week averaged 4.58 percent with an average 0.7 point, up from last week when it averaged 4.56 percent. A year ago at this time, the 15-year FRM averaged 5.93 percent.

"Long-term mortgage rates were barely changed this week, remaining historically low, which is helping to sustain a high level of affordability in the home-purchase market," said Frank Nothaft, Freddie Mac vice president and chief economist." Low rates contributed to existing home sales rising for the fourth consecutive month to an annual pace of 5.24 million in July, the most since August 2007, according to the National Association of Realtors®.

"Similarly, new home sales rose for the fourth month in a row to 0.4 million, the strongest pace since September 2008, the Commerce Department reported. The sales gain helped to reduce the number of new unsold houses on the market to the lowest amount since March 1993. In addition, house prices in June rose nationally for the second consecutive month, according to the Federal Housing Finance Agency's purchase-only house price index."

SOURCE: REAL ESTATE CHANNEL

Lending activity flat from April to May; originations down due to rate increases

From the Obama Administration comes a snapshot of lending in May (the most recent month for which data is available)

The overall outstanding loan balance ... was flat from April to May at the top 21 participants in the Capital Purchase Program (CPP). Total origination of new loans at the 21 surveyed institutions increased 1 percent from April to May.

In May, the 21 surveyed institutions originated approximately $277 billion in new loans. Total originations of loans by all respondents rose in four categories, specifically: mortgages, credit card loans, commercial real estate renewals and commercial real estate new commitments.

Total originations fell in the following three loan categories: home equity lines of credit, other consumer lending products, and commercial and industrial renewals, and were flat in one loan category, commercial and industrial new commitments.

And as we noted back in June

Many respondents reported high mortgage application volume through the month of May, but indicated that pipelines decreased as rates began to rise toward the end of May.

SOURCE: US TREASURY DEPT

New lending guidelines hampering non-default related sales

Anecdotal story from the NY Times that relates to problem #2 on our list of 5 factors holding down the current real estate market, credit availability

Despite a good credit score, a six-figure income and an ample down payment, Dr. Komarovskaya, a recent dental school graduate, could not get a loan. Her mortgage broker told her she ran afoul of new rules requiring two years of sufficient tax returns from some home buyers, instead of only one.

“Everyone says this is a buyer’s market, but they wouldn’t let me buy,” said Dr. Komarovskaya, 30. “It’s not fair.”

Not fair, perhaps, but far from unique, brokers and agents say. The readiness of banks to sell foreclosed properties has led to rising home sales in some areas. But the traditional housing market, the one that involves willing buyers and sellers, is still dead, with transactions lower than they have been for decades.

The recession is the major reason sales are dragging, of course, but it is not the only one. As Dr. Komarovskaya found, buyers once viewed as perfectly qualified are being denied mortgages.

Brokers and bankers say that in past decades, the credit markets would almost certainly have accommodated many of these people.

The unwillingness of lenders to loan money to qualified buyers will keep the brakes on the current market. And this is only problem #2 of 5 which needs to be resolved.

We still have a long way to go...

SOURCE: NY TIMES

Unemployment up more than expected in June

Those green shoots just can't catch a break:

Employers cut a larger-than-expected 467,000 jobs in June and the unemployment rate climbed to a 26-year high of 9.5 percent. Workers also saw weekly wages fall, suggesting Americans will have little appetite to spend and the economy's road to recovery will be bumpy.

The Labor Department report, released Thursday, showed that even as the recession flashes signs of easing, companies likely will want to keep a lid on costs and be wary of hiring until they feel certain the economy is on solid ground.

June's payroll reductions were deeper than the 363,000 that economists expected and average weekly earnings dropped to the lowest level in nearly a year.

What does this have to do with real estate? Well, bad economic news should have the effect of pressuring bond rates, and by default mortgage rates, lower. HighRiseSF will, of course, have details on rates in the coming days and whether this will, in fact, impact rates. If so, it might help to bring mortgage applications back up, and with it, sales.

SOURCE: CNBC

Mortgage applications drop 18.9% in one week

Mortgage applications, a true leading indicator of real estate activity (as opposed to sales, which lags behind by 30-60 days) dropped 18.9% from week to week:

The volume of mortgage applications filed last week dropped a seasonally adjusted 18.9% from the week before, as refinancing activity plunged, the Mortgage Bankers Association reported Wednesday.

Applications for mortgages to refinance existing home loans fell 30% for the week ended June 26 -- putting the MBA survey's refinance index at its lowest level since November.

Meanwhile, the week-to-week pace of applications filed for mortgages to purchase homes was down a seasonally adjusted 4.5%.

In the week ended June 19, overall applications activity rose a seasonally adjusted 6.6% from the prior week, the MBA's data showed. The survey done by the Washington-based MBA covers about half of all U.S. retail residential mortgage applications.

Again, not news for loyal followers of HighRiseSF - this is a conversation we've been having for the past month.

Keep following for the latest in up-to-date information and its impact on real estate prices and mortgage rates.

SOURCE: MARKETWATCH

5 reasons why real estate rebound remains shaky

CNBC breaks down the top 5 reasons why real estate hasn't fully rebounded yet; none of this will come as a surprise to followers of HighRiseSF, since we've been talking about these issues for the past month:

Despite hopes that the market would begin showing signs of life this spring, the latest housing data suggests otherwise. Instead, the sector remains stubbornly moribund—trapped in a spiral of declining prices, increasing mortgage rates, unemployment and several unforeseen factors.

And with many experts believing that a real estate rebound is critical for the overall economy to recover, patience with housing is beginning to wear thin.

1) Unemployment

Consumers fearful of losing their jobs haven't been spending on much of anything, and housing tops the list.

That's a trend unlikely to change until unemployment turns around. So it's no coincidence that housing and the jobless rate are expected to recover right about the same time.

2) Credit Availability

Despite all the government efforts to inject liquidity into the capital markets, banks are still reluctant to lend.

While those with squeaky-clean credit histories and a lot of cash on hand are in a better position to get loans, the rest of the buyers are getting kicked out of the marketplace.

3) Price Pressures

Call it the ultimate Catch-22: Housing prices are still too high to attract buyers but too low for the many sellers who are underwater—owing more than their homes are worth—on their mortgages.

That's creating a crisis in the market that can only continue to play out until the supply and demand equation can level.

"The faster you clear off this excess inventory the faster you can stabilize home prices," says Walter Molony, spokesman for the National Association of Realtors.

4) Appraisals

The National Association of Realtors has contacted the New York Attorney General's Office to look into new standards under the Home Valuation Code of Conduct that the group says its making it impossible to get a fair assessment done of home values.

5) Short Sales

One of the ways that the industry hopes to get rid of excess inventory is through so-called "short sales" of property. Such transactions occur when a mortgage holder agrees to the sale of a property even though it is less than the amount owed.

Banks, though, have been reluctant to agree to the sales. Critics say the reticence from banks comes from a desire to hold the properties until values go up, a move made easier by recent changes to mark-to-market accounting rules. Banks, though, say prospective buyers are trying to take advantage of the situation by submitting low-ball offers.

Again, nothing new for followers of HighRiseSF, but still a good primer to get you up to speed, in case you don't have time to read through the archives of this blog.

SOURCE: CNBC

Interest rates dropping again

Here are rates from Debra Stedt with Guarantee Mortgage:

Conforming to $417,000 5.375% at 0 points
High Balance to $729,750 5.375% at 1 point
5/1 ARM 5.625% at 0 points
7/1 ARM 5/875% at 0 points
10/1 ARM 6.00% at 0 points

Good news to end the week as we head into the summer slowdown.

Also awaiting figures from my BofA contact.

New homes sales fall in May; appraisals of greater concern than interest rate increases?

May numbers for new home sales are in; results prove what we've been seeing in the past month due to interest rate increases (as I'm sure will be the case for resale as well):

Battered home builders in the U.S. got even more bad news Wednesday: new-home sales fell unexpectedly in May [Ed. note: not unexpected for HighRiseSF followers], showing the sector must continue searching for stability as it limps through the worst downturn in generations.

Single-family sales decreased 0.6% from the prior month to a seasonally adjusted annual rate of 342,000, the Commerce Department reported. That's below the 360,000 economists had expected.

Year-over-year, new-home sales were 32.8% lower than the level in May 2008.

In addition, there is growing concern over sales lost due to new appraisal guidelines. Dan Oppenheim, analyst with Credit Suisse, sees this a potential roadblock to real estate recovery:

"We see low appraisals as a key issue we think will disrupt closings and hurt pricing for some time given the more stringent appraisal guidelines enacted last month. This will likely mean that many orders signed in recent months may not result in closings."

Recovery is looking more and more fickle. What does that mean for buyers and sellers? Chances are the best deals are still on the horizon and that we'll see further price decreases nationwide, which could very well pull equities lower in the coming months (and subsequently lead to lower interest rates again).

SOURCE: CNN MONEY

Mortgage brokers slash 2009 forecast

Today the Mortgage Bankers Association put out a revision in its 2009 originations forecast. A big revision. A $700 billion revision. “$84 billion of the drop is due to lower purchase originations and the rest is due to lower rate/term refinances and very low volumes in the Fannie Mae and Freddie Mac Home Affordable Refinance Program (HARP).” That’s big too.

The MBA had raised its forecast by over $800 billion in March following the drop in interest rates associated with the Fed’s announcement on the Treasury bond and mortgage-backed securities purchases programs as well as the implementation of the HARP. But at the time it warned that rates might not stay low, and guess what? They didn’t.

The refi’s dropped off for two reasons, one being the interest rate rise, and the second being the poor results on the HARP.>SOURCE: CNBC

Roubini worried about recovery, due to interest rates and oil prices

The price of oil, which is rising too fast, and long-term interest rates that are beginning to creep up are likely to suppress a budding recovery, famous economist Nouriel Roubini, also dubbed "Dr. Doom," told CNBC Monday.

"I see even the risk of a double-dip, W-shaped recession… towards the end of next year," Roubini told "Squawk Box Europe."

Because of bad macroeconomic data and poor earnings prospects as companies have weak pricing power and demand is still subdued, the surprises will be on the downside, he said.

"That's why I believe there's going to be a significant market correction for equities, for commodities and even for credit," Roubini added.

He said recovery signs should come from unemployment, housing, industrial production, sales and consumption data.

"When I look at them I see so far still more yellow weeds than green shoots...", he added.

I might have to agree with you, Dr. Doom. The plus side, if any, is that falling equities should lead to lower interest rates, again. The question is whether or not the real estate market will remain in recovery by then, or if this is all just a dead cat bounce.

SOURCE: CNBC

Praise Jesus! Rates falling!

Inflation numbers came out today which calmed inflation fears. They're calling it the "Goldilocks Scenario":

Large debt sales have raised concerns about inflation. But a government report on consumer prices released Wednesday indicated inflation is not a near-term threat, echoing the government's report released Tuesday on wholesale prices.

The Consumer Price Index, the Labor Department's key measure of inflation, has fallen 1.3% over the past year, marking the largest year-over-year decline since April 1950. On a monthly basis, CPI rose 0.1% in May, shy of the 0.3% rise that was expected.

With inflation in check, the Federal Reserve can feel more confident leaving its key lending rate at a target range of zero to 0.25%. One analyst said the Fed's hands are tied for now.

Also, the debt buyback program from Treasury is kicking in:

On Tuesday, debt prices rallied after the first scheduled debt buyback for the week where the government bought $6.5 billion of debt that matures between May 2012 and November 2013.

The government embarked on its $300 billion quantitative easing program in March. The goal was to create demand in the marketplace, keeping a lid on rising yields.

However, creating demand in a marketplace overwhelmed with supply has proven a challenge. Yields have dipped in the last few sessions, but are still higher than they were in March. Higher yields mean higher lending rates, particularly for home mortgages.

The government continues to sell debt to fund its rescue for the economy. On Thursday, the Treasury will announce the size of the 2-year, 5-year and 7-year auctions scheduled for next week. Last week, the market absorbed $65 billion in debt.

Subsequently, rates dropped 3/8th of a point over night.

SOURCE: CNN MONEY

As predicted, mortgage demand plummets ... home sale numbers to follow

Followers of HighRiseSF know this was coming:

Spiking U.S. mortgage rates drove down total home loan applications last week as demand for refinancing shriveled to the lowest level since November, the Mortgage Bankers Association said on Wednesday.

The swift rate rise crimps affordability, likely cutting offer prices on home sales and prolonging a housing turnaround.

Borrowing costs have soared as bond yields have risen, even as the Federal Reserve has sopped up hundreds of billions of dollars in bonds to keep rates low and stimulate the housing market.

The average 30-year fixed mortgage rate jumped 0.32 percentage point in the June 5 week to 5.57 percent. That was nearly a full point, about 100 basis points, above the record low rate of 4.61 percent in March, the trade group said.

This could very possibly put an end to our recent months of good news, with a new bottom looming on the frontier. If rates stayed low long enough to absorb the inventory on the market (already heading in the right direction), we'd be in better shape. Now, I'm afraid we'll see a period of increased supply (especially "shadow inventory" being held by banks) and higher interest rates. Let's hope they fall again, soon.

SOURCE: REUTERS via YAHOO NEWS

Refinances plunge on interest rate spike

As interest rates rise, the number of refinances (and soon to be purchase money) decrease:

A rise in interest rates has put a damper on a mortgage refinancing boom, according to industry data released yesterday, and created another potential stumbling block to a housing recovery.

Mortgage interest rates, at historic lows for weeks, rose to 5.25 percent for a 30-year fixed rate loan last week, a level last seen in January. That led to a 16.2 percent seasonally adjusted drop in mortgage applications, according to the Mortgage Bankers Association's weekly market composite index, a measure of mortgage loan application volume.

The tumble mainly reflects a drop-off in refinancing activity. The index tracking refinancing applications fell 24.1 percent last week, while the purchase index increased 4.3 percent. Refinanced loans make up the majority of the market, but a smaller piece as of last week, according to the industry group.

Let's hope rates fall again, or our fragile recovery might be in jeopardy.

SOURCE: WASHINGTON POST

Great news re: $8,000 tax credit and FHA loans

The Department of Housing and Urban Development announced plans that allow qualified first-time home buyers using a Federal Housing Administration-insured mortgage to "monetize" an $8,000 tax credit, meaning they can apply the funds to their down payment.
The recently unveiled credit, part of the Obama administration's effort to ease the housing crisis, was to be claimed on tax returns. "Families will now be able to apply their anticipated tax credit toward their home purchase right away," HUD Secretary Shaun Donovan said Friday.

Monetizing the credit effectively means FHA buyers are getting a short-term advance from lenders of up to $8,000 at closing. The money is paid back when the buyer files an amended tax return, receiving the credit.

First-time buyers using FHA-insured mortgages will have to make at least a 3.5 percent down payment on a home purchase. Friday's announcement means FHA-approved lenders may consider the funds as an additional down payment or for other closing costs, which can help lower a borrower's interest rate.

SOURCE: CHICAGO TRIBUNE

Could auto industry bankruptcies lead to higher mortgage rates?

That's the postion held by James Glassman, former under secretary of state during GWB's administration, presented in an op-ed in this weekend's NY Times:

Even if the courts were to reject the plans for G.M. and Chrysler, the administration’s actions in trying to force the deals may damage the credit markets for years to come. The treatment of the bondholders is a warning to investors that the federal government won’t hesitate to push them aside in a crisis.

Perhaps it’s no coincidence that in the wake of the Chrysler deal we have seen a decline in prices for long-term Treasury bonds and a sinking dollar. The Chinese, for example, could view things this way: If the United States is willing to skirt the law to help some of the president’s closest political supporters gain large pieces of two of the world’s biggest companies, will Washington necessarily stand behind any Treasury securities we own when it becomes politically inexpedient?

I don't put too much weight into the thoughts of former Bush administration officials, but I blockquote, you decide. Comments welcome, as usual.

SOURCE: NY TIMES

30 yr fixed rates at record lows

Rates on long term mortgages continue to fall:

Interest rates on 30-year mortgages dropped to the lowest level on record this week, adding another incentive for home buyers to leap back into the market.

Mortgage giant Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages fell to 4.85 percent, down from 4.98 percent last week. That's the lowest in the 38-year history of the company's survey. It's also nearly 2 percentage points off last year's peak of 6.63 percent, amounting to consumer savings of about $225 per month on a $200,000 loan.

Rates have marched steadily downward, in lockstep behind bond yields, since the Federal Reserve announced last week it would pump more than $1 trillion into the economy by buying up long-term Treasury notes and mortgage-backed securities.

ARTICLE: SF CHRON

Jumbo loans poised for a come back

Lenders appear to be ready to re-enter the jumbo loan market, after almost 6 months of being AWOL. And with rates rumored to start in the high 5's, they will be priced much more competitively now.

Article from San Francisco Chronicle

Good news if you're interested in one of my High Falutin' properties!

Fed to buy $1.25 Trillion in mortgages

The Fed announced that they will be purchasing $1.25 Trillion worth of mortgages from Fannie Mae and Freddie Mac, in an effort to further lower interest rates and take additional loans off the books.

Add this on top of a record low 4.89% for a 30 year fixed set last week (conforming loans, presumably) and yet another piece of the real estate recovery is now in place.