Housing Prices Gravitate Lower

Housing prices continue to gravitate lower as they come back down to more normal gains. The Case Shiller 20-city Home Price Index rose by 8.1% in the year ended in June, just below the 8.3% expected and down from the 9.3% recorded in May.

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Wednesday – August 13 Mortgage Market Guide

U.S. consumers spent less in July at retail locations across the nation as the economy lost some economic momentum headed into the third quarter. The Commerce Department reported that Retail Sales in July were unchanged led lower by a decline in sales of motor vehicles and parts sales, furniture and home furnishing stores as well as electronic outlets. Economists were looking for a 0.3% increase and the 0.0% was the lowest level in six months.

The Mortgage Bankers Association (MBA) reported on Wednesday that total home loan applications fell by 2.7% in the latest week. The refinance index fell by 4%, while the purchase index declined by 1%. The MBA said that the 30-year fixed rate with conforming loan balances was at 4.35%, near 12-month lows.

Popular retailer Macy’s reported on Wednesday that second quarter sales were not enough to make up for the dismal numbers in the first quarter, when the severe winter weather kept shoppers away from stores. The 158 year-old company also cut its full-year same-store forecast while reporting that earnings per share came in at 80 cents, below the 86 cents expected. Macy’s is looking to the back-to-school sales season to make up for lost sales earlier in the year.

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Monday – August 11Mortgage Market Guide

IMG_9573Gas prices at the pump continue to drift lower aided in part by a ramp up in refinery production along with more gasoline in the market, which has helped bring down prices, despite multiple overseas conflicts. The national average price for a regular gallon of gasoline is at $3.47, down from $3.63 a month ago. The highest price ever paid for a regular gallon of gas was $4.11, hit back in July of 2008. A year ago the price was $3.55. For the first time since March 2012, the national average price for unleaded gasoline is below $3.50.

The geopolitical tensions in Ukraine are easing a bit today, which is boosting the U.S. Stock markets. News reports began surfacing on Friday that Russia is “dialing back” on its efforts to overtake Ukraine. The closely watched S&P 500 Stock Index and the Dow Jones posted their biggest day on Friday since March. However, the U.S. just recently launched air strikes against Iraq targeting Islamic State fighters marching on the country’s Kurdish capitol.

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Thursday – August 7 Mortgage Market Guide

The job market continues to strengthen as evidenced by the decreasing number of Americans filing for first time unemployment benefits. The Labor Department reported that Weekly Initial Jobless Claims fell by 14,000 in the latest week to 289,000, below the 308,000 expected. First-time claims have now fallen to eight year lows, before the Great Recession began in late 2007. The four week moving average of claims, which irons out seasonal abnormalities, fell by 4,000 to 293,500, the lowest level since February 2006.

In the mortgage sector, home loan rates continue to hover near 12-month lows, aided by the continuing stimulus programs enacted the U.S. Federal Reserve (the Fed). The Fed embarked on the program late in 2008 in an effort to lower home loan rates and to stimulate the housing sector. Freddie Mac reported this morning that the 30-year fixed conventional rate is at 4.14%, up slightly from 4.12%. To obtain that rate, a borrower would have to pay 0.7 in points/fees.

Government-sponsored entities Freddie Mac and Fannie Mae reported positive quarterly earnings as the housing sector has rebounded from the depths of the financial crisis in 2008 and 2009. Freddie Mac reported that it earned 3.7 billion and will pay a dividend of $3.7 billion to the U.S. Treasury in September. Freddie Mac earned $1.4 billion and will pay a dividend of $1.9 billion. To date, Fannie Mae has paid a total of $126.7 billion to the Treasury, more than the $116 billion it received in bailout funds. Freddie has paid $88.2 billion, exceeding the $71.3 billion it was given during the financial crisis.

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Wednesday – August 6 Mortgage Market Guide

Economic woes continue to plague the Eurozone with the latest casualty being Italy, falling into a recession, as the government announced today that its Gross Domestic Product has fallen two consecutive quarters. Just recently the government of Portugal bailed out is largest bank, Banco Espirito Santo, while Germany reported today that factory orders fell to three year lows. Throw in economic problems in France and Spain and you have a recipe for renewed fears of widespread contagion.

Americans looking to refinance their home mortgages drove mortgage application volumes higher in the latest week as rates continue to hover near 12-month lows. The Mortgage Bankers Association’s Market Composite Index, a measure of total loan application volume, rose by 1.6% in the latest week. The refinance index, which makes up 55% of total applications, increased by 4%, while the purchase index fell by 1%.

In corporate news, two big merger deals have been called off this week. Just yesterday, 21st Century Fox withdrew its offer for Time Warner, which would have combined the two of the world’s largest media companies. The hurdles included heavy antitrust regulations and cultural clashes. In addition, Sprint and corporate parent SoftBank have decided to end the pursuit of a merger with T-Mobile after acknowledging the fact that antitrust regulators would block the marriage of a sector that is dominated by a few large companies.

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Monday – August 4 Mortgage Market Guide

DeathtoStock_Wired3   The gains in home price appreciation this year have been easing after the big gains seen in 2013. Just recently, CoreLogic reported that home prices rose by 8.8% in the year ended in May, down from the near 10% gain from April 2013 to April 2014. Corelogic also reported that it sees a 6% gain in home prices from May 2014 to May 2015. Today, analytics firm Clear Capital reported that its forecast through 2015 shows national home prices will increase just 1.5%. Price gains seem to be coming back to more normal levels.

Gas prices at the pump continued to move lower in the latest reading due to increased production at the nation’s refineries and as oil prices decline. The national average price for a regular gallon of gasoline is at $3.50, down from $3.66 a month ago. In addition, gas prices will most likely trend lower in August, which is opposite from what usually takes place this time of year. The all-time high price is $4.11 for a regular gallon of gas, hit back on July, 7, 2008.

Last Friday the Bureau of Labor Statistics reported that there were 209,000 new jobs created in July, which brings the average per month total to 230,000. That is the best stretch of growth since the Great Recession ended in mid-2009. However, all is not rosy in the sector. Half of those positions came from retail trade, professional and business services, leisure and hospitality, most of which are low paying jobs. In addition, in January 2009, there were 80,529,000 Americans not in the workforce. As of July 2014, the number is now 92,001,000.

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Q2 Gross Domestic Product Surges

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The Bureau of Economic Analysis reported on Wednesday that the first reading on 2014 2nd quarter Gross Domestic Product (GDP) surged by 4%, above the 3.2% expected and well above the -2.1% recorded in the first quarter. The gains were led by an uptick in consumer spending and business investments. Also contributing to the 4% gain was a rise in state and local government spending. GDP is the output of goods and services produced by labor and property located in the United States.

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