CCL Market Update: Home Sales, Mortgage Applications, Mortgage Rates

Home sales rose across the board for the month of February, according to data collected by the National Association of Realtors (NAR). New home sales increased to a 539,000 annual rate, up from the revised 500,000 in January, at the highest level since February 2008. There is an increasing demand for low-middle income housing, yet the supply of new homes in lacking. It is likely that this demand will encourage builders to expand construction of new homes.

Existing home sales saw a slight increase of 1.2%, going from a 4.82 million annual pace in January to 4.88 million in February. February’s 1.2% rise was less than analysts expected, as they hoped to reverse the 4.9% drop in existing home sales from January. Nevertheless, the year-on-year rate for existing homes was up 4.7% in February, showing the strongest reading since October 2013. Similar to the new home market, existing home sales are curbed by higher home prices and the limited selection of houses available to buyers.

Jobless claims fell by 9,000 in the March 21 week to 282,000, down from 291,000 the previous week, and the 4-week average decreased 7,750 to 297,000. Although this is a sizable drop in claims, the 4-week average is still slightly higher than the month-ago comparison.

This week will bring updated reports on employment and construction spending.

Mortgage News & Rates

Mortgage Applications are at the highest level since January, as the total volume of applications rose by 9.5% in the March 20 week. Purchase applications went up 5%, while refinancing applications increased by 12%. Steadily decreasing mortgage rates and continued job market improvement seem to be the biggest influences.

Nationally, mortgage rates are nearing record lows, and conventional rates are the lowest they have been since January. In their post-meeting press release last week, the Federal Reserve commented that it expects inflation rates to stay “below-target” for a while longer, which contributed to the low mortgage rates. The weekly Freddie Mac rate survey calculated that national rates for the 30-year Fixed program also decreased, going from 3.78% on March 19 to 3.69% on March 26.

For detailed information about local mortgage rates for a variety of loan programs, take a look at our weekly Mortgage Rate Update. As rates continue to drop, now is a great time to consider a home purchase or refinance! Give us a call at 805.543.LOAN for a free, customized rate quote.

CCL Market Update: Housing Market, Federal Reserve Policy, Mortgage Rates

Recent reports regarding the housing market are continuing to tell of the lack of first time buyers, especially in the new home market. The housing market index slowed by 2 points in March to an 8-month low of 53, and within that index, current sales went down 3 points this month to a 5-month low of 58. Analysts suggest that many potential first-time buyers are no longer seeing a home purchase as an appealing lifelong investment.

Housing starts saw a significant decline in February, down a monthly 17% from January. Single-family units fell 14.9% in February following a 3.9% drop in January, and Multi-family units fell 20.8% after an increase of 7.9% in January. On a positive note, housing permits saw a 3% gain in February, and were up 7.7% from the same time last year.

Bringing more optimism to the housing reports, U.S. foreclosures fell in February to the lowest rate in nearly 9 years; foreclosures in February declined by 4.3% from January, and 9.4% from February 2014.

The Fed released their much anticipated policy announcement on Wednesday. As many economists predicted, the Fed eliminated the word “patient” regarding their approach to raising rates. The removal of this word was thought to be a clear signal to markets that interest rate increases would occur as early as April. However, the Fed changed its classification of the economy, stating that “economic growth has moderated somewhat,” and is no longer “solid,” as it was in January. Changes were also made to various economic forecasts which temporarily confused the markets and ultimately dampened expectations for rate increases this year. The Fed now predicts:

  • Economic growth will be much slower through 2017 than it predicted in December. It now foresees growth of roughly 2.5% this year and next, down from 2.8% and 2.75%, respectively. Growth will then slow to about 2.2% in 2017, down from 2.4%.
  • Even with slower growth, unemployment will keep falling. The Fed now forecasts that the unemployment rate will be about 5.1% at year-end, down from its previous estimate of 5.25%. Next year, it will drop to 5% and in 2017 to 4.95%.
  • Inflation will be even lower this year, between 0.6% and 0.8%, down from the 1% to 1.6% it forecast in December. But Fed policymakers didn’t cut their outlook as much in later years; they still project that inflation will be near their 2% target in 2016 and 2017.

The Bloomberg Consumer Comfort Index reported weakening outlooks for the US economy this month. Only 30% of Americans that were surveyed said the economy was improving, the smallest percentage since November, while 43% viewed the economy as unchanged. Americans’ outlooks for the economy were previously holding at a 4-year high, but were likely effected by stagnant wages, and struggling retail sales and housing starts.

Mortgage Rates

Following the Fed’s meeting, national mortgage rates fell across the board. There is speculation that rate increases will not occur until late this year or even early next year, although the Fed chair did not rule out an earlier rate increase. Freddie Mac’s weekly mortgage market survey reported a 30-year fixed rate of 3.86% on March 12, decreasing to 3.78% on March 19. 15-year fixed rates went from 3.10% on March 12 to 3.06% on March 19.

Locally, conventional loan programs all saw a decrease in rates for the week ending March 20, with the exception of the 15-year fixed which remained unchanged. The 30-year fixed displayed the largest decrease, going from 3.875% (3.915% APR) to 3.750% (3.789% APR), a decrease of about 1/8 of a percentage point. Similarly, government loan programs, with the exception of the 30-year FHA, all decreased over the last week. The largest drop was found in the FHA 203k, decreasing by about 1/8 of a percentage point, while the Manufactured FHA only decreased by 0.002% APR.

Take advantage of these low rates for your home purchase or refinance today! Give us a call at 805.543.LOAN.

CCL Market Update: JOLTS Report, Consumer Sentiment, Mortgage Rates

The Labor Department released the results of their Job Openings and Labor Turnover Survey (JOLTS) for January last week. The last business day of January showed the number of job openings coming in at 4.998 million, up slightly from December’s 4.877 million. This is the highest number of job openings since 2001, bumping January’s job openings rate to 3.4%. Despite so many job openings, January hires decreased to 4.996 million from 5.239 million hires in December. There were 2.799 quits in January, up slightly from December’s 2.715 million, putting January’s quits rate at 2.0%.

Jobless claims for the week of March 7 fell by 36,000 to 289,000. This dropped the 4-week average down to 302,250 from the previous number of 306,000. Even though it decreased by 3,750, the 4-week average is still more than 10,000 above the average from a month ago.

So far this month, consumer sentiment has come in at 91.2 points. This has continued the downward trend from February’s 95.4 points and January’s 98.2 points, which had been the highest reading in nearly 8 years. This decrease is mirrored in the recent retail sales report, which detailed a 0.6% decrease in February, after a previous decrease of 0.8% in January. The solid job market has yet to elicit substantial consumer strength, and the steady increase of gas prices seems to be discouraging significant consumer spending in other areas.

The two-day Federal Open Market Committee meeting begins on Tuesday and concludes with a policy announcement on Wednesday. Traders will watch for the Fed’s continued use or removal of the word “patience” from the policy statement as an indication of the timing of future interest rate increases. If patience is, in fact, removed from the policy statement, rates could rise quickly and immediately.

Mortgage Rates

As job growth continues to gain momentum, mortgage rates are rising bit-by-bit. According to Freddie Mac’s weekly Primary Mortgage Market Survey, 30-year conventional mortgage rates are at 3.86% on average this week, up from 3.75% last week. This jump of 11 basis points (0.11%) is the biggest one-week increase in mortgage rates since December 2013. National rates for other loan types, including FHA, USDA and VA loans, all worsened by approximately 1/8 percent-point.

Thankfully, rates here on the Central Coast remain lower than Freddie Mac’s national survey numbers. Conventional loan programs all saw a small bump in rates this week except for the 15-year fixed. The 30-year fixed displayed the largest increase, going from 3.750% (3.793% APR) to 3.875 (3.915% APR), an increase of about 1/8 percent-point. Conversely, all government loan programs, with the exception of the 30-year FHA, decreased very slightly over the last week, down by about 0.003% APR to 0.004% APR.

Daniel Podesto, co-owner of Central Coast Lending, remarked on the rising rates, “With such a strong February employment report following three months of strong job gains, the general sentiment is that the Fed will raise rates sooner than later, and the markets are getting ahead of that.”
Before rates go much higher, give us a call at 805.543.LOAN to get a free personalized rate quote for your home purchase or refinance.

CCL Market Update: Strengthening Labor Market, Economic News, Mortgage Rates

The most notable reports from last week focused on the current employment situation. Payroll jobs are up 295,000 for the month of February, continuing the upward trend set by the 239,000 increase in January and 329,000 increase in December. This marks the 12th straight month that payrolls have increased by at least 200,000, the best run since 19-month stretch ending in March 1995.

Average hourly earnings rose only 0.1% in February and jobless claims rose by 7,000 to a higher-than-expected level of 320,000. However, the overall unemployment rate for the month of February dropped to 5.5% from January’s rate of 5.7%. This is lower than the forecasted rate of 5.6%, and the lowest level in almost seven years.
Jason Grote, President of Central Coast Lending, offered his view on the matter stating, “Labor-market conditions are quite good right now. The unemployment rate is consistent with Federal Reserve’s full employment range, job openings are increasing, and large employers like Walmart, Marshalls and TJ Max are raising wages. As the year progresses, I expect we’ll start to see those wage numbers build momentum.”

The Federal Reserve’s Beige Book report, a collection of anecdotal observations from each of the Fed’s 12 business districts regarding the current economic outlook in their region, described the economy as having “continued moderate expansion.” It is reported that consumer spending is up in most districts, and inflation is flat or, at most, increasing very slightly. The report also showed that home sales were mixed, banking conditions generally improved, while agricultural conditions generally worsened and oil and natural gas drilling declined.

U.S. Gas pump prices are rising five times faster than crude oil. Retail gasoline increased by 0.3 cents to $2.458 per gallon on Thursday, bringing average gas prices to their highest level since December 17. Gasoline prices are expected to rise 20 cents this month, after increasing by 20% since January 31.
This week should be fairly quiet with only Retail Sales, Jobless Claims, and a pair of consumer confidence reports due out.

Mortgage Rates

Mortgage rates are moving higher. Over the past two months, the 10-year Treasury yield, the benchmark indicator for 30-year fixed mortgage rates, increased 50 basis points, from 1.74% to a 2.24% close on Friday, with 22 basis points of that move occurring just last week! A strong jobs reports from Thursday and Friday are overshadowing recent dovish statements by members of the Fed, leading traders to speculate that the Fed funds could move higher as early as June.

Current mortgage rates continue to be near all-time lows, however, rate volatility is likely to continue with the eminent change in Fed economic policy. If you are considering refinancing, get the process started and pounce on the next dip in rates as it will likely be your last opportunity before we begin to experience a slow, steady climb higher. To start the loan process, give us a call at 805.543.LOAN or Apply Online today!

CCL Market Update: Housing Market, Consumer Sentiment, Gas Prices, Mortgage Rates

New home sales for January did better than expected, selling at an annual pace of 481,000. This is only slightly down from December’s 482,000, which had surged 8.1% from the month prior.

Existing home sales fell 4.9% in January to 4.82 million, the lowest annual rate since last April. According to the National Association of Realtors, homeowners are tending to stay in their homes an average of 10 years, longer than the previous long-term average of 7 years. Despite the drop, existing home sales are still up 3.2% from this time last year. The NAR forecasts that total existing home sales for 2015 will be around 5.26 million, which is about 6.4% above 2014.

Pending home sales, a leading economic indicator, rose 1.7% in January to 104.2, and was 8.4% higher than the January 2014 level of 96.1. This marks the 5th straight month of year-over-year gains for pending sales.

House prices are continuing to rise, according to data from the Federal Housing Finance Agency. FHFA house prices rose 0.8% in December driven by job growth and tight supply.

In California, total home sales increased by 2% year-over-year, while the median price of those homes increased by 6.5% to $376,000. In SLO County, the total number of homes sold decreased by 2.3% in January. Sales of existing homes actually increased 12.1%, however, new home sales were down 40%. The overall median home price for January increased 12.3% to $454,500.

Consumer confidence was at a 7-year high in January, but has since been steadily decreasing. The monthly consumer confidence index for February fell 7.4 points to 96.4, down from 103.8 in January. In a separate report, consumer sentiment saw its first decrease in 7 months, dropping to 95.4 this month from January’s 11-year high of 98.1. Recent fuel gains are likely the cause for consumer negativity, as gas prices are up 31-cents per gallon. The average cost of gas was reported to be $2.37/gallon on Thursday, up from $2.03/gallon on January 25, which was the cheapest since 2009.

This week is another busy week of potentially market-moving economic data! Some of the most notable items include a trio of manufacturing reports, the Beige Book, and the employment reports highlighted by the Unemployment Rate.

Mortgage Rates

Rates for almost all loan programs have decreased this week, with the exception of the 15-Year Conventional and 30-Year FHA programs. The largest decrease was seen for Manufactured FHA loans at 3.375% (4.966% APR), down 1/4-point from last week’s rate of 3.375% (5.179% APR). All of the Government Loan Programs returned rates similar to two weeks ago, with the exception of the 30-Year FHA, which has seen no movement in the last 7 weeks.

Loan programs remain significantly lower than this time last year: The 30-Year Conventional is 3.625% (3.812% APR) compared to 4.375% (4.421% APR) in February 2013, and the FHA 203k is 3.500% (5.060% APR) compared to 4.250% (6.242% APR) one year ago.

If you are interested in lowering your interest rate, removing mortgage insurance or shortening your loan term, call us at 805.543.LOAN or begin the process by applying online (Apply Now!). Prequalification for a refinance or purchase is always free.