Fewer Underwater Mortgages in the Second Quarter
Fewer homeowners were underwater on their mortgages in the second quarter, helped by an improvement in home prices, data analysis firm CoreLogic said.
An “underwater mortgage” is where a home owner owes more on their home than what they could sell it for. The majority of these home owners pay their mortgage on time (The share of home owners that were underwater and up to date on their payments was 84.9 percent, up slightly from 84.8 percent in the first quarter) but are trapped in their current location. The fewer homes that are underwater, the more well-qualified buyers hit the market.
About 600,000 homeowners returned to positive equity in the second quarter, adding to the 700,000 that were above water in the first quarter. That is a large number of newly eligible buyers that are ready to take advantage of fantastic rates and are willing to move forward with a purchase because they know first-hand that home values are increasing.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained +46 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move lower.
We had our highest mortgage rates on Wednesday and our lowest rates Thursday afternoon on another very volatile trading week.
Mortgage backed securities traded downward (worse rates for you) from Monday through Wednesday but then everything changed on Thursday.
Thursday was a “whipsaw” day. The Federal Open Market Committee (FOMC) announced at 12:30EST that they would leave their key interest rate alone until mid 2015 and start a massive mortgage backed security purchase program of $40 billion per month. MBS and bonds initially tanked (higher rates for you) as the bond market sold off due to their disappointment on not getting a true Quantitative Easing that they were expecting.
But MBS reversed course and saw some massive gains (+164BPS from our lows) as the market began to understand the new program and after Bernanke’s press conference at 2:15EST.
This massive intra-day rally sent MBS upward (better rates for you) to levels that we have not seen since July 2012.
But on Friday the market gave up much of Thursday’s gains (mortgage rates ticked upward from their lows on Thursday).
What to Watch Out For This Week:
The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises:
|Date||ET||Economic Release||Actual||Market Expects||Prior|
|17-Sep||8:30 AM||Empire Manufacturing||–||-3||-5.9|
|18-Sep||8:30 AM||Current Account Balance||–||-$126.8B||-$137.3B|
|18-Sep||9:00 AM||Net Long-Term TIC Flows||–||NA||$9.3B|
|18-Sep||10:00 AM||NAHB Housing Market Index||–||38||37|
|19-Sep||7:00 AM||MBA Mortgage Index||–||NA||11.10%|
|19-Sep||8:30 AM||Housing Starts||–||770K||746K|
|19-Sep||8:30 AM||Building Permits||–||800K||812K|
|19-Sep||10:00 AM||Existing Home Sales||–||4.58M||4.47M|
|19-Sep||10:30 AM||Crude Inventories||–||NA||1.994M|
|20-Sep||8:30 AM||Initial Claims||–||375K||382K|
|20-Sep||8:30 AM||Continuing Claims||–||3293K||3283K|
|20-Sep||10:00 AM||Philadelphia Fed||–||-4||-7.1|
|20-Sep||10:00 AM||Leading Indicators||–||0.00%||0.40%|
I will be watching these reports closely for you and let you know if there are any big surprises:
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.
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