Foreclosures Fall to Lowest Level in Six Years
Lenders repossessed fewer U.S. homes in January, bringing the number of completed foreclosures down to the lowest level in more than six years.
Banks took back 30,226 homes last month, a drop of 4 percent from December, foreclosure listing firm RealtyTrac said. Completed foreclosures were down 40 percent from January last year to the lowest level since July 2007, the firm said.
The U.S. housing market has emerged from a deep slump, aided by rising home prices, steady job growth and fewer troubled loans dating back to the housing-bubble days. Meanwhile, more homeowners are keeping up with their mortgage payments.
That’s led to fewer homes entering the foreclosure pipeline on a national level and is another bright spot in your housing market.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) lost -82 basis points (BPS) from last Friday’s close which caused 30 year fixed mortgage rates to increase. The market saw the lowest rates on Monday and the highest rates on Wednesday.
By far, the biggest event that impacted mortgage rates was new Federal Reserve Chair Janet Yellen’s first time up in front of the House Financial Services Committee. Her prepared statement was released ahead of her testimony. As a result, MBS sold off as her statement made it clear that she would support the “continuality” of the Fed’s programs and direction. Keep in mind that she was a major contributor to many (if not all) of the Fed’s decisions under Bernanke as she was Vice Chair and a major player. She was never listed on the rolls as a dissenting vote and the markets misconception that she would be more “dovish” (to bonds anyway) has proven to be wrong.
The combination of her statement and resolve during her testimony and questioning showed the following:
– The Fed is on course to taper at each meeting, that is the “auto-pilot” mode that they are on. It will take a major reversal in the economy and labor markets for them to change that bias.
– The Fed is data dependent but they are not reactionary to a specific report such as Non-Farm Payroll. Instead, the data impacts their forward looking forecast. So, we can have a weak labor report and the Fed will not change course if their own internal projections show that labor will pick up in the next period. (something that we just experienced).
– The Fed still has two benchmarks (we are no longer calling them “triggers”) 2% inflation and 6.5% Unemployment. Just because we reach or breach one of them does not mean that the Fed will change their Fed Fund rate…in fact, they have been making it quite clear that breaching the 6.5% Unemployment rate will not trigger a change in their policy.
There are two tools that the Fed is currently using that consumers often get confused. The Federal Reserve Keeps mortgage rates artificially low by purchasing mortgage backed securities each month, creating additional demand at levels that would not normally exist in a normal market. In 2013, they were purchasing $40 billion of mortgage backed securities each month. At their last meeting, the Fed reduced that monthly amount to $30 billion each month. As they continue to decrease that monthly amount, mortgage rates will steadily increase. This is despite their second tool.
The Fed’s second tool is to keep their Fed Fund rate at a level of 0.00% to 0.25%. This Fed Fund rate is the interest rate that depository institutions trade balances held at the Federal Reserve and is used as a benchmark for business loans and other types of loans issued by banks..but it is not a benchmark used for residential lending. Only their first tool keeps mortgage rates low…the second tool does not do that.
|Date||Time (ET)||Economic Release||Actual||Market Expects||Prior|
|18-Feb||8:30 AM||Empire Manufacturing||–||7.5||12.5|
|18-Feb||9:00 AM||Net Long-Term TIC Flows||–||NA||-$29.3B|
|18-Feb||10:00 AM||NAHB Housing Market Index||–||56||56|
|19-Feb||7:00 AM||MBA Mortgage Index||–||NA||-2.00%|
|19-Feb||8:30 AM||Housing Starts||–||964K||999K|
|19-Feb||8:30 AM||Building Permits||–||980K||986K|
|19-Feb||8:30 AM||Core PPI||–||0.10%||0.30%|
|19-Feb||2:00 PM||FOMC Minutes||–||–||–|
|20-Feb||8:30 AM||Initial Claims||–||335K||339K|
|20-Feb||8:30 AM||Continuing Claims||–||2973K||2953K|
|20-Feb||8:30 AM||Core CPI||–||0.10%||0.10%|
|20-Feb||10:00 AM||Philadelphia Fed||–||7.4||9.4|
|20-Feb||10:00 AM||Leading Indicators||–||0.40%||0.10%|
|20-Feb||10:30 AM||Natural Gas Inventories||–||NA||-237 bcf|
|20-Feb||11:00 AM||Crude Inventories||–||NA||3.267M|
|21-Feb||10:00 AM||Existing Home Sales||–||4.70M||4.87M|
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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