Mortgage Applications for Home Purchases Rise
The Mortgage Bankers Association reported that new applications to borrow money to purchase a home rose to the highest level since June 2013.
While 30 year fixed mortgage rates are slowly and steadily increasing this year, it has not slowed the appetite for home purchases.
Mortgage purchase applications are 12 percent higher than a year ago, but the loans are not the same.
“The average loan amount for a purchase application reached a record high, a sign that the mix of purchase activity is still skewed toward higher priced homes,” said Mike Fratantoni, MBA’s chief economist.
The average loan size for purchase applications rose to a survey high of $297,400.
Government backed and low down payment loans continue to see very strong demand as the FHA share of total applications increased to 14.0 percent from 13.7 percent the week prior. The VA share of total applications increased to 11.9 percent from 11.3 percent the week prior. The USDA share of total applications remained unchanged at 0.8 percent from the week prior.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained +9 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to sideways but we had a very volatile week. On Wednesday, we had the highest mortgage rates since March 6th. So far for the month of May, MBS are still down -34 BPS which means mortgage rates are still trending upward on a very slow pace.
Jobs Friday finally arrived and while there was some weakness…there was also some strength. This mixed bag of data probably has thwarted any chance of a June Fed rate hike, but September is still very much a possibility in bond traders’ minds.
Jobs, Jobs, Jobs: Here is a break down of what is bearish (bad) and bullish (good) rates.
April Non-Farm Payrolls (NFP) 223K vs est of 218K – Bearish
March NFP revised from 126K to 85K – Bullish
3 month moving average 191K – Bullish
6 month moving average 255K – Bearish
Unemployment Rate 5.5% dropped to 5.4% – Bearish
Average Hourly Earnings Month-over-month – 0.1% vs est of 0.2% – Bullish
Average Hourly Earning Year-over-year – 2.2% which is over the Fed’s target inflation rate of 2.0% – Bearish.
So, as you can see there is something for everyone in Friday’s data. On an intra-day basis this was positive for pricing and gave us our lowest rates of the week, but on a longer term trend line this data is not one sided enough to ensure better pricing/lower rates for the long term.
Our economy also saw some strong readings in Factory Orders, Unit Labor Costs, Initial Weekly Jobless Claims and a very strong reading in the ISM non-manufacturing (services) sector. Consumer Credit shot up but most of that increase was in student loan debt and auto loans instead of an increase in credit card debt which could of pointed the way towards more consumer spending.
What to Watch Out For This Week:
|Date||Time (ET)||Economic Release||Actual||Market Expects||Prior|
|12-May||10:00 AM||JOLTS – Job Openings||–||NA||5.133M|
|12-May||2:00 PM||Treasury Budget||–||$155.0B||$106.9B|
|13-May||7:00 AM||MBA Mortgage Index||–||NA||-4.60%|
|13-May||8:30 AM||Retail Sales||–||0.20%||0.90%|
|13-May||8:30 AM||Retail Sales ex-auto||–||0.40%||0.40%|
|13-May||8:30 AM||Export Prices ex-ag.||–||NA||0.20%|
|13-May||8:30 AM||Import Prices ex-oil||–||NA||-0.40%|
|13-May||10:00 AM||Business Inventories||–||0.20%||0.30%|
|13-May||10:30 AM||Crude Inventories||–||NA||-3.882M|
|14-May||8:30 AM||Initial Claims||–||275K||265K|
|14-May||8:30 AM||Continuing Claims||–||2300K||2228K|
|14-May||8:30 AM||Core PPI||–||0.10%||0.20%|
|14-May||10:30 AM||Natural Gas Inventories||–||NA||76 bcf|
|15-May||8:30 AM||Empire Manufacturing||–||4||-1.2|
|15-May||9:15 AM||Industrial Production||–||0.10%||-0.60%|
|15-May||9:15 AM||Capacity Utilization||–||78.40%||78.40%|
|15-May||10:00 AM||Mich Sentiment||–||96||95.9|
|15-May||4:00 PM||Net Long-Term TIC Flows||–||NA||$9.8B|
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.The above 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.
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