A significant decline in jumbo mortgage rates (loans above $417,000) are helping to move some of the highest-end inventory. Sales volumes of homes worth more than $1 million across the country are up more than 35% from this time last year according to the National Association of Realtors. They also stated that homes between $700,000 and a million were up 29% from last year.
There is no question that high unemployment and concern about the economy is pressuring the housing market at all price points, but it is clear that the ultra-low mortgage rates are having a dramatic impact on the highest end of the price spectrum.
Conventional lenders (Fannie Mae and Freddie Mac) do not make jumbo loans. Those loans usually are held by banks. These banks are becoming more comfortable making higher end loans these days and are looking to take advantage of a premium that they just can’t earn with a conventional mortgage where their margins are simply too thin.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) lost -3 basis points last week but reached their best all-time pricing levels on Tuesday. After we reached those great levels, we pulled back -31 basis points by Friday. The gains in mortgage backed securities (the only thing 30 year conventional mortgage rates are based on) were primarily the result of the Federal Open Market Committee (aka ”The Fed”) rate decision and policy statement on Tuesday afternoon. While they did leave their rates alone, their downwardly revised economic outlook and decision to reinvest their profits from maturing mortgage backed securities into Treasuries drove down rates.
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 | Release | For |
| 16-Aug | 8:30 | NY Fed – Empire Manufacturing Index | Aug |
| 16-Aug | 9:00 | Net Long-Term TIC Flows | May |
| 16-Aug | 10:00 | NAHB Housing Market Index | Aug |
| 17-Aug | 8:30 | Housing Starts | July |
| 17-Aug | 8:30 | Building Permits | July |
| 17-Aug | 8:30 | PPI | July |
| 17-Aug | 8:30 | Core PPI | July |
| 17-Aug | 9:15 | Industrial Production | July |
| 17-Aug | 9:15 | Capacity Utilization | July |
| 18-Aug | 10:30 | Crude Inventories | 14-Aug |
| 19-Aug | 8:30 | Initial Claims | 14-Aug |
| 19-Aug | 8:30 | Continuing Claims | 7-Aug |
| 19-Aug | 10:00 | Leading Indicators | July |
| 19-Aug | 10:00 | Philadelphia Fed | Aug |
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.
