Free and Clear Homes
We are all too familiar with the constant media reports that state that approximately one third of home owners are “upside down” or “underwater” on their mortgage. This is when they owe more on their mortgage than what their home is worth. As home prices have been steadily increasing, these people are less “underwater” than a year ago but they are still essentially stuck in their current home.
But a new report by Zillow shows that one third of all homes are owned “Free and Clear” with no mortgage at all.
Demographics, home prices and geographical location all seem to play into “free-and-clear” home ownership, according to Zillow’s survey. Obviously, the longer someone owns a home, the more likely they are to have paid off a mortgage. When looking at free-and-clear ownership rates as a percentage of homeowners in various age groups, however, Zillow found 34.5 percent of 20- to 24-year-old homeowners are free of mortgages. This represents an upwardly mobile block of homeowners that can sell their homes and purchase a new one.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained +2 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move sideways. We had our highest mortgage rates on Friday morning and our lowest rates on Wednesday.
We had a fairly light week for economic data which was largely ignored by the markets. The major driving force were the U.S. Treasury auctions. Both the 10 year note and 30 year bonds saw a pull-back in demand compared to the last auctions. This meant that the U.S. had to pay a higher rate to borrow funds. We still pay less than any other country but the slight uptick in borrowing costs pressured all bonds. Mortgage rates are based on Treasury’s but mortgage rates were pressured upward after the results of the auctions were released as all bonds were impacted.
But bonds recovered as the European Central Bank (ECB) did not change their rates and comments by the ECB President added some uncertainty to the market place as he stated the ECB has done what it can do and it was now up to the political parties for each country. This helped mortgage backed securities.
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|
|15-Jan||8:30 AM||Retail Sales||–||0.20%||0.30%|
|15-Jan||8:30 AM||Retail Sales ex-auto||–||0.30%||0.00%|
|15-Jan||8:30 AM||Core PPI||–||0.20%||0.10%|
|15-Jan||8:30 AM||Empire Manufacturing||–||2||-8.1|
|15-Jan||10:00 AM||Business Inventories||–||0.30%||0.40%|
|16-Jan||7:00 AM||MBA Mortgage Index||–||NA||11.70%|
|16-Jan||8:30 AM||Core CPI||–||0.10%||0.10%|
|16-Jan||9:00 AM||Net Long-Term TIC Flows||–||NA||$1.3B|
|16-Jan||9:15 AM||Industrial Production||–||0.20%||1.10%|
|16-Jan||9:15 AM||Capacity Utilization||–||78.50%||78.40%|
|16-Jan||10:00 AM||NAHB Housing Market Index||–||48||47|
|16-Jan||10:30 AM||Crude Inventories||–||NA||1.314M|
|16-Jan||2:00 PM||Fed’s Beige Book||–||–||–|
|17-Jan||8:30 AM||Initial Claims||–||370K||371K|
|17-Jan||8:30 AM||Continuing Claims||–||3100K||3109K|
|17-Jan||8:30 AM||Housing Starts||–||889K||861K|
|17-Jan||8:30 AM||Building Permits||–||905K||899K|
|17-Jan||10:00 AM||Philadelphia Fed||–||5.2||4.6|
|17-Jan||10:30 AM||Natural Gas Inventories||–||NA||-189 bcf|
|18-Jan||9:55 AM||Mich Sentiment||–||75||72.9|
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.