Lower homeownership rates are an opportunity
According to the Commerce Department, homeownership in the United States hit a 17-1/2-year low in the second quarter as Americans continue to shift toward renting, underscoring the lingering effects of the recession on the housing market. The seasonally adjusted rate slipped to 65.1 percent, the lowest since the fourth quarter of 1995. The rate, which peaked at 69.4 percent in 2004, was 65.2 percent in the first quarter.
In the second quarter, the decline in homeownership was concentrated in the 45-54 age group, where it fell four tenths of a point. It rose among people 65 years and older, in line with recent trends. Ownership among people between 55 and 64 years fell 0.3 percentage point in the second quarter. There were small gains in the 35-44 age cohort.
And that is where opportunity exists. This group of homeowners has recently been freed up from underwater mortgages as home prices have risen well over 10% in the last 12 months. Many renters that have decided to rent have done so primarily for two reasons. First, in some cases it has been less expensive to rent and secondly, they have been worried that once they purchase a home it will decrease in value. However, the recent trend in increasing home values have renters considering getting off of the sidelines to take advantage of a market that is on its way up..
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained +8 basis points from last Friday’s close which caused 30 year fixed rates to move sideways. It was a very volatile week for mortgage backed security trades with huge swings of 100 basis points in 3 of the 5 trading sessions. Our best pricing levels (lowest rates) was on Tuesday and our worst pricing levels (highest rates) was early Friday morning before bonds recovered.
It was a very volatile week for mortgage backed security trades with huge swings of 100 basis points in 3 of the 5 trading sessions. Our best pricing levels (lowest rates) was on Tuesday and our worst pricing levels (highest rates) was early Friday morning before bonds recovered. We had a 130 basis point spread between our highs and our lows.
Last week was all about the Fed and jobs.
Wednesday started with much a much better ADP Private Payroll report (200K vs est of 182K) and a stronger than expected 2nd QTR GDP (1.7% vs est of 1.2%). This positive economic news sent MBS prices tumbling (higher rates for you). But then the Federal Reserve Open Market Committee (FOMC) released their the interest rate decision and monetary policy. MBS reversed course and rallied (better rates for you) on the news that they did not specifically set a timeline to start their “tapering” process. This is where the would begin to decrease the amount of their monthly Treasury and mortgage backed security purchases.
MBS sold off again on Thursday morning on a much better Initial Jobless Claims report (326K vs est of 345K) and ISM Manufacturing (55.4 vs est of 52.0)
On Friday the much anticipated Non-Farm Payroll report hit the wires. And it certainly missed the mark coming in at 162K vs est of 184K. This weaker than expected data helped MBS to rally (better rates for you).
But when the smoke cleared, MBS were unable to close above our ceiling of resistance which has been in place for the last 9 trading sessions. This has caused mortgage rates on a week-over-week basis to move sideways.
|Date||ET||Economic Release||Actual||Market Expects||Prior|
|5-Aug||10:00 AM||ISM Services||–||53.2||52.2|
|6-Aug||8:30 AM||Trade Balance||–||-$43.4B||-$45.0B|
|7-Aug||7:00 AM||MBA Mortgage Index||–||NA||-3.70%|
|7-Aug||10:30 AM||Crude Inventories||–||NA||0.431M|
|7-Aug||3:00 PM||Consumer Credit||–||$16.0B||$19.6B|
|8-Aug||8:30 AM||Initial Claims||–||340K||326K|
|8-Aug||8:30 AM||Continuing Claims||–||2975K||2951K|
|8-Aug||10:30 AM||Natural Gas Inventories||–||NA||59 bcf|
|9-Aug||10:00 AM||Wholesale Inventories||–||0.40%||-0.50%|
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.