Posts Tagged ‘mortgage shopper’

Markets: The collapse of the dollar has driven rates slowly but surely to levels we haven’t seen in six months.  Seriously.  It would not be impossible to find 4.625% on some 30-year fixed loans, and we’re closing a 5/1 ARM tomorrow at 3.875%.

Analysis: Well, exactly a year ago today we watched as the mortgage market exploded and rates dropped by more than a full point in two hours.  I remember this well, as I logged on in a spare moment from a condo in Florida, where I was supposed to be on vacation, and spent the next two solid days on the phone because of it.  Not that I’m complaining, exactly, although it was surely most inconvenient.

But this is gratitude week, and I am spending it more or less being grateful.  I am truly grateful for all of you and your willingness to pass along the information I share here.  I depend on referrals for all of my business, and I don’t forget that you have to be thrilled with what you get from me, or you won’t refer me – and I wouldn’t want you to.

We’ll be making some changes to our operations here over the next couple of months that should improve our communications and expand the number of available channels for it, so that you can get this alert however suits you best, whether by Twitter or Facebook or email or text or what have you.  Watch for that, and in the meantime, give me suggestions on how I can make this alert more useful to you.  In turn, let me ask you to forward it on to someone – just one person – that might enjoy it, so that the reach of good, solid market information can grow.  Thanks in advance.

Action: And here is a suggestion from alert reader AmyJo in which she suggests that I add an action section to RateWatch, so here it is: if you’re interested at all in potentially refinancing or purchasing, hit reply to this email and let’s start the conversation.  Average lead time from first discussion to close is running at a career-high 84 days now.  It takes time to get things in place to qualify in this environment.  Do not wait and miss out, and yes, we’re still working in the holidays.  Let us work for you.

Cj

Chris Jones

Market: We’re flat.  Yesterday we were up 34 bps.  This is a trend, now, and not a blip.  There is consistent pressure for mortgage-backed securities (mbs) to rise to the 100- and 200-day moving averages, which we are sitting on right now.  That means rates holding steady at their current very low levels, between 5% and 5.25%. [Disclaimer: YOUR rate might be higher, and it might be lower.  That depends on a lot of things, not just the current market.  Get a pro to check for you.] [Incidentally, I am a pro.  <grin>]

Analysis: As usual analysis is complicated.  This morning’s data (ISM and pending home sales) were better than expected, which for months now has meant that mbs would retreat and stock would rise.  But for the past two weeks, that has not been so.  It’s not the Fed, this time – the Fed is buying mbs, of course, but buying them in ever-smaller quantities, and buying mostly the 5% and 5.5% coupons, meaning that they are providing no pressure for rates to go below 5%.  That pressure, what of it exists, is coming from the broader market.  And frankly, people, it makes no sense.

There’s no big move to the upside.  There is no immediate prospect of rates dropping back into the 4.5% range.  But still, there is this persistent pressure on mbs pricing that is holding things right where they are, instead of losing ground, as analysts expected (myself among them).  I wrote last week that the only thing I could point to was back-bench sentiment that the economy really wasn’t bottoming out and that there were worse things to come, but as time goes on that argument is less and less persuasive to me.  So I don’t know what it is.  Ideas?  What do you think?

Cj

Specifically, Utah County.  Our latest batch of appraisals in the Utah County area have come in about 10% lower than projected.  Since we run all of our appraisals through the best AMC on earth, 1st Choice AMS, we know these are not appraiser-specific values.  These are across the board, almost all properties, all appraisers and all loan types.

This is a warning for those of you that do business in Utah County.  Expect your values to be low.  We have not noted this problem in Salt Lake County, so at the moment we think it’s a phenomenon restricted to Utah County and southern environs.

Here’s our take on why this is: everyone knows that the $8000 first-time homebuyer credit is expiring in 90 days.  In Utah County, with its two large universities spewing forth about 10,000 graduates a year, there is an abnormally large population of first-time homebuyers.  That means that for the next little bit, that cohort, being especially active, is going to have disproportionate impact on home values.  When shopping for the thousands of properties out there, which is going to be most attractive to you: $198,000 or $204,000?  It’s human nature.  If the houses are even reasonably similar, the lower price is going to win, but here you also have the famous $1.99 effect working against you.

One of our most recent appraisals reaffirms this rather directly.  The house appraised for $203,000.  There were two comps in the low $200k range, each had been on the market for 300 days or longer.  There were 2 comps in the high $190k range, and their time on market was 42 days and SEVEN days.  The stuff that’s selling, people, is the stuff right under the K, at $295k and $195k, so if your house wants to appraise at $310k or at $210k, you might find that you’re in trouble.

Just a word to the wise.

Market: We’re flat, as in 0bps movement, so far today.  We’ve been trading in a narrow range, with a push to the upside on bonds (down on rates) for a few days now.  I find this exceedingly odd, and will attempt to explain why.  Rates continue 5.25% or thereabouts on the 30-year, lower (and MUCH lower sometimes) on ARMs, which yes, are still out there and making good sense for many.

Analysis: This is a tough market to read.  We are sitting right on the 100-day moving average (and the 200-day moving average).  For weeks, every time we touched that line, we retreated strongly.  Any news, even bad news, was interpreted in the most positive possible light, and bonds sold off.  The stock market is strongly up since March, and though bonds have not fallen by the same amount, the general consensus (here, too) has been that rates were trying to rise and that it was only a matter of time before we saw 6% and higher again.

Well, now I’m not so sure.  This is very odd behavior for the market.  The last couple days there has been some decent economic news, home sales higher, Case-Schiller index higher in 95% of the measured markets, consumer confidence much higher than expected, durable goods orders higher (but with embedded weakness), and ordinarily this would mean a selloff in bonds, especially as we’re right at the top of a trading range.  And yet, and yet.  We even had a huge 5-year treasury auction yesterday, but the bond market actually ROSE following that auction.

So here’s my interpretation at the moment: I think there is a nagging suspicion in the market that there is some really, really negative news coming.  I think there’s a fear that this summer was irrationally exuberant in terms of calling an end to the recession.  I think that means that we’re going to hang out right here on interest rates until at least the $8000 first-time homebuyer credit goes away (loans must be CLOSED by November 30).

That’s my read.  I could be wrong.  I’m holding out at least a 25% chance that there could be a big move down in rates before the end of the year.  I also wouldn’t be surprised to see a large move upward.  But if I were betting, and hey, that’s kind of what I do here every day, I’d bet on holding right here.

Cj

P.S. For you duplex buyer mortgage shoppers, just wanted to say that you’ll need to be in underwriting (for conventional financing) by Monday unless you want to put 20% down.  80% becomes the loan limit on all duplexes as of Tuesday Sept 1.  Just a word to the wise.

Markets: We’re down 65bps and switching from watching the 4.5% FNMA bond to watching the 5.0% bond, because we always watch the bond that is closest to par.  The 200bp decline over the past 5 days puts the 4.5% out of range.  Correct.  That is not good news for mortgage rates.  Not in any possible sense.

Analysis: What happened was the job loss wasn’t nearly as bad as it was expected to be.  This is further evidence that the economy is pulling out of the dive, and while a large rise in GDP doesn’t seem to be in the cards, it is possible that we are momentarily hitting the bottom.  Expect to bounce here for a while, but Americans being who they are, they’ll be buying stocks whenever things are not manifestly awful, meaning they’ll be selling bonds, meaning interest rates will rise.

Although, you know, rising interest rates puts downward pressure on home prices which is BAD news for the market which will hurt stocks and help bonds, which will drive interest rates down which will help ome prices rise which will be good news which will be a buy signal for stocks which will hurt bonds which drives interest rates up, and around and around the mulberry bush we go.

We’re still locking everything in sight.

Cj