MortgageVine

What Does The Year of the OX Foretell For Interest Rates

George DeVine, Mortgage Banker (Guaranteed Rate) — Sun, 14 Feb 2021 08:27:44 -0800

I'm sure we are all happy to turn the clock on the Year of the Rat and usher in the Year of the Ox. People born in the Year of the Ox are reliable, strong, fair, patient, kind, methodical, calm, and trustworthy. That sounds a heck of a lot better for than the Year of the Rat (2020) described as smart and talented but also hot-tempered and jealous. What will this mean for mortgage rates? Ok, thankfully we have better economic indicators than the Chinese calendar and they foretell rising rates are on the horizon. In the most basic of explanations, interest rates rise and fall with the economy. In a strong economy, the financial powers that be, namely the Federal Reserve, will increase rates to slow borrowing and investing. Conversly, when the economy is weak, the feds will lower rates to spur economic activity. 2020 brought a boatload of economic uncertainty and the government and Federal Reserve stepped in quickly by spending money and lowering rates to stimulate the economy. It is widely expected that our elected officials will pass another economic stimulus plan by the end of February to the tune of $1,900,000,000,000.00 No, I don't have an issue with my keyboard, that's 1.9 trillion dollars. This on the heals of already spending nearly $4,000,000,000,000.00 - OK you get the point.....This news, combined with the vaccine rollout, brings with it less uncertainty about the future, and confidence that we'll see more stability in the economy by mid-year. I don't want to get too far into the weeds, but the Feds. have been using tools in addition to lowering rates to prop up the economy, and while I do not expect they will increase rates until at least the latter part of the year, or more likely 2022, I do believe they will put some of these tools back in the box, namely purchasing government treasuries and mortgage debt. This will undoubtedly cause rates to rise in the coming months. Now, Wall Street doesn't wait until things come to fruition, they make investment decisions based upon short and long term economic forecasts and the above referenced factors foretell rising rates are at the doorstep. Thirty year fixed rate mortgages have been solidly below 3% over the past year for well quaified applicants. I believe we will see rates rise to 3% in the next month and top out in the 3.25% range by springtime. This is great news for those looking to purchase a home this year, or homeowner's looking to take cash out by refinancing their mortgage. For those who are seeking to refinance to lower their rate, while you won't catch the lowest rates we saw in 2020, this is still an opportune time and you shouldn't delay another day. On to the technical news:

It was a relatively quiet week for mortgage markets. While current inflation levels remain low, investors are divided about its outlook for later in the year. Mortgage rates ended the week nearly unchanged.

The reduced economic activity resulting from the pandemic has caused a decline in inflation, which has been one of the factors responsible for record low mortgage rates, and the latest figures revealed that current levels are even lower than expected. The Consumer Price Index (CPI) is a widely followed monthly inflation report that looks at the price change for goods and services. In January, Core CPI was just 1.4% higher than a year ago, down from an annual rate of increase of 1.6% last month and 2.3% in February 2020.

Despite this tame report, however, some investors are concerned that inflation may increase significantly later in the year. Their reasoning is that it is not surprising that inflation remains low while economic activity is restrained by rising Covid case counts during the holiday season. As the vaccine rollout progresses, though, pent up demand in areas such as travel may be unleashed, causing prices to spike.

On Wednesday, Fed Chair Powell said that Fed policy will remain accommodative until substantial progress is made in reaching full employment. According to Powell, the unemployment rate by some measures is closer to 10% than to the 6.3% reading seen in the latest Employment report.

While there is broad agreement that the government should provide more assistance to individuals and businesses harmed by the pandemic, lawmakers continue to negotiate the details. President Biden proposed a $1.9 trillion package, but some investors expect that the final size will be smaller. For mortgage rates, increased government spending is negative, since additional Treasury bonds must be issued to fund the spending, which causes a rise in yields, including mortgage rates.

Real Estate and Finance - Same Story Different Day

George DeVine, Mortgage Banker (Guaranteed Rate) — Sat, 30 Mar 2019 09:02:18 -0700

The past few weeks have been steady as she goes, so I'm going to mail in this post. Interest rates took a nice dip last week and continue to hold ground just north of 4%, lending support to the housing market, while real estate remains stable with moderate softening. Existing home sales came in at a bistering 12% month over month gain in February and are down slightly from February 2018.

It was a light week for economic news with few surprises, and mortgage rates ended nearly unchanged.

One big reason that mortgage rates have improved in recent weeks, and that the Fed has shifted toward looser monetary policy, is that inflation has held steady. Despite a very tight labor market by historical standards, wage growth has been moderate, and overall inflation levels in the economy have been constrained.

This trend continued in January, as the core PCE price index, the inflation indicator favored by the Fed, was just 1.8% higher than a year ago. The Fed's stated target for annual core inflation is 2.0%, and core PCE has held in a narrow range at or just below this level for the past year.

The latest figures on home construction were not encouraging, although unusually bad weather influenced the results. In February, overall housing starts fell 9% from January, which was far below expectations. Single-family starts posted an even larger decline of 17% from January to the lowest level since May 2017. Permits to build single-family homes, a leading indicator, were roughly unchanged. Builders point to rising land, labor, and materials costs, as well as high regulatory standards, as obstacles to additional construction.

Looking ahead, the important monthly Employment report will be released on Friday. As usual, these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, Retail Sales will be released on Monday. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a key indicator of growth. The ISM national manufacturing index will come out on Monday and the ISM national services index on Wednesday. In addition, news about the British exit (Brexit) from the European Union could affect mortgage rates.

Real Estate Gains Footing While Fed Policy Suggests Trouble Ahead

George DeVine, Mortgage Banker (Guaranteed Rate) — Sat, 23 Mar 2019 05:50:31 -0700

If you've followed my previous blogs, I've postured that the slowdown in real estate was a brief pause, rather than a substantial decline in the market. February's existing home sales bounced back with a blistering 12% increase over January, but still down 2% year over year.....I'll take it! The real estate market remains strong as we head into spring and I expect we'll see healthy numbers throughout the year. Interest rates took an unexpected drop this past week erasing increases we saw in the fourth quarter of 2018. This is welcome news, rates are now solidly below 4.5% from a high of 5%, however, it's disconcerting when every time the Fed seems to be on the path of trimming the balance sheet, they pull back amid concerns over the economy. The Feds. number one mandate is promoting employment growth, it's noteworhty that they've loosened monetary policy amidst a backdrop of 3.8 unemployment, and an economy growing north of a 2% clip. My take, it's more about concerns over the sate of the world economy, and less a commentary of ours, but disconcerting nonetheless.On to the numbers....

The outlook for global economic growth declined this week, which was reflected in economic data around the world and in the comments from the U.S. Fed. As a result, rates ended the week lower.

Outside the U.S., the economic data released this week suggested that growth may be slowing. In particular, the manufacturing data in the large European countries fell to the lowest levels in several years. Since slower economic growth reduces the outlook for future inflation, this was favorable for mortgage rates.

The surprisingly large shift to a more dovish (in favor of looser monetary policy) tone at Wednesday's Fed meeting was mostly due to outside risks to the U.S. economy. Because the strength of international markets impacts U.S. exports, Fed officials modestly lowered the outlook for U.S. economic growth in 2019 from 2.3% to 2.1%. The Fed also made a couple of other significant changes which suggested looser monetary policy going forward. First, the majority of Fed officials no longer think that any federal funds rate increases will be needed this year, down from a consensus forecast just last December for two rate hikes in 2019. In addition, the Fed announced that it will slow its pace of asset reduction beginning in May and will end it altogether in September, meaning that the size of the Fed's balance sheet will remain roughly steady after that time.

The latest news from the housing sector showed a nice surprise to the upside, as lower mortgage rates helped boost sales activity. In February, sales of previously owned (existing) homes jumped 12% from January, which was far more than expected. The inventory of homes for sale was at a 3.5-month supply, still well below the 6.0-month supply which is considered a healthy balance between buyers and sellers, but it was 3% higher than a year ago. The median existing-home price was 4% higher than a year ago.

Looking ahead, Housing Starts will be released on Tuesday. Pending Home Sales will come out on Thursday and New Home Sales on Friday. The core PCE price index, the inflation indicator favored by the Fed, will be released on Friday. In addition, news about the British exit (Brexit) from the European Union, which is currently scheduled to take place on March 29 but which may be delayed, could affect mortgage rates.

Real Estate and Interest Rates "Steady As She Goes"

George DeVine, Mortgage Banker (Guaranteed Rate) — Sat, 09 Mar 2019 04:47:47 -0800

Mortgage interest rates dipped to the mid-4% range in the fourth quarter of 2018 largely fueled by concerns over a European economy that can't seem to get out of first gear over the past 10 years, and ongoing China trade negotiations. More recent housing and employment data has put economists a bit onto the edge of their seat with concern we may see the US economy slowing this year. As they say, one month doesn't make for a trend, so only time will tell if housing and employment growth is in for a soft landing or a self-fulfilling recession. I'm still firmly in the camp that the real estate market will see a more balanced and healthy market in 2019 supported with stable employment and wage growth,On to the numbers....

A dovish message from the European Central Bank was favorable for mortgage rates this week, while the major U.S. economic data had little net impact, and rates ended the week lower.

In recent weeks, there have been substantial downgrades to the growth forecast for Europe from a wide range of sources. With this in mind heading into Thursday's European Central Bank (ECB) meeting, investors were anticipating that the ECB would adopt a more dovish (in favor of looser monetary policy) stance. In fact, the ECB did shift in this direction, and even more than expected. First, it extended the minimum period for which it will not raise benchmark rates by several months to the end of 2019. In addition, it will provide a fresh batch of cheap long-term loans to banks to encourage more lending and thus help boost economic activity. The ECB also sharply reduced its own forecast for GDP growth in 2019 from 1.7% to 1.1%. This news caused global bond yields, including U.S. mortgage rates, to decline.

Friday's Employment report offered a reminder that in an economy with about 150 million jobs, what may appear to be a large miss versus the expected levels still represents just a tiny fraction of the total pool of jobs. Against a consensus forecast of 175,000, the economy added just 20,000 jobs in February. Bad weather likely was one major factor behind the shortfall, as the Construction and Leisure & Hospitality sectors were particularly weak.

The unemployment rate declined from 4.0% to 3.8%, below the consensus of 3.9%. This was mainly due to workers returning after the end of the government shutdown. Wage growth was stronger than expected in February, with average hourly earnings 3.4% higher than a year ago, up from 3.2% the prior month, and at the highest level since April 2009.

Another closely watched economic report released this week clearly beat to the upside. The services sector accounts for more than 85% of U.S. economic activity, and the ISM national services index unexpectedly jumped to 59.7, which was well above the consensus of 57.0. Readings above 50.0 indicate an expansion in the sector, and readings above 60.0 have been extremely rare since record keeping for this index began in 2008.

Looking ahead, Retail Sales will be released on Monday. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a key indicator of growth. The Consumer Price Index (CPI) will come out on Tuesday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. Durable Orders, an important indicator of economic activity, will be released on Wednesday. In addition, Treasury auctions on Tuesday and Wednesday could influence mortgage rates. Investors also will be watching for signs of progress in the trade talks between the U.S. and China.

The government shutdown which began on December 22 and ended on January 25 has caused delays in the release of some economic reports produced by government agencies and likely will continue to do so until the affected agencies get caught up. It is generally not known when the postponed data will be ready to be released

Don't Buy The Hysteria Over The Slowing Housing Market

George DeVine, Mortgage Banker (Guaranteed Rate) — Sun, 03 Mar 2019 04:28:01 -0800

GDP Beats Forecasts

In my last blog post, I reported sales of newly built home increased 40% month over month in December lending optimism that maybe the fourth quarter slowdown in housing would be a short-lived breather followed by a pick up in sales as we near the spring market. Unfortunately, data released last week reported a decline in new home starts in December, while existing home sales declined 1.2% month over month in January, and by a whopping 8.5% from January 2018. On a positive note, the forward indicating pending home sales index climbed 11% from December, but is still below January 2018 activity by 2.3%. While housing data has been a mixed bag over the past few months, I believe housing activity over the next few months will show the market remains strong. We'll continue to see more inventory coming on the market with prices moderating and the number of sales continuing to decline from the previous year, however, mortgage rates, and the economy will remain stable throughout the year which should lend support to the housing market. We've experienced an unsustainable run up in housing prices over the past few years, which has stretched affordability to its limits. Keeping things in perspective, a decline in annual price gains from 6-8% to a more moderate and sustainable 3%, is healthy and essential if we are to maintain a strong housing market. In short, 2019 will be a Goldilocks market with a balanced supply of inventory at moderating prices.On to the numbers....

Stronger than expected economic growth data was unfavorable for mortgage rates this week. Progress in the trade negotiations also was negative, and mortgage rates ended the week higher.

GDP growth for the year was a solid 2.9%, which was the highest level since 2015. Early forecasts for 2019 generally are for slower growth below 2.5% based on fading stimulus effects from U.S. tax cuts and economic weakness overseas.

The latest report on home construction revealed somewhat disappointing news for activity at the end of 2018. The data for housing starts in December, which also was delayed by the government shutdown, showed an unexpectedly large decline of 11% from November to the lowest level since September 2016. Single-family starts fell 7% from November, while the more volatile multi-family segment dropped 20%. Building permits for single-family homes, a leading indicator of future construction, decreased a little from November.

As expected, President Trump postponed the increase in U.S. tariffs on Chinese goods which had been scheduled to take place on March 1. According to trade officials, the U.S. will "suspend the scheduled tariff increase until further notice." A trade deal likely would lead to faster global economic growth, which would raise the outlook for future inflation. As a result, the signs of progress in the negotiations seen this week were negative for mortgage rates.

Fed Chair Jerome Powell did not provide any new information about future monetary policy in his semi-annual testimony to Congress on Tuesday and Wednesday. Powell described a healthy outlook for the U.S. economy subject to uncertainty in areas including the pace of global growth, the trade negotiations, and Brexit (the British exit from the European Union). He confirmed that Fed officials will be "patient" in assessing the need for additional rate hikes and that they are "close" to agreeing on the appropriate size of the balance sheet.

Looking ahead, the important monthly Employment report will be released on Friday. As usual, these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, the ISM national services index will come out on Tuesday. The next European Central Bank (ECB) meeting will take place on Thursday and could influence U.S. mortgage rates. Investors also will be watching for signs of progress in the trade talks between the U.S. and China.

Home Sales On Fire During Polar Vortex

George DeVine, Mortgage Banker (Guaranteed Rate) — Sat, 16 Feb 2019 07:16:56 -0800

While the country was braving frigid temperatures during the polar vortex, new home sales were on fire. The Mortgage Bankers Association reported a substantial increase in sales of newly built homes last month. The Builder Application Survey (BAS) conducted by the Mortgage Bankers Association indicates sales increased by over 40 percent compared to December 2018 and were at the the same pace as January 2018. As noted in Mortgage News Daily, Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting said, "After two lackluster months, new home sales surged almost 30 percent in January to the fastest pace since our survey began in 2013. The healthy job market, faster wage growth, moderating price gains and lower mortgage rates all helped home sales recover. Additionally, builders seem to be seeing improvement in their labor shortages, as government survey data showed increases in construction hiring and openings in December." This is great news amid recent nervousness over what appeared to be a slowing housing market in the final months of 2018. The National Association of Realtors (NAR) will release their Existing-Home Sales data for January 2019 on Thursday, February 21. If the data is strong, we could be in for a brisk housing market in 2019, especially if mortgage rates remain in the mid-4% range and the labor market continues to strengthen. If you would learn more about home financing programs, please click on my banner below.

Interest Rates Stable As We Enter The Spring Home Buying Season

George DeVine, Mortgage Banker (Guaranteed Rate) — Sat, 09 Feb 2019 06:43:16 -0800

Interest rate markets remain stable with continued concerns over anemic economic growth in Europe, Brexit, and the ongoing China trade talks. Rates are holding steady in low to mid 4% range lending support as we head into the 2019 home buying season. Sandwiched between recent major economic events and several more later in the month, there was little significant economic news this week, and mortgage rates ended slightly lower.

Investors were mostly focused on bigger picture economic conditions this week, and their primary questions concerned the outlook for global growth. While the forecast for U.S. gross domestic product (GDP) growth in 2019 has held relatively steady around 2.5%, many other regions have been downgraded recently, particularly in Europe. This week, the primary governing body for the European Union (EU) reduced its forecast for 2019 GDP growth in the EU from 1.9% to 1.3%. Germany was cut from 1.8% to 1.1% and the UK from 1.7% to 1.2%.

Two geopolitical issues also will remain on the radar of investors in coming weeks. First, the trade negotiations between the U.S. and China appear to be progressing very slowly. U.S. tariffs are set to be increased again on March 1 if no deal is reached, and the latest report from the Wall Street Journal says that the two sides are "far from an agreement." Second, the British exit from the EU (Brexit) is scheduled to occur on March 31. The terms of the departure have not yet been decided, and a high level of uncertainty remains about what the effects will be after the deadline.

The most significant economic report released this week was the national services index from the Institute of Supply Management (ISM). The index declined to 56.7, slightly below the consensus of 57.0, and there was little reaction to the data. Readings above 50 indicate an expansion in the sector.

Looking ahead, the JOLTS report, which measures job openings and labor turnover rates, will be released on Tuesday. Fed officials value this data to help round out their view of the strength of the labor market. The Consumer Price Index (CPI) will come out on Wednesday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. Retail Sales is scheduled to be released on Thursday. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a key indicator of growth.

Trump's Bombastic Style and Volatile Stocks Put Feds On Hold

George DeVine, Mortgage Banker (Guaranteed Rate) — Sat, 02 Feb 2019 06:16:59 -0800

Major economic events made this a volatile week. Wednesday's Fed meeting was strongly positive for mortgage rates, while Friday's Employment report was modestly negative. The net result was a decline in rates for the week.

As expected, the Fed held the federal funds rate steady in light of stock market volatility, continued concerns with pace of the European economy, and China trade negotiations. The tone of its statement was more dovish (in favor of looser monetary policy and lower interest rates) than expected. In particular, the Fed now will be "patient" in deciding if additional rate hikes are needed. At their last meeting in December, and to the dismay of President Trump, officials clearly believed that more rate hikes would be appropriate, but on Wednesday the Fed said that "the case for raising rates has weakened." These comments caused investors to sharply reduce their outlook for rate hikes in 2019.

Another significant change noted in the statement is that the Fed will reconsider the size of the reduction in its massive bond portfolio, suggesting that it may sell fewer Treasuries and mortgage-backed securities (MBS) than expected. A smaller supply of MBS would increase their value, which would be good for mortgage rates.

At first glance, the headline figure for Friday's Employment report made it look like January was another blowout with job gains above 300,000 for a second consecutive month. However, nearly everything that followed in the remainder of the report brought the results back toward the anticipated levels. Throw in distortions from the government shutdown, weather effects, and revisions, and in the end investors viewed the data as just a little stronger than expected.

Against a consensus forecast of 160,000, the economy added a massive 304,000 jobs in January. However, downward revisions subtracted 70,000 jobs from the results for prior months. Strength was seen in the leisure/hospitality and construction sectors, partly due to unusually warm weather in many regions early in the month. The unemployment rate unexpectedly increased from 3.9% to 4.0%, but this was primarily due to the effects of the government shutdown. Average hourly earnings, an indicator of wage growth, fell short of expectations with just a slight increase from December. They were 3.2% higher than a year ago, roughly the same annual rate seen over the last few months. Despite the shortfall in wage growth, the overall strength of the report raised the outlook for future inflation, which was negative for mortgage rates.

Looking ahead, it will be a light week for economic data. Of note, the ISM national services index will come out on Tuesday. In addition, Treasury auctions on Wednesday and Thursday could influence mortgage rates.

Best Way To Save Money For Your First Home

George DeVine, Mortgage Banker (Guaranteed Rate) — Thu, 31 Jan 2019 04:27:04 -0800

AUTOMATE YOUR SAVINGS - IT'S AS SIMPLE AS THAT!Whether it's $50 or $1,000 per month, start diverting some amount of money out of your checking account each pay day and put it into a separate brokerage account, such as Vanguard or Fidelity. While auto-debiting directly into a local bank account is fine, you are less likely to tap into the funds if it's in a separate account with an instituation located remotely. Start with an amount that you likely won't miss each month, and increase the amount over time, especially when you receive a raise, or if your cost of living declines. If you're budget is too tight, look for ways to reduce your bills such as auto insurnace, cable, entertainment, etc. Allocate that money to an auto-debit savings account and watch your savings grow over time.

Interest Rates Remain At Recent Levels With Signs Of Increasing

George DeVine, Mortgage Banker (Guaranteed Rate) — Sun, 27 Jan 2019 05:19:37 -0800

Home Sales Slide

With some major economic data unavailable due to the government shutdown, and ahead of several major economic events in the near future, there was little market moving news this week, and mortgage rates ended nearly unchanged.

One economic report which was released this week revealed that housing market activity tapered off near the end of 2018. Sales of existing homes in December were down sharply from November and were 10% lower than a year ago. On a brighter note, the supply of homes for sale was a little larger than a year ago, and median home prices were 3% higher than a year ago.

Analysts cited a number of reasons for the decline in home sales late last year including rising mortgage rates, stock market volatility, higher home prices, and political concerns about the trade negotiations and the government shutdown. It remains to be seen whether the weak results for December were part of a longer-term trend or were due to temporary factors.

On Thursday, the report on new filings for jobless claims released each week unexpectedly fell to just 199,000, which was the lowest level since 1969. The accuracy of the results is a bit uncertain, though, since the number of claims for several states was an estimate rather than an actual count due to the Martin Luther King Jr. holiday on January 14.

As expected, Thursday's European Central Bank (ECB) meeting revealed a modestly more dovish stance. The ECB held its benchmark interest rates steady and said that the central bank will not hike rates at least through the summer of 2019. According to the ECB, risks to economic growth in the region now favor the downside due to several factors including financial market volatility, geopolitical uncertainties, "the threat of protectionism" and "vulnerabilities in emerging markets." There was little reaction to the meeting in U.S. markets.

Looking ahead, the important monthly Employment report will be released on Friday. As usual, these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, the Core PCE price index, the inflation indicator favored by the Fed, is scheduled to be released on Thursday. The ISM national manufacturing index will come out on Friday. In addition, the next Fed meeting will take place on Wednesday. Investors do not expect any change in the federal funds rate, but they will be looking for guidance about the pace of future monetary policy tightening. Trade talks between the U.S. and China could influence mortgage rates next week as well.

Also

note that the government shutdown which began on December 22 has caused delays in the release of some economic reports produced by government agencies and likely will continue to do so as long as it is in effect. It is generally not known in advance when the impacted data will be ready to be released.

Feds Are Flying Blind During Gov't Shutdown

George DeVine, Mortgage Banker (Guaranteed Rate) — Sat, 19 Jan 2019 07:51:27 -0800

Interest rates continue to benefit from a short-term economic environment, but this sweet spot will be short-lived. Once the affects of the Washington stalemate and threat of China tariffs abate, rates will find their way back to where they were in the latter half of 2018, pushing 5%. Those fortunate to find a home and enter into a purchase agreement have been able to lock into a 30 year fixed rate loan in the mid 4% range. Take advantage folks, this surely won't last.

Due to the government shutdown, there was little major economic data released this week, and mortgage rates ended slightly higher.

This week was more notable for the economic reports which did not get released rather than the ones that did. Tuesday's Retail Sales report became the most significant data so far to be delayed by the government shutdown which began on December 22. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a key indicator of growth, and this month's report was particularly important because it covered the holiday shopping season in December. The report on housing starts during the month of December also was postponed. It is generally not known in advance whether impacted data will be released as scheduled or how long it will be delayed.

The lack of several key pieces of economic data has left investors and Fed officials flying blind to a degree. Under the best of circumstances, it is extremely difficult to determine the pace of economic growth, and missing information compounds the problem. On top of this, the shutdown adds another layer of complexity which involves separating the temporary effects of reduced spending from out of work government employees and the underlying trends in economic activity.

One monthly housing report released by an outside source contained positive news. After a couple of months of declines, the National Association of Home Builders (NAHB) housing index showed that home builder confidence increased in January from 56 to 58, above the consensus for a flat reading of 56. Levels above 50 are viewed as positive.

According to the NAHB, declining mortgage rates in recent weeks boosted the results, and "low unemployment, solid job growth, and favorable demographic trends" provide a solid foundation for future activity.

As expected, the British Parliament rejected a Brexit (British exit from the European Union) deal proposed by Prime Minister Theresa May on Tuesday. The UK is scheduled to leave the EU on March 29, and a wide range of key issues about the terms of the departure remain unresolved. The vote caused little reaction in U.S. financial markets.

Looking ahead, Existing Home Sales will be released on Tuesday and New Home Sales on Friday. Durable Orders, an important indicator of economic activity, also will come out on Friday. In addition, the next European Central Bank (ECB) meeting will take place on Thursday and could influence U.S. mortgage rates. Mortgage markets will be closed on Monday in observance of MLK Day.

Weekly Change
10yr Treasury	rose	0.05
Dow	rose	500
NASDAQ	rose	125

Calendar
Tue	1/22	Existing Home Sales
Thu	1/24	ECB Meeting
Fri	1/25	Durable Orders

The Boy Does Cry Wolf, But Winter 2019 May Be The Time To Buy

George DeVine, Mortgage Banker (Guaranteed Rate) — Sat, 12 Jan 2019 04:24:06 -0800

As sure as the Holidays pass, and father time swipes the clock to the new year, Realtors will begin touting that winter is the best time of the year, not only to buy a home, but to sell as well. The mantra goes, there is less inventory, so a would be home seller has less competition. Conversely, most people like to purchase during the spring and summer months, so there is less competitive bidding to purchase. While there is merit to this logic, mortgage interest rates of late may actually lend credence to this line of reasoning. Often times, interest rate markets will move up or down in what might be viewed as ancillary influences. Environments such as the one we are in now are typically short-lived as the markets yield to more traditional macro-economic influences. This is what we are experiencing right now, interest rates have declined by nearly .50 percent (presently 4.5% - 4.75%) thanks to contemporary issues such as, China trade talks and the ensuing stock market sell-off, government shut down, and bombastic statements made by POTUS that created some tense moments as it relates to the Middle East. All of this noise will surely recede and the market will revert back to focusing upon the strong economy, and specifically, low unemployment and rising wage inflation. This will undoubtedly force mortgage interest rates back in the low 5% range by springtime. So, the boy does cry wolf, but a clock is also correct twice a day. This actually might be a good winter to buy and sell a home. Now for my weekly report on "more traditional" economic news....

There were no significant surprises in the major economic data or in the news from the Fed this week, and mortgage rates ended with little change.

The Consumer Price Index (CPI) is a widely followed monthly inflation report that measures the price change for goods and services. Most investors look at core CPI, which excludes the volatile food and energy components, to provide a clearer indication of the underlying trend.

The latest reading showed that core inflation held relatively steady for most of 2018. In December, core CPI rose 0.2% from November, which matched the consensus forecast. Core CPI was 2.2% higher than a year ago, the same annual rate of increase as last month. This is close to the Fed's stated target level of 2.0%.

The minutes from the December 19 Fed meeting released on Wednesday were consistent with recent comments from Fed officials in supporting the notion that they are open to slowing the pace of monetary policy tightening based on future economic conditions. According to the minutes, the "extent and timing of further policy firming" is "less clear" due to recent financial market volatility and signs of slowing economic growth. This message eased investor concerns that the Fed might mistakenly tighten too quickly.

Regarding the Fed's reduction in its roughly $4 trillion in holdings of Treasuries and mortgage-backed securities, Fed Chair Powell on Thursday said that the final size of the balance sheet will be "substantially smaller than it is now," but he declined to provide a less ambiguous figure. He elaborated that a "more normal level" would be no larger than the size needed to conduct monetary policy. Investors will be looking for more precise guidance in the future.

Looking ahead, Retail Sales will be released on Wednesday. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a key indicator of growth. Housing Starts will come out on Thursday. Industrial Production, another important indicator of economic activity, will be released on Friday.

Weekly Economic Wrap Up - Mortgage Rates and Housing

George DeVine, Mortgage Banker (Guaranteed Rate) — Sat, 22 Dec 2018 05:43:30 -0800

Continuing concern about the pace of global economic growth was good for mortgage rates and negative for stocks this week. The major U.S. economic data and the Fed meeting were smaller influences, and mortgage rates ended the week lower.

As expected, the Fed raised the federal funds rate by 25 basis points on Wednesday. The big question going into the meeting concerned the guidance about future monetary policy. Fed officials now expect two additional rate hikes in 2019, one less than it had previously forecast in September. Still, many investors had anticipated that the Fed would scale back the pace even more given the increased perception of slowing global economic growth and the large declines in major stock markets around the world. The meeting resulted in some short-term volatility, but it had little lasting effect on mortgage rates.

The most recent inflation data revealed that core inflation is rising but remains below the Fed's stated target level of 2.0%. In November, the core PCE price index, which excludes the volatile food and energy components, was 1.9% higher than a year ago, up from an annual rate of increase of 1.8% last month. Core PCE is the inflation indicator favored by the Fed.

The latest news from the housing sector was mixed. In November, sales of previously owned (existing) homes increased more than expected from October, but were 7% lower than a year ago. The inventory of existing homes for sale fell to a 3.9-month supply, well below the 6.0-month supply which is considered a healthy balance between buyers and sellers. The median existing-home price was 4% higher than a year ago.

Housing starts rose a solid 3% from October. However, the strength came from the volatile multi-family segment. Single-family starts dropped 5% from October to the lowest level since August 2017 and were 13% lower than a year ago. In addition, the December NAHB housing index showed that home builder confidence declined from 60 to 56, far below the consensus and the lowest level since May 2015.

Looking ahead, trading volume generally is very light during the holiday period at the end of December, which can lead to higher volatility. New Home Sales will be released on December 27 and Pending Home Sales on December 28. Mortgage markets will close early on December 24 and will be closed on December 25.

Weekly Economic Wrap Up - Mortgage Rates

George DeVine, Mortgage Banker (Guaranteed Rate) — Sat, 15 Dec 2018 06:27:51 -0800

European Central Bank Ends Bond Purchases

While a lot of volatility again was seen in the stock market, it was a relatively quiet week for mortgage rates. The major U.S. economic data came in on target, and there were no surprises from the European Central Bank. As a result, rates ended with little change.

Consumer spending accounts for about 70% of all economic activity in the U.S., and the retail sales data is a key indicator. While they slowed from the very strong pace seen in October, sales continued to display solid growth. Excluding the volatile auto component, Retail Sales in November rose 0.2% from October, and the results for October were revised higher. This recent strength bodes well for the holiday season.

The most recent inflation data was in line with the expected levels. In November, the core Consumer Price Index (CPI), which excludes the volatile food and energy components, was 2.2% higher than a year, down from an annual rate of increase of 2.5% last month. This was up from a level of 1.8% at the start of 2018.

While there were no surprises from Thursday's European Central Bank (ECB) meeting, it was notable for a couple of reasons. First, the ECB confirmed that it will conclude its bond purchases at the end of 2018, as previously announced. However, it will not begin to sell bonds from its massive portfolio for "an extended period of time." (while not good for long term rates, the delay in selling will be supportive in the near term). The ECB also lowered its economic growth forecasts for 2018 and 2019. Given the uncertainty about the future strength of the economy, investors do not expect the ECB's first rate hike to take place before early 2020. Risk factors include the threat of a global trade war, the need for a Brexit deal, and Italy's budget negotiations with the European Union.

Looking ahead, the next Fed meeting will take place on Wednesday, and most investors expect a 25 basis point increase in the federal funds rate (I'm not betting on it). In addition, Housing Starts will be released on Tuesday and Existing Home Sales on Wednesday. The core PCE price index, the inflation indicator favored by the Fed, and Durable Orders will come out on Friday.

Fewer Interest Rate Hikes Expected in 2019

George DeVine, Mortgage Banker (Guaranteed Rate) — Mon, 10 Dec 2018 06:02:09 -0800

Small Miss on Job Gains

Weekly Change
Mortgage rates	fell	0.08
Dow	fell	800
NASDAQ	fell	125

Weaker than expected U.S. labor market data and a reduced outlook for global economic growth were favorable for mortgage rates this week, and rates ended at the lowest levels in about two months.

Friday's key labor market report showed continued solid job gains and wage growth, but it was modestly weaker than expected. Against a consensus forecast of 190,000, the economy added 155,000 jobs in November, and the revisions to the results for prior months were minor. So far this year, average job gains have been 206,000 per month. The unemployment rate was unchanged at 3.7%.

Average hourly earnings, an indicator of wage growth, were 3.1% higher than a year ago, which was the same annual rate of increase as last month and matched the fastest pace since 2009. Since weaker economic growth reduces future inflationary pressures, the small miss in the data was good for mortgage rates.

The shortfall in the Employment report, along with a reduction in the outlook for global economic growth and growing fears of an escalation in the trade tensions with China, have caused investors to lower their expectations for the pace of tightening by the Fed in 2019. While most investors still believe that the Fed will raise the federal funds rate by another 25 basis points at the next meeting on December 19, they have significantly scaled back the anticipated number of rate hikes next year.

Looking ahead, the Consumer Price Index (CPI) will come out on Wednesday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. Retail Sales will be released on Friday. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a key indicator of growth. Industrial Production, another important indicator of economic growth, also will come out on Friday. In addition, the next ECB meeting will take place on Thursday and could influence U.S. mortgage rates.

Fastest Path To Increasing Your Net Worth

George DeVine, Mortgage Banker (Guaranteed Rate) — Wed, 05 Dec 2018 09:09:36 -0800

Comparing Owning a Home Vs. Renting? One more Factor to Support Buying a House. The ongoing debate between renting and buying a home puts many people looking to get out on their own into stasis longer than it should. While it is always a good idea to weigh out the options on both sides of a decision of this magnitude, the facts are that there are fewer long-term support stats FOR renting over buying. The latest data from the Federal Reserve Survey of Consumer Finances report gives another reason in the “pro” column to buy property over renting. The net worth of those Americans that own a home is increasing, whereas the net worth of the average renter has decreased in the last few years. Specifically, the median net worth of a homeowner is $231,400. That’s a 15% increase since 2013, whereas the net worth of renters decreased by 5% from $5,500 to $5,200. The net worth of homeowners compared to their renting counterparts is 44% higher. Buy to Save One of the most critical criteria in the comparison between buying or renting is the financial expense. The costs of a home are more often than not higher than those of a renter, but there’s one benefit that renters’, no matter their relative investment of funds, can match. Owning a home is a long-term investment to your net worth and your family’s wealth. As you make your monthly mortgage payment, you decrease your overall liability to the loan. Couple this with the fact that your home will gain value over the life of those payments, and you have a recipe that equals valuable equity. Equity can be used as an asset to borrow against or as a way to determine your financial standing. This is why real estate has again become a sought-after long-term investment strategy. Do you know what your net worth is? Probably not. However, if you’re making up a pro and con list comparing buying or renting a home, consider the net worth of your future self, and put two checks in the pro column for that criteria.

Will Rising Rates Threaten Home Price Gains

George DeVine, Mortgage Banker (Guaranteed Rate) — Fri, 02 Feb 2018 06:17:29 -0800

The following is the latest analysis written by our head of capital markets. The primary takeaway is we are squarely in a rising rate environment. Our projection for 2018 is for rates to top out in the high 4% range, while these levels will remain supportive of the housing market, it will certainly put a damper on future price gains. If you are seriously in the market to purchase a home, then the time is now, we anticipate the most servere rate increases in the middle and second half of the year. The good news is you should be able to lock into a 30 year fixed rate in the mid-4% range through the spring home buyinging market.Yesterday, the FOMC announced no change in rates and telegraphed a likely rate hike in March with two additional hikes this year. Over the past few years, that might have produced some stability in the fixed income market. Unfortunately, the environment is changing and fixed rate securities continue to lose ground as rates rise. As of the writing of this document, the yield on the 10 year note is 2.79% There are several factors influencing the market: The new tax legislation is projected to increase the Federal Budget Deficit. There are weekly, Monthly and Quarterly auctions of US Treasury debt and the market knows that extra supply is coming. The unknown is how much supply. Markets will likely be volatile as the Treasury Department re-calibrates supply throughout the year. Commodity prices, particularly Oil, have started to rise. The Federal Reserve made mention of a heightened expectation of higher inflation this year in their statement. Employment trends continue to be positive and with unemployment near all time lows, wage inflation is a real possibility in the future.Hints of reductions to quantitative easing in Europe are fueling additional fears that European debt will compete for portfolio managers attention sooner rather than later. The Fed has been the largest buyer of US Treasury and Mortgage Backed Securities over the past 9 years. As the Fed reduces their re-investment into those securities, it is unknown what yield levels will be required to meet the supply of bonds in the market. The good news is that mortgage rates in the middle 4% area continue to be substantially lower than 2007 levels in the low 6% area before all the housing related trouble began. As always, consumers should be aware that markets are live and that rates can change throughout the day. Daniel P. SpiegelCapital MarketsAtlantic Home Loans Inc.http://www.atlantichomeloans.com/gdevine

Mortgage Rates Rise As Investors Pin Hopes On Budget And Tax Cuts

George DeVine, Mortgage Banker (Guaranteed Rate) — Sat, 21 Oct 2017 05:16:50 -0700

Budget Plan Passes

The passage of a budget plan was negative for mortgage rates this week. The economic data had little impact. As a result, mortgage rates ended the week higher.

Late Thursday, the Senate voted in favor of a 2018 budget plan. This was a key early step along the path to tax reform. Investors viewed the progress on tax reform as negative for mortgage rates for a couple of reasons. First, a new tax plan likely would boost economic growth, which would raise the outlook for future inflation. In addition, it would increase the budget deficit. The added supply of bonds needed to fund the deficit would push yields higher.

The headline figures released on Wednesday for housing starts in September were disappointing. However, digging deeper it was clear that the data was heavily influenced by the impact of the recent hurricanes, and the market reaction was small.

After three months of strong results, single-family housing starts in September fell 5% from August, which was a much larger than expected drop. While starts rose in the Northeast, the West, and the Midwest, they suffered a massive 15% decline in the South, where the bulk of the hurricane damage took place.

Looking ahead, the big event next week likely will be Thursday's meeting of the European Central Bank (ECB). Investors expect that the ECB will announce its future plans for its bond purchase program. In the U.S., Durable Orders and New Home Sales will be released on Wednesday. Pending Home Sales will come out on Thursday. The first estimate for third quarter GDP, the broadest measure of economic growth, will be released on Friday.

Little Rocket Man A Frenemy To Mortgage Rates While Feds Taper Assets

George DeVine, Mortgage Banker (Guaranteed Rate) — Sat, 23 Sep 2017 06:17:36 -0700

Wednesday's Fed meeting was viewed as mildly negative for mortgage rates. Threats from North Korea on Friday were slightly positive. As a result, mortgage rates ended the week with little change.

For investors, the most notable information from the Fed meeting was that a rapid pace of raising the federal funds rate received support from more Fed officials than expected. Roughly 75% of Fed officials forecasted one more rate hike this year and three rate hikes in 2018. This news caused mortgage rates to rise.

In the years following the financial crisis, the Fed sought to drive longer-term interest rates lower and stimulate the economy by purchasing enormous quantities of Treasury bonds and mortgage-backed securities (MBS). While there is broad agreement that those goals were achieved, the purchases left the Fed with massive holdings of these securities. On Wednesday, the Fed said that it is going to gradually shrink its balance sheet beginning in October. Investors had been expecting this announcement at this meeting, so there was little reaction.

On Friday, North Korea threatened to detonate a hydrogen bomb over the Pacific Ocean. Investors reacted to this by shifting to relatively safer assets, including MBS. The increased demand for MBS caused mortgage rates to decline a little.

In August, single-family housing starts rose from July. The streak of strong readings seen over the last three months may be at risk, however, as the effects of the hurricanes will be seen in coming months. According to the Commerce Department, about 13% of home construction takes place in regions in Texas and Florida that were affected by the recent hurricanes.

Looking ahead, New Home Sales will be released on Tuesday and Pending Home Sales on Wednesday. Durable Orders, an important indicator of economic activity, also will come out on Wednesday. The core PCE price index, the inflation indicator favored by the Fed, will be released on Friday. In addition, there will be Fed speakers every day next week including a speech by Fed Chair Janet Yellen on Tuesday.

George DeVine is a residential mortgage banker and the RI branch manager with Atlantic Home Loans. George has nearly thirty year's experience in the business and would welcome a call or email if you're looking for expert consultation for your next real estate purchase. gdevine@goahl.com 401 301 0130.

Mortgage Rates Improve on Dovish Fed and Waning Support For Trump

George DeVine, Mortgage Banker (Guaranteed Rate) — Sat, 19 Aug 2017 05:06:28 -0700

Data, Fed, Politics

Uncertainty surrounding the Trump administration and dovish Fed minutes were positive for mortgage rates this week. Stronger than expected economic data had the opposite effect. While it was a fairly volatile week, the net result of these influences was that mortgage rates ended the week with little change, remaining near the best levels of the year.

After several months of surprisingly weak reports on retail sales, the data released on Tuesday was encouraging. Excluding the volatile auto component, retail sales in July surged 0.5% from June, which was well above the expected gains. In addition, the results for June were revised significantly higher.

Since retail sales are a critical part of the economy, this month's strong results were viewed as a positive sign for future economic growth, but also a contributor to rising inflation. This caused a negative reaction in mortgage rates.

It appears from the Fed minutes released on Wednesday that there is a growing split between Fed officials about when inflation will begin to rise. A growing number of officials would like to move slowly to raise the federal funds rate any further. They argued that the Fed "could afford to be patient under current circumstances." The more dovish tone of the minutes was favorable for mortgage rates.

President Trump's comments this week about the events in Charlottesville drew widespread condemnation. Apparent loss of support from political allies and business leaders and the rumored resignation of a key advisor sparked a stock market selloff late in the week. The chance that pro-growth legislation will pass any time soon is believed to have diminished. While this was bad for stocks, it was good for mortgage rates because expectations for future inflation also declined.

Looking ahead, investors will be watching for further developments regarding the Trump administration. It will be a light week for economic data. New Home Sales will be released on Wednesday and Existing Home Sales on Thursday. Durable Orders, an important indicator of economic activity, will come out on Friday. In addition, global central bankers will be attending the annual Jackson Hole conference Thursday through Saturday, and any comments about future monetary policy could affect mortgage rates.

Mortgage Rates Drift Lower on Tame Inflation and NOKO Concerns

George DeVine, Mortgage Banker (Guaranteed Rate) — Sat, 12 Aug 2017 06:15:54 -0700

George DeVine is a seasoned mortgage professional. If you're looking for expert consultation for your next home purchase, or would like to explore refinancing your mortgage, visit George's web site today at webmortgagebanker.com Mortgage Rates Improve On News Of Lower Inflation And NOKO Corncerns

Low inflation and rising tensions with North Korea were good for mortgage rates this week, while strong labor market data was negative. The net effect was that mortgage rates ended the week a little lower, near the best levels of the year.

Fed officials are hoping for inflation to rise, but the recent data has not cooperated. On Friday, the core consumer price index (CPI), a widely followed indicator, revealed that inflation in July was just 1.7% higher than a year ago, which was the same annual rate as last month. Just a few months ago, the annual rate was 2.2%.

The recent trend in inflation has been good for mortgage rates, and it could slow the pace of monetary tightening by the Fed. Earlier in the week, the Fed's Evans said that December is the earliest that the Fed should consider another federal funds rate hike and that if inflation remains weak they could put off another rate hike "until later."

Concerns about the threat posed by North Korea increased this week. Investors reacted by shifting from riskier assets such as stocks to relatively safer assets such as bonds. Mortgage-backed securities (MBS) were one beneficiary of this flight to safety. The added demand raised MBS prices, which was good for mortgage rates.

Tuesday's JOLTS report revealed job openings and labor turnover rates for June. While labor turnover rates were little changed, job openings unexpectedly surged to 6.2 million, which was a record high. A greater number of unfilled positions is viewed as a sign of strength for the labor market, so this data was good news for the economy. Stronger economic activity raises expectations for future inflation, however, so this report was negative for mortgage rates.

Looking ahead, Retail Sales will be released on Tuesday. Consumer spending accounts for about 70% of economic activity in the U.S., and the retail sales data is a key indicator. Housing Starts will come out on Wednesday. Industrial Production, an important indicator of economic activity, will be released on Thursday. In addition, the Minutes from the July 25 European Central Bank Meeting will come out on Thursday and could influence U.S. markets. News about North Korea could affect mortgage rates as well.

Mortgage Rates Are Holding Steady

George DeVine, Mortgage Banker (Guaranteed Rate) — Sat, 05 Aug 2017 07:24:31 -0700

Mixed Data

With little fresh news from global central bankers this week, the economic data was the primary influence on mortgage rates. Some reports were positive and some were negative. The net effect was that mortgage rates ended the week slightly lower.

The Fed's target level for inflation is an annual rate of 2.0%. Tuesday's release of the core PCE price index, the inflation indicator favored by the Fed, revealed that inflation remains well below this level. In June, core PCE was just 1.5% higher than a year ago, which was the same annual rate as in May. Low inflation is good for mortgage rates, and rates improved on Tuesday.

Aside from the Employment data, one of the most highly anticipated reports each month covers the services sector, which represents more than 75% of the jobs in the U.S. Slower than expected growth in this sector caused mortgage rates to fall on Thursday. The July ISM Services index fell to 53.9, well below the consensus, and the lowest level since August 2016.

Mortgage rates rose on Friday following the release of modestly stronger than expected Employment data. Against a consensus forecast of 180K, the economy added 209K jobs in July. Strength was seen in health care, business services, and leisure and hospitality. The unemployment rate declined from 4.4% to 4.3%, which matched May's reading at the lowest level since 2001.

Looking ahead, the most significant report during a light week will be the Consumer Price Index (CPI), which will come out on Friday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services which are purchased by consumers. Before that, the JOLTS report will be released on Tuesday. JOLTS measures job openings and labor turnover rates and has been described by Fed Chair Yellen as very useful data. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

Taking The Mystery Out Of The Jumbo Mortgage Loan

George DeVine, Mortgage Banker (Guaranteed Rate) — Sun, 02 Jul 2017 06:42:09 -0700

Most consumers don't understand what the rationale is behind a jumbo loan vs. conventional mortgage financing. A conventional loan refers to a mortgage that can be sold and securitized through Fannie Mae or Freddie Mac. These two agencies were originally established as government sponsored agencies, or GSA. A GSA is a privately, or publicly (stock ownership as is the case with FNMA and FHLMC) owned entity which has the implicit backing of the US Government. Nothing could be more clearly illustrated than when FNMA and FHLMC became insolvent during the mortgage crisis and the government stepped in and took them over. As GSA, FNMA and FHLMC are able to package mortgages into securities and sell them to investors on Wall Street. The rate of return demanded by investors is lower than other securities such as corporate bonds. Said another way, investors are willing to accept a lower rate so long as that security is insured or backed by the US government. Fannie and Freddie establish annually the maximum mortgage amount that can be sold and securitized, $424,100 in 2017 (the limit is more in high-end real estate markets such as San Francisco). So what's a would be home-buyer to do when looking to for a mortgage above the Fannie and Freddie limit; this is where jumbo mortgage financing steps in. The process of applying for a jumbo mortgage is no different than conventional financing and are widely offered through mortgage bankers, banks, and mortgage brokers. The difference comes in after your loan is sold by your mortgage lender. Rather then packaging and selling your mortgage to FNMA or FHLMC, your loan will be sold to a private investor, typically a pension fund, commercial bank, or Wall Street investment house. Local community banks also offer jumbo mortgage which is funded by their bank deposits and held in their loan portfolio.What does all of this mean to you....the lending requirements are typically more conservative than conventional mortgage financing. You will find the down payment requirements, credit score and history, and debt to income ratios are more restrictive than conventional mortgage guidelines. Also, because these loans don't have the implicit backing of the US Government, investors will demand a higher rate of return, this translates into the interest rate typically being higher on a jumbo mortgage loan. Learn more about jumbo lending by visiting my website or shoot me an email.

Is a JUMBO VA Loan The Right Option For You

George DeVine, Mortgage Banker (Guaranteed Rate) — Sun, 02 Jul 2017 05:40:31 -0700

A VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses, provided they haven't remarried. The most attractive benefit of a VA loan is an option to finance 100% of the home purchase, however, most would be home buyers don't realize that you can purchase an upsale home with a very small down payment relative to jumbo mortgage requirements. VA has an unique way of calculating the down payment for a purchase price that exceeds the conventional lending limit of $424,000 (may be more in high value real estate markets). Jumbo mortgages typically require a mimimum 10% down payment, so for example if you purchase a home for $500,000, the down payment requirement is $50,000 while the minimum down payment for a VA mortgage is $19,000. Not only are the down payment requirements attractive, the interest rate will typically be .25 - .50% better to boot. While you will pay a VA funding fee (2.15 - 3.25% of the loan amount), which can be financed into the mortgage, you will not pay the monthly mortgage insurance typically charged for conventional and jumbo mortgage loans. The VA funding fee may be waived for disabled veterans. Visit my website or give me a call to learn more about VA loans.

Mortgage Rate Update

George DeVine, Mortgage Banker (Guaranteed Rate) — Sun, 02 Jul 2017 04:55:55 -0700

Europe Influences U.S. Markets

A hint of a taper in the European Central Bank's (ECB) bond purchase program drove European yields higher this week, and U.S. yields followed. The U.S. economic data caused little reaction. Mortgage rates ended the week higher, but still attractive for mortgage refinance and home purchase. Conventional mortgage rates are hovering around 4%, FHA mortgage , VA mortgage , and USDA mortgage are approximately 3.875% and Jumbo mortgage at 4.25%. FHA 203k mortgage rates approximately 4.25%.

In today's global markets, a change in bond yields in one major region often produces a similar change in other markets. This week, comments from the ECB caused investors to expect tighter monetary policy sooner than expected, which resulted in an increase in bond yields around the world. In particular, ECB President Draghi hinted that the ECB may start to wind down (or taper) its massive bond purchase program relatively soon as the economy improves. The ECB currently buys 60 billion euros (about $68.5 billion) of bonds each month. This added demand from the ECB has helped push global bond yields lower, including U.S. mortgage-backed securities (MBS). As a result, the increased probability that this demand from the ECB will decline was negative for mortgage rates.

In contrast to the ECB, the U.S. Fed is well along the path to tighter monetary policy. The Fed now faces a bit of a dilemma, however. The Fed's stated target for inflation is 2.0%.

Last year, it appeared that inflation was slowly climbing to that level, as Fed officials had forecasted. This year, though, inflation has reversed direction. Friday's release of the core PCE price index, the inflation indicator favored by the Fed, showed that in May it was just 1.4% higher than a year ago, down from a year-over-year rate of 1.8% just three months ago.

While many Fed officials believe that the decline in inflation this year is due to temporary factors, recent comments indicate that some officials would prefer to wait and see if this is true before further tightening monetary policy.

Looking ahead, the important monthly Employment report will be released on Friday. As usual, this data on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, the ISM national manufacturing index will be released on Monday. The minutes from the September 17 Fed meeting will come out on Wednesday. These detailed minutes provide additional insight into the debate between Fed officials. The ISM national services index will come out on Thursday. Mortgage markets will close early on Monday and will be closed on Tuesday for the July Fourth holiday.