Mortgage Rates Stabilizing Here?

Quick update on mortgage rates.

Mortgage bonds have taken a beating the past few weeks.  However, the past few days trading action show possible stability.  This looks to me like an area of price support establishing itself.

Look at this chart.

Remember, as mortgage bond prices go down, mortgage rates go up.

That green bar on the very right hand side shows prices that prices opened and have moved higher (that's why the bar is colored green).  This pattern of today's bar in conjunction with yesterday's one is called a Bullish Engulfing candlestick pattern.  This pattern, seen at the end of a downward move, is typically a sign of the market turning.

So, what does that mean to you?

Well, if you are in need of locking in a mortgage rate on a current mortgage loan application in process you should watch for a move for improving rates in the coming days.

Now, don't expect much lower rates but 0.125, 0.25 to maybe 0.375 lower in rate might be available.

However, once we reach the low of the upcoming move expect rates to stop their improvement and then get back on the rising trend we are now in for years.

Brett
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Home Price Rise Sets a Record

Good morning,

Some good news in the housing data today.  The Case-Shiller report for April noted 12% gains in April.  That is the largest monthly year over year gain reported since this index has been calculated.

Here are some articles for more details:

http://www.cnbc.com/id/100839986

http://www.marketwatch.com/story/home-prices-see-record-jump-in-april-case-shiller-2013-06-25

http://www.businessinsider.com/april-case-shiller-home-prices-2013-6


Brett
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Bond Market Worsening

Good morning,

The bond market continues to weaken.  In fact, the recent move in the 10 Year Treasury is the biggest move in over 50 years.

Can we say volatility is back?  Look at these two charts.

6 Month Fannie Mae 3.5% Coupon Price

and this one....

6 Month 10 Year Treasury Yield

Many have  forgotten what market volatility looks like after the heavy-handed years of the Federal Reserve with their Quantitative Easing policy and actions of late.

Price stability is being sought and it still is too hard to say where it will occur.

So, we watch.

Mortgage rates continue higher in the meanwhile.

Mortgage rates under 4% are now gone and do NOT expect to see them again for years and likely decades to come.

Brett

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Mortgage Rates Having a Tough Go of It

Minus 127.

Minus 127 basis points that is.

Minus 127 for mortgage bonds today.  It sure has been some time since I've seen a print like that for the mortgage bond market for the day's trading action.

Things were going along fine until the Federal Reserve's press release after their two-day meeting.  Then, this (see chart below):

Remember, red is bad (it means higher mortgage rates).  Green is good (lower mortgage rates).

Since the beginning of May mortgage bonds have lost 600 basis points.

Mortgage rates have now moved almost a full point higher.

Where do we go from here?  Well, a move higher that retraces a third or half of the move down from early May is reasonable but I do not expect any further gains in prices for mortgage bonds from there.

The die seems cast for an upwardly trending mortgage rate market for the foreseeable future.

I expect this fact to take time to settle in for people as we've been spoiled by 11 years of mortgage rates moving lower and then hitting record lows.  Time to change the mentality on such things.

Brett
www.BrettGrendahl.com

4% is New Psychological Level

I am working late this evening after taking some great family time with my young kids and their grandparents. You only live once, or so they say.

The term once seems so finite and hard to place into a quantum world.

No surprise I'm reading financial news and looking for nuggets to see the near future.

One theme developing is the news stories talking about 4% mortgage rates.  Here are some articles on the topic if you want to go deep on the topic:

http://money.cnn.com/2013/06/13/real_estate/mortgage-rate/

http://www.usatoday.com/story/money/personalfinance/2013/06/13/mortgage-rates-near-4/2420219/

http://www.bloomberg.com/news/2013-06-13/u-s-mortgage-rates-rise-for-a-sixth-straight-week.html

What do I think about it?

Well.....this should not be unexpected.  Why not?

Mortgage rates hit record lows.  Eventually there is a record low that will stay such a record for many years.  The Federal Reserve has made this a manipulated marketplace with their monthly quantitative easing.  They are about 85% of the buy side of this market.  Manipulated.....I said that already, right?

My gut tells me the record lows are now in our collective rear-view mirror.

Rates are not upwardly trending.  What is not yet known is the slope we ascend.  How fast will they rise?

That answer will be found in how the economy heals and when, and at what intervals, the Fed raises their Overnight Rate.

The mortgage marketplace is going through a shift from a predominantly refinance transaction market to one of predominantly purchase transactions.  The purchase market sure does not feel what I'd call robust.  This is based on my own conversations with clients, financial advisors, CPAs, Realtors and acquaintances.

Low inventory is a positive to the health of the purchase market.

Tight mortgage finance underwriting guidelines persist.  This slows how much activity can be handled based on the workloads of originators, processors, underwriters, closer and so on.  It deters possible buyers who have resistance and reservations to undertake, as my own client named it, their "financial colonoscopy" that is getting a mortgage loan approved these days.

It is tough out there.  Yes.  But, you know, it had the usual bumps but we still closed the above clients new home purchase in 28 days from application.

However, the seasoned mortgage folks, the ones in the business from the 1990's or earlier, they are the ones that will power this market.  New entrants should align with these people as their mentors.  To do so will provide a clear direction on how to do well in this line of work.

Well, rates are headed higher.  If you want to stay on top of where they head please stop by here from time to time.  Or, join my mailing list here.

I think about this stuff all day long so you don't have to.

Brett Grendahl
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Will Mortgage Rates Mover Lower?

Well, it sure has been a hard fought week in the financial markets.  Equities are battling near the 50 day moving averages on the S&P 500, the Dow Jones and the Nasdaq composite indexes.  So far, these are proving to be price support.  So far.

The mortgage bond market had a horrible May and June hasn't been going all that great either.

However, prices are beginning to flatten out sideways the past few trading days.

Today, some good news.

Mortgage bonds were up 66 basis points (bps).   Check out the chart below:

For the casual passerby, green is good and red is bad for mortgage rates.

Hopefully, tomorrow or early next week we will see the price action break higher and break the downtrend we've been in since early May.  If you have a home purchase closing in late June and you have not locked in your rate yet you should wait and see if we can get a little lower by next week.

Are you buying a home?  Are you planning to buy a new home this summer?

If so, please reach out to me and let me explain why you really have a choice of using me or anyone else.  I'm happy to share my advice and what I can do.  If you find a better loan structure somewhere else I'll be the first to tell you to go with them.

But, if I can provide the best financing for you I will let you know.  In addition, you can rest assure that your closing will happen on time.

Brett Grendahl
Get my contact information here www.brettgrendahl.com
NMLS 455329

It's not just a house, it is your home!

Empirical Proof of Low Housing Inventory

As I was driving around today something was bubbling in my mind.  What was it?

Well, as I drove around I saw a few For Sale signs in the yards of homes.  What caught my attention and was then on my mind the rest of my drive to the office was the fact that 6 of the 7 signs I saw all had "Sold" affixed to them.

That sure seemed like a high percentage in just my little real world observations.

To me, that confirms what I hear from clients and Realtors across the country, housing inventory is very low.

Thank goodness!

Low inventory is a primal economic force for a better housing market for us all.  Supply versus demand.  Low supply will help keep prices up not matter what the demand is.

From my drive today, demand was high for 6 of 7 homes to be sold.

BG


Here are some articles on the topic:

http://www.marketwatch.com/story/in-some-places-homes-sell-in-just-one-day-2013-06-10

http://www.prweb.com/releases/low-housing-inventory/Minneapolis-home-sales/prweb10538864.htm

http://blog.equifax.com/real-estate/low-inventories-may-hurt-spring-real-estate-market/

30 Year Fixed to 5/1 ARM Mortgage Rate Spread Widening

Here is a quick update after I scan mortgage investor pricing this morning.

As mortgage rates experience upward pressure one thing of interest is the widening of the spread of the interest rate on the 30 year fixed rate mortgage as compared to the 5/1 ARM.

That spread is opening up to about 1.5 points.

For example, if a 30 year fixed rate prices at 4.25% for a particular loan scenario the corresponding rate on the 5/1 ARM is running around 2.75%.

As this spread opens up it makes sense to compare the ARM programs in your mortgage product selection.  Why?  It can save you a lot of money.

ARM loans went out of favor during the financial crisis as homeowners and homebuyer's became more risk averse.  However, every loan has its purpose.  What happened in the years leading up to the financial crisis was the misapplication of loan programs to borrower scenarios.

For example, a first time homebuyer with limited financial reserves should never be put on an Option ARM program with the potential for negative amortization that they do not understand.

However, a borrower with substantial financial liquid reserves with a varied income stream might find this loan program to match up perfectly for them.

Back to today, if you are buying a new home you should consider the ARM programs in your program selection.

However, make sure you enlist the professional advice of someone who truly understands how these programs work and when they best match up to your situation.

That is how I advise my clients across all 50 states.  I'm happy to help you, just reach out to me and we can discuss how.

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Mortgage Rates Continue Higher

Good morning,

As mortgage bond trading gets started for the week mortgage bonds are trading lower in price again, hitting a new 12 month low.  See the chart here.

Remember, lower prices equals higher mortgage rates.

Mortgage bonds continue to see a level of price support.  I will continue to watch for signs that a new level of price support is setting in.

Until then, I advise a locking rate stance on any new mortgage application.

Brett

www.BrettGrendahl.com

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Mortgage Rates Stabilizing

Good morning!

Mortgage bonds are slightly up in trading this morning.  So far, they seem to be settling in and forming a base of price support after last week's dramatic drop.

You know, I've watched the daily trading of mortgage-backed securities for over 10 years now.  In recent years, given the market manipulation by the Fed and the very narrow range rates have been moving up and down in, I stopped watching the day to day moves.

Things are changing.

Why?

Well, as the Fed begins to "talk the market" out of Quantitative Easing (QE) we need to acknowledge their eventual exit from their strong hand on the bond markets.  As the markets migrate back to a place of normal market dynamics, what makes the markets move up and down, going back to the daily charts on mortgage bond trading becomes important again.

For clients who will be purchasing a new home, timing of the mortgage rate lock has the ability to save hundreds and thousands of dollars of interest over the course of the loan's amortization.

In general, we are going through a secular change to a trend of higher interest rates in the future but there will still be ups and downs in the market.

In order to advise my clients on the most opportune time to lock in a rate for their home purchase I am getting back into my old regimen of watching the intraday mortgage-bond trading to have a read on the market's pulse.

So, if you or a friend is planning to buy a home, please stop by here for my thoughts on the market and what is going on with mortgage rates.

Then, when you find the home you will purchase, please let me know and I can share why the decision to have me assist with the financing is one that you will never regret.

Have a great week!
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