June 13th, 2017 9:14 AM by Richard Sardella MLO.100007700
First Time Home Buyers up 11 Percent:
The June 2017 First Time Home Buyer Market Report released by private mortgage insurance provider, Genworth Mortgage Insurance shows a steady increase in housing demand by first time home buyers in the 1st QTR of 2017. You can read the full report here.
Last year was the strongest period for the first-time homebuyer market in 11 years, according to Genworth’s First-Time Homebuyer Market Report. 2016 saw two million first-time homebuyers – 15% more than 2015.
They also contributed to 37% of all single-family home purchases, up from 34% in 2015, and the most purchases since 2005.
For the first quarter of 2017, 424,000 single-family homes were bought by first-time homebuyers – an 11% year-over-year increase.
First-time home buyers have led the housing recovery, contributing over 60 percent of the sales growth in the housing market over the past five years and 85 percent of the growth in the past two years. The resurgence of the first-time home buyer market has contributed to very tight housing supplies and accelerating home prices, particularly in the “low” end of the real estate market.
Unlike repeat home buyers, first-time home buyers do not bring another housing unit to the market at the time they are seeking to buy. They represent a shift in housing demand from rental to owner occupancy. Therefore, rising first-time home buyers in the housing market drain housing inventory and the supply of homes for sale much faster than a similar increase in repeat home buyers.
How Rates Move:
Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I’m among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending: Neutral
Mortgage backed securities (FNMA 3.50 MBS) lost -20 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly higher from the prior week. The market saw its lowest rates on Tuesday and its highest rates on Friday.
This Week's Rate Forecast: Neutral
Central Banks: Obviously, all eyes will be on our Federal Reserve but we also have Central Bank rate decisions and policy announcements from the Bank of England (5th largest economy) and Bank of Japan (3rd largest economy).
Our Federal Open Market Committee (FOMC) will begin meeting on Tuesday and will conclude Wednesday at 2:00 PM EDT. The following is the schedule: 2:00 EDT. Release of their Interest Rate Decision and Policy Statement 2:00 EDT. Release of their Economic Projections and Dot Plot Chart 2:30 EDT. Fed President Janet Yellen live press conference.
While most bond traders publicly say that they expect a 25 BPS rate hike at this meeting, it doesn't seem to be fully priced in. That is mostly because long bond traders have significantly walked back their expectations for a 3rd hike this year. Their forward guidance (dot plot chart) and Yellen's live comments will have more of an impact on our MBS pricing than a rate increase by itself.
Treasury Auctions this Week:06/12 10-year note06/13 30-year bond
Domestic: We have a huge week for economic data with the focus on inflationary data (PPI and CPI) and Retail Sales.
Geopolitical: We still have a lot of uncertainty in Great Britain as their new government attempts to gain some sort of majority and direction. Qatar and the Saudis appear deadlocked into more conflict, and at home we have more Senate testimony (Attorney General Sessions to testify) and the state of Maryland has filed a lawsuit against Trump.
This Week's Potential Volatility: Average
We start our day with our FNMA coupon rollover. We expect Monday to trade in the +12 to -12 BPS range (net of the rollover). For the week, we expect MBS to end the week at a slightly lower level than Monday's open (higher rates). In order for rates to move lower, the following would have to happen: The Fed does not increase the Federal Funds rate on Wednesday OR they signal that there will be no more rate hikes this year, along with comments from Yellen indicating a low likelihood of additional rate hikes this year. The greatest likelihood is that we will see MBS continue to drift slightly lower (higher rates). Although MBS are under pressure, geopolitical fear provides a "floor" for MBS.
If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.