CHM Blog

New Homes Seeing Strong Demand:

The Mortgage Bankers Association said that Mortgage applications for home purchases increased in April as demand for newly built homes grows amid the housing supply shortage.

Data from MBA’s Builder Application Survey showed that purchase applications for new homes in April rose 4.1% year over year but were down 11% month over month.

Despite the monthly decline, MBA deputy chief economist Joel Kan noted that the annual rise is a positive sign that homebuyers are turning to new homes as a way to adapt to limited housing inventory.

“This was the third straight month of year-over-year growth in applications, which signals improving housing demand for newly built homes at a time when the broader housing market is leaning more on new construction to boost for-sale inventory levels,” Kan said.

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 rates are moving sideways today. The MBS market worsened by -49 bps last week. This was enough to increase mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Higher

Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Inflation, 2) The Fed and 3) Geopolitical.

1) Inflation: We get the Fed's key measure of inflation, Core PCE this Friday. It is expected to increase another 0.4% on a MOM basis and YOY, increase from 4.6% to 5.0%. In other words, their target measure is expected to be moving higher and away from their 2.0% target rate... not closer to it.

2) The Fed: We have another very busy week for Fed Speak with the market focus on Wednesday's release of the Minutes from the last FOMC meeting.

05/22 Bullard, Barking, Daly

05/23 Logan

05/24 FOMC Minutes

05/25 Collins, Balance Sheet

3) Geopolitical: Front and center is the continued concern over the Debt Ceiling negotiations as we are fast approaching the June deadline. We also get key interest rate decisions out of China and New Zealand.

Treasury Sales: Here is this week's Treasury auction schedule.

05/23 2 year note

05/24 5 year note

05/25 7 year note

This Week's Potential Volatility: High

This morning markets are moving mostly sideways. Volatility has started at moderate levels and will spike throughout the week.

Bottom Line:

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 30 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.

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