May 18th, 2021 7:47 AM by Richard Sardella MLO.100007700/NMLS 233568
Applications for new home purchases on the rise
One of the big differences between buying a home with experience and a newly built house is that there are several "givens." You don't really negotiate on the price, and once you sign on the dotted line, you know the house will be yours. According to the Mortgage Bankers Association's Builder Application Survey, there was a 30.8%, year-over-year increase in new home purchase applications for April 2021 — a major increase compared to March 2021 when applications decreased by 9%.
Joel Kan, MBA's associate vice president of Economic and Industry Forecasting, says, "Purchase applications for new homes, unadjusted for typical seasonal patterns, declined in April, but the average loan size increased to its highest level in MBA's survey. The purchase market remains strong overall, but low housing inventory and accelerating home prices have started to adversely impact purchase activity." He goes on to say that homebuilders have also reported significantly higher input prices, which contributes to the ongoing rise in sales prices and average loan sizes.
The National Mortgage Professional's Navid Persaud reported that adjusting for these seasonal effects, new home sales in April rebounded from a two-month slump, increasing 8% to an annualized pace of 770,000 units. On an unadjusted basis, the MBA estimates that there were 72,000 new home sales in April 2021, unchanged from March. According to the report, conventional loans made up nearly 73% of loan applications, with the balance shared by FHA and VA loans. The average loan size of new homes increased from $374,353 in March to $377,434 in April.
Source: NMP | TBWS
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 trending sideways this morning. Last week the MBS market worsened by -66bps. This was enough to move rates or fees higher last week. We saw elevated rate volatility through the week.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to move rates this week. 1) The Fed, 2) Geopolitical, and 3) Domestic
1) The Fed: We get the Minutes from the last FOMC meeting on Wednesday. The bond market will be very sensitive to any mention/discussion of tapering. We will hear from a few key figures of the Fed to see if they lighten up on their non-stop message that keeps building the case for inflation is only "transitory."
2) Geopolitical: Across the Pond, the markets will continue to pay close attention to Israel/Palestine as the potential for escalation and spillover could disrupt much of the region and beyond. Covid in Asia is a big concern. Reopening in Great Britain is underway while the EU is dysfunctional and a cause for concern with vaccine rollouts. Domestically, Biden's infrastructure plan looks to be paired down but making slow progress while his other additional $2T plan is in the spotlight. On the Jobs front, more states have joined in to stop the Federal unemployment stipend, but 39 million households are set to get $250 to $300 per child per month.
3) Domestic: We get a lot of housing-related news this week, but the focus will be on Manufacturing (Empire, Philly Fed, and Flash PMIs) as well as Jobless Claims.
Treasury Dump: Here is this week's schedule.
This Week's Potential Volatility: High
We expect rate market volatility to remain elevated this week, given all of the events denoted above. Rate markets will pay particularly close attention to the Fed and domestic data.
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.