Virginia Mortgage Loans

At face value, today was a loss for mortgage rates.  The average lender is quoting a slightly higher rate for conventional 30yr fixed scenarios compared to yesterday, and you'd have to go back more than 4 months to see more than a day or two with higher rates. That's the bad news. The good news is that there have been some signs of resilience in the bond market that underlies interest rate momentum.  Almost any consumer interest rate can be traced back to trading activity in the bond market.  Mortgage rates are no different.   If you're looking for a great approximation for mortgage bond movement, the industry has been keeping an eye on the 10yr Treasury yield for decades.  There are certainly moments (or years?) where that correlation breaks down, but it's reasonably well behaved these days. Why so much explanation on 10yr Treasury yields?  Because I'd like to talk about rate trends against that backdrop for a moment.  Treasuries are also a bigger, more active mark...

FHFA and S&P Case Shiller each released their monthly home price indices (HPIs) for December this morning.  These are the two most widely followed HPIs.  FHFA has a broader reach while Case Shiller is focused on the 20 largest metro areas.   Both HPIs continued to do exactly what they were doing last month.  FHFA declined by 0.1% and Case Shiller dropped at a 0.5% pace.   The reversal from the strong pace of gains early in 2022 has been abrupt, but price declines have been modest.  If FHFA continues moving mostly sideways (which it arguably has over the last 4 months), it would mean that home prices have merely leveled off without undergoing a large outright correction.  In other words, prices aren't necessarily destined to lose much--if any--ground in year-over-year terms.  Things could always change, but for now, this has been a very orderly moderation in price. How could the correction be orderly if annual price growth has declined so sharply in the chart above?  Keep in min...

The message from today's overnight trading session is clear: European yields have broken well above their most recent ceiling after hotter inflation data in Spain and France.  That ceiling had seen similar activity to the US version at 3.98% in 10yr yields.  Today begins with US bonds fighting to stay inside the sort of range that EU yields just abandoned. In other news, home price indices were updated for both FHFA and Case Shiller this morning.  No major surprises.  Annual totals remain in positive territory.  Monthly changes are slightly negative. http://dlvr.it/Sk7dTP

“Life was much easier when apple and blackberry were just fruits.” But perhaps not as interesting. Here’s what happens when you put a West Coast MI rep on TikTok, sending out her message through the internet and technology. Meanwhile, the California MBA spread the word that, given the end of COVID’s emergency status, the DFPI’s “Guidance Regarding Remote Work” is posted on the internet. Here in Las Vegas, the ICE Experience is in full swing, and with it, technology talk abounds, as does how the cost per loan continues to rise despite tech tools. Certainly, compliance and regulatory costs enter into that (just like permitting and inspection costs enter into the cost of a new house), and we find our very Consumer Finance Protection Bureau making the headlines again; More below. (Today’s podcast can be found here and this week is sponsored by Built Technologies. Increase efficiency, streamline processes, and improve construction and real estate financing. Built connects lenders with key s...

After steadily falling over the winter, mortgage rates have started to rise in recent weeks. This is concerning to some potential homebuyers as the combination of higher mortgage rates and higher prices have made homes less affordable. So, if you’re planning to purchase a home this year, you too may be wondering if now’s the right time to buy or if you should hold off on your search until rates come back down. http://dlvr.it/Sk70fN

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One of the many reasons to buy a home is that it’s a major way to build wealth and gain financial stability. According to Freddie Mac:... http://dlvr.it/Sk4gs1

Here in Las Vegas (Why did the Dalai Lama go to Las Vegas? Because he loves Tibet) the population is about 650,000 with all manners of housing, subdivisions, and lifestyles. But around the nation and world, there are numerous ways and places to live. Here’s a story about a former NFL star who says he saved money by living inside Cincinnati Bengals stadium. What do Stowe, Vermont, Whitefish, Montana, and Lake Placid, New York have in common? The three U.S. towns made Travel & Leisure’s 25 Most Beautiful Small Towns. If you only want a house for part of the year, with elevated mortgage rates and home prices having risen considerably, the solution might be buying 1/6 of a house. Or sharing equity, which is what some of your borrowers and homeowner clients consider. “An Unlock HEA gives you cash in exchange for a portion of your home’s future value.” Or one can live underwater. (Today’s podcast can be found here and this week’s is sponsored by Built Technologies. Construction and real ...

One of the many reasons to buy a home is that it’s a major way to build wealth and gain financial stability. According to Freddie Mac: http://dlvr.it/Sk43fN

At some point during the current selling spree, bonds will find a point of equilibrium where traders feel they've adequately protected themselves from the prospect of sticky inflation and economic resilience.  They clearly didn't feel protected with 10yr yields under 3.5% several weeks ago.  While we started the week with more selling, the past 2 days have been more balanced (and largely trading inside Tuesday's range).  Patterns like this can simply be consolidations before more selling, but they can also be the first sign of settling into a new range. http://dlvr.it/SjtqHQ

Remember, not all math puns are terrible...just sum. Analyzing residential servicing is a combination of math and psychology. If you were an institution thinking of buying mortgage servicing rights (MSR), or a lender running the numbers on retaining servicing rather than selling it to an aggregator like AmeriHome or Penny Mac, you don’t like hearing the saying, “Marry the house, date the rate.” You’d prefer that the loan stay “on your books” well into the future because you want the monthly cash flow. In 2020 and 2021 origination income was dominant. But in 2022 servicing income won the day for those who owned it. What will happen to servicing in 2023? No one has a crystal ball, but if rates stay in the 5’s or 6’s, loans funded in 2020 and 2021 still stick. Prepayments have plummeted: no one wants to pay off their 2.875 percent loan. Of course, there are numerous parties slicing and dicing the numbers. For example, Black Knight’s MSR Index takes a sample current note rate production po...

According to a recent Harris Poll survey, 8 in 10 Americans say buying a home is a priority, and 28 million Americans actually plan to buy within the next 12 months. Homeownership provides many financial and nonfinancial benefits, so that interest is understandable. http://dlvr.it/SjskLV

Heading into the 3 day weekend, we knew there was a risk that Friday's rally was driven by position squaring (i.e. traders buying bonds in order to cover short positions). Heading into the new week, new short positions are back in fashion.  While a certain amount of this selling pressure may have been our destiny regardless, it received a clear boost from stronger Eurozone services PMI data.  Yields were already testing their weakest levels since early November.  Then when US services PMI numbers came in stronger than expected, bond market weakness kicked into an even higher gear.   All of the above pertains to scarcely a few drops of paint against the broader backdrop of February.  This month has delivered a harsh new reality that has taken many market participants by surprise.  Surely, the rate spike of 2022 would be taking a bigger toll on economic data and the softer numbers would combine with tamer inflation to help rates ease back to lower levels. But in 3 short weeks w...

Not every house is a 3 bedroom, 2 bath, single story subdivision home. Appraisers and underwriters aren’t big fans of places that aren’t, due to the lack of comps or the problems in “salability” should something go wrong. Inventive housing? Watch this house slide open to reveal Flexible Spaces (and an open-air bathroom). Some people have a home theater, but here’s a theater home for sale. And, finding homeowner’s insurance aside, what do kids do in this house when told to clean their room? Housing prices, just like mortgage rates, have at their base the influences of supply and demand. So this story is particularly interesting: “Investor purchases of U.S. homes fell by 45.8 percent on a year-over-year basis, with the largest declines occurring in pandemic boomtowns such as Las Vegas and Phoenix.” In other housing and finance trends, Seattle-based Flyhomes’ mortgage division is offering a “Buy Now Refi Later” promotion, where a homebuyer who takes out a loan with the company can refinan...

The biggest challenge the housing market’s facing is how few homes there are for sale. Mark Fleming, Chief Economist at First American, explains the root causes of today’s low supply: http://dlvr.it/SjlbZD

To sell your home this spring, it may need more preparation than it would have a year or two ago. Today’s housing market has a different feel. There are more homes for sale than there were at this time last year, but inventory is still historically low. So, if a house has been sitting on the market for a while, that’s a sign it may not be hitting the mark for potential buyers. But here’s the thing. Right now, homes that are updated and priced at market value are still selling fast. http://dlvr.it/SjhjJW

The current landscape is fairly simple.  The bond market has been in the midst of a "repricing" event following the jobs report at the beginning of the month.  Traders are "repricing" expectations for the Fed rate hike outlook.  This has spilled over into longer-term rates.  Until we have clear momentum heading in a friendly direction, the path of least resistance is for rates to continue redefining a new, higher range after failing to break through the new, lower range that was seen in December and January.  How do we know when we're witnessing a capitulatory "repricing" event (not to be confused with mortgage lender reprices) for the broader bond market?  We've posted charts on Fed Funds Futures over the past several days showing how longer term rate expectations have moved to match the peak/ceiling/terminal rates seen in the March/June Fed meetings.  We've also clearly seen some abrupt selling in longer-term bonds and MBS.  One thing that ...

Some Highlights * The biggest challenge in the housing market is how few houses there are for sale compared to the number of people who want to buy. * The number of homes for sale is up from last year but below pre-pandemic numbers, and that means we’re still in a sellers’ market. http://dlvr.it/SjYtDX

It was unrealistic to expect last week’s strong increase in mortgage activity to be sustainable in the current volatile rate environment, and indeed it was not. The Mortgage Bankers Association said its seasonally adjusted Market Composite Index, a measure of loan application volume, which had risen 7.4 during the week ended February 3, ended last week with a decline of 7.7 percent. On an unadjusted basis it was down 7.0 percent. Refinancing had driven last week’s surge, and it led the retreat, falling 13 percent . The index was 76 percent lower than the same week in 2022. The refinance share of applications dipped to 32.0 percent of the total from 33.9 percent the previous week. [refiappschart] The volume of purchase mortgages decreased 6.0 percent on a seasonally adjusted basis and was down 5.0 percent before adjustment. Purchase activity was 43 percent lower than the same week one year ago. [purchaseappschart] “Mortgage rates increased across the board last week, pushed higher by ma...

If you’re thinking about buying a home, you might be focusing on previously owned ones. But with so few houses for sale today, it makes sense to consider all your options, and that includes a home that’s newly built. http://dlvr.it/SjS1nd

[:en]No matter how the housing market changes, there are some things about owning a home that never change—like the personal benefits it can provide. When you own your home, you likely feel a sense of attachment because of the comfort it gives and also because it’s a space that’s truly yours. http://dlvr.it/SjP59T

What You Should Know About Closing Costs http://dlvr.it/SjNdHs http://dlvr.it/SjNdHs

Before you buy a home, it’s important to plan ahead. While most buyers consider how much they need to save for a down payment, many are surprised by the closing costs they have to pay. To ensure you aren’t caught off guard when it’s time to close on your home, you need to understand what closing costs are and how much you should budget for. http://dlvr.it/SjLFJM

Absolutely impossible to find words to describe the love a father has for his daughters. https://t.co/l035bhJrAX

Bonds Keep Fading; Cue The CPI Anxiety This morning's commentary headline was "if bonds aren't rallying, they're selling."  It could just as easily have been the recap.  In general, the entire week was defined by capitulation as traders came to terms with last week's jobs report and the Fed's persistent messaging.  While it's true that today's inflation expectation component of the Consumer Sentiment data may have greased the skids for more weakness, it probably didn't have a material impact on where we ended up on the week.  The several failed attempts to close below 3.62% in 10yr yields meant that we'd need an unexpectedly friendly CPI report next Tuesday to restore the range.  That said, bonds seem more content to worry about unexpectedly unfriendly data until it can be ruled out. Econ Data / Events Consumer Sentiment 66.4 vs 65.0 f'cast, 64.9 prev 1yr inflation 4.2 vs 3.9 prev 5yr inflation 2.9 vs 2.9 prev Mar...

At the risk of repeating a common thesis in recent days, bonds had a choice to make at the end of January.  The decision was whether or not a rally of more than 100bps from October's highs could be justified by the current state of data and Fed policy.  Last week's jobs report cast a clear vote and this week's Fed speeches served as the "told ya so." It's not the Fed had been telling the market that longer-term rates needed to be higher.  Rather, the Fed has simply been reiterating the following points: It's too soon to declare victory on inflation There's still a real risk that inflation could bounce higher again The labor market is still way too tight to suggest any loosening of policy Wage growth has slowed, but not enough to remove concern over inflation Policy is barely restrictive right now and it needs to get more restrictive and stay that way for a few years, probably While they've been consistent on those points, the marke...

As I type this piece on Friday morning, I am at the O’Hare aerodrome for a flight from Chicago to San Francisco. O’Hare is packed and humming… What economic slowdown? Does my opinion on the economy matter any more than yours, or… that of the guy running JPMorgan Chase? Last June CEO Jamie Dimon warned of an economic "hurricane" down the road. “Hurricane” is pretty sensationalist, especially when it hasn’t happened. This week he told Reuters that the U.S. economy was in “good shape.” It’s a safe bet that inflation will compel the Federal Open Market Committee to hike overnight interest rates above 5% (from the 4.50%-4.75% level it's at now). The Fed believes short-term rates will continue rising. If you had any questions, two Fed officials on Wednesday essentially echoed Fed Chair Jerome Powell’s hawkish opinion. Yet bond investors seem to be shrugging some of this off! If you knew that something was going to go down in price, you wouldn’t want to own it outright, right? I...

Some Highlights * In today’s housing market, you can still be the champion if you have the right team and strategy. * To win as a buyer, you need to build your team, make strategic plays, consider what’s in and out of bounds, and stand out from the crowd. http://dlvr.it/SjChlY

As noted in yesterday’s commentary, mergers and acquisitions of lenders are in the news across the nation. For curious lenders, it is good to have a general guide in how a buyer goes about valuing a lender. I happen to be in rainy Chicago now, but 1,700 miles away, there’s interesting news from the Phoenix area and the desert. How would you appraise a perfectly fine home that had no water? Rio Verde, aptly named Green River, a neighborhood outside of Scottsdale, Arizona, with some 2,000 homes, recently learned that there is not a stable water supply. The 1980s Groundwater Management Act required that in order for a development six lots or larger to proceed in Arizona, it had to secure a 100-year supply of water. The Rio Verde Foothills developers kept splitting parcels into four to five lots, putting them under the six-lot minimum that applied to the law and avoiding that requirement. About 30 percent of the residents now face a dramatic change in price as the city has cut them off fro...

67% of Americans say a housing market crash is imminent in the next three years. With all the talk in the media lately about shifts in the housing market, it makes sense why so many people feel this way. But there’s good news. Current data shows today’s market is nothing like it was before the housing crash in 2008. http://dlvr.it/Sj907p

In the wake of last week's strong economic data on Friday and follow-through weakness in overseas markets, traders are gearing up for additional Fed rate hikes.  They figure they can get some sort of comment on those conclusions in a Q&A session with Fed Chair Powell today (previously scheduled) at the Economic Club of Washington.  The event kicks off at 11am and runs through 1:30pm.  There is no scheduled time for Powell, but we've heard 12:30 is a good possibility.  Either way, the entire time frame will warrant vigilance.  In its wake, markets may breath a sigh of relief if Powell doesn't acknowledge Friday's data the same way that a few other Fed speakers have in the past 24 hours. How realistic is it for Powell to have some new reaction to one day's worth of econ data?  Again, other Fed speakers have already acknowledged their surprise.  The clearest example came from Kashkari this morning which we covered in detail in an update you can read HERE. As sa...

As we celebrate Black History Month, we reflect on the past and present experiences of Black Americans. This includes the path toward investing in a home of their own. And while equitable access to housing has come a long way, homeownership can be a steeper climb for households of color. It’s an important experience to talk about, along with how it can make all the difference for diverse homebuyers to work with the right real estate experts. http://dlvr.it/Sj3Tdk

Friday's strong jobs report and ISM data caused obvious, immediate problems for rates, but bonds held their ground fairly well all things considered.  As the new week began, Asia took its turn selling Treasuries before strong European data added to the pressure.  Traders are apprehensive about this week's bond market supply (both Treasury auction and corporate bonds) as well as a Q&A with Fed Chair Powell.  Perhaps he'll be more hawkish in light of the jobs report?  That's the fear anyway and it's easy to see in the 25bp uptick in rate expectations for September's Fed meeting.  The chart above suggests traders don't see the Fed returning to 50bp hikes, but rather adding an additional 25bp hike before leveling off. In terms of the bigger picture, this morning's weakness has 10yr yields up against the 3.62% range ceiling and well above the 3.56 ceiling that had been in play for most of the past 3 weeks.  http://dlvr.it/Sj1Kkj

I travel a fair amount via commercial airplane. (Greetings today from Ft. Lauderdale; this afternoon it’ll be Chicago.) But forget traveling in heavier-than-air-craft: there are people who live in airplanes! Meet Jo Ann, a beautician. Let’s see this baby appraise out for a refi! But the price is right for anyone willing to make the effort, as airplane carcasses are very affordable. One big topic at the Bank of England Mortgage event going on here is how interest rates impact affordability. Last week the Commentary included a link to a “handy-dandy chart for LOs to help borrowers to see how rates impact affordability.” I received several emails pointing something out, succinctly summed up by Fairway’s Mike S. “A quick glance shows that only 20% of the population’s affordability is determined by interest rates. At 3%, 65% of the country is already priced out. At 9%, that number is 85%. That means for 80% of the population, the interest rate is not a factor in determining whether they can...

Many of today’s homeowners bought or refinanced their homes during the pandemic when mortgage rates were at history-making lows. Since rates doubled in 2022, some of those homeowners put their plans to move on hold, not wanting to lose the low mortgage rate they have on their current house. And while today’s rates have started coming down from last year’s peak, they’re still higher than they were a couple of years ago. http://dlvr.it/Sj0hjR

BREAKING: US Fighter jets have DESTROYED the Chinese Spy Balloon over Myrtle Beach, SC. https://t.co/KuvlrDWgof http://dlvr.it/ShxgcZ

Some Highlights * Many people believe you need to put down 20% of the purchase price when you buy a home. But recent homebuyers actually put down far less on their purchase. * And with programs like FHA loans, VA loans, and USDA loans, some qualified buyers are able to put down as little as 0-3.5%. http://dlvr.it/ShtCw6

Bonds Talked Into Modest Gains by Europe US bond traders didn't necessarily come into work with the intention of adding to yesterday's rally.  It was only after European bonds exploded into stronger territory that US yields grudgingly followed--very grudgingly.  In fact, as soon as European trading wrapped up for the day, US yields rose back to meet yesterday's 3pm closing levels.  Several big corporate bonds may have added some pressure.  We can also consider that US bonds already had a fairly big rally after the Fed yesterday.  But the simplest view would be that it didn't make sense to get too carried away with the jobs report on deck in the morning. Econ Data / Events Jobless Claims 183 vs 200 f'cast,186k prev Unit Labor Costs, Q4 1.1 vs 1.5 f'cast, 2.0 prev Market Movement Recap 09:05 AM Flat to slightly stronger overnight.  Additional gains after ECB announcement.  10yr down 8bps at 3.34%.  MBS up 3/8ths of a point 12:51 PM Largely s...

Mortgage rates responded favorably to yesterday's press conference with Fed Chair Powell.  We discussed that move in detail in yesterday's commentary: Fed Hikes Rates. Mortgage Rates Drop. Here's How That Works. Now today, the average lender improved just a bit more as the Fed's European counterpart released its latest policy announcement.  Like the Fed, the European Central Bank (ECB) hiked rates at the same pace expected by markets but delivered comments that left the bond market feeling more upbeat. In the case of the ECB announcement, it was logically the European bond market that felt more upbeat.  But there's a certain amount of interconnectedness among the world's leading markets, so it's common to see spillover into US rates when something is pushing EU rates lower.   Given that US rates already experienced a fairly large move yesterday, they were somewhat resistant to the idea of going on a wild road trip toward even lower levels with their crazy Eu...

Today's big story is the European bond market's reaction to the European Central Bank (ECB) announcement.  The hike was as-expected, but the ECB also said the next rate hike is already locked in for March at which point it will reevaluate.  That reevaluation means a pivot toward smaller rate hikes followed by a pivot to no rate hikes.  And if you ask markets, there will then be a pivot to rate cuts as early as Q4 2023.  Traders see the pre-commitment for March's hike as evidence that the dovish shift has begun.  The result is a massive rally in EU bonds--far too big for US bonds to try to match.  In fact, 10yr yields are rallying at a mere quarter of the EU 10yr pace. The caveat is that US 10s got in quite a bit of rallying yesterday while EU bonds were already done for the day.  If we use the same 30bps of y-axis range for both, the net effect is only slightly lopsided in EU bonds' favor. The gains mean the prevailing range (which had bottomed out at 3.40-3.42) ha...

Happy Groundhog Day, where the rodent saw its shadow this morning, so plan on six more weeks of winter. There’s an old Yiddish proverb “We plan, God laughs.” Lots of people plan on owning a home, and will need financing. (Today’s podcast features an interview with homeowner Riley Howard about his decision why he refinanced his primary mortgage rate four times, and how he chose his lender(s).) Plenty of lenders are planning on being around to help do the estimated $2 trillion in home loans this year. Plenty of people had planned on the Federal Reserve’s Open Market Committee (FOMC) bumping up overnight rates by .25 percent (25 basis points) yesterday, and sure enough it happened. But rates dropped anyway, despite the planning and expectations, and if you want a primer on why, here you go. (Today’s podcast can be found here and this week’s is sponsored by Milestones. Giving homeowners an all-inclusive homeownership experience including home value and equity monitoring, home maintenance r...

The housing market has gone through a lot of change recently, and much of that was a result of how quickly mortgage rates rose last year. http://dlvr.it/ShqMRr

If you’re a homeowner ready to make a move, you may be thinking about using your current house as a short-term rental property instead of selling it. A short-term rental (STR) is typically offered as an alternative to a hotel, and they’re an investment that’s gained popularity in recent years. According to a Harris Poll survey, 28% of homeowners have considered using a rental service to temporarily rent out their home for additional income. http://dlvr.it/ShmSSD