Freddie Mac Weekly Mortgage Update: Long-Term Mortgage Rates Fall for the Ninth Week Out of Ten

30-year fixed-rate mortgage: Averaged 4.36 percent with an average 0.7 point for the week ending August 26, 2010, down from last week when it averaged 4.42 percent. Last year at this time, the 30-year FRM averaged 5.14 percent.

The 15-year fixed-rate mortgage: Averaged a record low of 3.86 percent with an average 0.6 point, down from last week when it averaged 3.90 percent. A year ago at this time, the 15-year FRM averaged 4.58 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.56 percent this week, with an average 0.6 point, unchanged from last week when it also averaged 3.56 percent. A year ago, the 5-year ARM averaged 4.67 percent.

One-year Treasury-indexed ARMs: Averaged 3.52 percent this week with an average 0.7 point, down slightly from last week when it also averaged 3.53 percent. At this time last year, the 1-year ARM averaged 4.69 percent.

Freddie Sayz
Attributed to Amy Crews Cutts, deputy chief economist, Freddie Mac.

• Existing home sales plunged 27 percent in July, while new homes fell 12%  to a new all-time record low, which led to some market concerns that the housing market may slow the economic recovery. As a result, long-term bond yields fell to the lowest levels since January 2009, allowing fixed mortgage rates to ease to new record lows this week.
  
• Much of the slowdown in sales, however, was expected due to the recently expired homebuyer tax programs, which pulled through future home purchases into the first half of the year. For instance, average existing home sales over the first seven months of 2010 were nearly 8 percent higher than over the same period a year ago.
• Moreover, house prices still appear to be stabilizing. Nationally, house prices rose 0.9 percent on a seasonally-adjusted basis during the second quarter of this year this year after 11 consecutive quarterly declines, according to the Federal Housing Finance Agencys purchase only index. Eight of the nine census regions experienced positive gains, compared to none in the first quarter
  
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Mortgage Bankers Weekly Update: Mortgage Refinance Applications Continue to Increase

Mortgage Bankers Association for the week of  08/25/2010

Market Composite Index: (loan application volume)   increased 4.9 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 4.5 percent compared with the previous week.

Refinance Index: increased 5.7 percent from the previous week and is at its highest level since May 1, 2009. The seasonally adjusted Purchase Index increased 0.6 percent from one week earlier.

Purchase Index: decreased 1.1 percent compared with the previous week and was 38.8 percent lower than the same week one year ago.

Refinance Share of Mortgage Activity: increased to 82.4 percent of total applications from 81.4 percent the previous week, which is the highest share observed since January 2009.

Arm Share: increased to 5.8 percent from 5.7 percent of total applications from the previous week.

MBA outlook: (Excerpted from mbaa.org)

Existing home sales in June declined 5.1 percent to a seasonally adjusted annual rate of 5.37 million units from 5.66 million in May, and are 9.8 percent higher than in June of last year. Single family home sales fell 5.6 percent to 4.70 million units in June from 4.98 million units in May, and are 8.5 percent above the pace in June 2009. For both total existing home sales and single family home sales, the monthly decrease was the largest since January this year.

We predict that mortgage originations will decrease to $1.5 trillion in 2010 from an estimated $2.1 trillion in 2009. Purchase activity continues to be weak, while refinance activity is being propped up by mortgage rates that are close to historical lows, although there is much less refinancing going on now than in previous periods of  comparably low mortgage rates. Purchase originations will fall to $576 billion from $750 billion in 2009 and refinance originations will decrease to about $900 billion in 2010 from $1.2 trillion in 2009.


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The Stock Market Looks At Real Estate

Well, we all have heard the bad news, housing sales down again, hugely - 23% in the quarter. NAR reports that sales are at their lowest since the sales series launched in 1999, and single family sales are at the lowest level since May of 1995. And it doesnt look much better in the near term either. Pending sales, a forward indicator of market activity, dropped 30% based on contracts signed on May and is almost 16% the May 09 numbers.

These reports are always about today. The stock market, however, is considered a discount mechanism. It trys to look into the future...to look past a problem and try to determine value and opportunity. So I wanted to see what the stock market had to say about these dismal numbers.

Heres What the Stock Market Says About Real Estate

Its all About What You Focus On.

Its not without its losers, but the sector rallied on this news! In fact demand for homes sold has been relatively strong given real market conditions. see chart Even in the face of foreclosures, underwater borrowers and unemployment and the future of Fannie Mae and Freddie Mac. Why?

Affordability
Stock market investors are looking at whats next and they see affordability. Home prices have declined to levels beginning to look affordable. Certainly painful for millions, but its how markets cycle. When prices get silly, they have to rationalize before an intelligent buyer will enter.

Supply
The builders have not been putting up much new stock for quite a while and today I noticed the builder stocks were up. Lennar did a deal worth 3 billion with the FDIC to buy bank loans and Toll Brothers swings to profit today. All of this in spite of a huge inventory overhang, perhaps the largest on record. see chart

Cheap Money
The cost of many is also very low and part of the affordability issue. Average rates on 30-year fixed-rate mortgages are hovering around 5%.

Demographics
Investors are hoping demographics and population growth can also take up the slack.

Why the S&P Real Estate REIT index is up from a one year low of $73.85 to over $105 today. We have more to work through and the near and mid term are rocky but the economy is still expected to recover and homes still sell.

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Freddie Mac Weekly Mortgage Update: 30-Year, Mortgages Continue to Inch Downward

30-year fixed-rate mortgage: Averaged 4.42 percent with an average 0.7 point for the week ending August 19, 2010, down from last week when it averaged 4.44 percent. Last year at this time, the 30-year FRM averaged 5.12 percent.

The 15-year fixed-rate mortgage: Averaged a record low of 3.90 percent with an average 0.6 point, down from last week when it averaged 3.92 percent. A year ago at this time, the 15-year FRM averaged 4.56 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.56 percent this week, with an average 0.6 point, unchanged from last week when it also averaged 3.56 percent. A year ago, the 5-year ARM averaged 4.57 percent.

One-year Treasury-indexed ARMs: Average 0.7 point, unchanged from last week when it also averaged 3.53 percent. At this time last year, the 1-year ARM averaged 4.69 percent.

Freddie Sayz

The housing market is in a lull following the expiration of the homebuyer tax credits. Single-family starts fell for the third straight month in July to an annual pace of 432,000 homes, the fewest since May 2009. In addition, homebuilder confidence fell for the third consecutive month in August to the lowest since March 2009, according to the NAHB/Wells Fargo Housing Opportunity Index . Even confidence among realtors was at a 16-month low in June, according to the National Association of Realtors

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Mortgage Bankers Weekly Update: Refinance Activity Increases to Highest Level Since May 2009

Mortgage Bankers Association for the week of  08/18/2010

Market Composite Index: (loan application volume)   increased 13.0 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 12.4 percent compared with the previous week.

Refinance Index:  increased 17.1 percent from the previous week and was the highest Refinance Index observed in the survey since the week ending May 15, 2009

Purchase Index: decreased 3.4 percent from one week earlier.

Refinance Share of Mortgage Activity: increased to 81.4 percent of total applications from 78.1 percent the previous week, which is the highest refinance share observed since January 2009.

Arm Share: decreased to 5.7 percent from 5.9 percent of total applications from the previous week.

MBA outlook: (Excerpted from mbaa.org)

Existing home sales in June declined 5.1 percent to a seasonally adjusted annual rate of 5.37 million units from 5.66 million in May, and are 9.8 percent higher than in June of last year. Single family home sales fell 5.6 percent to 4.70 million units in June from 4.98 million units in May, and are 8.5 percent above the pace in June 2009. For both total existing home sales and single family home sales, the monthly decrease was the largest since January this year.

We predict that mortgage originations will fall to $1.48 trillion in 2010 from an estimated $2.1 trillion in 2009.  Purchase originations will decrease 7 percent to $686 billion, as home prices continue to fall and the boost from the homebuyer tax credits wane.  Refinance originations will fall by about 42 percent to $797 billion in 2010.  We continue to mark up our refinance origination forecast given that mortgage rates have continued to remain close to historical lows.

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The Rental Sector Is Looking Up

June vacancy rates in the largest 64 markets in the country averaged 6.6%, down from 8.2% at the end of 2009, according to MPF Research. We certainly see the increase in rental demand in 2010, and it's been a little more, frankly, than most apartment experts had anticipated," said Mark Obrinsky, chief economist for the National Multi Housing Council.

This may be the brightest sector and only strong story in a dismal market. There is a real sense of confidence building in the rental sector based on a few strong factors not present in the rest of the housing market. Apartments never had the build out boom that homes did. High unemployment among echo boomers will keep a lid on  rentals catering to the 25-34 year olds in the short term. The echo-boom generation, almost 80 million strong, along with a large immigration trend and retirees coming into the city, coupled with a drastic pullback in housing construction, points to strong rent growth starting in 2011, notes Marcus and Millichap. Quite a rental pool indeed!

Reis reports a widespread consensus that there will be a supply shortage of multifamily rentals as early as next year. This constrained supply may lead to robust rent growth. The leading indicator for housing has to be jobs. A lack of job creation will keep echo boomers at home longer or doubling up in roommate situations. Retirees coming to the city from the burbs, may no be able to sell or rent and so will have to remain in large homes. The optimists would see this as a staging area for real growth in 2011-2012. However, for the long haul investor/owner its simply a matter of time before an expanding economy unleashes the powerful demographic trio waiting in the wings.

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Freddie Mac Weekly Mortgage Update: Mortgage Rates Down Again

30-year fixed-rate mortgage: Averaged 4.49 percent with an average 0.7 point for the week ending August 5, 2010, down from last week when it averaged 4.54 percent. Last year at this time, the 30-year FRM averaged 5.22 percent.

The 15-year fixed-rate mortgage: Averaged a record low of 3.95 percent with an average 0.6 point, down from last week when it averaged 4.00 percent. A year ago at this time, the 15-year FRM averaged 4.63 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.63 percent this week, with an average 0.6 point, down from last week when it averaged 3.76 percent. A year ago, the 5-year ARM averaged 4.73 percent.

One-year Treasury-indexed ARMs: Averaged 3.55 percent this week with an average 0.7 point, down from last week when it averaged 3.64 percent. At this time last year, the 1-year ARM averaged 4.78 percent

Freddie Sayz

And yet again, interest rates for fixed-rate mortgages and now the hybrid 5-year ARM fell to all-time record lows this week following the second quarter GDP release . Annual revisions cut the cumulative GDP growth in half over the past three years ending in the first quarter of 2010 from 1.4 percent to 0.6 percent. This reduces inflationary pressures and allows longer-term rates room to ease.

More recently, housing investment picked up in the second quarter of this year as the homebuyer tax credit spurred new and existing sales and low mortgage rates encouraged remodeling. Fixed residential investment added 0.6 percentage points to second quarter real GDP growth following two quarters of decline

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Mortgage Bankers Weekly Update: Mortgage Applications Increase

Mortgage Bankers Association for the week of  07/28/2010

Market Composite Index: (loan application volume) increased 1.3 percent on a seasonally adjusted basis from one week earlier.

Refinance Index:  increased 1.3 percent from the previous week

Purchase Index: increased 1.5 percent from one week earlier. This third straight weekly increase in the Purchase Index was driven by government purchase applications which increased 3.4 percent from last week, while conventional purchase applications were essentially flat.
 
Refinance Share of Mortgage Activity: increased 1.3 percent from the previous week.
Arm Share: decreased to 5.4 percent from 5.7 percent of total applications from the previous week.

MBA outlook: (Excerpted from mbaa.org)

We predict that mortgage originations will fall to $1.48 trillion in 2010 from an estimated $2.1 trillion in 2009.  Purchase originations will decrease 7 percent to $686 billion, as home prices continue to fall and the boost from the homebuyer tax credits wane.  Refinance originations will fall by about 42 percent to $797 billion in 2010.  We continue to mark up our refinance origination forecast given that mortgage rates have continued to remain close to historical lows.

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