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Lake Tahoe Mortgage Rate Trends-August 22,2014

“We are getting closer to a more normalized economy, and now we are expecting to see housing driven by fundamentals, and in fact, we’ve already seen this in some markets.” [Frank Nothaft, chief economist, Freddie Mac]

 ”Normalizing” is a rather mysterious word when we’re talking about a real estate market that has been anything but normal. We have seen home values pick up in the early stages of an apparent recovery because investors became so enthusiastic about single-family residences that they boosted prices by competing with one another to purchase viable investments. This is not the way we “normally” come out of a slowdown.

Nonetheless, it has helped boost real estate to resume higher pre-recession levels and has helped pull an astonishing number of homes out of likely foreclosures.

The question remains, though: Where is the market headednow? This is proving very difficult to judge and one of the reasons it is so difficult is that the real estate market, though it has clearly improved, is not acting in a recognizable way, for the most part. We just can’t find the normal signs that might help us decide where the market is truly headed.

In a sensible (normal?) period of economic growth, we would expect to see real estate sales volume growing in a nearly orderly way. Clearly, with rates still historically low and prices still relatively attractive, it seems a good time to buy a home–either as a personal residence or as an investment. In short, many of the factors that often accompany a resumption of real estate sales activity are in place. But buyers remain reluctant.

Particularly difficult to understand is new home construction, which our nation is lagging way behind in, but which is failing to pick up a great deal of steam. (Inevitably, with demand growing as it is, the number of builders constructing new homes has grown; employment in the sector has jumped. But we still don’t see the sales figures for New Homes rising at truly faster rates.)

Perhaps we can gain some insight into the reluctance to buy, sell or build in this market that seems to be normalizing by looking at the youngest potential buyers–the Millenials. Polling of the young potential buyers suggests this is an apparent lack of trust in the ability of the economy at this point to sustain meaningful growth rates.

We need economic growth–especially job growth–that inspires confidence in the future. Frank Nothaft, quoted above believes this kind of confidence is on the way. He may indeed be right, but proof is not yet in.

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Average Interest Rate

30-Year Freddie Mac Fixed-Rate Mortages

 

 

Lake Tahoe Mortgage Rate Trends-August 22, 2014

Friday’s bond market has opened flat with no relevant economic data to drive trading. Stocks are following suit with the Dow down 3 points and the Nasdaq up 2 points. The bond market is currently down 3/32 (2.41%), but due to strength late yesterday, we should see an improvement in this morning’s mortgage rates of approximately .125 of a discount point over Thursday’s morning pricing.

Today’s only events worth watching are speeches coming out of the Jackson Hole central banker conference. Our Federal Reserve Chair Janet Yellen spoke at 10:00 AMET this morning. Her comments about the difficulty of balancing the need to maintain economic growth while keeping inflation in check and the status of the labor market brought no surprises. The markets had little reaction to her words.

So it appears that unless something unexpected comes from the European Central Bank President at 2:00 PM ET, today’s only events were non-factors to the mortgage market. That also means that the benchmark 10-year Treasury Note yield could close below 2.44% for the week. This would be good news for mortgage shoppers because it strengthens 2.44% as a level of resistance and raises the possibility of yields and mortgage rates moving lower in the immediate future. However, I still have some concern about which direction yields are headed in the short and mid-term periods. Therefore, until we see some additional strength in bonds, I am maintaining a conservative position in the recommendations.

Next week has a handful of relevant economic reports scheduled in addition to a couple of Treasury auctions that have the potential to influence mortgage rates. Unlike most Mondays, there is data set for release that may impact rates. July’s New Home Sales report will be posted late Monday morning, giving us a measurement of housing sector strength. We also will get a revised GDP reading later in the week.

Lake Tahoe Mortgage Rate Trends- August 21,2014

Thursday’s bond market has opened slightly in positive territory despite all of this morning’s economic data giving us unfavorable results. The stock markets are mixed with the Dow up 64 points and the Nasdaq nearly unchanged. The bond market is currently up 3/32 (2.41%), but I don’t believe we will see much of a change in this morning’s mortgage rates due to weakness late yesterday.

The first of this morning’s three releases was last week’s unemployment figures at 8:30 AM ET. They showed that 298,000 new claims for unemployment benefits were filed last week, down from the previous week’s revised total of 312,000. That indicates the employment sector strengthened last week, making the data slightly negative for bonds and mortgage rates.

July’s Existing Home Sales report was posted by the National Association of Realtors at 10:00 AM ET this morning. They announced a 2.4% increase in home resales last month, exceeding forecasts of a slight decline in sales. That is a sign that the housing sector was stronger than many had thought, but growth was modest. Because analysts were expecting to see a decline in home sales, we should consider the data negative for bonds and mortgage rates.

Also at 10:00 AM this morning, the Conference Board said their Leading Economic Indicators (LEI) for July rose 0.9%. Forecasts were calling for a 0.7% rise, so this data is also not favorable to mortgage rates. It shows that the indicators are predicting a fairly rapid rate of economic growth over the next several months. Fortunately, none of this morning’s news is considered highly important and has had a minimal impact on today’s mortgage rates.

Tomorrow has no economic data of importance to mortgage rates scheduled for release. Fed Chair Janet Yellen is expected to speak at the central banker’s conference in Jackson Hole, Wyoming. Her words are always watched closely and have the potential to influence the financial and mortgage markets. Therefore, we will be watching for some type of reaction when she speaks at 10:00 AM ET. The European Central Bank President speaks at 2:00 PM ET, so there is a possibility of seeing some afternoon volatility also if he says anything surprising that is of significance.

Lake Tahoe Mortgage Rate Trends- August 20,2014

Wednesday’s bond market has opened in negative territory with nothing of relevance to drive trading this morning. Stocks are flat with the Dow nearly unchanged and the Nasdaq down 8 points. The bond market is currently down 5/32 (2.42%), which will likely push this morning’s mortgage rates higher by approximately .125 – .250 of a discount point from yesterday’s morning pricing.

Today’s only item worth watching is the release of the minutes from the last FOMC meeting at 2:00 PM ET. There is a pretty good possibility of the markets reacting to them following their release. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy, economic growth and how recent geopolitical events may impact the domestic and global economies. The goal is to form opinions about when Fed Chair Yellen and friends are likely to start raising key short-term interest rates. If there is a market reaction to them, it will be evident during afternoon trading. This is one of those events that can cause significant movement in rates after its release or be a non-factor, so be prepared for a move, but not surprised if the impact on rates is minimal.

Tomorrow actually has three reports that have the potential to influence mortgage rates. The first is at 8:30 AM ET when we will get last week’s unemployment figures. They are expected to show that 308,000 new claims for unemployment benefits were made last week, down from the previous week’s 311,000 initial claims. Rising claims indicate a weakening employment sector, so the higher the number, the better the news it is for bonds and mortgage rates. However, since this report tracks only a single week’s worth of initial claims, it usually takes a wide variance from forecasts for them to affect mortgage rates.

The week’s final two reports will be posted at 10:00 AM ET tomorrow. July’s Existing Home Sales is the first, coming from the National Association of Realtors. It will give us a measurement of housing sector strength and mortgage credit demand. It covers most home sales in the U.S., but usually does not have a major influence on bond trading and mortgage rates unless it varies greatly from analysts’ forecasts. It is expected to show a small decline from June’s sales, meaning the housing sector weakened slightly last month. This would generally be good news for the bond market and mortgage rates because a strengthening housing sector makes broader economic growth more likely. However, unless the report shows a much stronger or weaker level of sales, it will likely have a minimal impact on mortgage pricing.

Tomorrow’s third report will come from the Conference Board, who is a New York-based business research group. They will post their Leading Economic Indicators (LEI) for July late morning also. This index attempts to measure economic activity over the next three to six months and is considered to be moderately important. A higher than expected reading is bad news for the bond market because it indicates that the economy may be strengthening more than thought. However, a weaker reading means that the economy may not grow as much as predicted, making stocks less appealing to investors. This also eases inflation concerns in the bond market and could lead to slightly lower mortgage rates tomorrow if the stock markets remain calm and the housing report shows no surprises. It is expected to show an increase of 0.7 % in the index, indicating moderate economic growth over the next couple of months. It will take a sizable difference between forecasts and its actual reading for this report to noticeably influence mortgage rates.

Lake Tahoe Mortgage Rate Trends-August 19, 2014

Tuesday’s bond market has opened slightly in positive territory despite some unfavorable housing news and early stock gains. The major stock indexes are showing minor gains during early trading, especially if comparing to yesterday’s sizable rally. The Dow is currently up 43 points while the Nasdaq has gained 10 points. The bond market is currently up 2/32 (2.38%), but due to selling late yesterday that led to many lenders posting an intraday rate increase, we will likely see little change in this morning’s rates if comparing to Monday’s morning pricing.

July’s Consumer Price Index (CPI) kicked off this week’s calendar at 8:30 AM ET this morning, revealing a 0.1% rise in both the overall and core readings. Those matched forecasts and indicated that inflationary pressures remained subdued at the consumer level of the economy, making the data neutral for bonds and mortgage rates. The minor increase is good news but since they were of no surprise to traders, they have had little impact on today’s trading.

Also posted early this morning was July’s Housing Starts. The Commerce Department said that construction starts of new homes in the U.S. rose a whopping 15.7%, exceeding forecasts by a sizable margin. Even a secondary reading that tracks newly issued building permits that are needed for future starts showed a sizable increase. This is a sign of growth in the new home portion of the housing sector. Therefore, the data should be considered negative for bonds and mortgage pricing.

Tomorrow morning has no relevant economic data set for release, but we will get the minutes from the last FOMC meeting during afternoon hours. There is a pretty good possibility of the markets reacting to them following their release. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy, economic growth and how recent geopolitical events may impact the domestic and global economies. The goal is to form opinions about when Fed Chair Yellen and friends are likely to start raising key short-term interest rates. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading. This is one of those events that can cause significant movement in rates after its release or be a non-factor, so be prepared for a move, but not surprised if the impact on rates is minimal.

Lake Tahoe Mortgage Rate Trends- August 18,2014

Monday’s bond market has opened in negative territory with stocks starting the week with sizable gains. The Dow is currently up 128 points while the Nasdaq has gained 30 points. The bond market is currently down 8/32 (2.37%), but due to a rally in bonds late Friday, we should see little change in this morning’s mortgage rates if comparing to Friday’s morning pricing. If your lender improved pricing late Friday, you should see an increase this morning that offsets that move.

There is nothing of importance scheduled for release today, so as expected we are seeing bonds react to stock movement and a lack of geopolitical news. The rest of the week brings us the release of four pieces of monthly economic data in addition to the minutes from the last FOMC meeting. All of those events take place the middle days of the week.

The first is July’s Consumer Price Index (CPI) at 8:30 AM ET tomorrow. The CPI is one of the most important inflation reports we see each month as it measures inflation at the consumer level of the economy. As with last week’s Producer Price Index, there are two readings in the report. Analysts are expecting to see a 0.1% increase in the overall index and a 0.1% rise in the more important core data reading that excludes more volatile food and energy prices. Declines in the readings, especially in the core data, should lead to lower mortgage rates since it would mean inflation is still not a threat to the economy. On the other hand, stronger than expected readings will likely lead to an increase in mortgage rates tomorrow.

July’s Housing Starts will also be released early tomorrow morning, which will give us an indication of housing sector strength and future mortgage credit demand. It usually doesn’t cause much movement in mortgage rates unless it varies greatly from forecasts. This release is expected to show a fairly sizable increase in construction starts of new homes. The lower the number of starts, the better the news for the bond market, as it would indicate a weaker than expected housing sector.

Overall, tomorrow is likely to be the most active day for mortgage rates this week. Stocks will probably be a contributing factor to bond movement several days also. We saw bonds rally late last week, pushing the benchmark 10-year Treasury Note yield down to 2.34% due partly to geopolitical news out of Ukraine. Those knee-jerk reactions tend to unwind or reverse very quickly, so now could see bond yields start moving higher is the crisis does not escalate further.

Lake Tahoe Mortgage Rate Trends- August 18,2014

This week brings us the release of four pieces of monthly economic data in addition to the minutes from the last FOMC meeting. There is nothing of relevance to mortgage rates scheduled for release tomorrow, so look for the stock markets to drive bond trading and mortgage rates until we get the start of this week’s activities.

The first piece of data will be posted at 8:30 AM Tuesday when July’s Consumer Price Index (CPI) is released. The CPI is one of the most important inflation reports we see each month as it measures inflation at the consumer level of the economy. As with last week’s Producer Price Index, there are also two readings in the report. Analysts are expecting to see a 0.1% increase in the overall index and a 0.1% rise in the more important core data reading that excludes more volatile food and energy prices. Declines in the readings, especially in the core data, should lead to lower mortgage rates since it would mean inflation is still not a threat to the economy. On the other hand, stronger than expected readings will likely lead to an increase in mortgage pricing Tuesday.

July’s Housing Starts will also be released early Tuesday morning, which will give us an indication of housing sector strength and future mortgage credit demand. It usually doesn’t cause much movement in mortgage rates unless it varies greatly from forecasts. Tuesday’s release is expected to show a fairly sizable increase in construction starts of new homes. The lower the number of starts, the better the news for the bond market, as it would indicate a weaker than expected housing sector.

Wednesday has no relevant economic data set for release, but we will get the minutes from the last FOMC meeting during afternoon hours. There is a pretty good possibility of the markets reacting to them following their release. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy, economic growth and how recent geopolitical events may impact the domestic and global economies. The goal is to form opinions about when Fed Chair Yellen and friends are likely to start raising key short-term interest rates. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading. This is one of those events that can cause significant movement in rates after its release or be a non-factor, so be prepared for a move, but not surprised if the impact on rates is minimal.

Thursday has the final two reports, both at 10:00 AM ET. July’s Existing Home Sales is one, coming from the National Association of Realtors. It will give us a measurement of housing sector strength and mortgage credit demand. It covers most home sales in the U.S., but usually does not have a major influence on bond trading and mortgage rates unless it varies greatly from analysts’ forecasts. It is expected to show a small decline from June’s sales, meaning the housing sector weakened slightly last month. This would generally be good news for the bond market and mortgage rates because a strengthening housing sector makes broader economic growth more likely. However, unless the report shows a much stronger or weaker level of sales, it will likely have a minimal impact on Thursday’s mortgage pricing.

The Conference Board is a New York-based business research group that will also post its Leading Economic Indicators (LEI) for July late Thursday morning. This index attempts to measure economic activity over the next three to six months and is considered to be moderately important. A higher than expected reading is bad news for the bond market because it indicates that the economy may be strengthening more than thought. However, a weaker reading means that the economy may not grow as much as predicted, making stocks less appealing to investors. This also eases inflation concerns in the bond market and could lead to slightly lower mortgage rates Thursday if the stock markets remain calm and the housing report shows no surprises. It is expected to show an increase of 0.7 % in the index, indicating moderate economic growth over the next couple of months. It will take a sizable difference between forecasts and its actual reading for this report to noticeably influence mortgage ! rates.

Also worth noting is the annual central banker and economist conference in Jackson Hole, Wyoming. There have been major events to come out of this event in the past while others have been non-factors. Federal Reserve Chair Janet Yellen is scheduled to speak Friday but the conference runs Thursday through Saturday, so any impact on trading or mortgage rates will happen late in the week.

Overall, Tuesday is likely to be the most active day for mortgage rates and tomorrow appears to be the best candidate for least important. Stocks will probably be a contributing factor to bond movement several days also. We saw bonds rally late last week, pushing the benchmark 10-year Treasury Note yield down to 2.34% due partly to geopolitical news out of Ukraine. Those knee-jerk reactions tend to unwind or reverse very quickly, so now that the weekend has been fairly quiet there, we could see bonds start the week under pressure.
 

Lake Tahoe Mortgage Rate Trends- August 15,2014

Perhaps the most disconcerting news this past week comes from the retail sector. “Job growth has yet to stoke the type of wage gains needed to boost household purchases, a sign the economic expansion will probably not sustain the second-quarter pickup into the end of the year” [Bloomberg]. ”There’s no sign of momentum or enthusiasm out of the consumer right now,” added Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “Income growth continues to be so-so. Employment has picked up in recent months but you’re not seeing the growth in hours worked that would generate big increases in paychecks. I don’t think people have the wherewithal, not to mention the inclination, to ramp it up.”

So what is needed is some sign that employment and the income it creates are both on the upswing in a sustainable way. The actual economy, while growing at a decent pace, is not creating enough enthusiasm or confidence among consumers–including homebuyers–to inspire a surge in purchases.

Note, too, that builders have a tendency to avoid increased expenditures on new construction until after the economic indicators have begun to make it clear that we are now facing more demand for new homes–so home construction remains rather slow in the face of a tepid sales market.

But the numbers don’t all agree with one another. The Institute of Supply Management, in its recent index of non-manufacturing growth (for July), showed a forward leap from 56.0 to 58.7, with very strong new orders figures to boot. Bloomberg commented, “ISM’s non-manufacturing sample is reporting the strongest rates of monthly growth of the whole recovery with strength led by construction but including 16 of 18 industries.” Weak in the manufacturing sector doesn’t necessarily mean weak in construction and other non-manufacturing sectors.

This is very hard to follow as of yet, and it is nearly impossible to know where it leads. We seem to be following the yellow brick road, hoping to find improved conditions ahead.

One real estate researching firm has reached a tantalizing conclusion after scanning the confusion in today’s marketplace. Largely because of today’s gradual rise in desirable inventory and the slow but real gains in sales volume, we may be on the verge of a market that is improving despite on-going difficulties like the slow retail sector. “Housing,” says the firm, “is now edging back to normal.” Perhaps they are right. At this point, we can only hope so.

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Average Interest Rate

30-Year Freddie Mac Fixed-Rate Mortages

 

Lake Tahoe Mortgage Rate Trends-August 15, 2014

Friday’s bond market has opened in positive territory following the release of mostly favorable economic data. The major stock indexes are showing fairly minor gains with the Dow up 42 points and the Nasdaq up 23 points. The bond market is currently up 5/32 (2.38%), which should improve this morning’s mortgage rates by approximately .125 of a discount point over yesterday’s morning pricing.

Yesterday’s 30-year Treasury Bond auction went extremely well with most of the indicators we use to gauge investor demand showing a high level of investor interest. This led to broader bond market gains during afternoon trading and some lenders followed with a minor improvement to mortgage rates. If your lender improved pricing late yesterday, you may see little change in this morning’s rates.

The first of this morning’s three reports was July’s Producer Price Index (PPI) at 8:30 AM ET. It revealed a 0.1% increase in the overall reading a 0.2% rise in the more important core data that excludes volatile food and energy prices. The overall reading came in slightly weaker than expectations while the core reading matched forecasts. This means that inflationary pressures remain subdued at the manufacturing level of the economy last month, but because the news was not a surprise, we should consider the data neutral to slightly positive for bonds and mortgage rates.

July’s Industrial Production was next at 9:15 AM ET. It showed a 0.4% increase in production at U.S. factories, mines and utilities last month. This was slightly stronger than the 0.3% that was predicted, but it was a minor variance in a moderately important report so we are seeing little reaction to the data in this morning’s trading.

The last release of the week came just before 10:00 AM ET when the University of Michigan announced their Index of Consumer Sentiment for August. They said the index fell to 79.2 this month from July’s final reading of 81.8, meaning surveyed consumers were less optimistic about their own financial and employment situations than many had expected. That is good news for bonds and mortgage rates because waning confidence usually translates into weaker levels of consumer spending. If consumers are concerned about their job stability or finances, they are less apt to make a large purchase in the near future, limiting economic growth.

Next week is light in the number of economic reports scheduled that have a relevance to mortgage rates, but what is scheduled does include a couple of important releases. They include a key measure of consumer level inflation and the minutes from the most recent FOMC meeting. Nothing of importance is set for Monday, so we can expect weekend news or a noticeable move in stocks to drive bond trading and mortgage rates early in the week.

Lake Tahoe Mortgage Rate Trends- August 14,2014

Thursday’s bond market has opened in positive territory, extending yesterday’s momentum. The stock markets are flat with the Dow up a couple points and the Nasdasq nearly unchanged from yesterday’s close. The bond market is currently up 8/32 (2.39%), which should improve this morning’s mortgage rates by approximately .250 of a discount point over Wednesday’s morning pricing.

Today’s only relevant economic data was last week’s unemployment update at 8:30 AM ET. It showed that 311,000 new claims for unemployment benefits were filed last week, up from the previous week’s revised total of 290,000. This is good news for bonds and mortgage rates because new claims exceeded forecasts, indicating the employment sector was weaker last week than many had thought. Unfortunately, this is only a weekly report, so its impact on mortgage rates has been relatively minor.

We will get the results of today’s 30-year Treasury Bond auction at 1:00 PM ET. Yesterday’s 10-year Note sale wasn’t overly strong or weak. Several of the benchmarks we use to gauge investor demand in the sale showed an average level of interest. That doesn’t give us too much to be overly optimistic about in today’s sale, but not much to be concerned about either. If today’s auction did draw a high level of interest, we should see bond prices improve early this afternoon, possibly leading to a slight improvement in mortgage pricing.

The week does not end quietly tomorrow. There are three reports set for release that can affect mortgage rates. The first is August’s Producer Price Index (PPI) from the Labor Department at 8:30 AM ET, giving us an important measurement of inflationary pressures at the producer level of the economy. There are two readings that analysts follow in this release. They are the overall index and the core data reading. The core data is the more important of the two since it excludes more volatile food and energy prices. Analysts are predicting a 0.2% increase in the overall index and a rise of 0.2% in the core data. Stronger than expected readings may raise inflation concerns in the bond market. That would be bad news for bonds and mortgage rates because inflation is the number one nemesis of the bond market as it erodes the value of a bond’s future fixed interest payments. As inflation becomes more of a concern in the markets, bonds become less appealing to investors, leadin! g to falling prices, rising yields and higher mortgage rates.

July’s Industrial Production report is scheduled to be posted at 9:15 AM ET tomorrow. This report measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.3% increase from June’s level. A decline would be considered favorable news for bonds and mortgage rates because it would indicate manufacturing sector weakness and broader economic growth would be more difficult if manufacturing activity is slipping.

The last release of the week will be posted by the University of Michigan just before 10:00 AM ET tomorrow. Their Index of Consumer Sentiment will give us an indication of consumer confidence, which projects consumer willingness to spend. If a consumer’s confidence in their own financial situation is rising, they are more apt to make large purchases in the near future. But, if they are growing more concerned about their job security or finances, they probably will delay making that large purchase. This influences future consumer spending data and therefore, impacts the financial markets. It is expected to show a reading of 81.7 that would mean confidence was nearly unchanged from July’s level of 81.8. That would be considered slightly favorable news for bonds and mortgage rates. Good news for mortgage shoppers would be a sizable decline in the index.