Update on FLorida Mortgages July 22, 2013.

Keeping you updated on the market! For the week of July 22, 2013

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MARKET RECAP Fed Chairman Settles Mortgage Markets After sprinting a full percentage higher over the past two months, the 30-year fixed-rate mortgage has finally taken a breather. Last week, the bellwether loan was staid, holding near the prior week's rate. This week, the rate actually fell a few basis points. Lending markets have finally settled down, and for this we can thank Federal Reserve Chairman Ben Bernanke, who assured credit-market participants the Fed is unlikely to taper QE3 in the near future. This means the Fed will continue to purchase long-term U.S. Treasuries and mortgage-backed securities. In short, mortgage rates have likely plateaued for the near future, which gives frantic buyers some breathing room. The interesting lesson in the mortgage-rate surge is that it failed to materially impact the purchase market. Indeed, the four-week purchase-application trend held steady. What's more, the latest data from the Mortgage Bankers Association show purchase applications actually rose 1% last week. Purchase applications are obviously related to home sales and building activity. On the latter, there's concern rising rates could translate into falling activity because of falling consumer demand. The latest data on housing starts, released Wednesday, raised a few eyebrows, and a few concerns. Housing starts were down significantly, dropping 9.9% to 836,000 units on an annualized basis in June. After the news was released, we ran across a number of comments forecasting the end of the housing recovery. Upon closer inspection, though, it appears housing's imminent demise was highly exaggerated. We say that because the drop in starts was lead by the smaller and more volatile multifamily component, which declined 26.2% in June after rising 28.2% in May. In contrast, the larger and more stable single-family component slipped a modest 0.8% for the month after rising 0.5% in May. It's informative to consider the longer-term starts trend; by this measure, the residential construction industry looks quite healthy. Over the first   half of 2013, multifamily starts are up nearly 34% from the same year-ago period, while single family starts are up 20%. These are meaningful increases in activity and tell us we've come a long way in a short time. Moreover, there is plenty of room left to run. Starts remain low when viewed from a historical perspective. From 1959 through 2000, roughly 1.5 million housing units were started annually. (And keep in, the population was meaningful smaller back then.) So, yes, we've come a long way on residential construction, but we still have long way to go. This suggests that housing will remain healthy and will remain a key economic driver for at least the next couple years. And even if mortgages continue to climb, we think that's unlikely to change.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Existing Home Sales (June)	Mon., July 22, 10:00 am, ET	5.25 Million (Annualized)	Important. More supply coming to market will lead to higher sales volume in coming months.
FHFA House Price Index (May)	Tues., July 23, 9:00 am, ET	0.5% (Increase)	Moderately Important. Home prices will continue to post gains across most local markets.
Mortgage Applications	Wed., July 24, 7:00 am, ET	None	Important. Purchase activity should show noticeable improvement thanks to stabilizing rates.
Durable Goods Orders (June)	Thurs., July 25, 8:30 am, ET	1.0% (Increase)	Moderately Important. Rising orders are reflective of rising consumer confidence.

 

Don't Look Back, Look Ahead Anchoring can be a difficult psychological trait to overcome. By that, we mean the inclination to believe that the past will either return or be will maintained in the future. Anchoring occurs frequently in the investment world. Investors buy a stock, see it's share price cut in halve, and yet despite poor prospects, they'll continue to hold, believing that it's inevitable their purchase price will again prevail. We see the same phenomenon in the mortgage market. Many potential borrowers believe it's inevitable that mortgage rates will again hit multi-decade lows of a few months ago. Tomorrow will somehow present yesterday's opportunities. This isn't to say yesterday's prices can't return, but yesterday isn't today: the outlook and the variables influencing today's market are decidedly different. Today, we are looking at stronger economic growth and stronger residential construction across most of the United States. Neither variable bodes well for lower lending rates. The point we want to emphasis is to keep focused on the future, and the variables – Federal Reserve tapering, job growth, rising consumer spending, higher housing demand and construction – that will prevail in the future. With the future in mind, it's becoming increasingly difficult to make a case for a lower-rate lending environment.

Article courtesy of Patti Wilson, W.J.Bradley Bonita Beach FL.