This past holiday-shortened week was good for both the broad stock market indexes and mortgage bonds as both asset classes finished the week moderately higher.  Trading volumes were lower than usual due to the 4th of July holiday, although active investors had to wade through ongoing news of a “trade war” between the U.S. and China; the release of Fed minutes from their latest policy meeting; and data from the June Employment Report.

 

Thursday, the Fed released the minutes from its June 12-13 policy meeting revealing officials are aware of the possibility that growing trade tensions could have a negative impact on future business sentiment and investment spending.  Friday brought a “not too hot, not too cold” “Goldilocks” employment report featuring solid nonfarm payrolls growth of +213,000 jobs coupled with a restrained 2.7% year-over-year gain in average hourly earnings that kept inflation and aggressive rate-hike worries at arms’ length.  Nevertheless, neither the Fed minutes nor the key jobs data had much of an impact on long-term interest rates, with the yield on the benchmark 10-year Treasury note decreasing slightly for the week.

 

In housing news, CoreLogic reported Tuesday their Home Price Index (HPI) showed home prices increased by 1.1% in May and by 7.1% on a year-over-year basis.  May’s one-year appreciation of 7.1% was stronger than April’s reading of 6.9% and was the strongest number in four years.  Moving forward, CoreLogic is forecasting homes will appreciate 5.1% in the coming year which is slightly below their forecast of 5.3% last month.

 

The highest price gains in metro areas were seen in Denver, Las Vegas, and San Francisco.  CoreLogic Chief Economist Frank Nothaft remarked “The lean supply of homes for sale is leading to higher sales prices and fewer days on market, and the supply shortage is more acute for entry-level homes.

 

Wednesday, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed a decrease in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 0.5% during the week ended June 29, 2018.  The seasonally adjusted Purchase Index increased 1.0% from the week prior while the Refinance Index decreased by 2.0% from a week earlier.

 

Overall, the refinance portion of mortgage activity decreased to 37.2% from 37.6% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 6.7% from 6.5% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.79% from 4.84% with points decreasing to 0.41 from 0.42.

 

For the week, the FNMA 4.0% coupon bond gained 14.1 basis points to close at $102.063 while the 10-year Treasury yield decreased 3.60 basis points to end at 2.824%.  The Dow Jones Industrial Average gained 185.07 points to close at 24,456.48.  The NASDAQ Composite Index advanced 178.09 points to close at 7,688.39.  The S&P 500 Index added 41.45 points to close at 2,759.82.  Year to date on a total return basis, the Dow Jones Industrial Average has lost 1.06%, the NASDAQ Composite Index has gained 11.37%, and the S&P 500 Index has advanced 3.22%.

 

This past week, the national average 30-year mortgage rate decreased to 4.65% from 4.66%; the 15-year mortgage rate rose to 4.13% from 4.11%; the 5/1 ARM mortgage rate decreased to 3.99% from 4.00% while the FHA 30-year rate fell to 4.37% from 4.38%.  Jumbo 30-year rates decreased to 4.59% from 4.69%.

 

Economic Calendar – for the Week of July 9, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($102.063, +14.1 bp) traded within a slightly wider 34.4 basis point range between a weekly intraday high of 102.094 on Friday and a weekly intraday low of $101.750 on Tuesday before closing the week at $102.063 on Friday.  Mortgage bonds traded mostly between resistance and support levels during a holiday-shortened week, but did manage to close just above nearest resistance located at $101.988 on Friday.  However, the bond is currently extremely “overbought” and will be susceptible to a slight pull-back or sideways trading this coming week.  With the stock market seemingly “shrugging off” the latest trade news with China on Friday, we could see bond prices consolidate leading to stable or very slightly higher mortgage rates this coming week.

 

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Semantics are alive and well with real estate. You either buy, or you invest. Right? Well, let’s admit there is a slight nuance here. You plan to live in what you “buy,” but the idea of investing carries the connotation of renovating and making a quick buck. Today’s consumers are much more interested than ever to try their hand at flipping. The problem is, many of them have not done their homework, making the path ahead fraught with potentially costly roadblocks.

 

These days of frantic buying have caused many a consumer to muster up a quick education about real estate, but it may not always be a complete one. In a galaxy not that far away, raising capital for a simple distressed single-family house fix-and-flip used to be met with negative reactions. As a result, the world of real estate investing was at a standstill, and golden opportunities were missed.

 

HGTV and its reality shows about flips put new steam into the idea of buying the worst property on the best street. Suddenly everyone had a dangerous knowledge about buying distressed real estate, distilled into 50 minutes of airtime. Even Wall Street has recognized the residential rehab craze, sustaining the longest bull market ever, since real estate is a great hedge against a Wall Street correction.

 

What we are left with is a market full of people doing flips, driving property values up, and fueling the demand for inventory. But someone is bound to get burned. So, how do you start playing the real estate investment game and NOT be the guy who got there too late for those $100 bills being handed out on that proverbial corner somewhere?

 

Forbes New York Business Council’s Melissa Shea, a 15-year RE investor, and educator, offers some tips, the first of which is to take to heart in the saying that goes, “If you think the price of education is expensive, try ignorance.”

 

A quality education is key here, but we’re not talking about buying a course from some TV real estate guru standing in front of his yacht while leaning on his Bentley. What he’ll tell you won’t come close to the true reality of a fix-and-flip. Shea’s advice is to “take the money you would pay a guru, buy a house, and flip it by yourself. You’ll lose less money and learn more. The best place to start is local real estate investment clubs and associations. You need local knowledge, not national programs.” She recommends finding local investment clubs and associations by going to CRE Online or to the National Real Estate Investors Association. Don’t let your education stop there, however, she recommends. There is a podcast, among others, called Bigger Pockets that offers real content, excellent education and follows the trends, according to Shea.

 

And then there is the emotional component. Shea warns you not to get attached to properties, causing you to overlook costly potential errors. “People rationalize, ‘It’s only $3,000 more,’ but you said that three times ago, so now it’s $9,000 more, and you aren’t going to make much of a profit. Don’t lie to yourself. Stick to the numbers; they don’t lie,” she says. She warns against allowing yourself to increase your purchase price and not deluding yourself that the rehab is going to cost less than the quote your contractors gave you. “It’s always more,” she says. “Don’t fool yourself into thinking the property will sell for a higher price than the last house in the area because yours will be ‘so much nicer.’ That’s a recipe for financial disaster.”

 

Shea also advises you not to be alone on that investment island. “Going it alone is one of the worst mistakes you can make. Personally, I love joint ventures.” Time was when you could be a complete rookie, purchase a property, wait a few months and, without touching the property except for mowing the lawn and emptying the house, make a tidy sum. Even then, it was more likely that you would have lost money or broken even. The real estate market crash, however, served as an expert professor, teaching investors to use reputable attorneys, seasoned Realtors, long-established title companies and reliable lenders, and to network with other investors, she says.

 

Real estate investing is still not an exact science, according to Shea. “There are plenty of dangers, but if you’re educated, keep a level head, don’t get emotionally involved, and work with an award-winning team, you can enjoy the pleasures real estate investing can bring.”

 

Source: TBWS

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When we think of new home designs, we generally don’t think of what apartments look like or live like inside. Two different animals, right? But the truth of it is, although single-family and multifamily builders are not so much siblings as second cousins, there is a lot that is similar about them, according to a recent article in builderonline.com, the website for Builder Magazine.

 

“Both sets of builders have to buy land, get approvals, and build housing. But then things diverge. Single-family builders sell a house and walk away, while in most cases multifamily builders hold a property and have an ongoing relationship with consumers,” writes Frank Anton in his article Modernizing How We Build.

 

While that may add up to a big difference between the two, what new homebuilders (who have been experiencing a bit of a boom lately but fall WAY short when it comes to affordable housing) don’t seem to focus on is that multifamily builders have seen starts quadruple since they bottomed out in 2009, while single-family starts haven’t even doubled since hitting bottom in 2010.

 

“Multifamily builders have done the better job of reaching 25- to 36-year-olds. Yes, they have advantages. Renters don’t have to come up with a big down payment nor do they have to qualify for a mortgage, and single people are naturally more likely to rent than buy.” says Anton.

 

Think for a moment about how student debt is like an albatross around the necks of 45 million young people, a third of which have yet to form an independent household and end up staying longer than ever in Mom and Dad’s basement. The article cites how for the first time in 40 years (according to the University of Michigan’s consumer sentiment survey) that younger Americans are more pessimistic than older Americans. And pessimists are more reluctant to buy than rent, even if they might qualify for a mortgage.

 

While those negative factors affect the multifamily market as well, it’s still outperforming the for-sale market for one simple reason, according to Anton: “Multifamily builders are doing a better job of satisfying younger Americans’ housing needs.”

 

He goes on to outline a case in point where a young multifamily developer was describing the success of his most recent development, a 200-unit project in pricey San Francisco, practically offering a blueprint for how single-family builders can crack the first-time buyer market. The builder he describes put up a development in downtown San Francisco, where many young people want to live, but it’s not a stretch to believe the concept would work in city-close residential areas. His building has no parking, but if a developer were to put up a similar single-family development in nearby Daly City or San Bruno, perhaps it would offer houses with a one-car garage “or—heaven forbid—no garage,” says Anton.

 

What also attracted buyers was the SF project’s design – thoroughly contemporary, which is what the younger demographic prefers. The apartments are minuscule (the smallest unit is only 160 square feet), but homebuilders paying attention to the idea that anyone would be willing to pay a high rent for a closet-sized apartment might want to sit up and take notice of how they might design, perhaps, a 1,200-square-foot house in a suburb within commuting distance and call it good.

 

Younger renters, as well as buyers, are not like the rest of us, he points out. Harkening back to their college roots, they may be willing to share a compact common area in order to save money, as evidenced by this multi-family builder’s design for the larger units in the building.

 

“The only generous space in the building is a first-floor common area that brings residents together,” says Anton. “Single-family builders routinely build clubhouses in retirement communities, so why not clubhouses for first-time buyers?”

 

Who’d a thunk it would be a study in marketing and design for single-family homebuilders to visit successful multi-family projects to get clues on what younger buyers want? Someone did.

 

 

Source: builderonline.com, TBWS

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The stock market ended the week moderately lower on continuing trade tensions primarily between the U.S. and China.  The Energy Sector was a notable exception as oil prices reached new four-year highs following a lower than expected U.S. oil inventory report and news the U.S. State Department would seek to enact powerful sanctions on any countries that don’t cut oil imports from Iran to “zero” by November 4.

 

The Wall Street Journal reported last Monday that U.S. officials were planning to block Chinese firms from investing in U.S. technology companies plus enacting new limits on U.S. technology exports to China.  Also on Tuesday, the president told a group of White House reporters the government would continue to rely on the Committee on Foreign Investment in the United States (CFIUS) in limiting Chinese investments in U.S. technology.  Blocking Chinese access to certain U.S. technologies is not only seen as a deterrent to intellectual property theft, but also appears to be a negotiating tool to craft a more favorable trade deal with China.

 

In housing news, the Commerce Department reported last Monday that New Home Sales remained robust for the month of May, selling at a 6.7% pace higher than in April and 14.1% higher year-over-year for a seasonally adjusted annual rate of 689,000.  The median sales price fell 3.3% year-over-year to $313,000 with the average sales price declining 2.6% to $378,400.  Based on the current sales rate, new home inventory declined to a 5.2 months’ supply – down from April’s 5.5 month supply and 5.4 months’ supply from a year ago.  Sales in the Southern Region led the way with 17.9% sales growth with the other regions showing flat to negative sales growth.  The Western Region was lower by 8.7%; the Midwest was flat at 0.0%; and the Northeast was 10% lower.

 

Wednesday, the National Association of Realtors (NAR) reported their Pending Home Sales Index fell for the fifth straight month on an annualized basis by 0.5% in May.  NAR chief economist Lawrence Yun commented “Pending home sales underperformed once again in May …coming in at the second lowest level over the past year.  Realtors® in most of the country continue to describe their markets as highly competitive and fast moving, but without enough new and existing inventories for sale, activity has essentially stalled.”  Yun is now forecasting sales for existing homes to decrease 0.4% to 5.49 million in 2018 (down from 5.51 million in 2017) with the national median existing-home price expected to increase around 5.0%.

Wednesday, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed a decrease in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 4.9% during the week ended June 22, 2018.  The seasonally adjusted Purchase Index decreased 6.0% from the week prior while the Refinance Index decreased by 4.0% from a week earlier.

 

Overall, the refinance portion of mortgage activity increased to 37.6% from 36.8% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 6.5% from 7.0% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.84% from 4.83% with points decreasing to 0.42 from 0.48.

 

For the week, the FNMA 4.0% coupon bond gained 18.8 basis points to close at $101.922 while the 10-year Treasury yield decreased 4.04 basis points to end at 2.8600%.  The Dow Jones Industrial Average lost 309.48 points to close at 24,271.41.  The NASDAQ Composite Index fell 182.52 points to close at 7,510.30.  The S&P 500 Index dropped 36.51 points to close at 2,718.37.  Year to date on a total return basis, the Dow Jones Industrial Average has lost 1.81%, the NASDAQ Composite Index has gained 8.79%, and the S&P 500 Index has advanced 1.67%.

 

This past week, the national average 30-year mortgage rate decreased to 4.66% from 4.70%; the 15-year mortgage rate fell to 4.11% from 4.15%; the 5/1 ARM mortgage rate increased to 4.00% from 3.99% while the FHA 30-year rate fell to 4.38% from 4.42%.  Jumbo 30-year rates decreased to 4.69% from 4.73%.

 

Economic Calendar – for the Week of July 2, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.922, +18.8 bp) traded within a wider 31.3 basis point range between a weekly intraday high of 102.016 on Thursday and a weekly intraday low of $101.703 on Monday before closing the week at $101.922 on Friday.

Mortgage bonds traded in the opposite direction of the stock market, rising into a dual band of overhead resistance at the 76.4% Fibonacci retracement level ($101.988) and the 100-day moving average ($102.023).  A new buy signal showed last Wednesday from a positive stochastic crossover, but it appears it wasn’t strong enough to push bond prices above resistance.

 

Therefore, we could see some consolidation between the identified resistance and support levels ahead of this coming week’s significant economic news headlined by Friday’s Employment Report.  If the jobs numbers are as or better than expected we could see the stock market rebound and bond prices slip lower.  On the other hand, if the economic news is worse than forecast or trade talk becomes more antagonistic and the stock market continues to stumble, bond prices could continue to improve along with mortgage rates.

 

 

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It’s happening right under our noses, but few of us know it. The newest commercial parking facilities are being designed with autonomous cars in mind — the ones that drive themselves. Some developers are even going so far as to explore ways to repurpose existing parking garages. The question follows: how could autonomous vehicles change residential real estate? Will it render the two-car garage obsolete and increase livable square footage and home values?

 

Forbes’ Justin Thompson explored this in his article The Value of Your Home Could Get a Big Twist from Autonomous Cars, where he discusses things like how, after dropping its passengers off, the driverless car could simply (1) return to where the trip originated, (2) circle the neighborhood and wait to be called back, (3) head off to a remote parking spot for a while, or (4) just wait for another passenger, like a taxi or an Uber might do.

 

So if people are presented with an autonomous, on-demand vehicle service might they simply opt out of car ownership? Thompson says proponents point to the success of current ride-sharing platforms and the behavior of younger generations as evidence that this future is already unfolding.

 

The appeal is, of course, that autonomous vehicle ride sharing could very well offer the same mobility as car ownership without the major capital outlay expenses like insurance, maintenance, and depreciation.

 

For real estate purposes, a decrease in car ownership would likely translate to a decrease in the need for garage space. No big deal? Think again. In congested metropolitan areas, such as Los Angeles, where square footage sells for a premium, it would be a huge deal (remember– appraisers do not include garage space in a home’s total square footage). When you figure the current average price per square foot for a residential dwelling in LA County is between $400 and $600, it’s an in-your-face proposition. Thompson explains, “A 100-square-foot increase in the size of a home (which is the difference in size between a typical two-car garage and a typical one-car garage) would translate to an increase of roughly $40,000 to $60,000 in home value for a home in Los Angeles County, California. A shift of that magnitude could well incentivize builders to devote less square footage to garage use and more to the livable area of the house.”

 

He goes on to imagine the economic effects of this, explaining how an increase in home values would likely lead to a hike in property taxes while local government could expect to see an increase in permitting fees for all those garage conversion projects.

 

It’s anybody’s ball game whether autonomous vehicles will be adopted and integrated into our society. But it’s fun to think of how very differently both our homes and our lives might be affected.

 

 

Source: Forbes, TBWS

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Big demand. Small inventory. Spring homebuyers are pounding the pavement at a furious pace, but the pickings are getting ever slimmer, according to news reports.

 

Spring is traditionally the busiest time of year to buy a home, but this year listings are getting snapped with lightning speed as bidding wars have become par for the course. According to an article in NBC News, home prices have now surpassed their last peak, and at the entry level, where demand is highest, sellers are firmly in the driver’s seat.

 

The article cites a Realtor in Burbank, CA, who says, ”I’ve been selling real estate for 25 years and this is the strongest seller’s market I have ever seen in my entire real estate career. A lot of our sellers are optimistically pricing their homes in today’s market, and I have to say in most cases we’re getting the home sold anyway.”

 

As an example, NBC News reported how a three-bedroom, two-bathroom, 1,240-square-foot home in Burbank offered for $789,000 (considered an entry-level home in the LA market) had three offers before the first open house Sunday, drawing more than 100 potential but weary buyers.

 

As is customary in crazy markets like this, most of the listings are intentionally listed a bit low to garner attention. Then the bidding frenzy ensues, often getting a dozen or more offers on one property. According to the article, more homes came on the market in March, but fierce demand made “sold” signs go up quickly. “At the end of the month, the supply of homes for sale nationally was down 6.6 percent compared with a year ago, according to the National Association of Realtors. Unsold inventory is a slim 3.8-month supply. A balanced market between buyers and sellers has a five-to-six-month supply. Properties sold in March were on the market for an average 34 days, down from 45 in February and 47 in March 2016.”

 

All cash offers and contingency removals are common trends because, in such a hot market, homes are appraising well below the sale price, making it even harder for first-time, mortgage-dependent buyers to succeed.

 

All this has caused home prices to hit new peaks each month, with prices nationally up 5.7 percent in February year over year, according to Black Knight Financial Services. Washington, Oregon, and Colorado are seeing the biggest price gains, as buyers flee high prices in California.

 

Big cities are the all-hat-no-cattle losers, however. Real estate brokerage Redfin studied which markets had the most people searching for homes outside their city. San Francisco, Los Angeles, and New York were the biggest losers. “Fast-growing coastal cities may be generating the high-paying jobs, but they haven’t created enough budget-friendly housing to keep pace,” said Nela Richardson, Redfin’s chief economist. “The price of real estate and desire for homeownership is compelling many to uproot and seek housing in more affordable communities.”

 

 

Source: NBC News, Redfin, TBWS

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New home sales get a bump despite mortgage rate increase from CNBC.

 

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Although the Nasdaq Composite Index set a new all-time high last Wednesday, the three major stock indexes finished the week lower amid escalating trade tensions primarily between the U.S. and China and the U.S. and the European Union.  The Trump Administration wants to level the playing field when it comes to trade and tariffs by negotiating better deals to protect American workers and the economy.  U.S. tariffs are among the lowest in the world and in our nation’s history.  U.S. trade policy has long favored lower tariffs and fewer restrictions on the movement of goods and services across international borders while our trading partners have been more restrictive.  The U.S. is currently running the following trade deficits:

 

China – $636 billion traded with a $375 billion deficit.

Mexico – $557 billion traded with a $71 billion deficit.

Japan – $204 billion traded with a $69 billion deficit.

Germany – $171 billion traded with a $65 billion deficit.

Canada – $582 billion traded with an $18 billion deficit.

 

In response to all of the tariff and trade war talk, longer-term bond yields slipped marginally lower resulting in relatively stable mortgage rates.

 

There were several housing-related reports released this past week.  Last Monday, the National Association of Home Builders/Wells Fargo Housing Market Index (NAHB) measuring home builder sentiment was reported to have slipped two points to 68 in June.  A reading above 50 is considered to indicate positive sentiment.

 

Yet, June’s decline was attributed to soaring lumber prices that have added almost $9,000 to the average price of a new single-family home since January 2017.  Robert Dietz, NAHB chief economist, commented “Improved economic growth, continued job creation and solid housing demand should spur additional single-family construction in the months ahead.  However, builders do need access to lumber and other construction materials at reasonable costs in order to provide homes at competitive price points, particularly for the entry-level market where inventory is most needed.”

 

 

Tuesday, the U.S. Census Bureau and the Department of Housing and Urban Development reported Housing Starts increased 5.0% month-over-month in May to a seasonally adjusted annual rate of 1.350 million, exceeding the consensus forecast of 1.323 million.  However, Building Permits declined 4.6% to 1.301 million falling below the consensus estimate of 1.343 million.  Permits are a leading indicator of housing market strength and were lower in May for both single-family units (-2.2%) and multi-unit dwellings (-8.8%).  This suggests we may see some weakness in the June Housing Starts report.

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Wednesday, the National Association of Realtors reported sales of Existing Homes declined 0.4% month-over-month in May to a seasonally adjusted annual rate of 5.43 million.  This was slightly below the consensus forecast of 5.55 million.  The median existing home price for all housing types jumped 4.9% to an all-time high of $264,800 – the 75th straight month of year-over-year gains.  Existing home inventory for sale at the end of May rose 2.8% to 1.85 million, but this is 6.1% lower than the same period a year ago.  Unsold inventory is currently at a 4.1-month supply at the current sales rate compared to a usual 6.0-month supply associated with a more balanced market.  The song remains the same…limited home inventory coupled with rising prices and mortgage rates is hampering affordability, especially for first-time home buyers.

 

Wednesday, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed an increase in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 5.1% during the week ended June 15, 2018.  The seasonally adjusted Purchase Index increased 4.0% from the week prior while the Refinance Index increased by 6.0% from a week earlier.

 

Overall, the refinance portion of mortgage activity increased to 36.8% from 35.6% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 7.0% from 6.8% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance remained unchanged at 4.83% with points decreasing to 0.48 from 0.53.

 

For the week, the FNMA 4.0% coupon bond gained 9.3 basis points to close at $101.734 while the 10-year Treasury yield decreased 2.36 basis points to end at 2.9004%.  The Dow Jones Industrial Average lost 509.59 points to close at 24,580.89.  The NASDAQ Composite Index fell 53.56 points to close at 7,692.82.  The S&P 500 Index dropped 24.78 points to close at 2,754.88.  Year to date on a total return basis, the Dow Jones Industrial Average has lost 0.56%, the NASDAQ Composite Index has gained 11.44%, and the S&P 500 Index has advanced 3.04%.

 

This past week, the national average 30-year mortgage rate increased to 4.70% from 4.65%; the 15-year mortgage rate rose to 4.15% from 4.11%; the 5/1 ARM mortgage rate increased to 3.99% from 3.95% while the FHA 30-year rate rose to 4.42% from 4.38%.  Jumbo 30-year rates increased to 4.73% from 4.68%.

 

Economic Calendar – for the Week of June 25, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

 

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Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.734, +9.3 bp) traded within a far narrower 28.1 basis point range between a weekly intraday high of 101.859 on Tuesday and a weekly intraday low of $101.578 on Thursday before closing the week at $101.734 on Friday.

 

The bond traded along a convergence between the 25-day and 50-day moving averages (MAs).  These MAs act as both short-term support and resistance.  Should the 25-day MA cross above the 50-day MA, it would signal market strength and a buy signal likely resulting in a slight improvement in mortgage rates.  However, technical resistance is also found at the 76.4% Fibonacci retracement level at $101.988 so any upward move will have to contend with this layer of resistance plus that from the 100-day MA at $102.087.  These levels may temper any upward move resulting in stable rates.

 

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In addition to some generally positive economic news, there were three major events affecting the financial markets this past week.  There was an historic initial summit between the U.S. and North Korea over denuclearizing the Korean peninsula; a 25 basis point rate hike by the Fed; and further threats of a trade war between China and the U.S.  The three major stock indexes ended “mixed” for the week after the Dow Jones Industrials slid lower on Friday erasing its weekly gains.  The Nasdaq Composite Index managed to set a new record high during the week before falling back on Friday while the S&P 500 ended minimally higher.

 

The stock and bond markets reacted somewhat negatively to the Federal Reserve’s monetary policy meeting on Wednesday.  Fed officials decided to raise the federal funds rate by another 0.25% as widely expected, but the markets retreated after policymakers provided a more hawkish view for future rate hikes with greater expectations for a total of four rate hikes in 2018, rather than three.

 

Tuesday, the Labor Department reported consumer inflation in May rose 0.2% and had reached 2.8% on a year-over-year basis, its highest level since 2011.  However, most of the increase in inflation is attributed to the rise in oil prices, and core inflation (excluding food and energy costs) remained close to the Fed’s target of 2%.  Thursday, Retail Sales provided an upside surprise with retail sales excluding automobiles increasing 0.9% in May versus expectations for a 0.5% gain.  Friday, the Trump administration declared it would follow through with an earlier warning to implement tariffs on imports of $50 billion worth of goods from China in response to intellectual property theft and forced technology transfers.  China quickly responded with proposed tariffs on

$50 billion worth of U.S. goods including beef, cars, poultry, and tobacco.  Hopefully, these tariff announcements are nothing more than strategizing for a negotiated solution that will avoid a full-blown trade war that would end with negative consequences for the world’s two largest economies.

 

There were two mortgage-related reports released this past week.  Tuesday, CoreLogic released its monthly Loan Performance Insights Report for March 2018.  The report showed the number of mortgage loans 30 days or more past due declined from 4.8% to 4.3%.  The serious delinquency rate, defined as those loans 90 days or more past due, dropped to 1.9% in March, the lowest delinquency rate for the month of March since 2007 when it was 1.5%.  The serious delinquency rate a year ago for March was 2.1%.

 

The foreclosure inventory rate, a measure of the share of mortgages in some stage of the foreclosure process, was 0.6% for March – a level that has been holding since August 2017 and the lowest level since June 2007.  Dr. Frank Nothaft, chief economist for CoreLogic, remarked

“Unemployment and lack of home equity are two factors that can lead to borrowers defaulting on their mortgages.  Unemployment is at the lowest level in 18 years, and for the first quarter, the CoreLogic Equity Report revealed record levels of home equity growth with equity per owner up $16,300 on average for the year ending March 2018.”  This is certainly good news for the housing industry.

 

 

Wednesday, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed a decrease in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 1.5% during the week ended June 8, 2018.  The seasonally adjusted Purchase Index declined 2.0% from the week prior while the Refinance Index also decreased by 2.0% from a week earlier.

 

Overall, the refinance portion of mortgage activity remained unchanged at 35.6% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 6.8% from 7.1% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.83% from 4.75% with points increasing to 0.53 from 0.46.

 

For the week, the FNMA 4.0% coupon bond gained 4.7 basis points to close at $101.641 while the 10-year Treasury yield decreased 2.6 basis points to end at 2.924%.  The Dow Jones Industrial Average lost 226.05 points to close at 25,090.48.  The NASDAQ Composite Index gained 100.87 points to close at 7,746.38.  The S&P 500 Index added 0.63 of one point to close at 2,779.66.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 1.50%, the NASDAQ Composite Index has added 12.21%, and the S&P 500 Index has advanced 3.96%.

 

This past week, the national average 30-year mortgage rate decreased to 4.65% from 4.68%; the 15-year mortgage rate was unchanged at 4.11%; the 5/1 ARM mortgage rate increased to 3.95% from 3.94% while the FHA 30-year rate fell to 4.38% from 4.42%.  Jumbo 30-year rates decreased to 4.68% from 4.70%.

 

Economic Calendar – for the Week of June 18, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.641, +4.7 bp) traded within a wider 53.1 basis point range between a weekly intraday high of 101.797 on Friday and a weekly intraday low of $101.266 on Wednesday before closing the week at $101.641 on Friday.

 

The bond fell to its secondary support level at $101.234 during the first half of the week before bouncing and moving higher just above primary short-term support at $101.586 by the end of the week.  There was a new buy signal on Thursday from a slow stochastic crossover plus the bond is neither overbought nor oversold so we should see prices rise into overhead resistance levels this coming week.  If the bond is able to break above overhead resistance, it should lead to stable to slightly lower mortgage rates in the coming week.

 

 

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It’s terrifying but it’s true. One minute you think you own a property and the next, it has been recorded in someone else’s name. Fraud in real estate is alive and well, with authorities all over the country saying homes are illegally taken without owners’ consent.

 

Because of the ever-growing rise of technology, it is now easier than ever to create fraudulent documents that can be easily recorded in public records making your house appear that it was sold and now belongs to someone else.

 

In a Texas case, a deed turned out to be a forgery perpetrated by a daring group of rogue businessmen who claimed ownership of more than 70 vacant houses and lots across Houston. These con artists allegedly made millions by reselling them to unwitting buyers, according to a Houston Chronicle analysis of pending civil and criminal lawsuits.

The players in this massive swindle simply strolled into the Harris County Civil Courthouse with fake deeds bearing the freshly minted signatures of long-dead men, faked notaries’ seals and other blatantly false claims to seize and sell others’ property, according to the Chronicle. The consequences of this fraud — carried out between 2002 and 2008 — continue to affect hundreds of people in some of the city’s humblest neighborhoods and much of the mess remains unresolved.

 

Your best defenses against fraud of this kind are awareness and diligence, not permitting yourself to go on autopilot. The most straightforward way to make sure you are not a victim of this sort of fraud is to check public records regularly, looking for changes. Every city has a place where the public can go to search for information on a property. Property records are maintained at either the county courthouse, county recorder, city hall or another city or county department. Many public offices are staffed by knowledgeable personnel ready to help you find property deeds and encumbrances.

 

Telltale signs something is amiss would be things like getting mail addressed to a different name at your address or seeing that mail you normally might receive regarding your home is no longer arriving in your mailbox. Any new deed recorded in the public records triggers a slew of mail advertisements, so they are a great warning sign that something is up.

 

Another sign is sudden unsolicited interest from prospective real estate agents or home service-related companies. If anything sends up a red flag, go online and check for changes. Then check it again a few weeks later to confirm.

Vacation homeowners will need to be extra-vigilant, since these sorts of properties are especially vulnerable to fraud. Find a neighbor, or hire a reputable property manager, to regularly check and report on your property. Also, make sure to have mail related to that property forwarded to you, and be concerned if the flow stops unexpectedly.

 

Most times there will be nothing amiss regarding the ownership of your home. But it’s much easier to take steps to avoid a problem of this proportion than to spend a lot of time and money fixing it.

 

Source: Sun Sentinel, Houstong Chronicle, TBWS

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