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Apache is functioning normally

I’ve been traveling for more than a month now. While much of this travel has been for pleasure — I spent three weeks in Turkey with my cousin — there’s been plenty of work involved too. While I’ve been traveling, I’ve also been writing — and networking with other bloggers. Over the past month, I’ve attended two conferences, and spent three days meeting with folks in New York.

Note: Some of you have been craving more of my voice around Get Rich Slowly. That’s not going to happen. But if you’re really wanting to read what I write, check out More Than Money, where I’m writing about travel, blogging, and anything else that tickles my pickle.

FinCon 2012
In early September at FinCon 2012 (the financial blogger conference), I spoke about the future of financial blogging. While there, I reconnected with many of my colleagues, including Jim from Bargaineering, Flexo from Consumerism Commentary, Adam from Man vs. Debt, Ramit from I Will Teach You to Be Rich, Neal Frankle (the Wealth Pilgrim), and Kylie Ofiu (an Australian personal finance blogger).

At FinCon, I also met two new people who really impressed me.

First up was Pete, whom many of you know as Mr. Money Mustache. He has a hot early retirement blog, and for good reason. He offers solid advice in a strong personal voice. I loved his presentation at FinCon; his blogging philosophy and mine are closely aligned.

Second was Paula Pant, who writes at Afford Anything. Paula is remarkable for two reasons. First, she’s one of only a few female bloggers in a niche dominated by men. Second, Paula focuses almost exclusively on making money instead of saving it. Her blog is about building wealth, with a particular focus on rental properties. She’s sharp, and she now has me as a subscriber.

New York
After FinCon, I flew to Turkey to spend three weeks touring the country with my cousin. On my way home, I stopped in New York for business. I met with several colleagues, a few GRS readers, and my editor at Moneyland.

Also in New York, I practiced what I preach regarding conscious spending. You see, I’m a huge fan of musical theater. But good tickets to good shows on Broadway can be expensive. Very expensive. In order to be able to indulge my passion, I cut back in other areas.

For instance, I rented a cheap ($70/night) apartment on Airbnb and then walked everywhere in Manhattan. This saved me about $200 a day, money that I put into theater tickets. On Sunday, I joined Flexo (from Consumerism Commentary) and Ramit (from I Will Teach You to Be Rich) for a performance of The Book of Mormon, which was hilarious. I also saw Chicago (completely disappointing) and the achingly beautiful Once.

Sure, I had to stay in a tiny, tiny room (with barely room for a bed), but who cares? All I did was sleep there. With the money I saved, I had a great time in one of my favorite cities.

Note: On my last night, I had a beer with my hostess, a precocious young (26?) woman who’s found a clever way to reduce her cost of living. Rose’s apartment has three rooms. She lives in one and rents the other two out on Airbnb. “Are you able to keep the rooms rented?” I asked. She smiled and said, “My rent here is $3,600/month. Airbnb pays the rent for me.” Rock on!

Savvy Blogging Summit 2012
FinCon was fun, but I have to admit: My favorite blogging conference is always the Savvy Blogging Summit. Mostly, it’s attended by a group of remarkable women: stay-at-home moms who, in their spare time, blog about coupons, shopping, and other domestic concerns. They call themselves “dealbloggers”.

This topic may sound mundane, but more than any group I know, these savvy bloggers live the ideals I espouse everyday at Get Rich Slowly. Meeting these women is like seeing the Get Rich Slowly philosophy in action.

  • They actively work to keep their household expenses low.
  • They’ve found creative ways to boost their income. Most make money — sometimes a lot of money — from blogging. But I also talked to folks who earn income as spokeswomen, radio broadcasters, brand representatives, graphic designers, mobile app creators, and more.

And they do this all while raising families. In some cases, large families. These are stay-at-home moms who do a whole lot more. They aren’t just savvy bloggers; they’re also savvy entrepreneurs. (They’re also a hell of a lot of fun. They taught me to dance Gangnam Style this year!)

Early in the conference, I met John Saddington, an Atlanta-based blogger and entrepreneur. I’d never heard of him before Savvy Blogging Summit, but he and I had a chance to chat about business and blogging. I was intrigued by his vision, so I recruited him to help me present the “Blogging Exit Strategies” panel, which worked out well. I think the attendees got some great advice about building and selling a business.

Some of the other people I spent time with during this conference included:

  • Amy Gross from Vinesleuth, who has a free ebook called Dinner and Wine for $20 or Less.
  • Amber Bustanoby from Coupon Connections. Amber’s not just a coupon blogger; she can also bust a move on the dance floor.
  • Jennie Sanford from Bargain Blessings. I’d seen Jennie at three previous conferences but never talked with her before now, which is a shame. I want to chat with her more in the future.
  • Kimberlee, The Peaceful Mom, who taught me about Pinterest. (Sometimes I’m slow on the uptake.)
  • And on the plane from Atlanta to San Francisco, I spent five hours talking with Melissa Earl from Living a Frugal Life.

As always, I learned a lot at Savvy Blogging Summit, and did my best to impart some of my knowledge to others. I’ve already committed to speaking at SBS IV, which will be held next June in Cincinnati. I wouldn’t miss it.

Note: While in Atlanta, I reconnected with Paula from Afford Anything. I’d met her at FinCon at the start of the trip, and she was generous enough to offer me a ride. After picking me up from the airport, she showed me around Piedmont Park and told me all about her adventures in real estate. As I say, she’s sharp. If you’re interested in rental properties, you should read her blog.

Now I’m in San Francisco. Today, I’ll meet with the owners of GRS, have lunch at Twitter HQ, and stop by to meet the folks at Lending Club. Tomorrow, I get to meet my girlfriend’s family and friends.

I’m nearing the end of this marathon month-long trip, and thank goodness. I’m too old for all this travel!

Source: getrichslowly.org

Apache is functioning normally

The rollercoaster continues for mortgage rates. After falling 40 basis points last week to 5.30%, purchase mortgage rates climbed back up this week to 5.50%, according to the latest PMMS survey from Freddie Mac.

“Mortgage rates are volatile as economic growth slows due to fiscal and monetary drags,” said Sam Khater, Freddie Mac’s chief economist. “With rates the highest in over a decade, home prices at escalated levels, and inflation continuing to impact consumers, affordability remains the main obstacle to homeownership for many Americans.”

The survey results, which compile purchase mortgage rates reported by lenders during the past three days, comes on the heels of troubling inflation news. The federal government on Wednesday reported that the consumer price index rose 9.1% on a year-over-year basis in June, far above Wall Street’s estimate of 8.8%. It was the fastest pace for inflation since November 1981, and has generated concerns that a recession is just around the bend.

Following the CPI results, the 2-year treasury yield and the 10-year counterpart inverted, which Wall Street analysts say is a telltale sign of a coming recession. The 2-year traded more than 9 basis points higher at around 3.138%. The benchmark 10-year rate, dropped nearly 4 basis points to 2.919%. Wall Street observers believe the Federal Reserve will increase rates by 75 or 100 basis points later this month to stamp out inflation.

Mortgage rates of all stripes moved north on Wednesday following the CPI news. On HousingWire’s Mortgage Rates Center, pricing engine Optimal Blue had 30-year conforming rates at 5.782% on Wednesday. Loan officers told HousingWire this week that they were quoting rates in the low 6% range on conventional products, but about 100 basis points lower on jumbos.

The surge in rates has cooled the housing market over recent months, with buyers fretting over reduced purchasing power and record-high home prices. Homebuilders have also reported higher cancelation figures and lower demand.

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The refinancing market in particular, has tanked. Fewer than 20% of mortgage locks in June were refis, and hardly any were rate-term products, according to data from Black Knight.

According to Freddie Mac, the 15-year fixed-rate purchase mortgage this week averaged 4.67% with an average of 0.8 point, up from last week’s 4.45%. The 15-year fixed-rate mortgage averaged 2.22% a year ago. 

The 5-year ARM averaged 4.35% this week, up from 4.19% the previous week. The product averaged 2.52% a year ago. 

Source: housingwire.com

Apache is functioning normally

Demand for mortgages declined for the second consecutive week, led by a dip in purchase mortgage applications — despite rates on a downward trend.

The market composite index, a measure of mortgage loan application volume, decreased 1.7% for the week ending July 8, according to the Mortgage Bankers Association (MBA). The refinance index rose 2% from a week earlier and the purchase index dropped 4%.

“Purchase applications for both conventional and government loans continue to be weaker due to the combination of much higher mortgage rates and the worsening economic outlook,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

Freddie Mac PMMS showed purchase mortgage rates dropped 40 basis points to 5.3% last week. Rates during the previous two weeks dropped by half a percent but were still well above the 30-year purchase rate of 2.9% from the same period in 2021. 

The trade group estimates the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) remained at 5.74%, unchanged from the previous week. Jumbo mortgage loans (greater than $647,200) dipped to 5.25% from 5.28%. 

After reaching a record average purchase loan size of $460,000 in March 2022, the figure declined to $415,000 last week led by the potential moderation of home price growth and weaker purchase activity at the upper end of the market, Kan added. 

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The refi share of total applications rose to 30.8% last week, largely due to an uptick in conventional and Federal Housing Administration (FHA) refinances. The overall refi index remained 5% below the average level reported in June, according to the MBA.

“With the 30-year fixed rate 265 basis points higher than a year ago, refinance applications are expected to remain depressed,” said Kan. 

In a separate projection made by the MBA in June, of the $2.4 trillion origination volume forecast for 2022, about $730 billion is expected to come from refis. About $2.3 trillion, more than 40% of the $4 trillion origination volume, came from refis in 2021. 

The FHA share of total applications decreased to 11.7% from the previous week’s 12%. The United States Department of Agriculture (USDA) share also declined to 0.5% from the week prior’s 0.6%. The Veterans Affairs (VA) share of total applications slightly rose to 11.2% from 11.1%.

The share of adjustable-rate mortgages (ARM) applications also rose, accounting for 9.6%. According to the MBA, the average interest rate for a 5/1 ARM increased to 4.71% from 4.62% a week prior. 

The survey, conducted weekly since 1990, covers 75% of all U.S. retail residential mortgage applications.

Source: housingwire.com

Apache is functioning normally

California-based lender loanDepot was in the red again in the first quarter of 2023. However, margins and revenues improved in the period, according to documents filed with the Securities and Exchange Commission on Tuesday.

The lender recorded a loss of $60.2 million in non-GAAP adjusted net income from January to March, compared to a negative $110.7 million in the previous quarter. The GAAP net loss in the first quarter was $91.7 million.

It was loanDepot’s fourth consecutive quarterly loss and comes on the heels of a resolution to protracted infighting between founder and chairman Anthony Hsieh and the board of directors.

“The first quarter of this year remained challenging for the housing market as virtually all participants grappled with the impacts of ongoing volatility in mortgage interest rates, persistent cost inflation and the lack of available homes for sale,” Frank Martell, loanDepot’s president and CEO, said in a statement. 

“Profitable revenue growth and a reset of our cost structure were the key drivers behind the substantial narrowing operating losses quarter over quarter,” Martell told analysts. 

Total revenues increased to $207.9 million in the first quarter, up from $169.6 million in the previous quarter, “primarily driven by higher pull through weighted lock volume and servicing fee income,” the company told investors. Total expenses dropped to $314.4 million in Q1 2023, down from $343.7 million in Q4 2022.

Loan origination volume came in at $4.9 billion in the first quarter, down from $6.3 billion in the fourth quarter of 2022. Purchase loans comprised 71% of the total. Company executives project the second quarter volume to be anywhere between $4.5 billion and $6.5 billion.

“Although the affordability and availability of new and existing home sales remain challenging for the industry overall, we expect to continue to benefit from seasonally higher revenues and our ongoing cost reduction program,” Martell said. “Assuming the expected benefits of continuing seasonal volume increases and cost productivity, we expect to deliver improving financial results over the course of the second and third quarters of 2023.”  

loanDepot has started to display margin improvement, but they remain tight. These improvements followed major cost-cutting initiatives that reduced company headcount to roughly 4,800 from 10,000 at the end of the first quarter 2022.  

The gain-on-sale margin came in at 2.26% in the first quarter, better than the 2.21% registered in the previous quarter. 

According to Patrick Flanagan, loanDepot’s CFO, the higher gain-on-sale margin was primarily “due to a reduction in our repurchase provision,” as repurchase activity and discounts decreased substantially. Executives expect margins will be between 2.40% and 2.80% in the second quarter.

Flanagan told analysts that expenses during the second quarter may increase, reflecting seasonally higher loan origination volume. However, higher production and a further reduction in controllable expenses will help the company to narrow losses in the second quarter.

According to Martell, loanDepot is “well positioned with the originators that we have today to manage” higher volumes.  

Regarding its servicing portfolio, the unpaid principal balance increased to $141.6 billion as of March 31, 2023, from $141.1 billion as of December 31, 2022. Servicing fee income rose to $118.9 million in Q1 2023 from $107.2 million in the previous quarter.

loanDepot still has money to throw at problems. The lender said it had $798.1 million in cash balance at the end of March, down 7.6% from the fourth quarter.

Source: housingwire.com

Apache is functioning normally

Mortgage credit availability for borrowers fell in June as higher mortgage rates took a toll on purchasing power.

The monthly Mortgage Credit Availability Index (MCAI) fell by 0.3% in June, according to the Mortgage Bankers Association. A decline of the index, benchmarked to 100 in March 2012, indicates lending standards are tightening, while an increase suggests loosening credit. 

Credit availability was mixed by loan type. The conventional MCAI rose 1.2% while the government MCAI dipped by 1.7%. Of the component indices of the conventional MCAI, the jumbo MCAI increased by 1.4% and the conforming MCAI climbed by 0.6%. 

“Mortgage credit availability decreased slightly in June, as significantly higher mortgage rates compared to a year ago slowed refinance and purchase activity and impacted the overall mortgage credit landscape,” said Joel Kan, associate vice president of economic and industry forecasting at the MBA. 

Purchase mortgage rates, measured by the Freddie Mac PMMS Index, were at 5.3% last week. While rates are on a downward trend due to concerns about a potential recession, they remain well above last year’s 2.9% 30-year purchase rate. 

Borrowers’ demand for mortgage loans fell last week driven by a 7.7% decline in refi applications and a 4.3% dip in purchase applications from the previous week, according to the MBA.

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Although there was reduced supply of lower credit score and high loan-to-value (LTV) rate-term refinance programs, the decline was offset by increased offerings for conventional adjustable rate mortgage (ARM) and high balance loans, Kan said.

In a market with a shortage of inventory and soaring rates, an increasing number of homebuyers have been opting for ARMs this year, which carry lower rates for an initial period of fixed interest and amortize over a 30-year term. Application volume for ARMs hit a 14-year high in May, making up nearly 11% of all mortgage applications. Last week, it consisted of 9.5% of all mortgage applications. 

“With higher rates and elevated home prices, more prospective buyers are applying for ARMs, but activity remains below historical averages,” Kan said. 

Source: housingwire.com

Apache is functioning normally

Purchase mortgage rates increased for the second consecutive week but at a slower pace as the market chewed on the latest U.S. inflation data, the expectation of a tightening Federal Reserve’s monetary policy, and its economic impacts.  

After jumping 20 basis points last week to 5.50%, purchase mortgage rates increased this week to 5.54%, according to the latest PMMS survey from Freddie Mac. The index compile rates reported by lenders during the past three days.   

“The housing market remains sluggish as mortgage rates inch up for a second consecutive week,” said Sam Khater, Freddie Mac’s chief economist. “Consumer concerns about rising rates, inflation and a potential recession are manifesting in softening demand. As a result of these factors, we expect house price appreciation to moderate noticeably.” 

Mortgage rates tend to align with the 10-year U.S Treasury yield, which increased 13 basis points in one week to 3.15% Wednesday. The federal funds rate doesn’t directly dictate mortgage rates, but it does steer market activity to create higher rates and reduce demand.

The 10-year benchmark reflects that, in June, the consumer price index rose 9.1% on a year-over-year basis, far above Wall Street’s estimate of 8.8% and the fastest pace since November 1981. 

Wall Street observers believe the Federal Reserve will increase rates by 75 or 100 basis points later this month to reduce inflation, generating concerns that a recession is just around the bend. 

How auction buyer data foreshadows housing market shifts

The retail housing market data, released by Redfin at the end of June, shows the median asking price for newly listed homes for sale in the four weeks ending June 26 dropped 1.5% from an all-time high in the previous month even while a record share of all homes for sale saw price drops.  

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Weakening economic outlook, high inflation and affordability challenges have taken a toll on buyer demand. 

According to the Mortgage Bankers Association (MBA), the market composite index, a measure of mortgage loan application volume, declined 6.3% for the week ending July 15. The refinance index dipped 4% from the previous week, and the purchase index decreased 7%.

On HousingWire’s Mortgage Rates Center, Black Knight’s pricing engine Optimal Blue had 30-year conforming rates at 5.789% on Wednesday, slightly up to 5.782% the previous week. 

Meanwhile, the 30-year fixed-rate jumbo was at 5.245% Wednesday, down from 5.322% the previous week. The Optimal Blue index includes some refinancing data — but excludes cash-out refis to avoid skewing averages.

According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.75% with an average of 0.8 point, up from last week’s 4.67%. The 15-year fixed-rate mortgage averaged 2.12% a year ago. 

The 5-year ARM averaged 4.31% this week, down from 4.35% the previous week. The product averaged 2.49% a year ago. 

Source: housingwire.com

Apache is functioning normally

Last week we saw a noticeable slowdown in housing inventory growth that I hope has more to do with a holiday week than a trend. Mortgage rates fell last week after the debt ceiling issues were resolved, but the damage from higher rates took its toll on purchase application data again.

Here’s a quick rundown of the last week:

  • Active inventory grew 3,180 weekly, and new listing data fell week to week and is still trending at an all-time low in 2023.
  • Mortgage rates fell during the week from a year-to-date high of 7.14% to 6.85% but ended at 6.90%
  • Purchase application data had its third straight week of negative data as the constant theme of higher rates impacted the weekly data.

Weekly housing inventory

This year’s growth in active listing inventory has been so slow that I am willing to bet that a zombie from The Walking Dead could outrun it. However, I am grateful we even saw some traditional spring inventory growth this year because new listing data is trending at all-time lows.

  • Weekly inventory change (May 26-June 2): Inventory rose from  433,104 to 436,284
  • Same week last year (May 27-June 3): Inventory rose from 357,582 to 368,436
  • The inventory bottom for 2022 was 240,194
  • The peak for 2023 so far is 472,680
  • For context, active listings for this week in 2015 were 1,131,405

It’s been such a different year for inventory from 2023 versus 2022 that we are heading toward an event that would have seemed impossible in earlier years: If the current inventory trend continues, we will see some negative year-over-year inventory data soon for the weekly single-family listing data.

the chart below shows the clear trend, which is why tracking inventory with rates higher now will be critical to see if there is any way to stop this reality.

One big reason for this lack of inventory growth has been new listing data, which has trended at all-time lows since the second half of 2022, continuing into 2023. We had another bad week, which I am hoping is due to the holiday. With so few new listings and stable housing demand, it’s been hard getting much of a kick in inventory growth.

Here are the number of new listings for this week over the last several years:

  • 2021 72,643
  • 2022 71,113
  • 2023 55,226

With higher mortgage rates, active inventory should be growing more. This week’s data includes a holiday, so I’m looking for better numbers next week.

Purchase application data

As mortgage rates surpassed 7%, purchase application data had its third straight negative week-to-week print. The only thing that surprised me this time was that I thought purchase application data would actually decline much more than what we saw in the past three weeks. Earlier in the year, the cumulative average of the weekly declines when rates first spiked to 7.10% was -10%. Over these last three weeks, the cumulative decline was -3.93%.

For the year, we are at a wash: after making some holiday adjustments, we have had 10 positive prints versus 10 negative prints. Since Nov. 9, 2020, we have had 17 positive and 10 negative prints. After the big existing home sales report in March, we haven’t had much going on with purchase applications and it will be interesting to see if we get a positive print this week.

Mortgage rates fell and this year purchase applications have traditionally come back with a positive print after a week where the 10-year yield fell, something I talked about earlier in the year on CNBC.

The 10-year yield and mortgage rates

We had a keystone cops week with the bond market and mortgage rates. After the debt ceiling drama ended, we saw a noticeable move lower in bond yields, and rates fell. After the jobs report, the yield increased on Friday, leading to higher mortgage rates.

In my 2023 forecast, I wrote that if the economy stays firm, the 10-year yield range should be between 3.21% and 4.25%, equating to mortgage rates between 5.75% and 7.25%. I have also stressed that the 10-year level between 3.37% and 3.42% would be hard to break lower. I call it the Gandalf line in the sand: “You shall not pass.” 

So far in 2023, that line has held up, as the red line in the chart below shows. Mortgage rates have been in the range of 5.99%-7.14%. However, we do have some issues in the mortgage market.

Since the banking crisis started, the spreads between the 10-year yield and 30-year fixed mortgage rates have gotten worse, keeping mortgage rates higher than usual. This has been going on for some time, but the spreads were getting better before the banking crisis started and the Federal Reserve went into emergency clean-up mode. 

Getting better spreads can send mortgage rates back to the low 6% level without any help from the bond market. However, there is no sign of that happening anytime soon.

Another aspect of my 2023 forecast was that if jobless claims break over 323,000 on the four-week moving average, the 10-year yield could break under 3.21% and head toward 2.73%. This would send mortgage rates significantly lower than we have seen in 2023 if the spreads improve.

From the St. Louis Fed: Initial claims for unemployment insurance benefits increased by 2,000 in the week ended May 27, to 232,000. The four-week moving average declined, to 229,500.

The week ahead: A light economic week

This week doesn’t have much economic news, just the traditional purchase application data and jobless claims with some ISM reports. However, we should have some exciting bond market auctions after the debt ceiling drama ended since the government was running on fumes and needed to issue bonds to pay the bills. Also, it will be interesting to see how the bond market reacts after the last labor report, which I wrote about here. 

OPEC is making one of its occasional cuts in oil production because a few countries need oil prices to be above $83 a barrel to make the math work for their budgets. We’ll see how the market responds to that. However, outside of that, we will be tracking to see if the lower mortgage rates helped the weekly purchase application demand data, and, hopefully, inventory growth will pick up this week.

As we get closer and closer to July 4th, I will be keeping an eye on the new listing data, as we are getting closer to the time when we start the seasonal decline in new listing data since we are trending at all-time lows already. the last thing I want to see is this data line take another leg lower toward the end of the year. 

Source: housingwire.com

Apache is functioning normally

Unemployment ticked up in May, but employers kept pumping out jobs — more than enough to beat expectations.

The U.S. added 339,000 jobs in May, according to Friday’s jobs report from the Bureau of Labor Statistics (BLS). That’s well above the 190,000 gain forecast by economists surveyed by the news agency Reuters. It’s the 29th straight month of positive job growth.

The unemployment rate, meanwhile, rose to 3.7% in May, up from 3.4% in April, according to the BLS. Unemployment has wavered between 3.4% and 3.7% since March 2022.

As for wages, the May data shows hourly earnings grew 4.3% over the last year. It’s lower than the growth we saw in May 2022, when wages grew 5.2% over a 12-month period.

Which industries added jobs?

In May, the most job gains were in:

  • Professional and business services: +64,000.

  • Government: +56,000.

  • Health care: +52,000.

  • Construction: +25,000.

  • Transportation and warehousing: +24,000.

  • Social assistance: +22,000.

Leisure and hospitality jobs also rose (+48,000) but remain below their pre-pandemic level by 2.1%, BLS data shows.

April data showed other strong jobs numbers

On Wednesday, the BLS Job Openings and Labor Turnover Summary (JOLTS) also showed promise for the job market. Job openings climbed to 10.1 million in April, well above 9.6 million openings in March. In addition, layoffs and discharges decreased from 1.8 million in March to 1.6 million in April. And quit rates, which can indicate how workers feel about new job prospects, didn’t change much: 2.4% in April compared to 2.5% in March.

The areas that saw the most job opening growth in April were:

  • Retail trade: +209,000.

  • Health care and social assistance: +185,000.

  • Transportation, warehousing and utilities: +154,000. 

What’s the Fed’s next move?

Despite interest rate hikes, bank failures, the threat of a government default and high inflation, this labor market is still standing strong.

The jobs report is just one indicator the Federal Reserve considers as it weighs its next action to curb inflation. The inflation rate has declined for nearly a year but has yet to reach the Fed’s 2% target rate.

The Fed pays close attention to the core personal consumption expenditures index (PCE) as a proxy for inflation — that’s the change in the prices of all goods and services except food and energy. The latest 12-month core PCE index was 4.7%, according to the May 26 data released by the Bureau of Economic Analysis. That’s down from its peak of 5.1% in September 2022 but still far from the Fed’s 2% target.

Following 10 consecutive rate hikes aimed to cool inflation, the Federal Reserve might press pause during its next meeting, scheduled for June 13-14. As of Friday, the financial derivatives marketplace CME Group’s FedWatch Tool has the odds of no change to the rate at approximately 66%, compared to a 33% chance of a rate hike.

A strong job market tends to push inflation higher. However, that wasn’t the primary factor in the last couple of years, according to a May 23 Brookings Institution paper written by former Fed Chair Ben Bernanke and former head economist of the International Monetary Fund Olivier Blanchard. They found that the cost of goods — not labor — was the most significant contributor to inflation when it began rising during the pandemic.

But now that dynamic has shifted, and persistent labor market tightness is likely to become the more dominant factor in inflation. They say the “Fed is unlikely to be able to avoid slowing the economy to return inflation to target.”

The next jobs report is scheduled to be released on July 7.

Source: nerdwallet.com

Apache is functioning normally

While rising property values have continued to defy expectations, could it be the end for home price appreciation after nearly a decade of gains?

There’s been talk of frothy home prices for years now, with affordability stretched even as mortgage rates hit new all-time lows.

One new forecast says the good times in the red-hot real estate market might finally be over.

At least, that’s the call from data analytics firm CoreLogic, which is predicting a 1.3% drop in home prices from April 2020 to April 2021.

Home Prices Expected to Post an Annual Decline in 2021

  • Home prices were up 5.4% in April compared with April 2019
  • Property values increased 1.4% month-to-month from March to April
  • Month-to-month gain expected to be just 0.3% from April to May
  • Annual price decline of 1.3% predicted from April 2020 to April 2021

While home prices have still gone up both year-over-year and month-over-month lately, the gains are projected to decelerate and eventually turn negative.

Home prices rose 1.4% from March to April of this year, contributing to the 5.4% annual gain, but the CoreLogic HPI Forecast calls for just a 0.3% gain from April to May.

That could represent one of the few remaining (or last) of the monthly gains for a while since they expect home prices to decline 1.3% by April 2021.

If CoreLogic is right, it would mark the first yearly drop in more than nine years, when home prices bottomed around 2011/2012.

The good news is it’s only a small annual decline, and that’s if they’re right to begin with. The pundits have been predicting higher mortgage rates and lower home prices for years now.

And they’ve been wrong year in and year out, which again speaks to how difficult it is to call a bottom or a top.

Further throwing their forecast into question is the fact that the typical spring home buying season has been pushed back a few months, so we could see home prices rise in coming months.

Cities Driven by Tourism or Oil Industry Expected to Fare Worst

  • Miami and Las Vegas hurting due to less travel and fewer visitors
  • Houston and West Virginia suffering from oil/gas industry slowdown
  • Home prices expected to be down in 41 states by next April
  • One winner is Philadelphia thanks to NYC migration related to COVID-19

CoreLogic chief economist Frank Nothaft said their forecast has home prices down a year from now in 41 states, despite record low mortgage rates and limited housing inventory.

He added, “If unemployment remains elevated in early 2021, then we can expect home prices to soften.”

As always, when looking at home prices you have to consider the local market, not just the nation as a whole.

CoreLogic expects some metros to be hit more than most, and others may actually buck the trend and see even more gains thanks to shifting demographics.

For example, already overvalued markets such as Las Vegas and Miami are expected to decline by 7.2% and 4.4%, respectively, by April 2021.

The same goes for Cape Coral-Fort Myers and North Port-Sarasota-Bradenton in Florida, and Prescott, Arizona.

In these tourist-rich destinations, the economy has taken a big hit thanks to COVID-19, which could lead to increased foreclosures and fewer eligible home buyers.

And perhaps less appetite for investment properties if not as many individuals are vacationing or moving to those cities.

CoreLogic expects a decline in property values in these metros as visitors decide instead to stay home, which could lead to the sale of vacation rentals at discounted prices.

Similarly, home prices are under pressure in Huntington, West Virginia and Houston, Texas, both of which have suffered from a collapse in the oil and gas industry.

On the other side of the coin, Philadelphia has seen a boom as New Yorkers relocate “in search of more space and privacy,” thanks to the distancing effects of the coronavirus.

The Philly metro exhibited the biggest year-over-year increase in single-family detached home prices, which surged 10.6%.

Nationwide, homes price gains are outpacing condo price gains, with single-family attached units (condos, duplexes) up 4.3% year-over-year in April 2020 compared to a 5.7% increase for single-family detached properties.

This plays to the new trend of wanting/needing more space, just like why the suburbs are apparently hot again after falling out of favor with home buyers.

Zillow seem to be on the same page regarding 2021 home prices, though they expect a drop this year followed by a recovery in 2021 resulting in no real material change.

It’s too early to tell what’s going to happen, though if you’re modeling home price gains and losses based on COVID-19, assume it’s flimsy since the pandemic still presents many more questions than answers.

I still think this housing market has legs, possibly for several more years, even if there are some expected (or unexpected) hiccups along the way.

The cyclical prediction is home prices peaking around 2024, which continues to makes sense.

While it may feel close to a top, it always takes longer to play out than anticipated. Just look at home prices on the way down, or the meteoric stock market rise over the past several years.

In the meantime, enjoy the ride up, hopefully.

Source: thetruthaboutmortgage.com

Apache is functioning normally

Weakening economic outlook, high inflation and affordability challenges took a toll on buyer demand, leading to a drop in both purchase and refi applications last week, according to the Mortgage Bankers Association (MBA).

The market composite index, a measure of mortgage loan application volume, declined 6.3% for the week ending July 15, the MBA said. The refinance index dipped 4% from the previous week, falling to a 22-year low, and the purchase index decreased 7%.

“Mortgage applications declined for the third week in a row, reaching the lowest level since 2000,” Joel Kan, associate vice president of economic and industry forecasting at MBA. “The decline in recent purchase applications aligns with slower homebuilding activity due to reduced buyer traffic and ongoing building material shortages and higher costs.”

New U.S. home building activity fell 2% to a seasonally adjusted annual rate of 1.56 million units in June, marking a nine-month low since September 2021, according to the U.S. Department of Commerce. Permits for future homebuilding fell 0.6%, to a rate of 1.69 million units, also the lowest since September. 

While the refinance share of all mortgage activity slightly increased from 30.8% the previous week to 31.4% of total applications, the refi index was 80% lower than the same week a year ago.

“With most mortgage rates more than two percentage points higher than a year ago, demand for refinances continues to plummet,” Kan said.

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Mortgage rates have been volatile in recent weeks, following the Federal Reserve‘s interest rate hike of 75 basis points last month. After falling 40 bps two weeks ago to 5.30%, purchase mortgage rates climbed back last week to 5.5%, according to the latest Freddie Mac PMMS. A year ago at this time, 30-year fixed-rate purchase rates were at 2.88%.  

The trade group estimates the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) rose to 5.82%, from the previous week’s 5.74%. Jumbo mortgage loans (greater than $647,200) also increased to 5.31% from 5.25%. 

The Federal Housing Administration‘s (FHA) share of total applications rose to 12.4% from the previous week’s 11.7%. The United States Department of Agriculture‘s (USDA) share also increased to 0.6% from the week prior’s 0.5%. Meanwhile, the Veterans Affairs‘ (VA) share of total applications fell to 10.6% from 11.2%.

The share of adjustable-rate mortgages (ARM) applications also declined, accounting for 9.5%. According to the MBA, the average interest rate for a 5/1 ARM decreased to 4.6% from 4.71% a week prior. 

The survey, conducted weekly since 1990, covers 75% of all U.S. retail residential mortgage applications.

Source: housingwire.com