Local Market Review: Activity and Prices Climb, Pending Sales Dip
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Housing data released by MIBOR today shows continued strong sales and price activity through October 2013 with a weakening in pending sales activity. The slowing trend of pending sales in the last few months has resulted in the first negative metric all year with pending sales in October down 1.8 percent from October 2012. Closed sales still performed well increasing 6.6 percent in October and up 11.6 for the quarter ending in October.
According to the MIBOR Monthly Indicators Report, prices maintain a steady climb with median sales price up 4.9 percent for the quarter, and up 5 percent for the month of October. Average sales increased 4.9 percent in October and 4.4 percent for the quarter ending in October. The current average sales price in central Indiana is $165,916; median sales price is $132,500. Months of inventory dipped to 5.3 months. Along with the Monthly Indicators Report, a one-page report of each county within the service area is also provided. In total, these data sets are intended to be a snapshot of the market, providing historical comparisons whenever possible. The data was pulled from the BLC® listing service on November 18. To download the Monthly Indicators report, click here. To view the one-page county reports, click here. Please note, due to the length of the reports, it may take a few minutes to download. If you have questions regarding the data, please click here. |
Thursday, November 28, 2013
Recent Indianapolis Area Housing Stats Released
Wednesday, November 20, 2013
Mortgage Rate Update after Fed Minutes Released
A quick hitter today. The Federal Reserve released the minutes from their most recent meeting today along with current commentary from Fed Member James Bullard drives rates higher.
Mortgage Bonds began the day with some positive gains and we tested prices and rates seen the day of the Jobs Report from the 8th. But then the Fed Minutes and Bullard's words now driving us back down to near Nov 8th levels.
This proves a small point that streaks are made to be broken (see previous post). A few words out of a Fed Member has driven the Bond AND Stock Market into the negative today. These reactions are pretty fascinating...and by fascinating I mean ridiculous. Bond traders shrug off a report where existing home sales disappointed today...missing the target by over 3%. This drop in bond prices and rise in rates is one that will be reversed. There is still no good news floating out there other than a jobs report that may be revised next month for the worse (what I am anticipating). For now, hope you took our advice and locked two days ago. For current loans not locked, float your rate. I feel a change in sentiment coming yet this week.
Mortgage Bonds began the day with some positive gains and we tested prices and rates seen the day of the Jobs Report from the 8th. But then the Fed Minutes and Bullard's words now driving us back down to near Nov 8th levels.
This proves a small point that streaks are made to be broken (see previous post). A few words out of a Fed Member has driven the Bond AND Stock Market into the negative today. These reactions are pretty fascinating...and by fascinating I mean ridiculous. Bond traders shrug off a report where existing home sales disappointed today...missing the target by over 3%. This drop in bond prices and rise in rates is one that will be reversed. There is still no good news floating out there other than a jobs report that may be revised next month for the worse (what I am anticipating). For now, hope you took our advice and locked two days ago. For current loans not locked, float your rate. I feel a change in sentiment coming yet this week.
Monday, November 18, 2013
Jobs Report Aftermath
A week after the jobs report euphoria and the bond market has finally digested the report in its entirety. In sports they say a bad team is on a winning streak at two games. So what do we make of 5 straight days of gains since Friday the 8th of November (bond market was closed on 11-11-11 for Veteran's Day)? The chart below reflects how the traders in the bond pits and the US Govt was viewing bond pricing: it was too low and the economic outlook too optimistic following the Jobs Report.
Bond pricing have recaptured all of the losses from a week and are trending higher. I think enough people in the trenches think a Fed Taper of Bond purchases is still a few months away. I like the bounce in pricing and lowering of mortgage rates but feel our market is too fragile to bank on it to continue this trend in a straight line. If you regretted not locking prior to the jobs report, your chance to do so is today---LOCK IT. Streaks are made to be broken...this one will be too. But when? I'll check in later this week.
Tuesday, November 12, 2013
November Jobs Number Surprise: Results in Interest Rates Rising
Friday morning Nov 8th rolled in with the pundits on CNBC calling for a jobs creation number between 100k to 140k. I routinely switch off Mickey Mouse Clubhouse once a month on that particular Friday to the dismay of my 2 year old daughter to see how the reported number could impact my clients' rates. The past few months, the experts on the CNBC panel were often incorrect. They've had a much rosier picture of the economy than what I was seeing from daily economic reports. Thus, since August, mortgage rates had been improving from the mid to upper 4% range to the 4% to mid 4% range depending on the loan program for a 30 year fixed rate mortgage.
I was much more interested in Friday's number than normal, nervous would accurately describe it as my stomach was upset---a bad gut feeling. My concern was not if the jobs created for the month of October were less than the consensus of 120k (which would likely result in mortgage rates improving) but "what if this number surprises everyone and shows more improvement than anyone is talking about"?
I had a vested interest as several clients the day before told me they no longer wanted to wait to lock in their rate but were not sure they had done the right thing. I then had a few "gamblers" defined as those who felt the jobs report would disappoint...thus rates would go down further. So what happened next?
I am sitting on my couch, iphone at the ready showing Mortgage Market Guide Mobile via Google Chrome...and see Bonds are down 19 basis points (nearly a quarter discount point). Bond traders like to sell bonds thus driving down prices (and rate increases) when they don't know what a report like this will do to the overall fixed income market. But 19 basis points??? Ahhh, a bad jobs number will erase that in one trade so I am not concerned. What does have my palms sweating is Hampton Pearson...he's the poster boy for delivering us the good news every month from outside the Labor Department. CNBC comes back from commercial, the music fades in, the media over-used term Breaking News appears and...
204k jobs created...with upward revisions to previous months numbers. I flip my phone in the air and look at my wife and say "Rates are going to tank!" I hold up my phone and continue to hit refresh...but bonds stay at -19 bps. I get excited as maybe there is more to the report than the headline number (which is always the case). But then it happens...bonds drop to -55, then -75, then -95 over the next 30 minutes. They settle in at -116 bps for the 3.5% Fannie Mae Mortgage Backed Security Coupon. That just means rates got over a discount point worse in about an hour. But what does that mean?
On Thursday, my client wanted a 4.25% rate (and had been waiting to lock for 2 weeks) but rates were sitting at 4.375% which included a lender credit (Ruoff paying their closings costs and prepaid items) to the tune of $2600. Their loan amount was $380,000. A discount point is 1% of the loan amount or $3800. Had they not locked, on Friday to get that 4.375% rate they would have had to pay money (nearly $1500), not receive a credit back at closing. For them, locking in the rate on Thursday saved them over $4000.
This was a big deal to a lot of my clients...we protected them from higher rates. What about those getting ready to buy later this month and closing in December or January? Remember I mentioned there is often more to a jobs report that is not a part of the headline number? The jobs report reflected over 700,000 have given up looking for jobs. This is called the labor force participation rate...people actively looking for jobs vs. those who have given up their quest for employment. Our participation rate for the US is at the worst number seen since 1978 (below).
What I feel this statistic shows is that our jobs market is far from out of the woods. Just because you create 204k jobs when 300k-400k (the commonly accepted number from the economists) is the target number needed to continue the economic recovery, there is no reason to celebrate. And certainly no reason to have rates rise. Couple that with 700k people exiting the workforce --- just do the math and you see our labor force is still shrinking! But you see these knee jerk reactions occur when a certain data point is heavily focused on and scrutinized---like the monthly jobs report.
So for those of you not locked in on a rate, expect rates to hover in the range of the lower 4 range to upper 4 range over the next few months. And if you catch a day where rates drop as a result of a report like last Friday...LOCK IT IN. There is too much uncertainty and volatility in the market these days to speculate or think rates are going back to the 3% range. And if rates do go back down later, I always give my clients the option of refinancing at no cost. So lock it, and hope rates go down later and we can always take advantage of them when they do. Have a great week!
I was much more interested in Friday's number than normal, nervous would accurately describe it as my stomach was upset---a bad gut feeling. My concern was not if the jobs created for the month of October were less than the consensus of 120k (which would likely result in mortgage rates improving) but "what if this number surprises everyone and shows more improvement than anyone is talking about"?
I had a vested interest as several clients the day before told me they no longer wanted to wait to lock in their rate but were not sure they had done the right thing. I then had a few "gamblers" defined as those who felt the jobs report would disappoint...thus rates would go down further. So what happened next?
I am sitting on my couch, iphone at the ready showing Mortgage Market Guide Mobile via Google Chrome...and see Bonds are down 19 basis points (nearly a quarter discount point). Bond traders like to sell bonds thus driving down prices (and rate increases) when they don't know what a report like this will do to the overall fixed income market. But 19 basis points??? Ahhh, a bad jobs number will erase that in one trade so I am not concerned. What does have my palms sweating is Hampton Pearson...he's the poster boy for delivering us the good news every month from outside the Labor Department. CNBC comes back from commercial, the music fades in, the media over-used term Breaking News appears and...
204k jobs created...with upward revisions to previous months numbers. I flip my phone in the air and look at my wife and say "Rates are going to tank!" I hold up my phone and continue to hit refresh...but bonds stay at -19 bps. I get excited as maybe there is more to the report than the headline number (which is always the case). But then it happens...bonds drop to -55, then -75, then -95 over the next 30 minutes. They settle in at -116 bps for the 3.5% Fannie Mae Mortgage Backed Security Coupon. That just means rates got over a discount point worse in about an hour. But what does that mean?
On Thursday, my client wanted a 4.25% rate (and had been waiting to lock for 2 weeks) but rates were sitting at 4.375% which included a lender credit (Ruoff paying their closings costs and prepaid items) to the tune of $2600. Their loan amount was $380,000. A discount point is 1% of the loan amount or $3800. Had they not locked, on Friday to get that 4.375% rate they would have had to pay money (nearly $1500), not receive a credit back at closing. For them, locking in the rate on Thursday saved them over $4000.
This was a big deal to a lot of my clients...we protected them from higher rates. What about those getting ready to buy later this month and closing in December or January? Remember I mentioned there is often more to a jobs report that is not a part of the headline number? The jobs report reflected over 700,000 have given up looking for jobs. This is called the labor force participation rate...people actively looking for jobs vs. those who have given up their quest for employment. Our participation rate for the US is at the worst number seen since 1978 (below).
What I feel this statistic shows is that our jobs market is far from out of the woods. Just because you create 204k jobs when 300k-400k (the commonly accepted number from the economists) is the target number needed to continue the economic recovery, there is no reason to celebrate. And certainly no reason to have rates rise. Couple that with 700k people exiting the workforce --- just do the math and you see our labor force is still shrinking! But you see these knee jerk reactions occur when a certain data point is heavily focused on and scrutinized---like the monthly jobs report.
So for those of you not locked in on a rate, expect rates to hover in the range of the lower 4 range to upper 4 range over the next few months. And if you catch a day where rates drop as a result of a report like last Friday...LOCK IT IN. There is too much uncertainty and volatility in the market these days to speculate or think rates are going back to the 3% range. And if rates do go back down later, I always give my clients the option of refinancing at no cost. So lock it, and hope rates go down later and we can always take advantage of them when they do. Have a great week!
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