Mortgage Market Weekly – Update June 26, 2015

In This Issue…

Last Week in Review: The housing sector is batting strong, while the overall economy showed signs of a slump.

Forecast for the Week: The markets may be closed on Friday, but not before key reports on housing, manufacturing and the labor sector are released.

View: Check out these six keys to maximizing your success.

Last Week in Review

“You don’t have to swing hard to hit a home run. If you got the timing, it’ll go.” Yogi Berra. May was a good time for the housing sector, as several reports came in strong.

jun26-new-home-salesNew Home Sales hit their highest level in seven years in May, rising 2.2 percent from April to an annualized rate of 546,000. April’s figures were also revised higher to 534,000. Sales of new single-family homes are up nearly 20 percent from May 2014! Existing Home Sales also rose 5.1 percent in May from April.

However, the economy overall isn’t batting as well, as the final reading for first quarter Gross Domestic Product (GDP) showed that economic growth contracted by 0.2 percent, though less severe than the -0.7 percent from the second reading. In addition, the negative reading for the quarter was the fifth time in the six-year recovery that the economy couldn’t produce at least an anemic reading of 1 percent.

Growth in the first quarter was stunted by a negative trade balance due to the stronger dollar, harsh weather and the West Coast port closing. And with inflation still tame, rest assured the Fed will be watching economic reports closely this summer, as they determine when to raise the benchmark Fed Funds Rate (the rate banks charge each other to lend money overnight).

Overseas, the uncertainty surrounding Greece continues. Mortgage Bonds reversed course and moved lower in recent days, in part because signs have pointed to a possible deal. This will be a key story to watch in the next week.

Home loan rates are near 2015 highs, but are still very close to historic lows. If I can answer any questions at all for you or your clients about a home purchase or refinance, please get in touch!

Forecast for the Week

The fireworks could begin early in this holiday-shortened but jam-packed week.

  • In the housing sector, Pending Home Sales will be released on Monday, followed by the S&P/Case-Shiller Home Price Index on Tuesday.
  • Look for manufacturing data from the Chicago PMI on Tuesday and the ISM Index on Wednesday.
  • Consumer Confidence will also be released on Tuesday.
  • The first of two key reports on the labor sector will be released on Wednesday with the ADP National Employment Report.
  • Thursday is the big day with the June Jobs Report, which includes Non-farm Payrolls, Hourly Earnings and the Unemployment Rate. Weekly Initial Jobless Claims will also be reported on Thursday, as usual.

All U.S. markets will be closed on Friday in observance of the July 4th holiday.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.

When you see these Bond prices moving higher, it means home loan rates are improving and when they are moving lower, home loan rates are getting worse.

To go one step further a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Mortgage Bonds have struggled in recent days. I’ll be watching closely to see if they’re able to bounce back in the days and weeks ahead.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Jun 26, 2015)

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The Mortgage Market Guide View…

6 Keys to Remarkable Success

“We are what we repeatedly do. Excellence, then, is not an act, but a habit.” Aristotle, 345 B.C.

The myth that people are born talented is evaporating. The scientific community is at last catching up with what even Aristotle knew—the difference between success and non-success, skill and mediocrity, is a matter of dedication and time rather than innate ability.

But can the way you practice make a difference? Yes, says Tony Schwartz, author of “The Way We’re Working Isn’t Working,” who offers six principles for becoming really good at anything:

Pursue your passion. Passion will keep you motivated better than anything. If you can’t be passionate, find something else or you may burn out.

Hard work first. Most experts (and experts who study experts) say that practicing first thing in the morning when you have the most energy is best.

Practice intensely, but not too long. Working without interruption for short periods of no longer than 90 minutes with short breaks (and not longer than 4.5 hours each day) seems to be the norm for top performers.

Get feedback in small doses. Too much advice too frequently can impede learning and make you gun shy. Focus on your own experiments.

Refresh regularly. All work and no play … stinks! And it won’t help you in the long run. Plus, if it’s a breakthrough you want, rest is the best thing for activating your creative right hemisphere.

Ritualize practice. Time blocking ensures you don’t have to expend any energy thinking about when or how to work.

As always, feel free to pass these helpful tips along to your team, clients and colleagues!

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The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.

Don Parsons
Commerce Home Mortgage – NMLS 2105
450 Newport Center Drive Suite 480
Newport Beach, CA 92660
2130 Main Street Suite 260
Huntington Beach, CA 92648