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Highest Rates in Last 5-7 Years

Highest Rates in Last 5-7 Years

According to Matthew Graham late September 2018, mortgage rates are in bad shape. At some point in the past 3 days (depends on the lender), top tier 30yr fixed rate offerings hit their highest level in 5 years, then 7 years. For the first time since 2011, the most prevalent top tier rate is 4.875% (meaning a handful of lenders are at 4.75% or 5.0%). If this trajectory holds, the average lender would be at 5% next week.

In order to make the past few days relevant for anyone who reads this, let's focus on the CHANGE between today's average rates and those seen less than a week ago.  From mid-month, the average 30yr fixed quote is an eighth of a percentage point higher (.125%).  While we've seen moves that big in the past, with only 1 or 2 exceptions, we haven't seen anything like it in 2018.  And when we consider that it takes rates to their highest levels in 7 years, it's even more troubling.

Jann Swanson says that existing home sales, which were expected to increase in August after four straight months of declines instead remained unchanged from July. In fact, almost the entire report on August's existing home sales can be summarized by the word, "flat.

Said sales of single-family homes, townhouses, condos, and cooperative apartments were at the seasonally adjusted rate of 5.34 million, identical to the July rate.  Sales in July had fallen 1.5 percent below those from a year earlier, and that too was unchanged in the August to August comparisons.  Existing home sales were selling at an annual rate of 5.42 million in August of last year.

Econoday said the analysts it polls were expecting at least a modest increase after months of lagging sales analysts.  They forecasted results in the range of 5.290 million to 5.460 million with a consensus of 5.360 million.

Sales of both single-family homes and condos didn't sparkle either.  Single-family sales were at the same 4.75 million annual rate as in July and condo sales remained at 590,000 units.  Single family sales remain below sales a year earlier, by 1.0 percent and condo sales are down 4.8 percent.

Homebuilder stocks are tanking after J.P. Morgan said it is “more cautious” about the sector’s prospects.

“We expect the housing recovery to remain fairly tepid in 2019," the firm's analyst Michael Rehaut says. Homebuilder stocks fell Friday after J.P. Morgan said it is "more cautious" about the sector's prospects.

 

Weekly mortgage applications rise 1.6% as interest rates hit a 7-year high

Total mortgage application volume increased 1.6 percent last week compared with the previous week.

Rising interest rates for home loans may be what's getting borrowers back to their brokers.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances rose to its highest level in more than seven years.

Interest rates for home loans appear to be climbing again, and that may in fact be what's getting borrowers back to their brokers — fear that rates could move significantly higher in the coming months.

Total mortgage application volume increased 1.6 percent last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted report

Refinance volume led the charge, rising 4 percent for the week, although it was 39 percent lower compared with the same week one year ago. A year ago last week, rates were nearly a full percentage point lower.

The refinance shares of mortgage activity increased to 39 percent of total applications from 37.8 percent the previous week.

Shares of M.D.C., Beazer , Century Communities and Meritage all fell by more than 3 percent, while PulteGroup's stock dropped about 2 percent Friday after the report.

The analyst said rising inventories of new homes and declining affordability will hurt home prices over the next year. He cited J.P. Morgan's growth estimates of 150,000 jobs per month on average for 2019 vs. the 207,000 monthly job growth average so far this year.

"We expect builder fundamentals to moderate over the next two years, which include a continued softer order growth rate in 2018 and gross margins peaking over the next 12 months," he said.