More Solid Growth in Existing Home Sales:

With low interest rates and a labor market that is steadily growing its only a lack of inventory that keeping home sales from rising even more.

Existing-home sales steadily increased for the third consecutive month in July, while stubbornly low inventory levels and rising prices are likely to blame for sales to first-time buyers falling to their lowest share since January, according to the National Association of Realtors®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 2.0 percent to a seasonally adjusted annual rate of 5.59 million in July from 5.48 million in June. Sales in July remained at the highest pace since February 2007 (5.79 million), have now increased year-over-year for ten consecutive months and are 10.3 percent above a year ago (5.07 million).

The median existing-home price for all housing types in July was $234,000, which is 5.6 percent above July 2014. July's price increase marks the 41^st consecutive month of year-over-year gains.

Total housing inventory at the end of July declined 0.4 percent to 2.24 million existing homes available for sale, and is now 4.7 percent lower than a year ago (2.35 million). Unsold inventory is at a 4.8-month supply at the current sales pace, down from 4.9 months in June.

Lawrence Yun, NAR chief economist, says the increase in sales in July solidifies what has been an impressive growth in activity during this year's peak buying season. "The creation of jobs added at a steady clip and the prospect of higher mortgage rates and home prices down the road is encouraging more households to buy now," he said. "As a result, current homeowners are using their increasing housing equity towards the down payment on their next purchase." 


Source:
Brian Woolly
Prospect Mortgage

Builder Confidence Highest Since 2005:

A monthly sentiment index from the National Association of Home Builders rose 1 point to 61, the highest level since November 2005. Any reading above 50 is considered positive. The index stood at 55 one year ago.

"Today's report is consistent with our forecast for a gradual strengthening of the single-family housing sector in 2015," said NAHB Chief Economist David Crowe. "Job and economic gains should keep the market moving forward at a modest pace throughout the rest of the year."

Of the index's three components, buyer traffic increased 2 points to 45—the only component still in negative territory. Current sales conditions rose 1 point to 66, while sales expectations in the next six months held steady at 70.

Regionally, based on a three-month moving average, homebuilder confidence in the West and Midwest each rose 3 points to 63 and 58, respectively. The South gained 2 points to 63 and the Northeast held steady at 46. The Northeast has the smallest share of home construction nationally.

Source: 
Brian Woolley
Prospect Mortgage

How the American house has changed:

The single-family home in America has evolved in one particularly remarkable way: It has gotten bigger and bigger and bigger. New homes built today are about a thousand square feet larger than single-family homes completed just 40 years ago.

All that space is a sign of our times -- of the relative wealth to afford it, the government policies that incentivize it, the tastes we now have for third bathrooms and fourth bedrooms (even though the size of the typical American household has actually been shrinking).

In fact, in many ways -- most of them more subtle -- the American single-family home has changed with time in ways that say much about us and how we live. Vertical town houses built in the 1800s gave way a century later to horizontal homes, 3,000 square feet on a single floor. Compact ways of living that made sense when we got around on foot faded with time in favor of the spacious homes made possible by ubiquitous cars. And the popularity of cars changed the very design of our homes, too, as we created places to park them indoors.

We've gone over time from the row house to the ranch home to the McMansion, with myriad variations along the way determined by the climate (a New Orleans shotgun house demands a front porch for cooling off) and the culture (prairie-style homes mimic a favorite Midwestern son, Frank Lloyd Wright). Our homes have been reshaped, reformatted, and re-imagined depending on the availability of land and the materials on offer and the earlier styles that have come back in vogue.

Source:
Brian Woolley
Prospect Mortgage

Mortgage Market Update:

This week brings us the release of five pieces of monthly economic data in addition to two Treasury auctions that have the potential to affect mortgage rates. Some of the data is considered to be highly important, meaning we could see noticeable changes to mortgage rates multiple days. Following Friday’s boring Employment report, the markets will likely react heavily to any surprising data.

There is nothing of relevance scheduled to be posted or take place tomorrow, so look for the stock markets to heavily influence bond trading and mortgage pricing as the week starts. Employee Productivity and Costs data for the second quarter will be released early Tuesday morning. It will give us an indication of employee output per hour. High levels of productivity are believed to allow the economy to grow without fears of inflation. I don't see this being a big mover of mortgage rates either, but it may influence rates slightly during morning trading. Analysts have predicted a 1.4% rise in productivity during the second quarter and a 0.1% decline in labor costs. A sizable increase in productivity and a larger than expected drop in costs could help improve bonds, contributing to lower mortgage rates Tuesday.

There are two Treasury auctions this week that also have the potential to influence mortgage rates. The first is Wednesday's 10-year Treasury Note auction, which will be followed by a 30-year Bond auction Thursday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If the sales are met with a decent demand from investors, indicating that interest in longer-term securities such as mortgage-related bonds is good, the earlier losses are usually recovered after the results are announced. Results of sales will be posted at 1:00 PM ET of each auction day. If demand was strong, particularly from international investors, we should see mortgage rates improve during afternoon trading those days. However, weak levels of interest could lead to broader selling in the bond market that could push mortgage rates higher.

July's Retail Sales data will be posted at 8:30 AM ET Thursday. This report comes from the Commerce Department and will give us a very important measurement of consumer spending. Consumer level spending figures are extremely relevant to the markets because it makes up over two-thirds of the U.S. economy. Current forecasts are calling for a 0.5% increase in sales. Analysts are also calling for a 0.5% rise in sales if more volatile auto transactions are excluded. Larger than expected increases would be considered bad news for bonds and likely lead to an increase in mortgage pricing since it would indicate stronger economic growth.

The three remaining reports are all set for Friday morning. The first will be July's Producer Price Index (PPI) from the Labor Department at 8:30 AM ET, giving us an important measurement of inflationary pressures at the producer level of the economy. There are two readings that analysts follow in this release. They are the overall index and the core data reading. The core data is the more important of the two since it excludes more volatile food and energy prices. Analysts are predicting a 0.1% increase in the overall index and a rise of 0.1% in the core data. Stronger than expected readings may raise inflation concerns in the bond market and help guarantee a Fed rate hike sooner than later. That would be bad news for bonds and mortgage rates because inflation is the number one nemesis of the bond market as it erodes the value of a bond's future fixed interest payments. As inflation becomes more of a concern in the markets, bonds become less appealing to investors, leading to falling prices, rising yields and higher mortgage rates.

July's Industrial Production report is scheduled to be posted at 9:15 AM ET Friday. This report measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.3% increase from June's level. A decline would be considered favorable news for bonds and mortgage rates because it would indicate manufacturing sector weakness and broader economic growth would be more difficult if manufacturing activity is slipping.

The last release of the week will be posted by the University of Michigan late Friday morning. Their Index of Consumer Sentiment will give us an indication of consumer confidence, which projects consumer willingness to spend. If a consumer's confidence in their own financial situation is rising, they are more apt to make large purchases in the near future. But, if they are growing more concerned about their job security or finances, they probably will delay making that large purchase. This influences future consumer spending data and therefore, impacts the financial markets. It is expected to show a reading of 93.9 that would mean confidence was stronger than July's level of 93.1. That would be considered slightly favorable news for bonds and mortgage rates. Good news for mortgage shoppers would be a sizable decline in the index.


Overall, Friday is the best candidate to be labeled most important day with most of the week's economic data scheduled, but we could see noticeable movement in rates Thursday since it has the single most important release in Retail Sales. Wednesday afternoon could be active also due to the 10-year Note auction. I strongly recommend maintaining contact with your mortgage professional this week if still floating an interest rate and closing in the near future.

Source:
Jamie Steigerwald
GotMortgage

New Fannie Mae Selling Guide Announcement.

On June 30^th, Fannie Mae published an updated Selling Guide that includes a number of key policy changes that will simplify our requirements and result in less documentation from your borrowers.

Below are some of the key changes:

Removal of conversion of principal residence policy: Fannie Mae removed the  additional reserves and rental income overlays that were required when  borrowers are selling or renting out their previous home. The 30% equity in the  departing residence is no longer required to use rental income to qualify.

·     

     Verification of stocks, bonds, and mutual funds: Borrowers using verified  stocks, bonds and mutual funds to complete a transaction no longer need to document that the assets were liquidated when the verified amount is at least 20% more than is needed for the transaction. In addition, borrowers can now get 100% credit for the value of these accounts toward reserves (up from 70%), which means more assets can be factored into qualifying the borrower.

     Unreimbursed employee business expenses: No documentation or deduction of  2106 expenses from monthly income is required for salary, bonus, overtime, or commission income of less than 25% of the monthly income. This mirrors the existing Prospect Mortgage Policy.