It was a bumpy ride in the secondary mortgage market yesterday. At the open, MBS prices moved considerably higher, however, the gains did not last long. Most lenders issue rate sheets around 10am eastern and by that time, MBS had given back all of the early morning gains. This forced several lenders to recall rate sheets and reprice for the worse. As the day progressed, MBS did manage to move higher and by the close many lenders repriced for the better. All in all, mortgage rates held steady on the day.
This morning we received another read on the housing sector with the monthly Housing Starts. The index, which measures the monthly percentage change in new home construction, increased by 1.5% from the prior month signaling further improvement in the housing sector. The current annualized pace is at 598,000 homes per year which is still far below the highs of the housing boom when new home starts were recording annualized numbers of over 2 million! There was a caveat though, mutli-family starts led the way, not single family homes. Read MND Story.
The U.S. Department of Labor released the weekly jobless claims numbers which totals the number of Americans that filed for first time unemployment benefits in the prior week. Initial claims fell by 12,000 last week to 545,000 beating economists’ expectations. Continuing claims, an important component of the report that measures the number of Americans that continue to file due, unexpectedly rose by 129,000 to 6.23million suggesting that despite the lower first-time claims, workers are not finding new jobs quickly enough to drive down the overall jobless rate. READ MND STORY
The final economic report this morning comes from the Federal Reserve Bank of Philadelphia with the release of the monthly Philly Fed Survey. This report measures the strength of business conditions around the Philadelphia region. Last month’s reading was the first positive reading signaling expanding business conditions since October 2008. The trend of improvement continued today with the highest reading since June of 2007 beating expectations and suggesting dramatically improving business conditions. READ MND STORY
At 11am, the U.S. Department of Treasury announced that it will sell a record $112 bln year, 5 year and 7 year notes next week. Although $1 billion was added to each issue, the auction terms were close enough to expectations and the bond market didnt have much of a reaction. Even though our nation has issued record amounts of debt to battle the current recession, demand has remained very strong, which has helped mortgage rates hold at historic low levels.
I have spoken in the past regarding the government’s first time home buyer tax credit. This incentive for first time home buyers is set to expire on November 30th. To take advantage of this tax credit of up to $8000, you must not have owned a home in the previous three years and must be buying a home for a primary residence. There are some income restrictions where if you make more than $75,000 per year, the credit decreases than completely goes away if you make over $95,000 per year.
The National Association of Realtors is asking that this tax credit be extended beyond the November 30th deadline date, but as of now, it is set to expire. If you are looking to take advantage of this government stimulus, I would strongly recommend you get moving now. I suspect that volume will increase at lenders as the deadline approaches which will slow down the loan process. If your loan is delayed for any reason and it closes after November 30th you will not get the credit even if the reason for the delay was not your fault.
To increase awareness of this and other tax benefits of the American Recovery and Reinvestment Act, the IRS has announced several tools that are available to help explain the many benefits for American families under this Act. The IRS has placed several videos on Youtube (IRS Video) and ITunes to increase awareness. In addition, the official website of the IRS also has many useful links and explanation which you can access by going to the IRS' website. If you are looking to take advantage of these government programs, the clock is ticking.
Reports from fellow mortgage professionals are indicating that the par 30 year conventional rate mortgage continues to hold in the 4.875% to 5.125% range for the best qualified consumers. If you are seeking a year fixed rate conventional mortgage, the par rate is in the 4.375% to 4.625% range for the best qualified. To qualify for a par interest rate you must have a FICO credit score of 740 or higher(15yr term only need 620), a loan to value at 80% or less and pay all closing costs including one point loan origination/discount/broker fee. As always, you can elect to pay less upfront fees but you will get a higher interest rate.