What's New in Real Estate!
Rates Continue Higher Ahead of Important Fed Announcement
Banking sector fears were responsible for a nice little drop in mortgage rates over the past 2 weeks. As those fears subside (to some extent, anyway), the market reaction has reversed to some extent. This is most noticeable in the stock market in the US. Stocks don't dictate interest rates. That job falls to bonds and bonds have been slower to retrace their recent steps. That means rates are higher, but not yet back up to the levels seen before the banking drama began. That's a good thing, but it also presents a vulnerability. Specifically, if banking fears continue dying down, rates have more room to rise. Another key input for rate momentum will be tomorrow's Fed announcement. The Fed is highly likely to raise rates by 0.25%. There's a small chance (very small) they abstain on a hike at this meeting. Either way, they will also be updating their rate outlook for the coming months/years and that's arguably even more important than what they do with tomorrow's rate hike. Last but not least, Fed Chair Powell will hold the normal post-announcement press conference and that will give him a chance to balance out whatever decision is made on the rate hike. In other words, if they don't hike, Powell could speak more cautiously about the rate environment. If they do hike, he could offer reassurances that they're not trying to precipitate any more banking issues. Rates could be rising or falling fairly abruptly starting after 2pm Eastern time tomorrow as a result.Source: Mortgage News Daily | 21 Mar 2023 | 8:24 pm
Stocks and Bond Yields Moving Higher Together; Fed on Deck
Stocks and Bond Yields Moving Higher Together; Fed on Deck Today's trading session turned out to be every bit as simple as it seemed like it would be this morning. Why so simple? There were clear indications that improved sentiment in the banking sector was fueling a 'risk-on' trading pattern in Europe (i.e. stock prices and bond yields moving higher together). This extended to US markets, but especially to Treasuries. MBS actually outperformed, which isn't too shocking considering Treasuries were the star performers when the market was trading in a risk-off direction. Econ Data / Events Existing Home Sales 4.58m vs 4.20m f'cast, 4.0m prev Market Movement Recap 08:58 AM Weaker overnight. Europe trades risk-on. 10yr up 10+ bps at 3.587. MBS down 3/8ths. 10:41 AM Moderate improvement since 9am, but still weaker on the day. MBS down less than a quarter point. 10yr up 8bps at 3.562. 01:40 PM Respectable 20yr bond auction without any major reaction in the bond market. 10yr up 10bps at 3.583 and MBS down just over a quarter point. 03:45 PM Stocks at highs. 10yr yields up 12.3bps at 3.606, near highs. MBS outperforming despite a brief scare due to illiquidity. Still down just over a quarter point.Source: Mortgage News Daily | 21 Mar 2023 | 7:50 pm
February Existing Home Sales Stage Spectacular Break from Slump
Existing home sales emerged, at least temporarily, out of a prolonged slump last month, and weren’t even shy about it. The National Association of Realtors® (NAR) said seasonally adjusted annual sales of preowned single-family houses, townhomes, condos, and cooperative apartments hit a seasonally adjusted annual rate of 4.58 million units compared to 4.0 million in January. The 14.5 percent monthly increase snapped a 12-month losing streak and was the largest one-month gain since the 22.4 percent increase in July 2020. [existinghomesdata] Single-family home sales performed even better, rising from 3.59 million units in January to 4.14 million, a 15.3 percent increase. Condo and coop sales grew by 30,000 units to 440,000. The February increases, however, fell far short of restoring sales to their levels a year earlier. Total sales remained down 22.6 percent compared to the 5.92 million unit rate in February 2022. Single-family sales were 21.4 percent and condo sales 32.3 percent lower on an annual basis. Analysts had expected sales to break out of their long slide, but they underestimated the degree to which it would happen. Trading Economics had an analyst consensus of 4.2 million, which would have been a 5 percent increase. Econoday predicted 4.17 million units. “Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines,” said NAR Chief Economist Lawrence Yun. “Moreover, we’re seeing stronger sales gains in areas where home prices are decreasing, and the local economies are adding jobs.”Source: Mortgage News Daily | 21 Mar 2023 | 5:09 pm
POS, Prospecting, Automation, Certified Military Specialist Products; Quiet on the Bank Front
The way bond math works, every man, woman, and child that owns a fixed-income security issued when rates were lower is now underwater on that bond or that security. As long as they continue to collect payments on that coupon, and don’t have to sell it, fine. If they are forced to sell the security at a loss and book it, that’s a different story. When people want their money out of a bank, and the bank needs to sell securities to pay off depositors, well, we’ve seen how that plays out. Along those lines, big bank problems make the headlines, but there are plenty of smaller depository bank mergers and acquisitions going on that don’t make the headlines. And the same thing is happening with vendors and mortgage bankers & brokers. Before I forget, anyone can post a resume for free here and employers can view them for several months at a nominal charge. (Today’s podcast can be found here and this week is sponsored by Black Knight, Inc. As a premier provider of innovative, high-performance software, data and analytics for mortgage and home equity lending and servicing, Black Knight, Inc. is transforming the mortgage industry through its best in class solutions. Listen to an interview with Argyle’s Matt Gomes on alternative credit data and how it is enabling new and creative lending practices.) Lender and Broker Services, Products, and Software Memphis may be regarded as the birthplace of rock and roll, but Graceland isn’t the only stop to pencil into your schedule during MBA Great River. Plan to attend the 7-in-7 Keynote Session on Wednesday, April 5, at 1:30 p.m., where Optimal Blue’s secondary marketing expert Colleen Flynn will cover the CompassEdge hedging and loan trading platform. This revolutionary solution combines Optimal Blue’s unmatched pipeline risk management tools and analytics with dynamic loan sale and MSR valuation functionality. And later in the afternoon, be sure to catch Flynn again in a breakout panel session titled, “Capital Markets in 2023: The Only Consistent Variable is Change.” Both sessions will provide invaluable insight to support the success of your business. We hope to see you in Memphis!Source: Mortgage News Daily | 21 Mar 2023 | 2:29 pm
Drifting Away From Panic, Waiting on The Fed
Relative to the presence of important market developments and high volatility, the current landscape for bonds is surprisingly simple. The banking panic pushed traders into bonds--primarily shorter-term bonds--at the expense of equities. This is a classic risk-off trade. Without a steady stream of new sources of panic, the trade reverses. That's what we're seeing so far this morning, but trading levels are still quite far from pre-panic levels. The only other obvious order of business will be to get the Fed's take on how recent events reshape the rate hike narrative. To be clear, there's no major implication for tomorrow's meeting, but the outlook for the rest of the year has been going wild.Source: Mortgage News Daily | 21 Mar 2023 | 2:05 pm
How to Make Sense of Mortgage Rate Info These Days
Let's start today's rate coverage with a public service announcement on the best way to be a consumer of mortgage rate data online. It can be quite a chore to make sense of day-to-day mortgage rate movement recently. Even after doing as much as can possibly be done to ensure apples-to-apples comparisons, there can still be significant changes and discrepancies for one of any number of the following reasons: You're looking at rate info that is more than a few hours old (even worse if you replace "hours" with "days"). You're looking at rate info from one specific lender and comparing it to a broad average or a different lender You're looking at a rate quote that relies on upfront points in order to secure a lower rate You're looking at a rate quote for a scenario that involves LLPAs (loan-level price adjustments) imposed by regulators based on certain loan characteristics By the time we combine several of the bullet points above, it's not uncommon to hear that rates are 1.5% higher or lower for what may seem to be the exact same scenario. In general, but especially at times like this, it makes sense to account for as many of those variables as possible. And although our rate index does a great job of that, you can take it to the next level with one simple strategy: Forget the rate itself and focus on the day to day movement. In other words, our top tier 30yr fixed index suggests that lenders are quoting 6.625% today on perfect loans with no price adjustments. Someone with a more average scenario could easily be seeing 7%+. Lenders who compete for web leads with "fine print" conditions could be more than a percent lower. But any scenario at any lender is infinitely more likely to MOVE like another scenario at another lender.Source: Mortgage News Daily | 20 Mar 2023 | 8:13 pm
Simple, Boring, Half Point Sell-Off in MBS
Absence of Data Leaves Even More Focus on The Fed If there happened to be some significant economic data today, or on the next two mornings, financial markets might wait to see what it implied before diving head-first into the pastime of overanalyzing Fed rate hike odds. With essentially no relevant data between now and then, the task at hand is clear: get in position for the Fed (if you're not already) and react to any major developments in the banking sector. Monday's early trading suggests markets are actually right about where they want to be after a bit of overnight volatility surrounding the UBS takeover of Credit Suisse. Econ Data / Events No significant econ data Market Movement Recap 09:16 AM 10s are currently down 2.6bps at 3.412. MBS are unchanged (5.0 coupons). 11:27 AM More legitimate weakness after an early bout of illiquidity. MBD down 3/8ths with at least a quarter point of losses vs AM highs. 10yr yields are up 3.2bps at 3.47. 02:13 PM Weakest levels of the day with MBS down just over half a point and 10yr yields up 5.4bps at 3.492. Stocks are up about 2/3rds of a percent.Source: Mortgage News Daily | 20 Mar 2023 | 7:55 pm
TPO, QC, Credit Analysis, Bus. Dev., PPE Products; Credit Suisse Bought
“SMONDAY: The moment when Sunday stops feeling like a Sunday and the anxiety of Monday kicks in.” Do you think the shareholders and management of Credit Suisse felt that, given Credit Suisse is being purchased by UBS for $3.3 billion? Remember when CS was a renowned jumbo buyer? Now we can watch the layoffs. The CS price per share marked a 99 percent decline from Credit Suisse’s peak in 2007. Mark Twain said, "The older I get, the more clearly I remember things that never happened.” The S&L Crisis certainly happened, but have regulators, auditors, and rating agencies forgotten about it? Under the “getting ready to fight the last war” category, the Federal Reserve is evaluating tougher rules for midsized banks after the failures of Silicon Valley Bank (SIVB) and Signature Bank (SBNY). It is looking at tougher capital and liquidity requirements and could beef up annual "stress tests" that assess banks' ability to weather a potential recession. Large U.S. banks have been inundated with new depositors as smaller lenders face turmoil. (Today’s podcast can be found here and this week is sponsored by Black Knight, Inc. As a premier provider of innovative, high-performance software, data and analytics for mortgage and home equity lending and servicing, Black Knight, Inc. is transforming the mortgage industry through its best in class solutions. Listen to an interview with HOA.com’s Brandon Barnum on the art of the referral business.) Lender and Broker Services, Products, and SoftwareSource: Mortgage News Daily | 20 Mar 2023 | 1:43 pm
The Fed Will Still Raise Rates in March, And That’s Why Rates May Keep Falling
There’s certainly a chicken/egg problem when it comes to interest rate news. Is it the Fed’s decisions that move rates? Or do market forces move rates, thus forcing the Fed to react? The answer is somewhere in between. If inflation and economic growth were always positive, low, and stable, the Fed would never lift a finger, but they are compelled to act when stability is threatened. Since March 2020, the Fed has acted quite a bit. They maintained rate-friendly policies for almost 2 years and then got precipitously unfriendly early in 2022. “Unfriendly,” in this case, refers to hiking the Fed Funds Rate and buying fewer bonds on the open market. The combined effect was one of the sharpest rate spikes in history. Now after more than a year of unfriendliness, the Fed is finally thinking about leveling off and seeing how things play out without too many more rate hikes. They’ve already decreased the pace from 0.75% per meeting to 0.25%. This isn’t a random decision on the part of the Fed. It comes in response to shifts in inflation data as well as other signs that their unfriendly policies are having an effect on the economy. The latest sign is the banking drama that has been in the news this week. It began with Silicon Valley Bank last week but spiraled into a bigger problem with the closure of Signature bank over the weekend. Many people have never heard of these institutions, but they now represent the 2nd and 3rd largest bank failure in US history.Source: Mortgage News Daily | 17 Mar 2023 | 8:48 pm
