Weekly Market Preview

MBS OVERVIEW ***We have a holiday-shortened week*** Thursday - the Bond Market will Close early at 2:00EDT Friday - the Bond Market will be CLOSED all day. Even though we have a short week, we have a lot of big name economic data to digest like Retail Sales, CPI, Production and the Fed's Beige Book. Plus we have a few "Talking Fed's", most notably Janet Yellen. It's Ground Hog Day all over again: As we once again start off the trading session with economic news that would normally pummel your pricing. But the "Teflon Bond Market" has shrugged it off. March Retail Sales were much stronger than expected and February's data was revised upward. But this was once again offset due to a flight to safety into anything U.S. due to more news out of the Ukraine. This time, Pro-Russian supporters have taken over at least two Ukrainian Police stations and are refusing to leave. This has traders concerned that Ukraine may respond with force and escalate things further. As a result, MBS are down only -9BPS in early trading. Typically, with this type of strong Retail Sales data, MBS would be down at least -50BPS. Wednesday's release of the Fed's Beige Book will be key as we learn how the manufacturing, housing, lending, and labor markets are doing in each Fed district. There are no major U.S. Treasury auctions this week. TODAY'S EVENTS Retail Sales: Potentially, the most important economic release of the week. Headline Retail Sales for March were much stronger than expected (1.1% vs est of 0.8%). Plus, February was revised upward from 0.3% to 0.7%. Excluding Autos, Retail Sales were up 0.7% vs estimates of 0.5%. Retail Sales are the top of the economic pyramid, and these numbers come from a period where weather was an issue. This is certainly positive economic news and that means that this reading is negative for MBS pricing today. Business Inventories: Generally not a major market mover. The consensus estimates are for a small improvement from 0.4% to 0.5%. What happened last week? MBS OVERVIEW Mortgage backed securities (MBS) gained +47 basis points (BPS) from last Friday's close which caused 30 year fixed mortgage rates to move slightly lower from the prior week. The market saw the lowest rates on Thursday and the highest rates on Wednesday. For the third straight week, we had domestic economic data that (under normal circumstances) would have caused MBS pricing to deteriorate. Consumer Sentiment was stronger than expected (82.6 vs 81.0), Initial Jobless Claims were lower than expected (300K vs 320K), the Producer Price Index was higher than expected (0.5 vs 0.1) and Import Prices were higher than expected (0.6 vs est of 0.2). But once again, the growth in the U.S. was overshadowed by concern over China (this time over their weaker than expected import/export data) and Ukraine/Russia as tensions still mount. This caused more flight to safety by international traders which propped up demand for our bonds and completely countered our economic growth. As a result, your interest rates improved.

Windermere Lake Stevens Spotlight

how can one hold title

Here are five ways to hold title:
Community Property/Domestic Partnership
Tenancy in Common
Trust
Joint Tenancy
Separate Estate

"The all-time record low – since Freddie Mac began tracking mortgage rates in 1971 – was 3.31% in November 2012. Conversely, the all-time record high occurred in October of 1981, hitting 18.63%. That's more than four times higher than today's average 30-year fixed rate of 4.32% as of March 20...rates hovering around 4.5% may be high relative to last year, but something to celebrate compared to almost any year since 1971."

Real Estate Issues 2014

MORTGAGE & FINANCE news

4 mortgage-rate trends for 2014

http://realestate.msn.com/four-mortgage-rate-trends-for-2014#1

Homeowners living in flood-prone areas are getting relief from big spikes in insurance costs

http://abcnews.go.com/Politics/wireStory/obama-signs-relief-flood-insurance-hike-23009892

REAL ESTATE news

Where are prices headed over the next 5 years?

http://www.keepingcurrentmatters.com/2014/03/10/where-prices-are-headed-over-the-next-5-years-2/?inf_contact_key=8c5a36f588a512a67f31a1b8303113e974eeff971a298d384830c50fba5e4641

25 backyard landscaping ideas – just in time for the sunny weather

http://www.hgtvgardens.com/photos/landscape-and-hardscape-photos/backyard-landscaping-ideas?affiliate=blocker&omnisource=SEM&c1=RSS_Outbrain&c2=Outbrain&c3=RSS&c4=23-Backyard-Landscaping-Ideas-23-photos

LOCAL news

King County property valuations nearly back to 2008 level

http://www.seattlepi.com/realestate/article/King-County-property-valuations-nearly-back-to-5236180.php

Bellingham named eighth-best US downtown

http://www.bizjournals.com/seattle/morning_call/2014/03/bellingham-named-eighth-best-u-s-downtown.html?iana=ind_rre

WEEKLY DOSE OF awesomeness

You won’t lose your keys, TV remote or kids again thanks to a couple of Boeing engineers

http://www.geekwire.com/2014/boeing-engineers-create-pebblebee-never-lose-keys-kids-tv-remote/

TITLE & ESCROW info

Need to find a utility company?  Click on the link below – select community links and you’ll find a large list of local utility companies in our Puget Sound region

http://www.cwtitle.net/title-and-escrow-resources/

Home Equity 2013

On December 20, 2013, in Economist Commentaries, by Ken Fears, Manager, Regional Economics and Housing Finance Policy
With the end of 2013 closing in, it is time to take stock of the impact from the strong 2013 housing market.
Home price growth was robust in 2013 compared to 2012 and is currently forecast by NAR Research to finish the year 11.3% stronger.
This improvement is important for the market as it has created equity for homeowners, boosted buyer confidence, and pulled many underwater homeowners into positive equity positions.
A borrower who purchased a median priced home[1] in 2004 and held it for nine years, the current median tenure of a homeowner according to NAR’s annual Profile of HomeBuyers and Sellers, would have $28,114 in equity from the combined benefit of price appreciation and paying down the mortgage principle.
A borrower who bought a median price home in 2012 would have more than $23,000 in equity. It is important to note that borrowers who purchased in 2006 and 2007 at the peak of the market and thus those who experienced the sharpest price declines are now nearly in positive equity. A person who purchased in 2006 and owned through 2012 (not pictured) would have been underwater by roughly $28,200, but by 2013 this gap was down to $4,700.
Continued price growth in 2014 will help to further ameliorate this gap. Homeowners who purchased since 2007 are in positive equity. Even through the visitudes of the great recession, for most homeowners housing remains an effective vehicle for building equity and wealth. [1] With a 10% downpayment at the prevailing average 30-year fixed mortgage rate Ken Fears, Manager, Regional Economics and Housing Finance Policy


Ken Fears is the Manager of Regional Economics and Housing Finance Policy. He focuses on regional and local market trends found in the Local Market Reports and the Market Watch Reports . He also writes on developments in the mortgage industry and foreclosures.

This Weeks Market Info

Why is the Fed FOMC Meeting this week such a big deal?
This week all eyes are on the Federal Open Market Committee meeting, as the market waits for the Federal Reserve’s tapering decision. Both the FOMC policy statement and its up-to-date economic and market projections will be released on Wednesday at 2 p.m. EST, followed by Fed Chairman Ben S. Bernanke’s press conference at 2:30 p.m. EST.

Why is this all such a big deal? In the real estate world, we are watching to see if the Fed begins tapering – the term used for cutting back on the purchases of Treasuries and MBS (Mortgage Backed Securities) that constitute the current round of quantitative easing, known as QE3. To oversimplify it, if the Fed begins tapering, it will likely drive mortgage rates up further.

So why is the Fed looking to taper these purchases now, and how likely is it that they will do so on Wednesday?
It all has to do with the health of the economy - the Fed needs to stop QE3 sometime, and it appears that the economy is showing enough signs of strength that now would be the time to begin. Specifically, how swiftly the Fed cuts its QE purchases will depend a lot on the evolution of the labor market. The Fed announced its most recent round of QE in September of last year, and it has been buying $85 billion a month since January ($45 billion in Treasuries, $40 billion in MBS). Recent economic data has shown signs that the economy is improving, and that jobs are stabilizing.  Economic stability and improvment is exactly what the Fed has been waiting for to pull the trigger on tapering (which they did NOT do in September's meeting).

So what to do now?
Be prepared for lots of interest rate volatility this week as the markets work to stay ahead of the Fed moves and speculation abounds. Keep in close communication with your favorite Mortgage Loan Professional and have them keep you abreast of what happens throughout the week,

Last Week's Mortgage Rate Recap

Mortgage Rates Currently Trending: NEUTRAL

Last week saw rates remain mostly flat, with most lenders worsening rebate pricing (the cost to obtain a rate or the credit the lender gives you towards your closing costs when selecting a rate) as MBS (Mortgage Backed Securities) sold off a net loss of -35 basis points.  Most consumers would have seen their offered mortgage rate remain the same, but would have gotten a lower amount as a credit towards closing costs or would have paid a little bit more to obtain the same rate.  The week started with a nice bounce back from the lows we experienced the week before.   Wednesday was a bad day for rates as the MBS market sold off, giving back the gains from Monday and Tuesday.  Thursday continued the sell off slightly, until we saw a reversal and a positive day for pricing on Friday.  It's important to note that since November 18th, we've lost about 230 basis points in the MBS market, meaning that traders have priced themselves towards a Fed tapering.

This Week's Mortgage Rate Forecast

Mortgage Rates Forecast: VOLATILE, and heavily dependent on Wednesday's FOMC announcement

This week is going to prove to be volatile and hard to predict, both before the Fed's FOMC announcement on Wednesday, as well as after depending on what the Fed announces.  There is a large consensus

 that the Fed will announce their intent to begin tapering.  If that does occur, we may very well see more selling off in MBS, even though the market has already been pricing that in.  If the Fed announces that they are not yet ready to taper, as happened in September, the market should reacti very positively and MBS pricing will improve along with mortgage rates.

BOTTOM LINE:  It is very important this week to stay in contact with your Mortgage Loan Professional, especially on Wednesday when the Fed makes their announcement.  If they announce tapering, be prepared for rates to go up slightly.  If they announce they will not yet taper, it is likely that rates improve anywhere from .125% to .250%.  The only way to stay ahead of lenders who will raise interest rates when that happens is to stay in close contact with your LO who is monitoring the market in real time with an institutional grade Wall St. data feed.  Be prepared for volatility later this week.