by Calculated Risk on 9/22/2011 10:21:00 AM

• From Freddie Mac: Fixed-Rate Mortgages Hold Steady, Remain Near Record Lows

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing fixed-rate mortgages changing little amid sluggish economic, mixed housing data, and ongoing concerns over the European debt markets. The 30-year fixed remained unchanged at 4.09 percent, while the 15-year fixed dropped a single basis point to 3.29 percent, marking a new record low.

There will be new record low mortgage rates reported next week.

• From MarketWatch: August economic indicators signal weak growth

The economy should exhibit "continued weak growth" through the fall and winter, the Conference Board said Thursday as it reported that its index of leading economic indicators grew 0.3% in August, compared with a 0.1% gain expected by economists polled by MarketWatch. "There is growing risk that sustained weak confidence could put downward pressure on demand and business activity, causing the economy to potentially dip into recession," said Ken Goldstein, a Conference Board economist ...

• From the FHFA: FHFA House Price Index Up 0.8 Percent in July

U.S. house prices rose 0.8 percent on a seasonally adjusted basis from June to July, according to the Federal Housing Finance Agency’s monthly House Price Index. The previously reported 0.9 percent increase in June was revised to a 0.7 percent increase. For the 12 months ending in July, U.S. prices fell 3.3 percent.

This is the GSE only index. The FHFA “expanded-data” House Price Index (HPI) that covers all homes is only released Quarterly. There will be more house price data released soon - and Case-Shiller next Tuesday.

by Calculated Risk on 9/22/2011 08:30:00 AM

The DOL reports:

In the week ending September 17, the advance figure for seasonally adjusted initial claims was 423,000, a decrease of 9,000 from the previous week's revised figure of 432,000. The 4-week moving average was 421,000, an increase of 500 from the previous week's revised average of 420,500.

The following graph shows the 4-week moving average of weekly claims since January 2000 (there is a longer term graph in graph gallery).

Click on graph for larger image in graph gallery.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased this week to 421,000.

The 4-week average has been increasing recently and this is the highest level since early July.

by Calculated Risk on 9/21/2011 08:46:00 PM

• From reader Soylent Green is People (mortgage broker):

"Refinance boom will be much larger than 2009 when the Feds remove the 125% LTV cap on HARP loans. There are so many whispers about it I can hardly hear myself think."

• From Tom Petruno at the LA Times: Mortgage rates expected to slide on new Fed move

The shift back to mortgage bonds could bring $20 billion or more a month of Fed buying power into that market, said Walter Schmidt, a bond market analyst at FTN Financial in Chicago.
...
“It’s absolutely clear they’re targeting mortgages,” Keith Gumbinger, a principal at mortgage data firm HSH Associates in Pompton Plains, N.Y., said of the Fed.
...
The 4% level is a psychological barrier for the market, but “I think we can breach that” soon, Schmidt said.

• An update to the widely quoted Carmen Reinhart and Kenneth Rogoff paper from the Oregon Office of Economic Analysis: This Time is Different, An Update

I have recreated and updated some of Ms Reinhart and Mr Rogoff’s work. Specifically, what follows (PDF – full version) is based on their draft paper for an American Economic Association presentation in January 2009 “The Aftermath of Financial Crises.“

In order to not bury the lede, first up is a quick summary of the U.S.’ current experience relative to historical financial crises, followed later by graphs for each individual measure.

All told, the recent U.S. financial crisis looks very similar to the historical crises as detailed by Reinhart and Rogoff – just your “garden variety, severe financial crisis” if you will. Across each of the five measures discussed in the Aftermath paper, the current U.S. experience is of the same magnitude

See the post for several tables and graphs.

Earlier:
• Existing Home Sales in August: 5.0 million SAAR, 8.5 months of supply
• Existing Home Sales: Comments and NSA Graph
• Will there be another Refinance Boom?
• AIA: Architecture Billings Index Turns Positive
• Existing Home Sales graphs

by Calculated Risk on 9/21/2011 04:55:00 PM

First, one of the changes in the FOMC statement was the assessment of "downside risks". The August phrase "downside risks to the economic outlook have increased" was changed to "there are significant downside risks to the economic outlook, including strains in global financial markets." (emphasis added). Now the risks are "significant".

The Ten year Treasury yield declined following the FOMC announcement today to 1.875% - another record low. The Fed will not extend maturities, but the Fed will also "reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities", and that will probably push mortgage rates down.

A 3 handle for a conforming 30 year fixed rate mortgage is very possible. As of Sept 15, the 30 year fixed rate was at 4.09% for conforming loans according to the Freddie Mac Weekly Primary Mortgage Market Survey®.

Here are a couple of graphs - the first comparing 30 year conforming mortgage rates to the MBA Refinance index (on a monthly basis), and the 2nd graph is weekly comparing the Refinance index to the Ten Year yield.

Click on graph for larger image in graph gallery.

This graph shows the MBA's refinance index (monthly average) and the the 30 year fixed rate mortgage interest rate from the Freddie Mac Primary Mortgage Market Survey®.

The Freddie Mac survey started in 1971. Mortgage rates are currently at a record low for the last 40 years and will probably fall further.

It usually takes around a 50 bps decline from the previous mortgage rate low to get a huge refinance boom - and rates might not fall that far - but there should be an increase in refinance activity over the next few weeks. Note: 30 year conforming mortgage rates were at 4.23% in October 2010.

The second graph compares refinance activity to the ten year yield.

The ten year yield is below the level during the financial crisis.

My guess is we see 30 year mortgage rates under 4% and a significant pickup in mortgage refinance activity - although probably not the level of refinance activity that happened in 2003 or 2009.

Earlier:
• Existing Home Sales in August: 5.0 million SAAR, 8.5 months of supply
• Existing Home Sales: Comments and NSA Graph
• Existing Home Sales graphs

by Calculated Risk on 9/21/2011 02:22:00 PM

From the Federal Reserve:

Information received since the Federal Open Market Committee met in August indicates that economic growth remains slow. Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has been increasing at only a modest pace in recent months despite some recovery in sales of motor vehicles as supply-chain disruptions eased. Investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction.

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action were Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who did not support additional policy accommodation at this time.

UPDATE: Statement from NY Fed: Statement Regarding Maturity Extension Program and Agency Security Reinvestments (includes details).

Earlier:
• Existing Home Sales in August: 5.0 million SAAR, 8.5 months of supply
• Existing Home Sales: Comments and NSA Graph
• Existing Home Sales graphs