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Housing Starts, Retail Sales Rise

Last Week in Review:
Retail Sales and Housing Starts blossom in March.

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Retail Sales rose 0.6 percent in March, above the 0.4 percent expected and up from the decline of 0.1 percent in February, the Commerce Department reported. Leading the boost was spending on automobiles and health and personal care items. Consumer spending makes up two-thirds of U.S. economic activity and is crucial to a healthy economy.

Housing Starts also bloomed in March, rising 1.9 percent from February to an annual rate of 1.319 million units, per the Commerce Department. February’s figure was also revised higher to 1.295 million units. Housing Starts got a big boost from a 16.1 percent monthly increase from the multi-dwelling sector. However, things were less rosy for those interested in single family homes, as single-family starts fell 3.7 percent from February. From March 2017 to March 2018, Housing Starts were up 10.9 percent.

Building Permits, a sign of future construction, rose 2.5 percent from February to March to an annual rate of 1.354 million. Limited inventory remains a challenge in many areas of the country, so it will be important to see if Housing Starts continue to blossom and if single family starts shift gears higher.

Mortgage Bonds struggled in the latest week, approaching five-year lows, due to strong economic news and positive data. Home loan rates have edged higher but still remain historically attractive.

If you or someone you know has any questions about rates or home loans, please get in touch. We’d be happy to help.

Consumer Inflation Remains Tame

Last Week in Review:
Inflation remained tame in March, though the Fed still expects it to rise this year.

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The Consumer Price Index (CPI) fell 0.1 percent in March, below the expected gain of 0.1 percent, the Bureau of Labor Statistics reported. Lower gas prices at the pump were to blame for the first decline in 10 months. When stripping out volatile food and energy prices, Core CPI was in line with expectations at 0.2 percent. However, Core CPI rose 2.1 percent on an annual basis, a 12-month high.

Inflation at the wholesale level was a bit hotter than expected, as the Producer Price Index (PPI) and Core PPI both rose 0.3 percent in March, versus the 0.2 percent expected.

Though inflation remained tame in March, the minutes from the Fed’s March meeting showed that the Fed still expects inflation to rise this year. Inflation hurts the value of fixed investments like Mortgage Bonds, meaning a rise in inflation can cause Bonds to worsen. Home loan rates are tied to Mortgage Bonds, so a rise in inflation can cause rates to rise as well.

Geopolitical headlines also garnered attention in the latest week, as heightened tensions over Syria between the U.S. and Russia helped Bonds benefit temporarily from safe-haven trading. Earnings season also began and there is a growing sense that corporate earnings for the first quarter could be strong due to the tax cuts. This could benefit Stocks at the expense of Mortgage Bonds and home loan rates.

For now, Mortgage Bonds are trapped in a sideways trading pattern that began in mid-February. Home loan rates remain just above all-time lows.

If you or someone you know has any questions about rates or home loans, please get in touch. We’d be happy to help.

Newsflash! Carrington on CNBC

CNBC highlights Carrington’s new Non-Prime programs with Rick Sharga

See what Rick Sharga, Executive Vice President of Carrington Mortgage Holdings has to say about Carrington’s new Non-Prime loan programs, in this CNBC video clip.

 

March Job Growth Slows

Last Week in Review:
March job growth came in lower than expected, while home prices continue to rise.

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Just 103,000 jobs were created in March, much lower than the 175,000 expected, the Bureau of Labor Statistics reported. February’s report was revised higher to 326,000 new jobs from 313,000, while January was revised lower to 176,000 from 239,000. The Unemployment Rate was unchanged at 4.1 percent.

Average hourly earnings came in at 0.3 percent, higher than expectations. Annual wage growth ticked up to 2.7 percent in March from 2.6 percent for the 12 months ending in February. The first quarter of 2018 also saw higher job growth than the same period last year, as an average of 202,000 new jobs were created in the first three months of 2018 compared to 177,000 in 2017. Overall, despite the disappointing headline number, there was some positive news in the report.

In housing news, home prices continued to push higher in February due in part to the ongoing theme of limited housing supply on the markets. Research firm CoreLogic reported that home prices, including distressed sales, rose 6.7 percent from February 2017 to February 2018 and were up 1 percent from January to February. Looking ahead, CoreLogic forecasts that home prices will rise 4.7 percent from February 2018 to February 2019.

Extreme volatility continued in the markets this week, as uncertainty regarding tariffs and a trade war with China caused wild swings in Stocks. Mortgage Bonds were stuck in a sideways trading pattern, while home loan rates remain historically attractive.

If you or someone you know has any questions about home loan products, please give us a call. We’d be happy to help.

Inflation Tame, GDP Edged Lower

Last Week in Review:
GDP edged lower in fourth quarter 2017, while inflation remained tame in February.

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Fourth quarter 2017 Gross Domestic Product (GDP) edged lower to 2.9 percent, down from 3.2 percent in the third quarter, the Bureau of Economic Analysis reported. However, the report showed that consumer spending rose 4.0 percent, up from 2.2 percent in the third quarter. The jump in consumer spending was the quickest pace since the fourth quarter of 2014. Consumer spending makes up two-thirds of economic activity and is a key driver of economic growth.

Home prices continued to rise in January due in part to the low amount of homes for sale on the markets. The S&P/Case-Shiller 20-City Home Price Index rose 6.4 percent from January 2017 to January 2018, up from 6.3 percent recorded from December 2016 to December 2017. Home prices were also up 0.8 percent from December to January. Inventory continues to be a real challenge for many would-be buyers. Currently, there is a 3.4-month supply of homes for sale, well below the 6-month supply that is seen in a healthy market.

Consumer inflation remained low in February. The Bureau of Economic Analysis reported that Personal Consumption Expenditures (PCE) and Core PCE rose 0.2 percent from January to February, both in line with estimates. The more closely watched Core PCE reading excludes volatile food and energy prices and February’s figure was just below the 0.3 percent recorded in January. From February 2017 to February 2018, Core PCE came in at 1.6 percent, just above the 1.5 percent recorded in January. However, the reading is still well below the Fed’s target range of 2 percent.

When inflation starts to rise, a rise in home loan rates can follow. Inflation reduces the value of fixed investments like Mortgage Bonds, and home loan rates are tied to Mortgage Bonds.

For now, home loan rates remain attractive and near historically low levels.

If you or someone you know has any questions about home loans, please reach out. We’d be happy to help.

Non-Prime Product Primary and Second Home Guideline Updates

Effective for Non-Prime Primary Residence and Second Home loans with applications taken on and after Monday, April 2, 2018, Carrington Mortgage Services, LLC (CMS) will introduce the following guideline enhancements:

  • New Credit Grades – Non-Prime Program revised to Credit Grades A, B, and C (formerly grades A-, B+, B and RHE). See CMS Non-Prime Matrix for complete LTV and credit score details.
  • Cash Out Limits – Non-Prime standard cash-out limit has been increased to $500,000 (previously $250,000) with no LTV reduction required.
  • Expanded Debt to Income (DTI) Expanded DTI available for A and B up to 50% with minimum FICO of 620. Expanded DTI available for A and B up to 55% with minimum FICO of 680
  • Mortgage and Payment Verification – Credit Grade A housing history – 0 x 60 x 12 (previously 1 x 30 x 12) for Purchase and Rate/Term Refis with 620 FICO up to 85% LTV. See CMS Non-Prime Matrix for complete Non-Prime housing history requirements.
  • Enhanced Ratios Removed the 40% Maximum Housing Ratio requirements
  • Calculating Qualifying Income Updated income calculations for the Business Bank Statement Program. Option 1 can now be a Borrower prepared P&L.  Additionally, the variance on bank statements vs. P&L has increased to 10% (previously 5%).
    Note: This applies to Investment Bank Statement program as well.

In addition to the enhancements above, the Non-Prime program will have the following additional guideline changes:

  • First Time Homebuyer and Second Homes Minimum credit score increased to 580 from 560.
  • Maximum Loan Amounts loan amounts greater than $1MM available only to credit grades A and B

All loans with APPLICATIONS on and after Monday April 2, 2018 must comply with the new Non-Prime Underwriting Guidelines.  All loans with Applications prior to Monday April 2, 2018 must be fulfilled using the prior Non-Prime Underwriting Guidelines.

Fed Hikes Rates

Last Week in Review:
Sales of new and existing homes showed different results in February while the Fed raised the Fed Funds Rate.

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February Existing Home Sales rose 3 percent from January to an annual rate of 5.54 million, above the 5.42 million expected, the National Association of REALTORS® (NAR) reported. Gains were seen in the South and West with declines in the Northeast and Midwest. Sales were up 1.1 percent from a year ago. Unsold inventory is at a 3.4-month supply, well below the 6-month supply that is seen as normal.

Sales of new homes had the opposite result in February, falling for the third straight month. New Home Sales edged lower by 0.6 percent from January to an annualized rate of 618,000, just below expectations, the Commerce Department reported. Sales increases were seen in the Northeast and South, with declines in the Midwest and West. New Home Sales were up 0.5 percent from February 2017 to February 2018. And there was good news regarding inventory. There was a 5.9-month supply of new homes for sale on the market, which is near the 6-month supply seen as normal.

The Fed also made headlines in the latest week. As expected, the Fed raised its benchmark Federal Funds Rate 0.25 percent, bringing the new target rate range to between 1.5 and 1.75 percent. The Fed acknowledged inflation remains low, but it is expected to rise in the coming months as tax cuts further stimulate the economy.

If inflation does begin to rise, an increase in home loan rates could follow. Inflation reduces the value of fixed investments like Mortgage Bonds, and home loan rates are tied to Mortgage Bonds. However, many factors impact the direction of the markets, including possible tariffs, trade wars and the direction of other economic reports. We’ll continue to monitor all of these developments closely.

In the meantime, home loan rates remain historically attractive.

If you or someone you know has any questions about home loan rates or products, please reach out. We’d be happy to help.

State of the Nation Webinar – Presented by Rick Sharga, Carrington Mortgage Holding, EVP


Want to know what’s in store for the real estate and mortgage industries in 2018? Will low inventory, rising rates, and falling affordability derail the housing recovery? Get the answers to these and other questions in an informative webinar hosted by Rick Sharga, Executive Vice President, Carrington Mortgage Holdings, on the State of the U.S. Housing Market. Rick will share insights on US Economic Performance, Home Sales Trends, Mortgage Industry Trends and what the outlook is for the real estate market for the rest of 2018. We’ll also cover current events such as immigration policy and tax reforms, and their potential impact on the market. Don’t miss this great opportunity to get informed. Register now to save your spot!

Register Now

Rick Sharga on Fox Business how rising interest rates impact your mortgage

Executive Vice President Rick Sharga discuss the impact of rising interest rates on the housing market.

View on FoxBusiness.com.

Effective March 1st, Per Diem Interest on FHA & VA IRRRL Loans

Per Diem Interest on FHA Streamline and VA IRRRL Loans, Effective March 1st, 2018

Effective March 1, 2018, Carrington Mortgage Services, LLC (CMS) will no longer offer an interest credit to cover the per diem interest on FHA Streamline and VA IRRRL loans.

New Streamline/IRRRL submissions received on or after March 1, 2018 will no longer offer automatic lender credit to cover per diem interest amount.

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