Home Price Climb Continues

Last Week in Review:
Home prices continue to rise while geopolitical and trade war uncertainty eased.

Research firm CoreLogic reported that home prices, including distressed sales, rose 6.9 percent from April 2017 to April 2018, while there was a 1.2 percent gain from March to April of this year. Looking ahead, CoreLogic forecasts a 5.3 percent increase in home prices from April 2018 to April 2019.

CoreLogic Chief Economist Frank Nothaft noted that “new construction has failed to keep up with and meet new housing growth or replace existing inventory.

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Also of note, there was good news from the labor sector, as weekly Initial Jobless Claims continue to hover near lows seen in the early 1970’s.

Headlines from across the globe had an impact on the markets in recent days. However, the smoothing of the political turmoil in the Eurozone and easing trade issue woes lifted some of the uncertainty that had driven investors into the safer haven of the Bond market. Mortgage Bonds have been edging lower as a result. Investors may also be awaiting the upcoming Fed meeting June 12-13, as it has the potential to move the markets.Also of note, there was good news from the labor sector, as weekly Initial Jobless Claims continue to hover near lows seen in the early 1970’s.

At this time, home loan rates remain historically attractive.

Lender Paid Compensation for the Near-Prime and Non-Prime products

Carrington Mortgage Services, LLC (CMS) is pleased to announce that effective Tuesday, June 5, 2018, Brokers may submit loans using Lender Paid Compensation for the Near-Prime and Non-Prime products.

Refer to the CMS Rate Sheets for the latest pricing.

Please note: For all transactions where the Broker selects the Lender Paid Compensation option, the submission is required to include a valid Anti-Steering Disclosure.

Job Growth Heats Up in May

Last Week in Review:
Geopolitical headlines moved the markets. May job growth beat expectations.

Market_Trends_2018-06-04The Bureau of Labor Statistics reported that Non-Farm Payrolls rose 223,000 in May, above expectations and up from 159,000 in April. April and March were revised for an increased total of 15,000 more jobs than previously reported. May Average Hourly Earnings also rose 0.3 percent, in line with estimates, and up from 0.1 percent in April. Year over year, earnings were up 2.7 percent in May, from the 2.6 percent for the year ended in April. The Unemployment Rate for May fell to 3.8 percent, the lowest level since April 2000. Overall, the Jobs Report was strong and shows a strengthening labor market.

Annual Core Personal Consumption Expenditures (PCE) showed that inflation rose 1.8 percent in April, while March was revised lower to 1.8 percent from 1.9 percent. Core PCE, which excludes volatile food and energy prices, is the Fed’s favorite inflation gauge. While inflation remains steady, it is still below the Fed’s 2 percent target. Since inflation reduces the value of fixed investments, like Mortgage Bonds, it can hurt Mortgage Bonds and the home loan rates tied to them. It will be important to see where inflation heads in the coming months.

In housing news, home prices continued to edge higher in March due in a large part to low inventories of homes for sale on the market. The S&P Case-Shiller 20-City Home Price Index rose 6.8 percent from March 2017 to March 2018, matching the February gain.

Although the second reading on first quarter 2018 Gross Domestic Product was also released last week, it came and went with little fanfare, near unchanged from the first reading. The real market mover was the geopolitical events throughout Europe. Political turmoil in Italy and Spain pushed investors into the safe haven of the Bond markets early in the week, but those fears eased in recent days as both countries came to an agreement.

Mortgage Bonds were able to squeak out small gains in the latest week as they rose to near 2018 highs. Home loan rates declined and remain historically attractive.

Carrington is on the June 2018 cover of the Scotsman Guide

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Pricing Improvement on Near-Prime and Non-Prime Loans

Effective May 30, 2018, Carrington Mortgage Services, LLC (CMS) will offer improved loan level pricing for the Near-Prime and Non-Prime Loan programs. The matrices below list the amounts of the applicable Loan Level Price Adjustment improvements by FICO and LTV. Refer to the CMS Rate Sheets for the latest pricing.

Near Prime

Non-Prime

View Today’s Rates

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Housing Starts Stutter

Last Week in Review:
Housing Starts stall in April, while registers were ringing at retailers.

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Retail Sales rose 0.3 percent from March to April, the Commerce Department reported, with sales highest at furniture stores, clothing stores and gasoline stations. On a year-over-year basis, Retail Sales jumped a solid 4.7 percent. The Retail Sales report is a measure of the total receipts of retail stores from samples representing all sizes and kinds of businesses throughout the nation, making it a key indicator regarding the state of our economy.

Home construction was a different story in April, however. Construction on new homes declined in April from March due in part to a rise in the price of lumber. April Housing Starts fell 3.7 percent from March to an annual rate of 1.287 million units, below expectations. Single-family home starts, which make up a big chunk of residential construction, rose 0.1 percent from March to April, while multi-dwelling starts of five or more units fell 12.6 percent. On a positive note, Housing Starts were up 10.5 percent from April 2017.

Building Permits, a sign of future construction, fell 1.8 percent from March to an annual rate of 1.352 million units. National Association of Home Builders Chairman Randy Noel explained, “The record-high cost of lumber is hurting builders’ bottom lines and making it more difficult to produce competitively priced houses for newcomers to the market.”

Mortgage Bonds struggled in the latest week, falling below a key technical level and hitting seven-year lows. Home loan rates are tied to Mortgage Bonds and, as a result, rates hit seven-year highs. However, rates remain attractive on a historical basis.

Memorial Day 2018 Holiday Lock Desk Hours

The Lock Desk will be closed on Monday, May 28, 2018 for Memorial Day, which is a Federal Holiday. Normal lock hours will resume on Tuesday, May 29, 2018.

Additionally, the Lock Desk will close early on Friday, May 25, 2018 at 10:00 A.M. PST due to the early close of the financial markets.

Locks that expire on the holiday will automatically roll to the next business day.  In addition there are some important disclosure considerations associated with the holiday:

  • Monday, May 28, 2018 cannot be included in the rescission period for refinance transactions.
  • Monday, May 28, 2018 cannot be included in the seven (7) business day waiting period between the date the initial Loan Estimate (LE) was provided to the borrower and the consummation of the loan
  • When re-disclosure of the LE is required, Monday, May 28, 2018 cannot be included in the four (4) business day waiting period between the date the revised LE was provided to the borrower and the consummation of the loan.
  • When re-disclosure of the CD is required, Monday, May 28, 2018 cannot be included in the three (3) business day waiting period between the date the revised CD was provided to the borrower and the consummation of the loan.

Issues related to locks should be sent via email to lockdesk@carringtonms.com.

Consumer Inflation Below Expectations

Last Week in Review:
Consumer and wholesale inflation were tame in April, while geopolitical events also made headlines.

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The Consumer Price Index (CPI) rose 0.2 percent in April, just below expectations, the Bureau of Labor Statistics reported. This was down from the 2018 high of 0.5 percent recorded in January. The numbers revealed an uptick in energy and food prices which was offset by a decline in demand for used cars and trucks. The Core CPI, which strips out volatile food and energy prices, rose 0.1 percent, also below expectations.

Inflation at the wholesale level was also tame in April as the Producer Price Index (PPI) rose 0.1 percent. Core PPI rose 0.2 percent, as expected.

Tame inflation is typically good for Mortgage Bonds, as well as the home loan rates tied to them, because inflation reduces the value of fixed investments like Bonds. And Mortgage Bonds were boosted by the tame inflation data in the latest week.

It’s also important to remember that many factors impact both Stocks and Bonds. Strong economic news can benefit Stocks (sometimes at the expense of Bonds), while geopolitical turmoil can have the opposite effect. Stocks received a boost in the latest week when energy Stocks lifted the entire market, as oil prices spiked after President Trump announced his decision to withdraw from the Iran nuclear deal. The release of prisoners from North Korea and the scheduling of a meeting between President Trump and Kim Jong-un also lifted some uncertainty and helped the recent rise in Stock prices.

Investors will be watching headlines from the Middle East and Korea closely in the coming weeks as they decide where to put their investing dollars.

For now, though, home loan rates have trended higher this year, they remain attractive and near historically low levels.

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

Jobs, Inflation and the Fed

Last Week in Review:
The April Jobs Report disappointed while inflation ticked up in March. Plus, the Fed met.

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The Jobs Report for April was a bit of a disappointment, as job creation rose from March but came in below expectations. There were 164,000 new jobs added in April, below the 190,000 expected, the Bureau of Labor Statistics reported. This was up, however, from the 135,000 recorded in March (which was revised higher from 103,000). The Unemployment Rate fell to an 18-year low of 3.9 percent. Wage growth fell to 2.6 percent on an annual basis, down from the 2.9 percent recorded in January. Month-over-month hourly earnings rose 0.1 percent versus the 0.2 percent expected.

The Fed’s favorite inflation measure, annual Core Personal Consumption Expenditures (PCE), showed that inflation rose 1.9 percent in the 12 months through March. This was up from the 1.6 percent annual increase recorded in February. The Core reading excludes volatile food and energy prices. March’s number was the biggest increase since February 2017, and it brings annual Core PCE closer to the Fed’s target of 2.0 percent.

Inflation reduces the value of fixed investments, like Mortgage Bonds, meaning inflation can hurt Mortgage Bonds and the home loan rates tied to them. It will be important to see if signs of inflation remain in the air.

The Fed met and, as expected, left its benchmark Fed Funds Rate unchanged at 1.5 to 1.75 percent. This is the rate at which banks lend money to each other overnight, and it is not directly tied to home loan rates. The Fed noted, as mentioned above, that inflation has moved closer to its 2.0 percent target, employment growth has been strong, and that the economy is growing at a moderate rate.

Over in the housing sector, high demand plus a limited supply of homes for sale on the market pushed home prices higher in March. Research firm CoreLogic reported that home prices, including distressed sales, rose 7 percent from March 2017 to March 2018, while there was a 1.4 percent gain from February to March. Looking ahead, CoreLogic forecasts a 5.2 percent rise in home prices from March 2018 to March 2019.

Despite the warm inflation reading, the disappointing labor market news in part helped Mortgage Bonds bounce off five-year lows. Home loan rates improved this week and 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.

Introducing a new Near-Prime Product

Overview

Effective May 3, 2018 Carrington Mortgage Services, LLC (CMS) will introduce a new Near-Prime Product to broaden our commitment to serving the underserved borrower!

The Near-Prime product is well suited for borrowers who may have credit challenges but need pricing that is closer to prime rates. The program features Fixed and Adjustable Rate loan programs with FICO scores down to 620.

General Highlights

  • Recent Mortgage / Rental Lates up to 1 x 30 x 12
  • Foreclosure, Short Sale, Deed in Lieu and Bankruptcy with 36-month seasoning
  • Max Debt Ratios from 50% up to 55%
  • First Time Home Buyers allowed
  • Non-warrantable Condo Permitted (max 80% LTV)
  • Fully Documented Loans, 24 Months Bank Statements, 12 Month Bank Statements, and 1-Year Alternative Documentation
  • No Mortgage Insurance required
  • No Prepayment Penalties

Near-Prime Program Terms

  • Purchase, Rate/Term and Cash-Out Transactions (up to $500,000 cash-out)
  • 30 Year Fixed, 5/1 and 7/1 LIBOR ARMs
  • Maximum Loan Amount to $1.5MM
  • Cash-Out available to $500K
  • Primary Residence and Second Homes
  • Max LTV/CLTV: Up to 95%*
  • Min FICO: 620
  • Not Available in AK; MA; WV

*Refer to the CMS Near-Prime Matrix for LTV requirements.

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