Mortgage Market Weekly Update: September 17 - 21, 2012

Includes: REZ, XHB
by: Julie Young

Average mortgage rates reported by Freddie Mac's Primary Mortgage Market Survey fell for the week, following the Federal Reserve's initial purchase of mortgage-backed securities on September 14. The Federal Reserve's September MBS purchases of $23 billion began on September 14 and will be followed by monthly MBS purchases of $40 billion.

Freddie Mac's PMMS stated an average 30-year fixed-rate mortgage of 3.49 percent for the week. This rate matches the year's record low reached during the July 26 week. If maintained at its current level, the September average will also fall below the 30-year FRM's all-time monthly record low of 3.55 percent which occurred in July 2012.

According to the PMMS, the 15-year FRM also fell to a new 2012 weekly record low at 2.77 percent, 3 basis points below the previous low of 2.80 percent reached during the July 26 week. If maintained at its current level, a new monthly record low for the 15-year FRM is also likely to be set in September.

Mortgage rate levels appear to be falling consistent with the Federal Reserve's expectations, which should continue to improve the market's confidence in Federal Reserve monetary policy actions.

The Mortgage Bankers Association's Weekly Application Survey, which lags one week behind the reporting of Freddie Mac's PMMS, fell for the week, likely because buyers awaited Federal Reserve monetary policy actions following the September 12 - 13 FOMC meeting.

The MBA's Market Composite Index, which measures mortgage applications, showed a 0.2 percent decrease for the week. The Refinance Index, however, gained 1 percent and increased the refinancing share of mortgage applications to 81 percent.

The MBA's weekly report stated an average contract rate of 3.72 percent for 30-year fixed-rate mortgages with loan balances below $417,500. For loan balances greater than $417,500 the average 30-year fixed-rate reported by the MBA was 3.99 percent.

The MBA's Purchase Index level for the week provides another market benchmark for housing purchases following the Federal Reserve's September 13 monetary policy announcement. It decreased 4 percent from the previous week on a seasonally adjusted basis.

In other real estate news, the National Association of Homebuilders reported increased builder confidence, the Commerce Department released data on residential construction and the National Association of Realtors reported improvements in existing-home sales.

The National Association of Home Builders/Wells Fargo Housing Market Index improved three points to 40 in September, reaching a level it has not attained since June 2006. Gains were recorded in September for all three components of the Index's measures, which track builder's confidence in sales conditions for newly built single-family homes.

According to David Crowe, NAHB Chief Economist, "Builders across the country are expressing a more positive outlook on current sales conditions, future sales prospects and the amount of consumer traffic they are seeing through model homes than they have in more than five years."

Residential construction (pdf) also continued to improve in August, according to monthly data released by the U.S. Commerce Department. Housing starts, completions and building permit authorizations for single-family homes all increased in August reporting seasonally adjusted gains of 5.5 percent, 5.4 percent and 0.2 percent, respectively. Meanwhile, privately-owned housing starts and completions also gained in August and showed year-over-year improvements as well.

Existing-home sales in August added to the housing market's improving conditions. The National Association of Realtors reported a 7.8 percent increase in the seasonally adjusted existing-home sales annual rate from July to August. On a year-over-year basis, the rate increased by 9.3 percent to 4.82 million from 4.41 million in August 2011.

The NAR report also stated a median existing-home sales price of $187,400, a 0.05 percent monthly increase and a 9.5 percent year-over-year increase.

Distressed real estate was also less burdensome for the housing market in August. It accounted for 22 percent of the month's sales compared to 24 percent in July and 31 percent in August 2011, according to the NAR.

As the national market improves, regional differences are still varied. According to the NAR's report, the Northeast region had the greatest increase in monthly sales, improving 8.6 percent with the median selling price up 0.6 percent from one year ago to $245,200. In comparison, the South reported the weakest monthly improvement in existing-home sales, rising 7.3 percent with a median price up 6.5 percent to $160,100.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.