Anniemac
Inside Track

Market Update from Our CEO- 04.15.16

 

Daily Quote:

Your greatest assets are a cheerful heart, a smiling face, a helping hand, and the time at your disposal. Use them for good, use them wisely, and use them for success.

Fun Fact Of The Day:    

Laughing lowers levels of stress hormones and strengthens the immune system. Six-year-olds laugh an average of 300 times a day. Adults only laugh 15 to 100 times a day.

What’s Driving This Surge In Mortgage Business?

If you said “interest rates” then you’re only partially right…but I’ll start with them anyway. 

Interest Rates:  Our interest rate forecasts have been remarkably accurate so far and even though our predictive abilities might be more dumb luck than skill the results are the same – we’ve staffed for pipeline growth and growth came.  A homeowner’s backend DTI looks more favorable when rates are lower, they can buy more home and the overall interest burden over the term of the loan is significantly reduced.  This has not only helped add some fuel into the purchase market but has also kept the refi market alive as evidenced by the industry’s weighted average pipeline which currently stands at about 55% purchase/45% refinance…which is a very healthy blend.

Jobs:  Income is more important to home ownership than interest rates….period.  If you’re employed and managing your expenses there’s a good chance you’re more financially able to own a home.  However if you’re unemployed (or under-employed) interest rates can be zero and you still wouldn’t be able to manage the financial responsibility of home ownership.  Make sense?  So while the job market on a monthly basis isn’t lighting the world on fire, the literally millions of jobs which have been created over the past 4 years has added some much need wind to the back of the mortgage industry.

Negative Equity:  Oh…it’s still out there Mary but in most areas it’s been significantly reduced or completely overcome.  This allows empty-nesters to finally sell their current home and downsize thereby freeing up inventory for people who have either been living in apartments, Mom’s basement or have outgrown their current space.  Less inventory accelerates this phenomenon as it pushing prices higher, further reducing negative equity.  At some point this levels off but we’re pretty far from that in some areas.

Enough With The Millennials Already!:  Despite news to the contrary this entire demographic hasn’t, in one generation, decided to eschew home ownership and live in boxes and mini-homes their entire life.  Sure there is some psychological scarring from watching their parents struggle and sure college debt can weight them down but the nature of men, woman and children hasn’t changed that much.  The couple who is happy living in a studio quickly finds the appeal of a home with a small yard very appealing as the family grows.  Here’s a simple recipe for you and the second most well-known equation of all time: 

Wife + Job + Child = Homeownership. (In case you’re wondering, e-mc2 is the first!)

Weather:  There is something about cold weather which slows life and activity to a crawl…but enter the Spring and I don’t care whether you’re a rabbit, a turtle or a human your desire to “get a move on things” kicks into high gear.  History has shown us that the 5 months between April to August spur a flurry of activity in housing and for the reasons above and more this year will be no different.

What Does This Mean For Mortgage Participants?   

This is an easy one…it means you’re going to be busy – really busy.  Don’t worry about Presidential elections or the Federal Reserve right now…worry about working efficiently and setting proper expectations.  Everything else will fall into place.

 

Economic News/Activity:

 

Time

Release

Period

B'Berg Survey

Actual

Prior

Revised

08:30

Empire Manufacturing

Apr

2

9.56

0.62

--

09:15

Industrial Production MoM

Mar

-0.10%

--

-0.50%

--

09:15

Capacity Utilization

Mar

75.30%

--

76.70%

75.40%

09:15

Manufacturing (SIC) Production

Mar

0.10%

--

0.20%

--

10:00

U. of Mich. Sentiment

Apr P

92

--

91

--

10:00

U. of Mich. Current Conditions

Apr P

--

--

105.6

--

10:00

U. of Mich. Expectations

Apr P

--

--

81.5

--

10:00

U. of Mich. 1 Yr Inflation

Apr P

--

--

2.70%

--

10:00

U. of Mich. 5-10 Yr Inflation

Apr P

--

--

2.70%

--

16:00

Total Net TIC Flows

Feb

--

--

$118.4b

--

16:00

Net Long-term TIC Flows

Feb

--

--

-$12.0b

--

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1777 S. Harrison Street Suite 1111

Denver, CO, 80210

(844) 771-1156