Market Studies

Positive economic and housing news lifted fixed mortgage rates to their highest level in months this week. According to Freddie Mac&'s Primary Mortgage Market Survey, the average interest rate for a 30-year fixed-rate mortgage (FRM) was 3.42 (0.7 point) for the week ending January 24, up from 3.38 percent last week. The last time the average 30-year reading was this high was September 29 of last year, Freddie Mac said. The 15-year fixed average also rose, climbing to 2.67 percent (0.7 point) from 2.66 percent previously.

While some are asking when the economy will return to normal, others are wondering if this prolonged period of below-potential GDP growth is actually the ""new normal,"" according to a report from Fannie Mae's (FNMA/OTC) Economic & Strategic Research Group. For 2013 and 2014, Fannie Mae projects a continuation of below-potential economic growth, with a 2 percent growth rate expected for 2013, similar to the lackluster performance seen in 2012.

First-time claims for unemployment insurance fell to another five-year low for the week ending January 19, dropping 5,000 to 330,000, the Labor Department reported Thursday. Economists expected claims to increase to 360,000 from the prior week. The previous week's report was unchanged at 365,000, which had been the lowest level since January 2008.

Speaking at the NAHB's International Builders' Show in Las Vegas, chief economists David Crowe (for the NAHB), David Berson (Nationwide), and Frank Nothaft (Freddie Mac) talked about the trends the housing industry can expect to see and the potential threats that may impede the recovery. In total, NAHB forecasts 949,000 total housing starts in 2013, up 21.5 percent from 781,000 in 2012. Single-family starts are expected to rise 22 percent to 650,000 in 2013 and an additional 30 percent to 844,000 in 2014.

The Federal Housing Finance Agency (FHFA) reported another increase in home prices for November. On a seasonally adjusted basis, prices increased 0.6 percent from October to November and by 5.6 percent over the 12-month period ending in November, according to FHFA's calculations. FHFA has not reported a decline in monthly home prices since January 2012. The current index is 15.2 percent lower than the national peak reached in April 2007.

Home prices may appear to be in recovery mode, but they haven't reached bottom yet and probably won't until sometime in 2014, according to a report from DBRS. Although the rating agency acknowledged positive housing trends in 2012, such as signs of recovery for home prices, decreasing delinquencies, and more prime jumbo securitizations, DBRS still stated it ""believes that the housing market will remain under pressure in the foreseeable future.""

Lender Processing Services (LPS) offered preliminary data on mortgage performance in December, revealing foreclosure inventory and delinquency rates were both down year-over-year. The foreclosure pre-sale inventory rate fell to 3.4 percent in December. The figure represents a 2 percent decrease from November and an 18 percent drop from December 2011. The delinquency rate, or loans past due 30 or more days, stood at 7.2 percent at the end of December, which is a slight 0.7 percent increase from November and a 9.1 percent decrease from a year ago.

As the National Association of Realtors reported, home sales dropped in December. However, Capital Economics warns this should be no cause for despair. ""[M]onthly changes are volatile,"" the analytics firm stated Tuesday, adding that three-month averages are often more indicative of market trends and the numbers from a single month. Based on the three-month average, existing-home sales are still on the rise.

As servicers rise out of the paralysis caused by regulatory issues, they are able to take necessary steps to clear out aging loans in shadow inventory, according to a report from Moody's Investors Service. In the report, Moody's revealed the number of loans in foreclosure shadow inventory, or loans in the process of foreclosure but with no resolution, decreased from Q2 to Q3, with the exception of jumbo loans from Citi and subprime loans from Bank of America.

Serious delinquencies for U.S. RMBS improved across all sectors in the fourth quarter of 2012, according to a new mortgage market index from Fitch Ratings. Furthermore, the agency expects RMBS delinquencies to continue declining this year. According to Fitch, the improvement ""reflects positive selection in the remaining pools, loan modification efforts by servicers, and positive home price trends.""