Housing Could Rise Even Further This Fall
Autumn is historically the start of the slow season for home sales, but after a good spring and summer, wrought with still-tight supply and higher costs, the stage may be set for another small pick up in U.S. housing this fall, at least according to a new report.
More sellers are lowering their price expectations, because the number of homes that sold above list price in July was down nearly 26 percent from a year ago, noted in the report. That is the biggest drop of the year. Lower prices, still-low mortgage rates and increasing supply could push sales higher.
Twenty-seven percent of homes sold above their list price a year ago, compared with 20 percent this July. Home prices rose 7.4 percent nationally in July from a year ago, according to CoreLogic, but the gains have been shrinking steadily. That includes sales of distressed homes, which are slowly becoming a smaller share of the market. It is the 29th straight year-over-year gain in prices.
With Consumer Confidence increasing, interest rates very low and more supply of homes entering the market at more realistic prices – the stage is set for more units across the U.S. to move.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) lost -33 basis points (BPS) from last Friday’s close which caused 30 year fixed mortgage rates to increase and wiped out the prior week’s +37 BPS gain. We saw our best rates on Tuesday and our worst rates on Friday.
We had a very interesting week which could have caused much more volatility for MBS pricing than it did with very robust economic data, a bewildering jobs report, an ECB rate cut and a cease-fire in Ukraine.
ISM Manufacturing, ISM Non-Manufacturing, Factory Orders, Construction Spending and Auto Sales were all better than market expectations and were at very high historical levels.
The ADP Private Payroll report showed 204K new jobs but Friday’s Non-Farm Payroll (NFP) report showed only 142K which was well below the consensus estimates of 225K. After looking at all of the very strong manufacturing data, the bond market decided to ignore the NFP report as it simply doesn’t reflect current market conditions and they believe it will be revised upward significantly.
The European Central Bank (ECB) announced an interest rate cut that went into negative territory for deposits held at the ECB by their member banks with the idea that banks wont sit on their cash..instead they will start to lend it out and stimulate the fragile Eurozone economy. They also announced their own version of a an asset backed purchase program (similar to our QE) that will begin in October (while our QE will end in October).
The Ukraine and the pro-Russian separatists agreed on a cease-fire after the NATO summit which cause some of the “fear-factor” premium in bonds to abate.
What to Watch Out For This Week:
|Date||Time (ET)||Economic Release||Actual||Market Expects||Prior|
|8-Sep||3:00 PM||Consumer Credit||–||$17.4B||$17.3B|
|9-Sep||10:00 AM||JOLTS – Job Openings||–||NA||4.671M|
|10-Sep||7:00 AM||MBA Mortgage Index||–||NA||0.20%|
|10-Sep||10:00 AM||Wholesale Inventories||–||0.50%||0.30%|
|10-Sep||10:30 AM||Crude Inventories||–||NA||-0.905M|
|11-Sep||8:30 AM||Initial Claims||–||300K||302K|
|11-Sep||8:30 AM||Continuing Claims||–||2490K||2464K|
|11-Sep||10:30 AM||Natural Gas Inventories||–||NA||79 bcf|
|11-Sep||2:00 PM||Treasury Budget||–||NA||-$147.9B|
|12-Sep||8:30 AM||Retail Sales||–||0.60%||0.00%|
|12-Sep||8:30 AM||Retail Sales ex-auto||–||0.30%||0.10%|
|12-Sep||8:30 AM||Export Prices ex-ag.||–||NA||0.30%|
|12-Sep||8:30 AM||Import Prices ex-oil||–||NA||0.00%|
|12-Sep||9:55 AM||Mich Sentiment||–||83.5||82.5|
|12-Sep||10:00 AM||Business Inventories||–||0.40%||0.40%|
The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.
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