Home Sales Hit 8 Year High
U.S. home resales rose in June to their highest level in nearly 8-1/2 years, a sign of pent-up demand that should buoy the housing market recovery and overall economy.
The National Association of Realtors said on Wednesday existing home sales increased 3.2 percent to an annual rate of 5.49 million units, the highest level since February 2007.
Existing sales this year are on track to record their biggest gain in eight years, the NAR said. May’s sales pace was revised slightly down to 5.32 million units from the previously reported 5.35 million units.
Lawrence Yun, NAR chief economist, says backed by June’s solid gain in closings, this year’s spring buying season has been the strongest since the downturn. “Buyers have come back in force, leading to the strongest past two months in sales since early 2007,” he said. “This wave of demand is being fueled by a year-plus of steady job growth and an improving economy that’s giving more households the financial wherewithal and incentive to buy.”
Adds Yun, “June sales were also likely propelled by the spring’s initial phase of rising mortgage rates, which usually prods some prospective buyers to buy now rather than wait until later when borrowing costs could be higher.”
The median existing-home price for all housing types in June was $236,400, which is 6.5 percent above June 2014 and surpasses the peak median sales price set in July 2006 ($230,400). June’s price increase also marks the 40th consecutive month of year-over-year gains.
Total housing inventory at the end of June inched 0.9 percent to 2.30 million existing homes available for sale, and is 0.4 percent higher than a year ago (2.29 million). Unsold inventory is at a 5.0-month supply at the current sales pace, down from 5.1 months in May.
“Limited inventory amidst strong demand continues to push home prices higher, leading to declining affordability for prospective buyers,” said Yun. “Local officials in recent years have rightly authorized permits for new apartment construction, but more needs to be done for condominiums and single-family homes.”
What Happened to Rates Last Week?
Mortgage backed securities (FNMA 3.50 MBS) gained +35 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to improve slightly.
It was a week of very slow gains as our domestic data weighed on pricing but international events provided terrific support and even some upper momentum.
Domestically, we had a very light economic calendar and no major Treasury auctions. Existing Home Sales were much stronger than expected and reached an eight year high. Weekly Jobless Claims fell to their lowest level since 1973. And the Leading Economic Indicators were three times stronger than market expectations. This wave of positive economic news provided pressure on pricing but this was more than offset by international events.
International Flavor: While the Chinese stock market continues to be a huge concern, we also go news that their PMI (manufacturing data) just hit a 15 month low. Greece remained front and center as two more votes were passed and they used their new bridge loan to make some payments back to the ECB and IMF. “hair cut” creditors would have to take on Greek debt has the market worried that Germany will scuttle the deal and it is this fear that caused the upward movement in pricing for the week.
What to Watch Out For This Week:
|Date||Time (ET)||Economic Release||Actual||Market Expects||Prior|
|27-Jul||8:30 AM||Durable Orders||–||3.00%||-2.20%|
|27-Jul||8:30 AM||Durable Goods -ex transportation||–||0.50%||0.00%|
|28-Jul||9:00 AM||Case-Shiller 20-city Index||–||5.60%||4.90%|
|28-Jul||10:00 AM||Consumer Confidence||–||100||101.4|
|29-Jul||7:00 AM||MBA Mortgage Index||–||NA||0.10%|
|29-Jul||10:00 AM||Pending Home Sales||–||1.00%||0.90%|
|29-Jul||10:30 AM||Crude Inventories||–||NA||2.468M|
|29-Jul||2:00 PM||FOMC Rate Decision||–||0.25%||0.25%|
|30-Jul||8:30 AM||Initial Claims||–||271K||255K|
|30-Jul||8:30 AM||Continuing Claims||–||2200K||2207K|
|30-Jul||8:30 AM||Chain Deflator-Adv.||–||1.50%||0.00%|
|30-Jul||10:30 AM||Natural Gas Inventories||–||NA||61 bcf|
|31-Jul||8:30 AM||Employment Cost Index||–||0.60%||0.70%|
|31-Jul||9:45 AM||Chicago PMI||–||50.5||49.4|
|31-Jul||10:00 AM||Michigan Sentiment – Final||–||94||93.3|
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.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.
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