5 Year High For the Housing Market
August Existing Home Sales jumped 7.8% from July – that was the fastest annual rate since May 2010 and well above analysts’ expectations of a 4.55 million-unit rate. Homes rose 9.3% from the same period a year ago.
Nationwide, the median price for a home resale rose to $187,400 in August, up 9.5 percent from a year earlier as fewer people sold their homes under distressed conditions.
Keep in mind that this added demand for housing which is pushing up home prices started months before the Federal Reserve announced their massive $40 billion per month in Agency ( Fannie Mae, Ginnie Mae and Freddie Mac) mortgage backed securities purchases which have lowered rates even further since July.
“The strengthening housing market is occurring even with difficult mortgage qualifying conditions, which is testament to the sizable stored-up housing demand that accumulated in the past five years,” said the National Association of Realtors’ chief economist Lawrence Yun.
The gains in housing would certainly be much higher if it weren’t for strict mortgage guidelines. But there is so much pent up demand for housing that 1/3 of all existing home purchases were made with good old cash as investors realize that time is shortening for them to pick up houses at good bargains now that they see the home prices increasing.
With the August jump of 7.8 percent from July, Realtors now say they are confident that home sales for all of 2012 will hit their highest level in five years.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained +95 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move lower. We had our highest mortgage rates on Monday and our lowest rates on Friday.
We had a very light week for economic data that saw big improvements in Existing Home Sales, Home Builders Index and in the Philly Fed manufacturing index. Initial Jobless claims improved slightly and the Leading Economic Indicators matched expectations. Only the NY Empire manufacturing Index was weaker than the prior month. Overall, this data was positive for the economy and should have pressured MBS (worse rates for you). But this data was largely overshadowed by two factors.
First, is your tax dollars hard at work. The Federal Reserve purchased just under $20 billion of Agency Mortgage Backed Securities as part of their new $40 billion per month purchase plan. Second, U.S. bonds were very attractive to foreign investors on much weaker than expected PMI data (Purchasing Managers Index – a measure of manufacturing growth) out of China and Europe.
What to Watch Out For This Week:
The following 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:
|Date||ET||Economic Release||Actual||Market Expects||Prior|
|25-Sep||9:00 AM||Case-Shiller 20-city Index||–||0.80%||0.50%|
|25-Sep||10:00 AM||Consumer Confidence||–||63||60.6|
|25-Sep||10:00 AM||FHFA Housing Price Index||–||NA||0.70%|
|26-Sep||7:00 AM||MBA Mortgage Index||–||NA||-0.20%|
|26-Sep||10:00 AM||New Home Sales||–||380K||372K|
|26-Sep||10:30 AM||Crude Inventories||–||NA||8.534M|
|27-Sep||8:30 AM||Initial Claims||–||380K||382K|
|27-Sep||8:30 AM||Continuing Claims||–||3270K||3272K|
|27-Sep||8:30 AM||Durable Orders||–||-5.10%||4.10%|
|27-Sep||8:30 AM||Durable Orders -ex Transportation||–||-0.30%||-0.60%|
|27-Sep||8:30 AM||GDP – Third Estimate||–||1.70%||1.70%|
|27-Sep||8:30 AM||GDP Deflator – Third Estimate||–||1.60%||1.60%|
|27-Sep||10:00 AM||Pending Home Sales||–||1.00%||2.40%|
|28-Sep||8:30 AM||Personal Income||–||0.20%||0.30%|
|28-Sep||8:30 AM||Personal Spending||–||0.50%||0.40%|
|28-Sep||8:30 AM||PCE Prices – Core||–||0.10%||0.00%|
|28-Sep||9:45 AM||Chicago PMI||–||52.8||53|
|28-Sep||9:55 AM||Michigan Sentiment – Final||–||79||79.2|
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.