Home Prices Push Past Rising Rates
Despite rising interest rates, home prices continue to surge higher. The latest read shows values, including distressed properties, up 12.4 percent in July, year over year, according to a monthly CoreLogic report. That’s higher than both May and June’s annual increases.
This is the 17th consecutive month of annual gains for home values nationally. Prices were up 1.8 percent month over month, according to the report.
Mortgage rates are about a full percentage point higher today than they were at the beginning of March. The average rate on the 30-year fixed hit 4.80 percent by the middle of last week, according to the Mortgage Bankers Association. That is the highest since April 2011.
Rates have been trending higher on expectations that the Federal Reserve will begin to taper its investments in mortgage-backed securities.
Home prices are also trending higher in part due to the fact that there are fewer distressed properties for sale. Excluding distressed sales, prices were up 11.4 percent year over year. Distressed properties have seen big price jumps in the past year, as investors fight to get the remaining bargains.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained +22 basis points from last Friday’s close which caused 30 year fixed rates to move slightly lower from the prior week.
We had a very positive week for domestic economic data. Durable Goods Orders, Consumer Confidence, and GDP were all better than expected and showed some nice levels of growth in our economy. Normally, this would cause rates to rise because rates do go up hand-in-hand with economic growth.
But instead, rates moved lower…why?
This was due to solely to concerns over a U.S. military strike against Syria. Any military action always caused a “flight to safety”. This is where domestic and international traders “park” their money in the very low-return but very safe U.S. bond market while they wait out any potential volatility due to the after effects and unintended consequences of any forceful action. This causes a temporary spike in demand for our bonds which in turn, lowers rates. But this type of improvement is only temporary.
|Date||ET||Economic Release||Actual||Market Expects||Prior|
|3-Sep||10:00 AM||ISM Index||–||53.6||55.4|
|3-Sep||10:00 AM||Construction Spending||–||0.50%||-0.60%|
|4-Sep||7:00 AM||MBA Mortgage Index||–||NA||-2.50%|
|4-Sep||8:30 AM||Trade Balance||–||-$38.2B||-$34.2B|
|4-Sep||2:00 PM||Auto Sales||–||NA||5.6M|
|4-Sep||2:00 PM||Truck Sales||–||NA||6.8M|
|4-Sep||2:00 PM||Fed’s Beige Book||–||NA||NA|
|5-Sep||7:30 AM||Challenger Job Cuts||–||NA||2.30%|
|5-Sep||8:15 AM||ADP Employment Change||–||180K||200K|
|5-Sep||8:30 AM||Initial Claims||–||333K||331K|
|5-Sep||8:30 AM||Continuing Claims||–||2977K||2989K|
|5-Sep||8:30 AM||Unit Labor Costs||–||1.00%||1.40%|
|5-Sep||10:00 AM||Factory Orders||–||-3.70%||1.50%|
|5-Sep||10:00 AM||ISM Services||–||54.5||56|
|5-Sep||10:30 AM||Natural Gas Inventories||–||NA||67 bcf|
|5-Sep||11:00 AM||Crude Inventories||–||NA||2.986M|
|6-Sep||8:30 AM||Nonfarm Payrolls||–||177K||162K|
|6-Sep||8:30 AM||Nonfarm Private Payrolls||–||180K||161K|
|6-Sep||8:30 AM||Unemployment Rate||–||7.40%||7.40%|
|6-Sep||8:30 AM||Hourly Earnings||–||0.20%||-0.10%|
|6-Sep||8:30 AM||Average Workweek||–||34.5||34.4|
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.