Slight Cooling in Housing a Good Thing
U.S. housing prices rose 8.5% through August even as higher mortgage rates hurt demand, according to a Federal Housing Finance Agency report.
Though home prices continue to rise, real estate research from Zillow (Z) finds evidence the housing market is cooling. The pace of home value appreciation slowed in the third quarter to 1.2%, about half the pace of the second quarter of this year. And as Stan Humphries, chief economist at Zillow, tells The Daily Ticker in the above video — that’s “a pretty good thing.”
“We have been wanting to see a little bit of moderation in the pace of home value gains because they’ve been rising at a very fast pace off the bottom. And in order to get back to a normal pace we need to start to see things moderate,” he tells us. “The normal pace in the housing market looks more like 3.5% [growth in values] a year, so in the past several months we’ve been rising at almost twice that pace.”
In other words, you want the housing recovery to be sustainable so in some cases (like now) a slowdown is good.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained +61 basis points from last Friday’s close which caused 30 year fixed rates to move lower for the week. We saw our best rates on Wednesday and our worst rateson Monday.
The benchmark FNMA 3.5 November mortgage backed security (MBS) had one major movement during the week which was almost solely responsible for rates decreasing. This was due to Tuesday’s Non-Farm Payroll release.
The market was expecting around 180K new jobs. But the reading was much lower at 148K. Many economists think that we need at least 150K new jobs each month to see any measurable economic growth. Bonds generally do better in low or negative economic growth, so this reading was positive for bonds and therefore your mortgage rates. Traders also viewed this data as a signal that the Federal Reserve would have to keep their massive monthly $85 billion Treasury and MBS purchases in place until at least the 2nd quarter of 2014 which will keep rates at low levels for an extended period of time.
|Date||Time (ET)||Economic Release||Actual||Market Expects||Prior|
|28-Oct||9:15 AM||Industrial Production||–||0.30%||0.40%|
|28-Oct||9:15 AM||Capacity Utilization||–||78.00%||77.80%|
|28-Oct||10:00 AM||Pending Home Sales||–||-1.30%||-1.60%|
|29-Oct||8:30 AM||Retail Sales||–||-0.10%||0.20%|
|29-Oct||8:30 AM||Retail Sales ex-auto||–||0.30%||0.10%|
|29-Oct||8:30 AM||Core PPI||–||0.10%||0.00%|
|29-Oct||9:00 AM||Case-Shiller 20-city Index||–||12.40%||12.00%|
|29-Oct||10:00 AM||Business Inventories||–||0.20%||0.40%|
|29-Oct||10:00 AM||Consumer Confidence||–||73.1||79.7|
|30-Oct||7:00 AM||MBA Mortgage Index||–||NA||-0.60%|
|30-Oct||8:15 AM||ADP Employment Change||–||125K||166K|
|30-Oct||8:30 AM||Core CPI||–||0.10%||0.10%|
|30-Oct||10:30 AM||Crude Inventories||–||NA||5.246M|
|30-Oct||2:15 PM||FOMC Rate Decision||–||0.25%||0.25%|
|31-Oct||7:30 AM||Challenger Job Cuts||–||NA||19.10%|
|31-Oct||8:30 AM||Initial Claims||–||335K||350K|
|31-Oct||8:30 AM||Continuing Claims||–||2850K||2874K|
|31-Oct||8:30 AM||Personal Income||–||NA||0.40%|
|31-Oct||8:30 AM||Personal Spending||–||NA||0.30%|
|31-Oct||8:30 AM||PCE Prices – Core||–||NA||0.20%|
|31-Oct||9:45 AM||Chicago PMI||–||55||55.7|
|31-Oct||10:30 AM||Natural Gas Inventories||–||NA||87 bcf|
|1-Nov||10:00 AM||ISM Index||–||55||56.2|
|1-Nov||10:00 AM||Construction Spending||–||NA||NA|
|1-Nov||2:00 PM||Auto Sales||–||NA||5.4M|
|1-Nov||2:00 PM||Truck Sales||–||NA||6.5M|
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.