Existing Home Sales and Prices Jump
The National Association of Realtors reported today that May sales of homes that have been previously occupied (the largest segment of homes) jumped 4.9% from April. Existing Home Sales came in at an annualized rate of 4.89 million units which handily beat the market expectations of 4.73 million units.
The median price rose to $213,400 which is a 5.1% increase over the past year (May 2013 to May 2014).
The reason for the spike in sales? Is it interest rates? Nope, its inventory. Home Sales had been suppressed even while fixed mortgage rates hit their lowest levels for 2014 due to a very tight supply of homes available for sale. Since home prices have been increasing at a moderate pace, many homes that were “under water” are now back into positive equity and these homeowners are now finally able to put their homes on the market.
Mortgage backed securities (MBS) gained +41 basis points (BPS) from last Friday’s close which erased the prior week’s -40BPS sell off and caused 30 year fixed mortgage rates to move to slightly lower. We saw our best rates on Thursday and our worst rates on Tuesday.
MBS were on a sharp path downward (higher rates for you) early in the week on the back of some better than expected economic data (Industrial Production and Capacity Utilization) and much higher than expected inflation data with a reading of 0.4% vs est of 0.2% in the Consumer Price Index. ByTuesday afternoon, MBS had sold off -28BPS.
But we had a sharp reversal on Wednesday due to the Federal Open Market Committee (FOMC).
Bond prices are were largely unaffected by the FOMC action of reducing their monthly asset purchases of Treasuries and agency mortgage backed securities by another $10 billion and left their Fed Fund rate alone as both were expected by the market. And their policy statement didn’t really provide any new information. But bonds really jumped (better rates for you) on comments made by Fed Chair Janet Yellen during her press conference that followed the FOMC statement. Specifically, MBS had a huge reaction to her comments that she felt the recent higher inflationary data was “noisy” and that the Fed would not begin to increase rates just because inflation climbs back above 2% (as measured by PCE).
What to Watch Out For This Week:
Date Time (ET) Economic Release Actual Market Expects Prior 23-Jun 10:00 AM Existing Home Sales – 4.80M 4.65M 24-Jun 9:00 AM Case-Shiller 20-city Index – 11.60% 12.40% 24-Jun 9:00 AM FHFA Housing Price Index – NA 0.70% 24-Jun 10:00 AM New Home Sales – 440K 433K 24-Jun 10:00 AM Consumer Confidence – 84 83 25-Jun 7:00 AM MBA Mortgage Index – NA -9.20% 25-Jun 8:30 AM Durable Orders – 0.40% 0.60% 25-Jun 8:30 AM Durable Goods -ex transportation – 0.40% 0.30% 25-Jun 8:30 AM GDP – Third Estimate – -1.80% -1.00% 25-Jun 8:30 AM GDP Deflator – Third Estimate – 1.30% 1.30% 25-Jun 10:30 AM Crude Inventories – NA -0.579M 26-Jun 8:30 AM Initial Claims – 310K 312K 26-Jun 8:30 AM Continuing Claims – 2588K 2561K 26-Jun 8:30 AM Personal Income – 0.40% 0.30% 26-Jun 8:30 AM Personal Spending – 0.40% -0.10% 26-Jun 8:30 AM PCE Prices – Core – 0.20% 0.20% 26-Jun 10:30 AM Natural Gas Inventories – NA 113 bcf 27-Jun 9:55 AM Michigan Sentiment – Final – 81.7 81.2
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.