Home Prices Continue to Rise
We have yet another positive housing report that shows continued growth in home prices. Data provider CoreLogic says home prices increased 8.8% in May compared to a year earlier. So, that means that the average homeowner enjoyed an 8.8% appreciation rate over the past 12 months.
On a month-to-month basis, prices rose 1.2 percent from April to May. But CoreLogic’s monthly figures aren’t adjusted for seasonal patterns, such as warmer weather, which can affect sales.
Prices increased the most in Western states, including Hawaii, California and Nevada.
Last week, we reported that Pending Home Sales shot up 6.1% and the continued gains in housing are helping more and more homeowners climb back into positive equity territory. This new release supports pricing gains from other reports such as the Case-Shiller Home Price Index (+10.8% on a yearly basis) and the FHFA Home Price Index which showed a yearly gain of +6.6%. Regardless of which reading is the most accurate, consumers are now starting to understand that the likelihood that they will loose money after purchasing their next home has diminished greatly.
Mortgage backed securities (MBS) lost -64 basis points (BPS) from last Friday’s close which caused 30 year fixed mortgage rates to move to higher for the week. We saw our best rateson Monday and our worst rates on Thursday.
To over simplify things a bit, the weaker the economy is….the better it is for mortgage rates. The stronger the economy market is…the worse it is for mortgage rates. And we certainly saw some good economic data last week that has traders and economists looking past the weak 1st quarter GDP readings.
On the manufacturing front we saw fantastic readings with the Chicago PMI (62.6) and ISM Manufacturing (55.3). A reading above 50 for both of these is expansionary. Total Vehicle Sales hit 17 million on an annualized basis and the servicing sector (non-manufacturing which accounts for 2/3 of our economy) was very strong with a ISM reading of 56.0. Plus, Pending Home Sales were very strong with a monthly gain of 6.1%. All of this data points to growth and pushed your rates upward.
But last week’s focus was on jobs, jobs, jobs. And we got a slew of better than expected labor reports that really sent MBS downward and therefore mortgage rates upward as the Unemployment Rate dropped from 6.3% to 6.1% and more importantly, the Non-Farm Payroll (NFP) data was very strong. NFP hit 288K vs market expectations of only 213K. But just as important was the fact that May and April were both revised upward with April breaking above 300K and was the best reading in 12 months. This is key because April is the first month of the 2nd QTR after that very weak 1str QTR GDP data. Mortgage rates hit their highest level on Thursday after the NFP report.
An improving labor market and economy is always good news for the housing industry as demand for housing is driven primarily by employment and not rates.
What to Watch Out For This Week:
Date Time (ET) Economic Release Actual Market Expects Prior 8-Jul 10:00 AM JOLTS – Job Openings – NA 4.455M 8-Jul 3:00 PM Consumer Credit – $16.2B $26.8B 9-Jul 7:00 AM MBA Mortgage Index – NA -0.20% 9-Jul 10:30 AM Crude Inventories – NA -3.155M 9-Jul 2:00 PM FOMC Minutes – – – 10-Jul 8:30 AM Initial Claims – 312K 315K 10-Jul 8:30 AM Continuing Claims – 2567K 2579K 10-Jul 10:00 AM Wholesale Inventories – 0.60% 1.10% 10-Jul 10:30 AM Natural Gas Inventories – NA 100 bcf 11-Jul 2:00 PM Treasury Budget – NA $116.5B
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.