Affordable Housing Draws Middle Class to Inland Cities
By Shaila Dewan
Americans have never hesitated to pack up the U-Haul in search of the big time, a better job or just warmer weather. But these days, domestic migrants are increasingly driven by the quest for cheaper housing.
The country’s fastest-growing cities are now those where housing is more affordable than average, a decisive reversal from the early years of the millennium, when easy credit allowed cities to grow without regard to housing cost and when the fastest-growing cities had housing that was less affordable than the national average. Among people who have moved long distances, the number of those who cite housing as their primary motivation for doing so has more than doubled since 2007.
Rising rents and the difficulty of securing a mortgage on the coasts have proved a boon to inland cities that offer the middle class a firmer footing and an easier life. In the eternal competition among urban centers, the shift has produced some new winners.
Oklahoma City, for example, has outpaced most other cities in growth since 2011, becoming the 12th-fastest-growing city last year. It has also won over a coveted demographic, young adults age 25 to 34, going from a net loss of millennials to a net gain. Other affordable cities that have jumped in the growth rankings include several in Texas, including El Paso and San Antonio, as well as Columbus, Ohio, and Little Rock, Ark.
Newcomers in Oklahoma City have traded traffic jams and preschool waiting lists for master suites the size of their old apartments. The sons of Lorin Olson, a stem cell biologist who moved here from New York’s Upper East Side, now ride bikes in their suburban neighborhood and go home to a four-bedroom house. Hector Lopez, a caricature artist, lives in a loft apartment here for less than he paid to stay in a garage near Los Angeles. Tony Trammell, one of a group of about a dozen friends to make the move from San Diego, paid $260,000 for his 3,300-square-foot home in a nearby suburb.
“This is the opposite of the gold rush,” Mr. Trammell said.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) lost -13 basis points (BPS) from last Friday’s close which caused 30 year fixed mortgage rates to move sideways. As you can see by the chart above, it was a our third consecutive week were MBS moved in a very narrow range.
We had a huge week for economic data with news out of the Fed, the Housing Market, Manufacturing and Jobs.
On the housing front, Pending Home Sales dipped 1.1% on a month-over-month basis and the Case-Shiller Home Price Index showed a year-over-year gain in property values of 9.3%.
On the manufacturing side, the regional Chicago Manufacturing PMI disappointed economists with a reading of 52.6 but still showed economic expansion. The national ISM Manufacturing Index was at a block-buster reading of 57.1 which was the highest reading of 2014.
Consumers appear to be on board with the economic expansion as the Consumer Confidence reading hit 90.9, handily beating forecasts and marking the best reading in seven years.
The preliminary release of the 2nd QTR GDP showed much more growth than the market expected (4.0% vs estimates of 3.0%). The Federal Reserve Open Market Committee (FOMC) left their key interest rate alone and reduced the amount of their monthly Treasury note and MBS purchases by another $10B which was widely expected and did not have a major impact on mortgage rates.
On the Jobs front, the Unemployment Rate ticked up from 6.1 to 6.2 but this was due to an increase in people answering the survey that they were now looking for work (they are not counted if they are not looking for work). But traders focused on the release of the Non-Farm Payroll report. This came in weaker than market forecasts but it was the sixth straight reading above 200K which shows some solid growth in the labor market.
But even though we had a slew of big-name economic reports hit, MBS basically did nothing for the week. Why? Fear. That’s why. Continued international fear over Ukraine/Russia and Israel/Hamas, as well as other conflicts, have international traders pouring cash into the safe-haven of our U.S. bonds which keeps a nice floor of support on our pricing.
What to Watch Out For This Week:
|Date||Time (ET)||Economic Release||Actual||Market Expects||Prior|
|5-Aug||10:00 AM||Factory Orders||–||0.50%||-0.50%|
|5-Aug||10:00 AM||ISM Services||–||56.5||56|
|6-Aug||7:00 AM||MBA Mortgage Index||–||NA||-2.20%|
|6-Aug||8:30 AM||Trade Balance||–||-$45.2B||-$44.4B|
|6-Aug||10:30 AM||Crude Inventories||–||NA||-3.697M|
|7-Aug||8:30 AM||Initial Claims||–||308K||302K|
|7-Aug||8:30 AM||Continuing Claims||–||2525K||2539K|
|7-Aug||10:30 AM||Natural Gas Inventories||–||NA||88 bcf|
|7-Aug||3:00 PM||Consumer Credit||–||$15.8B||$19.6B|
|8-Aug||8:30 AM||Unit Labor Costs||–||2.00%||5.70%|
|8-Aug||10:00 AM||Wholesale Inventories||–||0.40%||0.50%|
The above 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.
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.