A New Group of First Time Homebuyers is on the Horizon
The American dream is still alive as Teens overwhelmingly think that they will own their home.
A new survey found that American teens overwhelmingly think that they will be home owners—a far cry from millennials who were much less sanguine about their fortunes in an earlier study.
The study, conducted for real estate service Better Homes and Gardens Real Estate, found that 97 percent of those ages 13-17 believe they will own a home in the future. Compared with the 40 percent of millennials who said in an earlier Better Homes study that they expected to buy a home in the near term, these new figures prove that the younger generation may be more attached to the notion of home ownership.
This means that the next generation to reach adulthood will bring about 21 million hopeful home buyers to the market. For reference, just over 5 million existing homes were sold in 2013, according to the National Association of Realtors.
Lest anyone suggest that the survey’s respondents are unaware of what it takes to be a homeowner, the study also found that the average teen has an impressively accurate understanding of the price of a home: Of the 97 percent who said they would own a home, they estimate paying on average $274,323 for their first one. The median cost of a new home in June was $273,500, according to the U.S. Census Bureau.
Not only are teens significantly optimistic about their home buying, but 82 percent also said home ownership is the most important part of the American Dream, according to the survey. Way to go teens!
What Happened to Rates Last Week:
Mortgage backed securities (MBS) lost -118 basis points (BPS) from last Friday’s close which caused 30 year fixed mortgage rates to increase, it was the second consecutive week where rates increased. We saw our best rates on Monday and our worst rates on Friday.
Stocks also sold off with the DJIA losing over -120 points for the week as just about every facet of the financial markets declined on increased trader sentiment that our Federal Reserve will begin their cycle of raising their Fed Fund rate earlier in 2015 than projected.
We also had a pull-back in the amount of “fear factor” premium that has been providing support for our long bonds as traders are reducing their expectations for an increase in military escalation with Ukraine/Russia and U.S./ISIS.
We saw continued strong demand (in the form of the bid-to-cover ratio) for both our 10 year and 30 year Treasury auctions but this had no impact on MBS pricing for the week. We did have another week which showed mild economic growth with good readings with Retail Sales (up 0.6%), Business Inventories (up 0.4%) and a very strong reading (84.6) in the Consumer Sentiment Index report.
The combination of improving U.S. economic data, a pull back in the “fear factor” premium and a shift in bond trader sentiment on the timing of the first Fed Fund rate hike pushed MBS pricing to their lowest levels since April 2014 and therefore, the highest mortgage rates since then.
What to Watch Out For This Week:
|Date||Time (ET)||Economic Release||Actual||Market Expects||Prior|
|15-Sep||8:30 AM||Empire Manufacturing||–||16||14.7|
|15-Sep||9:15 AM||Industrial Production||–||0.30%||0.40%|
|15-Sep||9:15 AM||Capacity Utilization||–||79.30%||79.20%|
|16-Sep||8:30 AM||Core PPI||–||0.10%||0.20%|
|16-Sep||4:00 PM||Net Long-Term TIC Flows||–||NA||-$18.7B|
|17-Sep||7:00 AM||MBA Mortgage Index||–||NA||-7.20%|
|17-Sep||8:30 AM||Core CPI||–||0.20%||0.10%|
|17-Sep||8:30 AM||Current Account Balance||–||-$114.5B||-$111.2B|
|17-Sep||10:00 AM||NAHB Housing Market Index||–||56||55|
|17-Sep||10:30 AM||Crude Inventories||–||NA||-0.972M|
|17-Sep||2:00 PM||FOMC Rate Decision||–||0.25%||0.25%|
|18-Sep||8:30 AM||Initial Claims||–||305K||315K|
|18-Sep||8:30 AM||Continuing Claims||–||2945K||2487K|
|18-Sep||8:30 AM||Housing Starts||–||1045K||1093K|
|18-Sep||8:30 AM||Building Permits||–||1054K||1052K|
|18-Sep||10:00 AM||Philadelphia Fed||–||23.5||28|
|18-Sep||10:30 AM||Natural Gas Inventories||–||NA||92 bcf|
|19-Sep||10:00 AM||Leading Indicators||–||0.40%||0.90%|
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.