30 Straight Months of Home Price Gains
The Existing Home Sales report for August was just released today by the National Association of Realtors and in it we find that the median price for an existing home sold was $219,800 with a 4.8% increase over August of last year and marks the 30th straight month of year-over-year gains in home prices.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 1.8 percent to a seasonally adjusted annual rate of 5.05 million in August from a slight downwardly-revised 5.14 million in July. Sales are at the second-highest pace of 2014, but remain 5.3 percent below the 5.33 million-unit level from last August, which was also the second-highest sales level of 2013.
NAR chief economist, Lawrence Yun, says sales activity remains stronger than earlier in the year, but fell last month as investors stepped away. “There was a marked decline in all-cash sales from investors,” he said. “On the positive side, first-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country.”
Yun adds, “As long as solid job growth continues, wages should eventually pick up to steadily improve purchasing power and help fully release the pent-up demand for buying.”
The percent share of first-time buyers remained unchanged in August from July at 29 percent. First-time buyers have represented less than 30 percent of all buyers in 16 of the past 17 months and also represent the biggest potential for a surge in housing once they come back into the market place.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained +32 basis points (BPS) from last Friday’s close which caused 30 year fixed mortgage rates to improve slightly from the prior week. We saw our best rates on Friday and our worst rates on Thursday. MBS have lost a total of -113BPS for the month of September causing mortgage rates to be higher than August.
It was a very interesting week that had the potential for a lot of volatility but instead, trading was confined to a very well-defined technical trading channel as our 200 day moving average provided terrific support.
The long-bond market was focused on two main events for the week: The Federal Reserve and Scotland’s Independence vote. On Friday, Scotland voted to stay in the United Kingdom and that calmed the financial markets which caused both stocks and bonds to rally and gave us our best rates of the week.
The much anticipated Federal Open Market Committee (FOMC) meeting did not reveal any new bomb-shells. As they tapered another $10 billion in Treasury and Agency MBS purchase and reaffirmed that they will no long purchase either after November. They also left their key interest rate unchanged and left in the term “considerable” in their statement. It was the longest (most words) of any prior FOMC statement in history and also contained some economic forecasting. MBS sold off a small amount on the event but regained everything by Thursday. The final vote among FOMC members was 8-2.
On the economic front, we continue too see very mild inflation data – this time from the PPI and CPI reports and saw some positive momentum in jobs with a very low reading (280K) with the weekly jobless claims release and a big improvement in the employment component of the Philadelphia Fed Survey.
What to Watch Out For This Week:
|Date||Time (ET)||Economic Release||Actual||Market Expects||Prior|
|22-Sep||10:00 AM||Existing Home Sales||–||5.2M||5.15M|
|23-Sep||9:00 AM||FHFA Housing Price Index||–||NA||0.40%|
|24-Sep||7:00 AM||MBA Mortgage Index||–||NA||7.90%|
|24-Sep||10:00 AM||New Home Sales||–||435K||412K|
|24-Sep||10:30 AM||Crude Inventories||–||NA||+3.67M|
|25-Sep||8:30 AM||Initial Claims||–||300K||280K|
|25-Sep||8:30 AM||Continuing Claims||–||2470K||2429K|
|25-Sep||8:30 AM||Durable Orders||–||-16.30%||22.60%|
|25-Sep||8:30 AM||Durable Goods -ex transportation||–||0.70%||-0.70%|
|25-Sep||10:30 AM||Natural Gas Inventories||–||NA||90 bcf|
|26-Sep||8:30 AM||GDP – Third Estimate||–||4.60%||4.20%|
|26-Sep||8:30 AM||GDP Deflator – Third Estimate||–||2.10%||2.10%|
|26-Sep||9:55 AM||Michigan Sentiment – Final||–||85||84.6
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.