Be Careful, You Might Get Trampled at an Open House
The competition in today’s housing market is suddenly fierce, so fierce that some are calling the cops.
“We got shut down!!” laughed Catherine Luther, an agent with Channing Real Estate in the Boston area. “I’ve been in this business for 30 years, and it’s never happened before.”
At a Saturday open house at her listing in suburban Belmont, she had over 100 people in 45 minutes, which blocked the street. Neighbors called police, who shut down the open house. Then Luther smartly hired an off-duty officer to direct traffic the next day for the Sunday open house. The officer counted more than 150 cars. The three-bedroom colonial house went under contract three days later with more than a dozen bids.
City to city, neighborhood to neighborhood, the story is the same everywhere. Spring demand is coming out with the sunshine, but there is just nothing to buy. There was just a 4.7 month supply of homes for sale in January, even before the spring surge, according to the National Association of Realtors. Six months is considered a balanced market. While more sellers are listing now, it is not nearly enough to meet demand.
Driving demand are several factors: increased consumer confidence, better employment and sky-high rents. More than 12 percent of current renters in the nation’s 20 largest housing markets now say they intend to buy a home in the next year, according to a survey just released by Zillow, a real estate company. That is about 5.2 million renters, a 25 percent jump from a year ago.
“As home affordability continues to look great and rental affordability looks abysmal, many current renters clearly seem to be rethinking their attitudes toward home ownership, and are expressing more confidence in the overall housing market as a result,” said Zillow Chief Economist Stan Humphries.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained +49 basis points (BPS) from last Friday’s close which caused mortgage rates to level off after three straight weeks of increases. So far for the month of March, our benchmark FNMA 3.0 coupon has lost -80BPS and that is net of the +49BPS gain last week. So, rates are still much higher than February.
We had a mixed bag of U.S. Economic data last week. Wholesale Inventories were better than expected but Business Inventories were lighter than expected. The Labor Conditions Index dropped but Weekly Jobless Claims were better than expected. The biggest report of the week was Retail Sales and it was very disappointing (-0.6% vs est of +0.4%). Ex-autos it was -0.1% vs est of +0.6%. This is the third straight report that shows a pull back in retail spending despite falling prices at the pump.
We had two major Treasury auctions. The 10 year note was well received and saw some very strong demand and temporarily helped mortgage rates as MBS improved. But the 30 year Treasury bond was a different story. we (the U.S. tax payer) had to pay 2.560% to borrow money to service our deficit. This time around, our borrowing costs shot up to 2.681%. This is reflective of the sentiment of traders along the longer end of the curve. They are looking out down the road and see inflation hitting 3 to 5 year out which impacts long bond pricing. MBS sold off in direct reaction to this weaker auction and mortgage rates rose on an intra-day basis but we still remained in positive territory for the week.
What to Watch Out For This Week:
|Date||Time (ET)||Economic Release||Actual||Market Expects||Prior|
|16-Mar||8:30 AM||Empire Manufacturing||–||8.8||7.8|
|16-Mar||9:15 AM||Industrial Production||–||0.30%||0.20%|
|16-Mar||9:15 AM||Capacity Utilization||–||79.50%||79.40%|
|16-Mar||10:00 AM||NAHB Housing Market Index||–||56||55|
|16-Mar||4:00 PM||Net Long-Term TIC Flows||–||NA||$35.4B|
|17-Mar||8:30 AM||Building Permits||–||1070K||1053K|
|17-Mar||8:30 AM||Housing Starts||–||1040K||1065K|
|18-Mar||7:00 AM||MBA Mortgage Index||–||NA||-1.30%|
|18-Mar||10:30 AM||Crude Inventories||–||NA||4.512M|
|18-Mar||2:00 PM||FOMC Rate Decision||–||0.25%||0.25%|
|19-Mar||8:30 AM||Continuing Claims||–||NA||NA|
|19-Mar||8:30 AM||Initial Claims||–||294K||289K|
|19-Mar||8:30 AM||Continuing Claims||–||2420K||2418K|
|19-Mar||8:30 AM||Current Account Balance||–||-$105.0B||-$100.3B|
|19-Mar||10:00 AM||Philadelphia Fed||–||7.2||5.2|
|19-Mar||10:00 AM||Leading Indicators||–||0.20%||0.20%|
|19-Mar||10:30 AM||Natural Gas Inventories||–||NA||-198 bcf|
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.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.