Pending Home Sales Jump 12 Percent
Still sitting on the sidelines? Then you are certainly in the minority as buyers recognize that prices are steadily increasing and good inventory is sometimes difficult to find. So, they are snapping up property often with multiple offers competing for an active listing.
The National Association of Realtors (NAR) just released their Pending Home Sales (contracts signed but not yet closed) data for February this morning and it appears that cold temperatures and snow did not keep homebuyers away. The year-over-year increase is an impressive 12%. On a month-over-month basis, Pending Home Sales were up 4.1% which was much hotter than market expectations of only 0.4%.
“Pending sales showed solid gains last month, driven by a steadily-improving labor market, mortgage rates hovering around 4 percent and the likelihood of more renters looking to hedge against increasing rents,” said Lawrence Yun, chief economist for the NAR. “These factors bode well for the prospect of an uptick in sales in coming months. However, the underlying obstacle—especially for first-time buyers—continues to be the depressed level of homes available for sale.”
The gains were primarily driven by sales in the West and Midwest. Pending sales jumped 11.6 percent month-to-month in the Midwest and are now 13.8 percent higher than a year ago. Sales in the Northeast fell 2.3 percent but are 4.1 percent above a year ago. Sales in the South decreased 1.4 percent sequentially, but are 10.8 percent above last February. Sales in the West climbed 6.6 percent and are now 18.3 percent above a year ago.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) lost -28 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher than the prior the week.
The biggest report of last week was the third and final revision to the 4th QTR GDP and unchanged from it’s prior revision of 2.2%. The final revision to Consumer Confidence improved from 91.2 to 93.0. Durable Goods was a big miss to the downside coming in at -1.4% vs est of +0.4%.
On the housing front, Existing Home Sales (the largest segment of the housing market) improved from 4.82 million units up to 4.88 million units on an annualized basis. And New Home Sales (the smallest segment of the housing market) improved from an upwardly revised 500K units up to 539K units on an annualized basis.
We had three Treasury auctions last week with mixed results. The 2 year saw very strong demand and mortgage rates improved a little in afternoon trading after the results hit. But the 5 year and 7 year both saw a pull back in demand as bond traders’ sentiment towards a Fed rate hike around the September meeting weighed on demand. Mortgage rates increased after each of those auctions.
Overall, our benchmark FNMA 3.0 MBS coupon pulled back below our 10 day moving average but we still had great support which kept MBS from selling off further. And that support was due to concern over Greece’s potential “Grexit” from the Eurozone. Last week’s financial headlines were dominated by news stories of dysfunctional negotiations between Greece and Germany as Greece was refused access to part of the funds still available in their last bailout until they can demonstrate that they are actually implementing the reforms that they promised.
Both stocks and bonds had massive rallies after the Fed release.
What to Watch Out For This Week:
|Date||Time (ET)||Economic Release||Actual||Market Expects||Prior|
|30-Mar||8:30 AM||Personal Income||–||0.30%||0.30%|
|30-Mar||8:30 AM||Personal Spending||–||0.20%||-0.20%|
|30-Mar||8:30 AM||PCE Prices – Core||–||0.10%||0.10%|
|30-Mar||10:00 AM||Pending Home Sales||–||0.40%||1.70%|
|31-Mar||9:00 AM||Case-Shiller 20-city Index||–||4.50%||4.50%|
|31-Mar||9:45 AM||Chicago PMI||–||52||45.8|
|31-Mar||10:00 AM||Consumer Confidence||–||96.2||96.4|
|1-Apr||7:00 AM||MBA Mortgage Index||–||NA||9.50%|
|1-Apr||7:15 AM||ADP Employment Report||–||NA||212K|
|1-Apr||8:15 AM||ADP Employment Report||–||228K||212K|
|1-Apr||10:00 AM||ISM Index||–||52.5||52.9|
|1-Apr||10:00 AM||Construction Spending||–||-0.20%||-1.10%|
|1-Apr||10:30 AM||Crude Inventories||–||NA||8.170M|
|1-Apr||5:00 PM||Auto Sales||–||NA||5.2M|
|1-Apr||5:00 PM||Truck Sales||–||NA||7.9M|
|2-Apr||7:30 AM||Challenger Job Cuts||–||NA||20.90%|
|2-Apr||8:30 AM||Initial Claims||–||285K||282K|
|2-Apr||8:30 AM||Continuing Claims||–||2423K||2416K|
|2-Apr||8:30 AM||Trade Balance||–||-$42.0B||-$41.8B|
|2-Apr||10:00 AM||Factory Orders||–||-0.50%||-0.20%|
|2-Apr||10:30 AM||Natural Gas Inventories||–||NA||12 bcf|
|3-Apr||8:30 AM||Nonfarm Payrolls||–||248K||295K|
|3-Apr||8:30 AM||Nonfarm Private Payrolls||–||240K||288K|
|3-Apr||8:30 AM||Unemployment Rate||–||5.50%||5.50%|
|3-Apr||8:30 AM||Hourly Earnings||–||0.20%||0.10%|
|3-Apr||8:30 AM||Average Workweek||–||34.6||34.6|
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.