Buyers get creative in Sellers market
MADISON, Wis. – As a blossoming housing market continues to grow in Madison, home buyers are coming up with more creative ways to get their foot in the door.
“If you’re waiting to find them on an Internet portal, you’re probably 24 hours too late,” Restaino realtor Michelle Ames said.
Ames said the housing demand far outweighs the supply, which requires home buyers to try nontraditional ways of securing a new home.
Ames has taken to the mailboxes to help out her clients. She sends out hundreds of personalized letters that detail why her family would be the perfect fit for that particular home. The letters are sent to houses that may or may not be for sale but fit the family’s needs.
Betsy and Brian Hood had Ames send out letters to help them find a home. The premise of their plea was their 11-month-old daughter, Britton.
“This could be the place she takes her first steps, say her first words. It might even be the place she’s picked up for her first date,” the letter reads. “This home is where Britton and her mommy could create a lifetime of memories.”
The Hoods were skeptical at first, but they eventually decided the letter personalizes their home-buying experience.
“We don’t want to just be pushed aside with different offers,” Betsy said. “We want them to know who we are and why we really like this house.”
Letters are just one way realtors are reaching out to potential sellers who haven’t put their house on the market yet. Some are using postcards, personal ads and even door-to-door pleas to persuade owners their home might be perfect for someone else.
What Happened to Rates Last Week?
Mortgage backed securities (FNMA 3.50 MBS) lost -161 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to rise to their highest levels of 2015 (so far).
The FNMA 3.0 MBS coupon (the benchmark for the year until last week) dropped -202 basis points for the week.
So what’s going on? Why are rates rising? Last week saw constant pressure on mortgage backed securities as part of a secular trend. German bund yields rose and MBS sold off as major bond traders continued to move money out of low return (but very safe) bonds. Hedge funds are done with camping money in bonds for the past two years in exchange for safety. There are seeking actual profits now and leaving the safety of U.S. bonds…its risk on!
The biggest domestic story of the week was Jobs, Jobs, Jobs as the bond market knows that the Fed is paying very close attention to wage inflation. And we certainly received several different reports that showed a tightening of labor slack in our economy. Personal Income increased by 0.4% and the ISM Manufacturing Index showed a big increase in their employment index. ADP Private Payrolls were stronger than expected with a 201K reading and the number of announced corporate job cuts plummeted from 61.5K down to only 41K in the Challenger Job Cuts report. Non-Farm Productivity tanked due to Unit Labor Costs that shot up 6.7%.
And then we had Friday’s jobs reports where across the board, this report showed strength in the labor market and gave MBS every reason to sell off even more. The May NFP was higher than expected (280K vs est of 220K), plus the last two months saw upward revisions of 32K which is also very important.
The Unemployment Rate ticked upward from 5.4% to 5.5% but that is a good thing as it was artificially too low due to a skewed and an all time low participation rate. With more legitimate humans seeking employment, it causes the Unemployment Rate to increase until they find a job.
But the REAL STORY was the Average Hourly Earnings which were three times higher than in April and beat market expectations (0.3% vs est of 0.2%). This is the KEY to the Fed’s timing of their first rate hike as Janet Yellen has been very clear that wage inflation is more important to her than commodity inflation.
What to Watch Out For This Week:
Date Time (ET) Economic Release Actual Market Expects Prior 9-Jun 10:00 AM Wholesale Inventories – 0.20% 0.10% 9-Jun 10:00 AM JOLTS – Job Openings – NA 4.994M 10-Jun 7:00 AM MBA Mortgage Index – NA -7.60% 10-Jun 10:30 AM Crude Inventories – NA -1.948M 10-Jun 2:00 PM Treasury Budget – NA -$130.0B 11-Jun 8:30 AM Initial Claims – 278K 276K 11-Jun 8:30 AM Continuing Claims – 2200K 2196K 11-Jun 8:30 AM Retail Sales – 1.10% 0.00% 11-Jun 8:30 AM Retail Sales ex-auto – 0.70% 0.10% 11-Jun 8:30 AM Export Prices ex-ag. – NA -0.70% 11-Jun 8:30 AM Import Prices ex-oil – NA -0.40% 11-Jun 10:00 AM Business Inventories – 0.20% 0.10% 11-Jun 10:30 AM Natural Gas Inventories – NA 132 bcf 12-Jun 8:30 AM PPI – 0.50% -0.40% 12-Jun 8:30 AM Core PPI – 0.10% -0.20% 12-Jun 10:00 AM Mich Sentiment – 91.5 90.7
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.