Home Sales strong but hindered by inventory
The August Existing Home Sales report was just released this morning by the National Association of Realtors and its clear that there are some bright spots and some headwinds in the largest segment of the housing market.
Total existing–home sales for August, which are completed transactions that include single–family homes, townhomes, condominiums and co–ops, have risen year–over–year for 11 consecutive months and are 6.2 percent above a year ago (5.00 million).
The median existing–home price for all housing types in August was $228,700, which is 4.7 percent above August 2014 ($218,400). August’s price increase marks the 42nd consecutive month of year–over–year gains.
Ok..things are looking good…so where are the headwinds? Here they are – inventory. While we have 11 straight months of year-over-year gains in sales and 42 straight months of home price increases, the August data compared to July actually fell -4.8%. Why? Inventory. There simply isn’t enough homes available for sale in the most popular price points for buyers to purchase. Total housing inventory at the end of August rose 1.3 percent to 2.29 million existing homes available for sale, but is 1.7 percent lower than a year ago (2.33 million). Unsold inventory is at a 5.2–month supply at the current sales pace, up from 4.9 months in July. But anything below 6 months of supply is very constrictive to our housing market.
Lawrence Yun, NAR chief economist, says home sales in August lost some momentum to close out the summer. “Sales activity was down in many parts of the country last month — especially in the South and West — as the persistent summer theme of tight inventory levels likely deterred some buyers,” he said. “The good news for the housing market is that price appreciation the last two months has started to moderate from the unhealthier rate of growth seen earlier this year.”
“With sales and overall demand higher than a year ago and supply mostly unchanged, low inventories will likely continue to limit options for those looking to buy this fall even with the overall pool of buyers shrinking because of seasonal factors,” adds Yun.
What Happened to Rates Last Week?
|Mortgage backed securities (FNMA 3.50 MBS) gained +47 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move lower from the prior week.
The long bond market (which determines mortgage rates) was on hold during the beginning of the week as we awaited Thursday’s Fed decision. We got some volatility on Tuesday as bond traders hedged against a rate hike but then more than made up for the sell off after the Fed left their key interest rate alone.
It was Fed-O-Rama…did you feel it? The bulk of long bond traders wanted a rate hike but expected them to wait and that is what we got but the reasoning behind waiting was the shocker.
First, here are the links for you to directly access what the Fed released.
Okay…now that you have read all of that ;), lets dive right in.
What the Fed said: They left their key interest rate UNCHANGED and the FOMC vote was 9-1 with only Lacker dissenting. Overall a very dovish statement.
Now comes the release of their economic projections which leads us to the famous dot plot:
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.