Pending Home Sales gain for 12th straight month
The August Pending Home Sales report was just released this morning by the National Association of Realtors (NAR) and it showed a year-over-year gain of 6.2% and marks the 12th consecutive month of year-over-year gains.
Lawrence Yun, NAR chief economist, says even with the modest decline in contract signings, demand continues to outpace housing supply and elevate price growth in numerous markets. “Pending sales have leveled off since mid–summer, with buyers being bounded by rising prices and few available and affordable properties within their budget,” he said. “Even with existing–housing supply barely budging all summer and no relief coming from new construction, contract activity is still higher than earlier this year and a year ago.”
According to Yun, sales in the coming months should be able to roughly maintain their current pace.
The national median existing–home price is expected to increase 5.8 percent in 2015 to $220,300. Yun forecasts total existing–home sales this year to increase 7.0 percent to around 5.28 million, about 25 percent below the prior peak set in 2005 (7.08 million).
The bottom line is that the overall housing market is still trending very strongly, hampered only by a shortage of quality inventory in the specific price points.
What Happened to Rates Last Week?
|Mortgage backed securities (FNMA 3.50 MBS) lost -25 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move slightly higher from the prior week.
It was our first full week after the FOMC’s decision to not raise rates on 09/17 and the long bond market (which determines mortgage rates) was trapped in a very tight range with very strong overhead technical resistance that squashed every attempt by MBS to make any gains.
The biggest piece of economic data that was released was the 2nd QTR GDP. This was the third time that the number was released and it was once again revised upward. This time it was ramped up from 3.7% up to 3.9% which means the 2nd QTR grew at a much hotter pace than originally thought. Consumer Sentiment for September was also revised upward from 85.7 to 87.2. New Home Sales were also much better than expected with a reading of 552K.
We also got a much different perspective from a few key officials from the Federal Reserve than the prior week’s policy statement. Federal Reserve Chair Janet Yellen spoke Thursday after our financial markets were closed. Friday Morning we had an immediate sell off of more than -25BPS right out of the gate as bond traders focused on Yellen placing herself squarely in the camp of those Federal Open Market Committee officials who favor raising rates in 2015. “Most of my colleagues and I anticipate that it will likely be appropriate to raise the target range for the federal funds rate sometime later this year.”
James Bullard: The St. Louis Fed President said that the FOMC continues to expect “normalization” (term for raising rates) to commence shortly. Once normalization (rate tightening cycle) begins, the Fed will still be extremely accommodative through the medium term.
Esther George: The Kansas City Fed President said she believes the Fed should raise interest rates soon so that it will “have the luxury” of being able keep rate hikes gradual.
|What to Watch Out For This Week:
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.