Existing Home Sales Rise 3.8%
The largest segment of the housing market continues to hold on. Year-over-year, existing home sales rose 3.8% and is on track to record their best annual sales in eight years.
The median existing-home price for all housing types in October was $219,600, which is 5.8 percent above October 2014 ($207,500). October’s price increase marks the 44th consecutive month of year-over-year gains.
Total housing inventory at the end of October decreased 2.3 percent to 2.14 million existing homes available for sale, and is now 4.5 percent lower than a year ago (2.24 million). Unsold inventory is at a 4.8-month supply at the current sales pace, up from 4.7 months in September.
The percent share of first-time buyers increased to 31 percent in October, up from 29 percent both in September and a year ago.
While the month-over-month number saw a small decline, this was mainly due to a lack of inventory rather than a pull back in desire to own a home. In some areas that have seen the most growth, there is almost no inventory to be found.
Lawrence Yun, NAR chief economist, says a sales cooldown in October was likely given the pullback in contract signings the last couple of months. “New and existing-home supply has struggled to improve so far this fall, leading to few choices for buyers and no easement of the ongoing affordability concerns still prevalent in some markets,” he said. “Furthermore, the mixed signals of slowing economic growth and volatility in the financial markets slightly tempered demand and contributed to the decreasing pace of sales.”
Adds Yun, “As long as solid job creation continues, a gradual easing of credit standards even with moderately higher mortgage rates should support steady demand and sales continuing to rise above a year ago.”
What Happened to Rates Last Week?
Mortgage backed securities (FNMA 3.50 MBS) gained +13 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.
We had a very quiet week with only a small plate of economic data to digest. As a result, MBS moved sideways. But the good news is that we at least made some gains after selling off for three weeks in a row.
The focus of the long-bond market was on Central Bank action as we had the release of the minutes from our last FOMC meeting and the last ECB meeting.
Federal Open Market Committee (FOMC “The Fed”): We basically have a trade off among the centrists voting members which is pointing the way to a December Rate Hike…however to placate those “doves” they are agreeing to make the trajectory of further rate hikes about as thick as a human hair.
Most voting members in the October meeting thought a rate hike would be supported in December unless the “data dependent” Fed saw a reversal in our economic trends.
Most saw global risk diminishing but were still concerned about the impact of a rate hike.
It is clear that the Fed intended to send the signal that a rate hike is appropriate. This is important because often times the market can misunderstand the signals that our Fed gives (or more appropriately ignores the signals because they think that market forces will control the Fed)…..here the Fed really did want the markets to anticipate a hike.
European Central Bank (ECB): We got the minutes from their last meeting and they seemed to be very concerned with deflation and not inflation. Deflation, of course, is very scary and not only a symptom of falling commodity prices (which will always auto-correct once supply and demand are normalized) but more its more worrisome when it is due to an overall contraction in economic activity. They said that they would reevaluate everything at their December meeting…setting the stage for the ECB easing at the same time that our Fed is tightening.
|What to Watch Out For This Week: