August 6th, 2018 7:45 PM by Richard Sardella MLO.100007700/NMLS 233568
Home prices hold steady citing May report
The National Association of Realtors reported gains in home prices holding steady in May, while a lack of inventory helped prevent an uptick in growth.
According to the S&P CoreLogic Case-Shiller National Home Price Index, average home prices in major metropolitan areas rose 6.4% in May, identical to the year-over-year increase reported in April. An index of 10 cities gained 6.1% over the year, down from 6.4% the prior month. The 20-city index gained 6.5%, down from 6.7% the previous month.
Since August 2016 the annual increase in the Case-Shiller national index has topped 5% each month. Pricing is one of the few strong spots in the housing market due to a low volume of homes being offered, arming sellers with continued pricing power despite slowing sales.
According to the S & P’s David Blitzer, rising prices are contributing to a slowdown in virtually every other housing-market indicator—from existing home sales to housing starts to pending home sales, which have lagged behind for six straight months.
“The combination of rising home prices and rising mortgage rates are beginning to affect the housing market,” Mr. Blitzer said in the article.
The West is still the price leader. with Seattle reporting a 13.6% annual gain in prices in May compared with a year earlier. Las Vegas followed closely behind with 12.6% and San Francisco saw a 10.9% increase.
Experts are saying that rising mortgage rates are no small factor in the slowed pace of home sales in recent months, potentially having put a slight downward pressure on prices. “Existing home sales have now declined on an annual basis in five of the first six months this year, as rising prices and mortgage rates and a lack of inventory have made it more difficult for would-be buyers to find and afford homes,” according to the report.
How Rates Move:
Conventional overnment (FHA and VA) lenders set their rates based on the pricing of Mortgageand G-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I’m among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending: Neutral
Mortgage rates are trending sideways this morning. Last week the MBS market improved by 11 bps. This was not enough to move rates last week. There was very little mortgage rate volatility last week.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to move rates this week. 1) Trade Wars, 2) Across the Pond and 3) Inflation.
1) Trade Wars: Plenty of "saber rattling" going on and none of it is giving markets any degree of comfort or certainty as to the scale and length of the Trade War. This not only includes China but also the Eurozone, NAFTA, and others.
2) Across the Pond: This week's domestic data flow is coming from overseas with very critical readings from the world's largest economies. We will get both PPI and CPI out of China as well as their foreign reserves report. Japan will give us the BofJ Summary of Opinions as well as their prelim Q2 GDP. Germany will release their production and construction data.
3) Inflation: We will get our PPI and CPI data with the bond market focusing on Friday's Core (ex-food and energy) CPI YOY reading which is expected to remain at 2.3%
Treasury Auctions this Week:
This Week's Potential Volatility: Average
Mortgage rates a likely to move sideways most of the week. The markets will be paying close attention to the inflation data at the end of the week. The markets will look out for a change in trade tensions with China.
If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.