December 2nd, 2019 12:13 PM by Richard Sardella MLO.100007700/NMLS 233568
Home sales report good numbers
Way to begin ending 2019 with a bang. According to The U.S. Census Bureau and Department of Housing and Urban Development reports home sales surged to surpass sales a year earlier by 31.6 percent, more than doubling the annual increase the prior month.
While sales of newly constructed homes were actually slightly lower than in September, sales during the month at a seasonally adjusted annual rate of 733,000, down 0.7 percent from September. That previous number, however, was revised from an originally reported 701,000 to 738,000 units. Sales in October 2018 were at the rate of 557,000 units.
According to Mortgage News Daily’s Jann Swanson, “On a non-adjusted basis, there were 57,000 newly constructed homes sold during the month, unchanged from September but up from 43,000 a year earlier. On a year-to-date basis, sales have totaled 586,000 units, 9.6 percent more than during the same period in 2018.” She goes on to say that the median sales prices of a home sold in October was $316,700, compared to $328,300 in October 2018. The average price was $383,300, down from 394,900 a year earlier.
While sales declined in the short term by 18.2 percent in the Northeast, they were still 17.4 percent higher year-over-year. The Midwest saw an increase of 4.2 percent and 17.2 percent for the two earlier periods.
The report says sales in the South dipped 3.3 percent from September but were 40.6 percent higher on an annual basis, while the West posted gains of 7.1 percent and 21.9 percent respectively.
At this point, 2020 might just turn out to be a good one for home sales.
How Rates Move:
Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage 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 so far today. Last week the MBS market improved by +10bps. This caused rates to move sideways. We saw very low rate volatility all 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 War(s), 2. Jobs, and 3. Manufacturing and Services.
1) Trade War(s): The December 15th deadline is fast approaching for the newest round of Chinese Trade Tariffs. China is pushing for not only for those tariffs to be postponed or removed but also for existing tariffs to be removed as a condition of completing a Phase I trade deal. Meanwhile, President Trump has reactivated steel and aluminum tariffs against Brazil and Argentina due to the massive devaluation of their currencies.
2) Jobs: We get a ton of job and wage-related economic data this week with ADP Private Payrolls, Challenger Job Cuts, Initial Jobless Claims, Non-Farm Payrolls, Unemployment Rate, Participation Rate, Average Work Week and most importantly - Average Hourly Earnings. The market is expecting another reading of 3.0% on a YOY basis. Any reading hotter than that will be negative for rates.
3) Manufacturing and Services: We get key readings for both manufacturing (1/3) of our economy and services (2/3) of our economy with both Markit and ISM releases. Perhaps more importantly, we get the same data from China, Germany, and the Eurozone.
This Week's Potential Volatility: Average
We get a ton of economic numbers this week that can move rate markets. Having said that, rates are trapped in a very tight channel for weeks now. It will take some unexpected jobs or manufacturing numbers to push rates out of its channel.
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.