February 25th, 2019 2:21 PM by Richard Sardella MLO.100007700/NMLS 233568
Transition from seller's to buyer's market may slowly be taking place
The real estate tide is turning, according to Fortune Magazine’s Chris Morris. What was once a seller's market, complete with frenzied offers and multiple bidding, is beginning to smooth a bit, becoming what Realtors refer to as a “balanced market” where homes stay on the market a tad longer, and buyers actually have a chance to negotiate.
The National Association of Realtors says existing home sales in January dropped to their lowest level in three years, with existing home sales down 1.2% to an adjusted annual rate of 4.94 million units last month. That’s below analyst expectations and an 8.5% drop from a year ago. According to their stats, only the Northeast saw a rise in sales activity.
And while home prices are still showing increases, they’re nowhere close to the rise we saw in recent years. The median price of an existing house climbed 2.8% in January to $247,500, the smallest increase since February 2012. According to the article, prices have increased for 83 consecutive months, but experts are now saying that trend could be ending. All that means is that buyers now have a chance to participate in the American Dream.
“The number of homes on the market is starting to rise, too, meaning buyers have a wider selection to choose from,” says Morris. “In January, there were 1.59 million previously owned homes on the market, compared to 1.53 million in December. The average home stayed on the market 49 days, a week longer than January 2018.” Forbes real estate also predicts the wave of first-time home buyer demand will be met by somewhat higher inventory levels than in 2018, according to a year-end article by Aly Yale.
Morris goes on to cite the NAR’s chief economist, Lawrence Yun: “Moderating home prices combined with gains in household income will boost housing affordability, bringing more buyers to the market in the coming months.”
So if you’ve got a house on the market, patience is a virtue, along with pricing it to sell. And if you’re in the market to buy, prepare to have more to choose from.
Source: Fortune, Forbes, NAR, TBWS
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 this morning. Last week the MBS market improved by +10bps. This caused rates to move mostly sideways for the week. We saw low rate volatility through the week.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week: Fed, Trade War, and Domestic.
1) Fed: Fed Chair Powell will give his semi-annual monetary report to the Senate and House this week. We also have a lot of Fed speeches this week. Bond traders will be looking for more discussion on the path of expected inflation and the timing of the balance sheet wind down.
2) Trade War: President Trump has postponed the March 1st deadline that would have increased tariffs on $200B of Chinese imports from a rate of 10% to 25% citing "substantial progress" in trade negotiations and said that they are currently working on a summit in March where President's Trump and Xi would sign an agreement in Mar-a-Lago. North Korea is also front-and-center as President Trump heads to Vietnam for a summit with N.K. Kim Jong Un. Also, the United States is looking to hit the EU with auto tariffs with the EU vowing to retaliate.
3) Domestic: For a refreshing change of pace, we actually have some big-name reports that have the gravitas to move rates this week. The stronger these reports are, the worse it will be for mortgage rates, the worse that they are - the better it will be for rates. The "biggies" this week are the preliminary 4th QTR GDP, PCE, and ISM Manufacturing.
Treasury Auctions this Week:
This Week's Potential Volatility: Average
We have a good number of economic reports due out this week that has the potential to move mortgage rates. Rates have been moving sideways for some time now. It would take something unexpected, like a complete breakdown in trade talks, to push rates lower. Look for rates to move sideways to higher on relatively modest volatility.
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.
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