CHM Blog

Realtor Market Insider July 29, 2019

July 29th, 2019 12:23 PM by Richard Sardella MLO.100007700/NMLS 233568

Rates At a Glance
Mortgage Rates
Currently Trending
7 Day Mortgage
Rate Forecast
This Week's
Potential Volatility

Neutral

Neutral

High
(by Sigma Research)
Realtor Report

New home sales get a shot in the arm

Following two straight months of declines, new home sales jumped 7% in June compared to May to a seasonally adjusted annual rate of 646,000 in June, the Commerce Department said Wednesday.

It's the straw that stirs the soup, so to speak, even though new home sales represent only about 10% of home sales. When newly-built homes are sold, and that figure rises, it's always a bright spot in the housing sector, reflecting consumer confidence and a continued belief in the American Dream. It also props up myriad industries that are involved in the care and feeding of a newly built home and its occupants.

Statistics are always affected by available inventory, and the number of homes for sale in June would last 6.3 months at the current pace. That's up from 6 months a year earlier. It may not sound like much, but homebuilders and all the industries related to the creation of a new house have reason to smile. The median sales price of a new home in June was $310,400, roughly the same as a year ago when the median sales price was $310,500. From a year ago, new home sales were up 4.5%.

According to an article in Realtor.com, low unemployment and rising wages have put more households in a position to buy while mortgage rates have been held down by the prospect of a cut in interest rates next week by the Federal Reserve.

According to Investopedia, a new home sale is considered to be any deposit or contract signing either in the year the house was built or the year after it was built. The Department of Commerce's Census Bureau releases New Home Sales reports that include both quantity and price statistics. New home sales are considered a lagging indicator of market demand, and as a factor affecting mortgage rates.

The recent report showed new home sales falling in the Northeast and the Midwest, but sales rose strongly in the West in June after slumping in May. Sales in the South were roughly on par with the previous month.

Source: Realtor, Investopedia, TBWS

This Week's Mortgage Rate Summary

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 +5bps.  This caused rates to move sideways.  While rates ended unchanged for the week, we did see some volatility throughout 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. 1) Central Banka, 2) Inflation, and 3) Jobs.

1) Central Bank: We will hear from the Central Banks of three of the world's top 5 economies this week with the Bank of Japan, Bank of England and our own Federal Reserve. The Federal Reserve will get the lions-share of the attention from bond traders this week. The long bond market (which included MBS) is pricing in about an 85% chance of a 25 basis point rate cut which would be the first-rate cut by the Fed in over a decade (2008). So, if that is what the Fed does, then there will be little to no reaction by MBS. However, if they lower their rate by 50 basis points, MBS will rally. But, if they do not lower rates at all, MBS will sell-off.

2) Inflation: Friday's GDP report showed some very high QoQ PCE data, but that is very old data at this point. The same day that the Fed starts two days of meetings, we will get the June PCE data. The Core YOY PCE data point is what the Fed uses as their official measure of inflation. The market is expecting a reading of 1.7%. A reading of that or below should solidify the Fed cutting rates the next day. However, if that hits 1.9% or above, then the odds of any rate cut will diminish considerably.

3) Jobs: Friday's jobs report is expecting the Unemployment Rate to remain near historically low levels with a 3.7% reading. But the market focus will be on the YOY Average Hourly Earnings rate, which is being estimated in the 3.2% range.

This Week's Potential Volatility: High

Many traders are billing this week as the most important week for economic news in a decade. Hard to quantify that, but this is a very important week for rates and we could see a spike in rate volatility. We'll be paying particularly close attention to the central banks, trade talks, Fed and the mountain of economic data.

Bottom Line:

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.

About Richard Sardella

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.

About This Report And Disclosure Information

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.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on July 29th, 2019 12:23 PM

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