CHM Blog

Listings rise as interest rates cool things off

Cause and effect: interest rates go up and those holding off on listing their homes sit up and finally pay attention. Fear of missing out (FOMO) regarding getting the prices they want for their homes is now being tempered by the idea that fewer and fewer buyers can afford them as rates continue to rise to curb inflation.

According to Mansionglobal’s Ayce Kelce, more sellers have been listing their homes, providing a breath of fresh air to the U.S. real estate market that has been struggling with low inventory levels since the beginning of the pandemic. “The number of homes listed in the week through Saturday increased by 8% compared to the same time in 2021 after decreasing in the prior four weeks, according to a Realtor.com report published on Thursday,” says Kelce.

She goes on to say that the median price of homes in the U.S. surged 15.3% over the last year, with active inventory down 13%. However, the boost in new listings alongside increasing mortgage rates cooling demand indicate a possible return to a more stable housing market. Reports also project that for the first time in three years, the number of homes for sale could start to grow on a year-over-year basis by this summer.

The best time to list? Realtor’s research says it’s THIS WEEK (April 10-16) based on data indicating surging buyer demand, high home prices, quick sales and less competition from other sellers compared to 2021 numbers. “We are in the stage of the home-buying season when inventory typically starts rising from the year’s low point,” Danielle Hale, Realtor.com chief economist, said in the report.

However, even with ever-growing median listing prices and surging demand, more sellers have been dropping their asking prices — good news for buyers. “Around one in every 10 listings, or roughly 12% homes currently listed, had a price drop during the four weeks ending Sunday, which was up from 9% at the same time in 2021 and the highest share since early December, according to a separate report released by Redfin on Thursday,” says Kelce.

“Price drops are still rare, but the fact that they are becoming more frequent is one clear sign that the housing market is cooling,” Daryl Fairweather, Redfin chief economist, said in the report. “It goes to show that there’s a limit to sellers’ power. There is still way more demand than supply, and buyers are still sweating, but sellers can no longer overprice their home and still expect buyers to clamor at their door.”

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: Higher

Mortgage rates are moving higher today. The MBS market worsened by -105 bps last week. This was enough to increase mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Higher

Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Inflation, 2) Central Banks, 3) Geopolitical

1) Inflation: We get several releases this week with market focused on the Consumer Price Index which is expected to eclipse the last reading which was a 40 year high with a new high. On a YOY basis, the headline CPI is expected to hit 8.5% and the Core (ex food and energy) to jump to 6.6%. We also get PPI and Import Prices, both are inflationary data points.

2) Central Banks: The Bank of Canada is expected to raise their rates as is the Bank of New Zealand. We will also hear from the European Central Bank. The market is not expecting a rate change from the ECB but there are other policy changes that are on the radar.

3) Geopolitical: France's election, Ukraine/Russia and China's lockdown/manufacturing slowdown will garner a lot of attention from bond traders.

Treasury Sales: Here is this week's schedule of selling our debt into the marketplace:

04/11 3 year note

04/12 10 year note

04/13 30 year bond

This Week's Potential Volatility: High

This morning markets are keeping to trends as inflation pushes them higher. Volatility will likely spike several times this week as inflationary data is released.

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.

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 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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