CHM Blog

For the first time since records began, first-time homebuyers made up the smallest share of sales last year at 26%

Despite a recent softening in the US housing market, a combination of rising borrowing costs and still-high prices have put prospective first-time homebuyers in a serious bind.

The difficulties for first-time buyers have been escalating for years. During the pandemic boom, they were frequently squeezed out as they competed against people with cash and investors who frequently target starter homes even though the typical household income for first-time buyers soared to as much as $90,000 in 2022 from about $70,000 in 2019.

Zillow has predicted that it would take around 10 years for an individual saving 5% of the median household every month to set aside enough for a 10% down payment on a typical home.

What’s more, supply of entry-level housing remains tight, with the inventory of America’s cheapest properties down 1.5% in January vs. the same time last year, while supply for the most-expensive properties jumped 37%.

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 moving sideways today. The MBS market improved by +4 bps last week. This was not enough to decrease mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Neutral

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

1) The Fed: The spotlight this week will be on Fed Chair Powell as he testifies before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday. We also hear from a few Feds this week as Friday starts their media blackout period. We get the Fed's Beige Book on Wednesday which is prepared in advance of the next Fed FOMC meeting.

2) Jobs: We get a ton of Jobs and Wage related data this week, culminating in Big Jobs Friday. This week we will get JOLTS, ADP Payrolls, Challenge Job Cuts, Weekly Jobless Claims, Non Farm Payrolls, Average Hourly Earnings, Unemployment Rate, U6 Underemployment Rate, Labor Force Participation Rate and Average Weekly Hours.

3) Central Banks: We get key interest rate decisions and policy statements out of the Reserve Bank of Australia, Bank of Canada and Bank of Japan.

Treasury Dump: We have some very important Treasury auctions this week that will be heavily influenced by Fed expectations.

03/07 3 year note

03/08 10 year note

03/09 30 year bond

This Week's Potential Volatility: High

This morning markets are mostly treading water but expect pressure later this week. Volatility has started low but expect it to spike on important data releases.

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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