May 16th, 2022 12:41 PM by Richard Sardella MLO.100007700/NMLS 233568
Average Home Payments 1.5 times higher than this time last year
Lots of things have changed in the housing market over the past 12 months. A tight housing market has become even tighter with fewer homes available in inventory, which has caused the median home list price to surge from $372K in April 2021 to $425K in April of 2022 according to Realtor.com
That’s why Realtor.com looked at the increase in mortgage payments in the nation’s 15 largest metropolitan areas. In the Miami metro, buyers’ mortgage payments are 83% higher than they were just one year ago. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.) On the other end of the spectrum, mortgage payments in Detroit were up a still bruising but far less devastating 19%.
The situation has forced many homebuyers with more modest budgets to compromise on the homes of their dreams, move to less convenient areas—or simply give up their search for the foreseeable future. Many are competing with all-cash buyers, often investors or longtime owners downsizing into smaller, less expensive homes.
Cash buyers are not affected by the slow and steady rising mortgage rates and may even be helped by them, since they often lead to less competition in the market, and lower overall offers.
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 lower today. The MBS market improved by +54 bps last week. This was 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) Retail Sales and 3) Treasury Sales.
1) The Fed: The narrative last week was several speakers (Bostic, Mester, et al) parroting Powell and talking down the potential for a 75BPS increase at the next meeting and doubling down on the concept that a "neutral" Fed Fund rate is somehow magically in the 2.00 to 2.50 range. The bond market will be paying very close attention to this week's speakers to see if the narrative continues. Here is this week's schedule:
05/17 Powell, Harker, Mester and Evans
2) Retail Sales: We had a record run up in the recent Consumer Credit report... does that translate to a big spike in spending? Or are consumers simply using credit cards to make ends meet? This is an important question for the economy and the markets. Tuesday's Retail Sales report is the most important data point of the week.
3) Treasury Sales: We had three strong Treasury auctions last week in terms of demand (bid to cover ratio) but only the 30 year bond auction had an impact on rates. This week we the 20 year bond auction which can certainly impact rates as well.
This Week's Potential Volatility: High
This morning markets are trending towards lower rates. Volatility has started choppy and is likely to stay that way.
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.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.