CHM Blog

Reluctant buyers and wild bond market news create a shifting industry threshold

While new lower-priced homes attracted buyers last month, the existing home market struggled significantly, reports Real Estate News’ Dave Gallagher. Citing the National Association of Realtors, Gallagher adds, “Sales of existing homes declined 5.9% from February to March, reaching a seasonally adjusted annual rate of 4.02 million, which represents a 2.4% decrease compared to the previous year.” The sluggish pending sales indicate this downward trend may continue in the coming months.

Market momentum was interrupted when most March sales would have entered contract as mortgage rates were decreasing. Realtor.com's chief economist Danielle Hale noted in her April 24 analysis that these lower rates were likely counterbalanced by increasing consumer concerns about personal finances and job security. “Despite slowing year-over-year price growth, which dropped to 2.7% in March from January's 4.8%, the median existing home price reached $403,700, setting a record high for March,” she says.

Bond market volatility wreaked havoc with mortgage rates, with the 30-year fixed rate averaging slightly down from last week according to both Freddie Mac and Mortgage News Daily. Bright MLS Chief Economist Lisa Sturtevant explains that daily rates fluctuate in response to market changes and unpredictable policy statements, potentially keeping mortgage rates stagnant this summer regardless of economic weakening.

Bond yields saw dramatic shifts due to uncertainty about broad-based tariffs and global economic impacts. This potentially reduced investors' confidence in U.S. bonds as historically safe investments. Despite inventory increasing 8.1% from February and 19.8% year-over-year, resulting in a four-month supply compared to 3.2 months a year ago according to NAR, buyer activity has declined.

Seems potential home buyers are not running to their mortgage broker in any great numbers or haste, as mortgage applications dropped 12.7% week-over-week based on Mortgage Bankers Association data. Purchase applications, though up 6% from last year, fell 7% week-over-week.

And those open houses? Home touring is also slowing, according to Redfin's weekly report, prompting Redfin's economic research lead Chen Zhao to advise that both buyers and sellers must be more strategic than ever.

Gallagher says Zhao recommends sellers price homes fairly for the shifting market, perhaps lower than their initial instinct to sell quickly and avoid concessions, while buyers should negotiate aggressively and thoroughly research mortgage rates.

RealEstateNews, 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 moving sideways today. The MBS market improved by +37 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. 1) Tariffs, 2) Inflation and 3) Jobs.

1) Tariffs: The main driving force for rates this month is still here and can still cause a lot of volatility.

2) Inflation: The Fed's key measure of inflation, Core PCE will hit on Wednesday. The bond market will be very sensitive to this reading. If its high, its very negative for rates. If it is lower than expected, it could give the Fed cover to cut rates.

3) Jobs: It will be Big Jobs Friday and starting on Tuesday will get a daily barrage of job and wage related data each day culminating in the BLS release on Friday with Non Farm payrolls, Unemployment Rate, Average Hourly Earnings and more.

Central Banks: We will get the Bank of Japan's interest rate decision on Thursday.

This Week's Potential Volatility: High

This morning markets saw some rocky trading that has left us sideways for now. Volatility has started high with potential for high volatility all week.

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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