CHM Blog

Is any news good news? When there are more houses to choose from, perhaps it is

If you’re desperate to buy a home, Realtor.com’s Jillian Pretzel says homebuyers who brave the cold to get out there and shop for homes right now face a strange mix of really good as well as not-so-great news.

“First, the good: More homes are finally coming on the market,” she says. “The bad? The cost to finance that purchase has hit a new high. A new report by Realtor.com® has found that 7.5% more home sellers listed their homes in November than this same month last year.

Realtor.com Chief Economist Danielle Hale reports, “November saw the first annual growth in newly listed homes in 17 months.” She also says that if you look at total inventory—of both new listings and old—that’s improved, too, with the typical day in November enjoying 0.7% more homes for sale than a year earlier.

Why is this such a big deal? According to Hale, it “ends a four-month streak of annual inventory declines.” says Hale. To boot, seasonal housing stock in November increased by 2.4% above October levels, which is another first. “It’s actually “the first time inventory has increased this late in the fall season since our records commenced in 2016,” Hale points out.

Pricing and interest rates are a whole other ball game, however. “While this fresh infusion of real estate listings is a welcome gift for buyers, they will have to pay dearly for them,” says Pretzel. “In November, homes were priced at a median of $420,000. That’s down from October’s $425,000, and up by just 1% compared with November of last year.”

Although Hale maintains that the nation’s median list price has remained “relatively stable,” November’s higher mortgage rates compared with last year have increased the monthly cost of a typical home by 7.9%—roughly $172 more per month compared with a year earlier, which Hale says is a new record since Realtor.com began tracking this data in mid-2016.

Bottom line? It means the typical homebuyer or combined homebuyer income today would need to hit around $118,000 per year to comfortably afford those house payments, up $7,100 from just a year ago.

Another tidbit of news: many sellers who waited on the sidelines with a wait-and-see approach seem to have turned a corner. Giving up hope that rates will subside anytime soon, they’re out there looking again.

“Many consumers still expect mortgage rates to rise over the next year,” Hale says. Some home sellers might be looking to close the deal before rates go up further. She also cites Fannie Mae’s Home Purchase Sentiment Index, which found a 17% increase in respondents who believed it was a good time to sell in October compared with reports from last year.

Sellers, however, as responding to this interest rate predicament buyers with price reductions, slashing prices with “more momentum than is typical this time of year,” according to Hale.

Despite this rise in new listings, historically speaking, the pickings are still slim compared with the pre-pandemic days. Total housing inventory is still 37.8% below typical 2017 to 2019 levels.

Realtor, 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: Higher

Mortgage rates are under heavy pressure today. The MBS market improved by +97 bps last week. This may have been 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 can have the most impact rates this week. 1) Jobs. 2) Central Banks and 3) Services.

1) Jobs: We get a ton of job and wage related data this week culminating in Big Jobs Friday. We have ISM Services Employment Index, JOLTS, ADP, Unit Labor Costs, Challenger Job Cuts, Initial Weekly Jobless Claims, Non Farm Payrolls, Average Hourly Earnings, Unemployment Rate, Average Weekly Hours, U6 Under Employment and Labor Force Participation Rate.

2) Central Banks: The Bank of Canada is expected to keep their key interest rate at 5.00% however the markets will be very keen to examine their language hinting on a rate cut. Speaking of rate cuts, the bond market is balancing expectations of a rate cut by the ECB next week and will continue to try to front run the FOMC's decision next week.

3) Services: We got a mixed bag with Manufacturing last week with a huge beat in Chicago PMI but a very tame ISM. This week the focus will be on the services side which accounts for 2/3 of our economic engine and has almost single-handily kept our economy afloat. ISM Non Manufacturing PMI will hit on Tuesday.

This Week's Potential Volatility: High

This morning markets have seen some big pull back from last week's gains. Volatility has started high and will likely remain that way with the deluge of jobs data this 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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