CHM Blog

May was a moment for first-time buyers

After months of fits and starts, the housing market finally strung together a month worth talking about. Reporting for Realtor.com, Snejana Farberov covers the latest NAR data showing existing-home sales rose 3.2% in May — both month over month and year over year — reaching a seasonally adjusted annual rate of 4.17 million, the highest since December. It's one of the stronger monthly readings in three years, and the people driving it may surprise you.

First-time buyers accounted for 35% of May transactions, the highest share in nearly 6 years. Affordability improvements and rising incomes opened the door for buyers who had been waiting on the sidelines, and a meaningful number of them walked through it.

NAR Chief Economist Lawrence Yun called it a clear signal of momentum. "More Americans are on the move," he said, noting that even with mortgage rates ticking up slightly from earlier in the year, they remain below year-ago levels and are sitting near long-term historical averages. Income gains, he added, are outpacing home price growth in most parts of the country — modestly, but meaningfully.

Single-family home sales led the way, climbing 3.5% from April to a seasonally adjusted rate of 3.8 million — up 3.3% from a year ago. Condo and co-op sales were flat for the month but up 2.8% annually. The median sales price hit $429,300, a record for the month of May and the 35th consecutive month of year-over-year price gains.

Yun attributed the new price high to solid homeowner fundamentals and persistent supply constraints, noting that only 1% of all sales involved a foreclosure or underwater situation.

Regionally, the Midwest led with a 6.4% monthly surge to an annual rate of 1 million sales, followed by the South at 3.2% to 1.96 million. The Northeast posted a 2.2% monthly gain but fell 8% year over year, even as its median price climbed more than 4% to $534,900 — the fastest regional price appreciation in the country, driven largely by that same inventory squeeze. The West was flat month over month but up 5.6% annually, with its median price dipping slightly to $625,900.

Inventory grew 3.3% from April and 0.6% from a year ago to 1.55 million units, with 4.5 months of supply — essentially unchanged. Yun was direct about what's still missing: "We need to see about a 30% boost in inventory to really loosen up the market."

The sales gains weren't evenly distributed across price points either. Homes priced at $1 million and above saw the biggest year-over-year growth — partly, Yun said, due to stock market gains — while sales under $250,000 retreated. A textbook K-shaped market, where momentum at the top doesn't tell the whole story at the bottom.

The economist's clearest prescription for unlocking broader demand: lower mortgage rates. Until then, May's numbers are genuinely good news — just not quite enough to call it a full recovery.

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: Neutral

Mortgage rates are getting support today. The MBS market improved by +16 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

These are three things that have the greatest ability to impact rates this week. 1) Geopolitical, 2) The Fed, 3) Central Banks.

1) Geopolitical: We start the week off with a US-Iran Peace Deal. However, it will not be officially singed until Friday so we may yet still see some volatility from either side. If a cease-fire holds we most likely will see oil prices fall which is positive for rates.

2) The Fed: On Wednesday will get new Fed Chair Warsh's first FOMC Interest Rate Decision and Policy Statement. This WILL include their Economic Projects (dot plot chart) as well. The market is not pricing in any move in rates at this meeting.

3) Central Banks: We will get key interest rate decisions from Switzerland, Japan, Australia and the UK. The Bank of Japan is expected to raise their rates.

This Week's Potential Volatility: High

This morning markets got a boost on geopolitics and oil prices. Volatility has started high and can stay that way 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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