November 17th, 2020 8:45 AM by Richard Sardella MLO.100007700/NMLS 233568
Home prices continue to spike higher
Traditionally, the real estate market begins to take a breather over the holidays. But 2020 is a year that nothing is traditional. Housing Wire’sJulia Falcon reports that low mortgage rates paired with record-low housing inventory have driven home price through the roof, with the National Association of Realtors saying that the median single-family home price grew year over year in all 181 metro areas it tracks.
“In the U.S., median existing single-family home prices rose 12% year over year to $313,500,” NAR said. “In 117 metros, there were double-digit price gains from one year ago. For added perspective, in Q2, only 15 metro areas had double-digit price gains.”
When asked how to remedy this craziness, NAR Chief Economist Lawrence Yun responded by saying that the answer is finding a solution to the housing inventory crisis. Falcon says that by the end of Q3, 1.47 million existing homes were available for sale, which is 19.2% lower than the total inventory at the end of Q3 last year. As of September 2020, there were enough homes in inventory to last 2.7 months at the current sales pace.
“As home prices increase both too quickly and too significantly, first-time buyers will increasingly face difficulty in coming up with a down payment,” Yun said. “Transforming raw land into developable lots and new supply are clearly needed to help tame the home price growth.”
“Favorable mortgage rates will continue to bring fresh buyers to the market,” said Yun. “However, the affordability situation will not improve even with low-interest rates because housing prices are increasing much too fast.”
Source: NAR | 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
Rates are trending sideways this morning. Last week the MBS market worsened by -37bps. This was enough to move rates higher last week. We saw high rate volatility through much of the week.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to move rates this week. 1) Coronavirus, 2) Geopolitical, and 3) Domestic.
1) Coronavirus: Last week, MBS sold off on Monday and Tuesday due to the announcement of a vaccine and a treatment that were both >90% effective. This week, we start with another vaccine, this one from Moderna, and it's about 95% effective, and unlike the Pfizer version, it does not require it to be as cold during shipping, which makes it more attractive from a logistics perspective. That's the good news. Now the bad news, over 1M brand new infections in the U.S. over the past 6 days. That means those people, plus likely many family members and people they have been in contact with, are now locked in their homes. There's probably at least 3 to 5 million people not going to the office, shopping, going out etc. That is a huge blow to our economy.
2) Geopolitical: Of course, our Presidential Election is still going to take center stage as recounts and lawsuits crowd the headlines. The rate markets will pay particularly close attention to the Georgia Senate seat.
3) Domestic: We get a ton of housing-related news this week (Home Builder's Sentiment, Weekly Mortgage Applications, Housing Starts and Building Permits, Existing Home Sales), but these do not impact pricing. Retail Sales on Tuesday and Wednesday's 20-year bond auction are the two biggest events for the bond market.
This Week's Potential Volatility: Average
We're seeing a bit of volatility today in the rate markets after Moderna's announcement denoted above. We're not expecting a lot of rate movement today or until the retail sales numbers on Tuesday. Look for moderate volatility throughout the week.
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 27 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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