CHM Blog

Residential housing market is shifting, but at a snail’s pace

If you sold cars and found that your inventory was selling 22 days faster and people were willing to pay 10% more than a year ago, you’d be thrilled. Translate this into houses instead of cars, however, and it’s both a bad news/good news scenario. Good news for sellers, and frustrating news — especially for first time buyers.

Realtor.com Chief Economist Danielle Hale says she is seeing light at the end of the tunnel for those homebuyers, however, with more homes coming onto the market. “Inventory rose 6.5% annually in July. Even more homes went up for sale in the nation’s largest metropolitan areas, particularly in the Midwest, which saw a nearly 20% increase in homes being listed,” she says, while trying not to compare it all to a year ago.

“Seeing more properties hit the market is encouraging,” says Hale. “These are baby steps in the right direction, but we’re so far out of balance, it’s going to take a while before it’s noticeable for buyers.”

Realtor’s ClareTrapasso reports that on one hand, the wild home price growth seen during the COVID-19 pandemic has been steadily slowing nationally, signaling that the market is starting to cool. “However, this is likely because there are more smaller homes on the market and fewer larger, more expensive ones, according to a recent Realtor.com report. It’s not that price growth is softening overall; it’s that the mix of homes for sale has shifted. Smaller residences typically cost less than larger ones, which are popular with pandemic-weary buyers seeking extra space for home offices and virtual classrooms.”

It seems now that it’s starter homes that are getting all the attention. Says Trapasso, “And in a cruel twist for first-time buyers, prices are shooting up at a breakneck pace for starter homes, those that typically clock in between 750 and 1,750 square feet. Prices surged 18.6% for homes under 2,000 square feet in July.” She adds that, unfortunately, budget-conscious buyers just haven’t been able to catch a break.

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: Lower

Mortgage rates are trending slightly lower this morning. Last week the MBS market was essentially unchanged. The MBS market was volatile last week.

This Week's Rate Forecast: Lower

Three Things: These are the three main areas that have the greatest ability to impact rates this week. 1) Covid, 2) The Fed and 3) Domestic News.

1) Covid: Continued concerns over supply chain disruption (China's major port(s) closed last week due to Covid), were heightened even further this morning after a slew of weak economic data out of China. This portends a global slowdown which is generally favorable for pricing.

2) The Fed: As we head into the Jacksonhole WY Symposium, the focus of long bond traders continues to be the timing of the Fed's taper. We will hear from Fed Chair Powell this week and get the Minutes from the last FOMC meeting.

3) Domestic News: We get a lot of housing news this week, but bond traders will be focusing on Tuesday's Retail Sales and Thursday's Jobless Claims.

This Week's Potential Volatility: Neutral

This morning we're still expecting to see some improvements after the poor consumer sentiment report on Friday. Volatility should stay at moderate levels depending on what the Fed and Congress do.

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 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

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