February 8th, 2021 5:56 PM by Richard Sardella MLO.100007700/NMLS 233568
Home prices jumping higher as low inventory continues
While it has been reported repeatedly that homes-for-sale inventory pickings are slim, the pandemic has made the situation worse as virus-wary home sellers have pulled their properties off the market. The result is sky-high prices and bidding wars that may well be driving homebuyers to distraction.
A recent Realtor.com report compared January to the same month last year and found that it plummeted 43%, with new listings down 23% year over year, and median home prices skyrocketing 15.4% annually to $346,000 in January as a result of the shortage. It's a war zone, and there are no signs it will be letting up any time soon as the spring home-buying season gears up.
Realtor.com's Chief Economist Danielle Hale admits it's particularly tough for first-time buyers dealing with limited options and fast-rising prices. "We're looking at an all-time low number of homes for sale and record numbers of buyers trying to get into the market," she says.
With 443,000 fewer homes up for grabs this year than last year (before COVID-19 hit), builders have ramped up their pace of constructing new homes, but that doesn't seem to have made much of a ripple yet. Realtor's Clare Trapasso says the hope is that once more people get vaccinated against the coronavirus, sellers will feel more comfortable listing their homes. "The threat of catching the virus from a potential buyer walking through and having to move in a pandemic has led many sellers to hold off," she says.
She reports that home prices rose the most in the Northeast, by 16.8%, followed by the West, at 12.3%, the Midwest, at 10.4%, and the South, at 8%. But in the nation's 50 largest metropolitan areas, prices shot up the most in Austin, TX, Rochester, NY, and Los Angeles in January, ranging from 22%-30%.
The priciest locales saw the most significant inventory increase action — Silicon Valley's San Jose, CA, and San Francisco, where many white-collar workers who can now telecommute from anywhere with a good internet connection have sought out cheaper parts of the country, according to Trapasso.
Source: 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 trending slightly higher so far today. Last week the MBS market worsened by -19bps. This may've been enough to worsen mortgage rates or fees. The volatility last week was a bit elevated even though the net change each day and for the week was relatively small.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to move rates this week: 1) Stimulus, 2) Inflation, and 3) The Fed.
1) Stimulus: The next stimulus bill's size would appear to be at or near the proposed $1.9T. The House basically passed a "blank check" budget on Friday. With its passage, they will now (after the fact) draft the details of the stimulus component of the budget in their committees. It would then go to the Senate, where the reconciliation process would begin. Any clarification on the timeline and firm details on the stimulus size and scope will significantly impact rate markets.
2) Inflation: We have a very light economic calendar this week; the biggest report is Wednesday's Consumer Price Index. The Core (ex-food and energy) CPI reading is a key measure of inflation. While it's expected to remain well below the important 2% level, the higher the reading is - the worse it is for pricing, the lower the number is - the better it is for pricing.
3) The Fed: We will hear from Fed Chair Powell on Wednesday afternoon. Any comments on stimulus, rates, and asset purchases can have a significant impact on the markets.
Treasury Dump: We have another record-breaking week in terms of the size of the debt being offered up in the market.
This Week's Potential Volatility: High
We don't have a lot of economic data due out this week that can move rates. However, rate markets will pay close attention to the Consumer Price Index on Wednesday. Rate markets will also pay close attention to the stimulus package's details as it goes through reconciliation.
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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