May 10th, 2021 2:45 PM by Richard Sardella MLO.100007700/NMLS 233568
Existing home pricing outpacing new builds
According to data release by CoreLogic, big private-equity firms, real-estate speculators and others that buy properties comprised more than 11% of U.S. home purchasers in 2018.
What does this mean? It means that with investor purchases of U.S. homes at an all-time high, rising home prices have done little to dampen demand for flipping homes or turning them into single-family rentals. The investor purchases are near twice the levels before the 2008 housing crash. While this can pose a challenge for millennials and other first-time buyers who are increasingly looking to buy starter homes but are forced to compete with deep-pocketed cash buyers, it also means demand is still high, and real estate remains healthy.
"Big commercial property owners like Blackstone Group LP and Starwood Capital Group began buying thousands of homes out of foreclosure during the housing bust," says realtor.com's Laura Kusisto. "Many economists credit investors with helping to stabilize the housing market in 2011 and 2012 by buying with cash when prices were low and mortgage credit froze."
But, she adds, analysts expected those purchases to slow as the market rebounded and properties could no longer be had for bargains. The reverse happened, and demand for properties has intensified. "While these purchases dipped slightly when the market started to recover in 2015 and 2016, they have rebounded to surpass the previous peak of six years ago," says Kusisto.
She explains how investors are an especially powerful force at the bottom of the market, where all-cash deals often dwell. CoreLogic discovered that investors purchased one in five homes in the bottom third price range in 2018, up 5 percentage points from the 20-year average of less than 15% — homes that first-time home buyers would logically be buying.
This isn't happening everywhere, however. "The biggest markets for investor purchases in 2018 were Detroit, followed by Philadelphia and Memphis, Tenn., where home prices are still low enough for investors to profit by renting them out," says Kusisto.
Source: RealtorMag | 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 sideways to slightly lower this morning. Last week the MBS market improved by +30 bps. This was enough to move rates or fees slightly lower last week. We saw a good deal of volatility through the week.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to rates this week. 1) Inflation, 2) Treasury Dump, and 3) Retail Sales.
1) Inflation: We get two big inflation data points this week, with CPI on Tuesday and PPI on Wednesday. While this is not the Fed's primary inflationary gauge, it can still significantly impact bond yields.
2) Treasury Dump: We have a large amount of long-term debt hitting the marketplace this week. Wednesday's 30 year Treasury bond auction is the most important, but Tuesday's 10 year Treasury Note auction will also be very key to watch.
3) Retail Sales: After March's big spike due to the helicopter money from the stimulus checks, how will retail sales fare during the same period that only saw 266K Non-Farm Payroll job adds?
This Week's Potential Volatility: High
Rate volatility will likely be calm until we start getting economic data on Wednesday with the inflation data denoted above. From then on, the rate markets will have a lot of data to digest. Overall, rate market volatility will be high for 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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