September 28th, 2020 1:58 PM by Richard Sardella MLO.100007700/NMLS 233568
No end in sight for increasing home prices
Somehow we all thought home prices would calm down as we head into the fall and winter months. We were wrong, as we are hit with not-so-subtle increases.
According to Redfin’s Tim Ellis, housing market takeaways for 434 U.S. metro areas during the 4-week period ending September 20 reveal a 14% increase from 2019 to $319,978—the highest on record, also the largest since August 2013. In just the 4 weeks, prices have increased by 6.6%, compared to that same period in 2018 and 2019, when prices declined an average of 3.7%.
Year over year, pending home sales climbed 29% year, while active listings (the number of homes listed for sale at any point during the period) fell 28% from 2019 to a new all-time low. “The rate of year-over-year supply declines has remained consistent at this level for the past couple of months,” says Ellis. To boot, buyers are making it easy for sellers to let go, with 45.7% of homes that went under contract getting an offer accepted within the first two weeks on the market — a figure that has held relatively steady for the last 16 weeks. This is partially the result of very small margins between asking and selling price; the average sale-to-list price ratio, which measures how close homes are selling to their asking prices, rose to 99.4%—an all-time high and 1.2 percentage points higher than a year earlier.
Ellis cites Redfin chief Daryl Fairweather, saying, “The recent boost in the number of people listing their homes for sale still falls far short of demand from folks looking to buy homes right now. Unfortunately, that means little relief for homebuyers, especially those seeking an affordable home. I don’t expect the double-digit home-price increases to subside before early 2021.”
According to Ellis, real estate experts agree that pricing a home conservatively in a market like this is the ticket, reaping multiple offers that oftentimes come in over asking price. Unrealistic asking prices by comparison, tend to make a house sit on the market for a while, lacking the same multiple offer activity.
Source: Redfin, CoreLogic, 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 this morning. Last week the MBS market improved by +47bps. This was enough to move rates lower last week. We saw high rate volatility at the end of the week.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas with the greatest ability to impact rates this week: 1) Jobs, 2) The Fed, and 3) Domestic.
1) Jobs: We get a deluge of job and wage-related data this week with ADP Private Payrolls, Initial Weekly Jobless Claims, Personal Income, Challenger Job Cuts, Non-Farm Payrolls, Average Hourly Earnings, Unemployment rate, and more.
2) The Fed: We will have a lot of speeches this week, and while the market has been beaten over the head with pretty much non-stop Powell last week, we will be looking for any divergent views from this week's speeches.
3) Domestic: We have a big week for some big-name economic reports. The biggest are PCE (the Fed's key inflation measure), ISM Manufacturing, and Chicago PMI Manufacturing. We will also get the revised 2nd QTR GDP (third time seeing that data point).
This Week's Potential Volatility: Average
This could be a very wild week for rate markets with the influx of economic data. However, we're trapped in a very narrow trading range, and it would take something totally unexpected on the economic front or a stimulus deal to move rates.
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.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.