According to the National Association of Realtors, the median price of a vacation home that sold last year, jumped 28 percent to $192,000 which is outpacing the rate of appreciation of owner-occupied homes.
Sales of vacation homes in 2015 hit 920,000 units with the strongest gains seen in the South, according to the NAR, particularly in Florida.
Vacation home sales accounted for 16 percent of all transactions in 2015 — down from 21 percent in 2014. Buyers used cash more often in 2015 and had a higher median household income ($103,700) than those in 2014 ($94,380), according to the NAR.
More than a third of buyers surveyed said they plan to use their property for vacations or as a family retreat (37 percent), 16 percent bought for future retirement plans and 7 percent bought as a rental investment, down from 11 percent in 2014.
What Happened to Rates Last Week?
Mortgage backed securities (FNMA 3.00 MBS) gained +28 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move slightly lower from the prior week.
We had yet another week of good economic data (which is normally negative for mortgage rates) but that was offset by several “dovish” comments from Fed members and volatility in Oil prices.
Texas Tea, Black Gold: We had a very choppy session last week with several sessions seeing over a $1 swing in intra-day prices for WTI Oil. One the days that WTI prices increased by a buck, MBS sold off (higher rates) and on when WTI sold off by a buck, MBS improved (lower rates). Overall, WTI did trend higher for the week but closed below the important $40 mark which provided terrific support for our bonds and rates.
The Talking Fed: We got to look at the minutes from the last FOMC Meeting (March). The overall theme was that while the members all have varying opinions of the state of our domestic economy, they all were very concerned with global growth and its potential negative impacts on our economy and our financial system and had a “wait and see” position to see if things got worse globally or if they leveled off. Most bond traders view the minutes with a lens that shows a June rate hike at the earliest, which is basically the same view traders had before the release of the minutes.
Separately, we heard from Federal Reserve Chair Janet Yellen. She spoke on a panel with former Fed Chairs Bernanke, Greenspan and Volcker. Basically, she defended the Fed rate increase in December and laid out a strong probability of a rate hike or two this year. She said: “The U.S. economy has continued to progress in a satisfactory way. We continue to see good job performance, some evidence of inflation moving up, so that was our expectation when we raised rates in December,”
And, “So yes, there is accommodation in the monetary policy that we have. But we think the gradual path of rate increases will be appropriate,” Yellen added. “We remain on a reasonable path and I don’t think December was a mistake.”
ISM Services: ISM Manufacturing two weeks ago, was stronger than expected (20% of the macro picture) and last week we get the other 80% with Non-Mfg and it was stronger than expected (54.5 vs est of 54.0). This is the best reading since December of last year. The employment component rose from 49.7 to 50.3 which is very important. This was a strong report.
What to Watch Out For This Week:
The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.
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