The Housing Market Update

Waiting to Write an Offer Could Cost You:

Homebuyers across the country continue to struggle with a historic shortage in homes available to purchase which has led to rising prices, multiple offers and reduced time on the market.

Highly selective buyers (particularly first time home buyers with unreasonable expectations) are seeing homes vanish while they weigh the options over several properties that they are interested in.

Nationally, the number of homes on the market dropped for the eighth consecutive quarter in Q1, falling 5.1% from Q1 of 2016. And the inventory shortage continues to be most dire for more affordable homes.

Starter-home inventory fell by 8.7% year over year, while trade-up home inventory fell by 7.9%. Meanwhile, the stock of premium homes fell just 1.7% year over year.

“Recovering home values have proven to be a double-edge sword,” said Ralph McLaughlin, Trulia’s chief economist. “While homeowners across the country are thrilled to regain equity in their homes, many have not been in a hurry to trade up. This has added to the inventory gridlock that ties up would-be starter-home inventory from ever coming on to the market, further constraining supply and decreasing affordability.”

That disproportionate drop in starter-home inventory is making homeownership less and less affordable for first-time buyers. Right now, a typical starter-home buyer would have to dedicate 38.3% of his or her monthly income to buy a home, Trulia found. That’s a 2.9% increase from last year.

The bottom line is that homebuyers need to have their mortgage ready and be able to put in an offer quickly.  Chasing a home with more features or for a lower price may very well result in losing out in the market altogether.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +41 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move lower from the prior week.

We had a very light week for domestic economic data.  The bond market (which controls mortgage rates) focused on the slew of speeches by Federal Reserve President’s and board members.  MBS drifted upward as President Trump could not get any changes to the Health Care law through the House last week.  This has traders concerned that he may face the same resistance with corporate and personal tax reform.  Both are considered very stimulative for our economy.

Domestic Flavor:
Durable Goods Orders: The headline reading rose by 1.7% in February which beat out forecasts  of 1.2%.  Plus, January was revised upward to 2.3%.  When you strip out the very volatile Transportation sector, Durable Goods rose by 0.5% vs of 0.6% and January was revised upward from -0.2% to 0.2%.  Overall a pretty good report. The only real weakness was with core capital goods that missed the mark (-0.1 vs est of 0.5) but January was revised upward from -0.4 to +0.1…so that makes up the difference there.

The Talking Fed:
Fed Chair Janet Yellen spoke in Washington at a conference this morning.  She did not address the pace of future rate hikes or even our economic trajectory but remained on topic for the conference which was “The Economic Future of Kids and Communities”.
Chicago Fed President Charles Evans (voting member) did the same thing as Yellen yesterday and did not address rates or the economy in his address to a child education conference.
S.F. Fed President John Williams (non-voting member) said  “Three or even four increases as your total makes sense,” indicating the economy is growing at a strong enough pace to support at least three rate increases this year.
St. Louis Fed President James Bullard (non-voting member) said that the Fed should keep its policy rates low but should instead trim their balance sheet (which would mean less MBS purchases and therefore cause mortgage rates to rise without the Fed having to raise their Fed fund rate).
New York Fed President William Dudley (voting member) said that the economy is “at a pretty good pace right now”.  He said the Unemployment Rate could drop lower but then that brings up concern over wage inflation.
Cleveland Fed President Loretta Mester (non voting member) said that she sees MORE than three rate hikes this year. “I actually built into my forecast more than three as I have the economy a bit stronger than the median forecast,”  This is no surprise as she voted three times in 2016 to raise rates (rates were only actually raised once in December)
Chicago Fed President Charles Evans (voting member) said that the Fed is now going to wait until June before it considers its next rate hike.

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.

Brought to you by:

Taff Weinstein
Office: 832-794-2136
Cell: 832-794-2136

First Imperial Mortgage
3409 Morrison St
Houston, TX 77009
NMLS 225846

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