NAR: Best Real Estate Market In 10 Years

More homes are predicted to be sold this year than in more than a decade. In 2017, the number of existing-home sales is expected to increase about 3.5 percent to 5.64 million. By 2018, existing-home sales will likely rise another 2.8 percent to 5.8 million, according to forecasts by the National Association of REALTORS®.

You can read the original report on the NAR website here.

The rise in new jobs, pent-up household formation, and increasing consumer confidence are helping to propel the housing market forward, says Lawrence Yun, NAR’s chief economist.

Lawrence Yun, chief economist for the NAR, recently presented his 2017 midyear forecast. According to Yun, the first quarter saw the best quarterly existing-home sales pace in 10 years with 5.62 million. Yun said he expected that pace to stay on track and finish around 5.64 million, 3.5% above 2016 and the best rate since 2006. The national median existing-home price is also expected to rise around 5% this year, according to the NAR.

“The housing market has exceeded expectations ever since the election, despite depressed inventory and higher mortgage rates,” Yun said. “The combination of the stock market being at record highs, 16 million new jobs created since 2010, pent-up household formation and rising consumer confidence are giving more households the assurance and ability to purchase a home.”

The new-home sector is also expected to see a surge over the next year. New-home sales are expected to rise 10.7 percent this year to 620,000. The sector is also expected to tick up another 8 percent in 2018 to 670,000 sales, NAR predicts.

Buyers are likely to face higher prices on homes. Prices are expected to increase 5 percent in 2017 and another 3.5 percent in 2018, NAR predicts. “As a result, buyers are compromising on the number of rooms, length of a commute, or other home qualities,” says Joseph Kirchner, senior economist of realtor.com®. “Meanwhile, builders are mostly building for the mid- to upper price range. This mismatch in supply and demand is making affordability more acute for those with modest incomes.”

To still get in, buyers are devoting higher percentage of their incomes toward homeownership or compromising on smaller homes or a home farther from the city center where they work.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +42 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move lower from the prior week.  The market saw its lowest rates on Wednesay and its highest rates on Monday.

We had a very light week for economic data that had only a limited impact on pricing and rates.  The biggest factor in rates last week was not domestic or global economics or inflation but instead it was an unscheduled bit of geo-political shock that sent MBS soaring.

Wednesday was a very volatile day as our benchmark MBS gained +50 basis points in one session (lower rates).   This was due to the barrage of media coverage over a few liberal democrats calling for the impeachment process to start and a special investigation over the firing of former FBI Director Comey.  MBS rallied not in reaction to the politics of this but rather due to the view among long bond traders that this would mean important stimulative measures would be put on the back burner for some time.  This includes tax reform, a stimulus package and regulatory reforms.   These were widely believed to have a higher probability of moving forward just after the election and now are viewed as being stuck in yet another Congress that is deeply divided.  Since the likelihood of those measures (which would have directly caused economic growth) has decreased (at least in traders’ minds) MBS rallied.  MBS and other long bonds do best when expectations for low growth are low inflation increase.

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
Broker/Owner
Office: 832-794-2136
Cell: 832-794-2136
taff@firstimperialmortgage.com

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

www.firstimperialmortgage.com

Copyright © 2016 Powered by www.MBSauthority.com

Home Builder’s Sentiment Highest Since 2005

The National Association of Home Builders just released their Builder Confidence report:

In a further sign that the housing market continues to strengthen, builder confidence in the market for newly-built single-family homes rose two points in May to a level of 70 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the second highest HMI reading since the downturn.

“This report shows that builders’ optimism in the housing market is solidifying, even as they deal with higher building material costs and shortages of lots and labor,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas.

“The HMI measure of future sales conditions reached its highest level since June 2005, a sign of growing consumer confidence in the new home market,” said NAHB Chief Economist Robert Dietz. “Especially as existing home inventory remains tight, we can expect increased demand for new construction moving forward.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Two of the three HMI components registered gains in May. The index charting sales expectations in the next six months jumped four points to 79 while the index gauging current sales conditions increased two points to 76. Meanwhile, the component measuring buyer traffic edged one point down to 51.

The three-month moving averages for HMI scores posted gains in three out of the four regions. The Northeast and South each registered three-point gains to 49 and 71, respectively, while the West rose one point to 78. The Midwest was unchanged at 68.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost just -4 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.  The market saw its lowest rates on Monday and its highest rates on Thursday.

It was the 4th straight week where the end result was a very narrow change, but we did have some volatility during the week as there was a net difference of -67 BPS from our intra-day highs of the week and our intra-day lows of the week.

The two biggest movements were Wednesday and Friday.  Wednesday sold off (higher rates) due to comments from a Fed official and Friday rallied (better rates) due to weaker inflationary data.

The Talking Fed:
Boston Fed President Eric Rosengren said the Fed needs to hike at least 3 more times this year, note the 2 times that the market is expecting.  He said “Along with a gradual reduction in the level of the balance sheet, it would still be reasonable to have three rate increases over the remainder of this year.”  This was much more “hawkish” than what the markets have priced in which is basically only one more hike this year and not seeing an adjustment to the pace of MBS purchases until 2018.

Inflation?  The front-end (PPI) showed some inflationary pressure, but it is clear that for now that is being absorbed by companies and not being passed on to consumers as PPI showed a little weakness.  Of note is the fact that Core CPI YOY dropped back below the 2.00% target inflation rate which is why MBS rallied on Friday.

The April Producer Price Index (PPI) was much higher than expected. The Headline MOM reading was more than double market expectations (0.5% vs est of 0.2%) and is now at 2.5% on a YOY basis which is much higher than the consensus estimates of 2.2%.  When you look at the Core (ex food and energy) the MOM reading came in at 0.4% vs est of 0.2% and YOY it ws 1.9% vs est of 1.7%.  The YOY reading is the highest since January 2015!

The April Consumer Price Index (CPI) did not show the gains from Thursday’s PPI, which means that companies for the time being are not passing through the increased costs to consumers.  The Headline CPI MOM reading matched expectations (0.2% vs est of 0.2%) but the Core (Ex food and energy) MOM reading was a little light (0.1% vs est of 0.2%).  But the Fed looks at the YOY data and the Core CPI YOY fell back below 2.0% (1.9% vs est of 2.0%).

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
Broker/Owner
Office: 832-794-2136
Cell: 832-794-2136
taff@firstimperialmortgage.com

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

www.firstimperialmortgage.com

Copyright © 2016 Powered by www.MBSauthority.com

Too Few Listings

The March Pending Home Sales (homes with contracts on them but have not closed) were much better than market forecasts but have hit a road block.

Homes are selling at close to the fastest rate in recorded history, and 42 percent of homes sold at or above list price in March (the second highest amount since NAR began tracking in December 2012).

Lawrence Yun, NAR chief economist, says sparse inventory levels caused a pullback in pending sales in March, but activity was still strong enough to be the third best in the past year. “Home shoppers are coming out in droves this spring and competing with each other for the meager amount of listings in the affordable price range,” he said. “In most areas, the lower the price of a home for sale, the more competition there is for it. That’s the reason why first-time buyers have yet to make up a larger share of the market this year, despite there being more sales overall.”

Pointing to revealing data from the March Realtors® Confidence Index, Yun worries that the painfully low supply levels this spring could heighten price growth — at 6.8 percent last month — even more in the months ahead. Homes in March came off the market at a near-record pace, and indicating an increase in the likelihood of listings receiving multiple offers, 42 percent of homes sold at or above list price (the second highest amount since NAR began tracking in December 2012).

“Sellers are in the driver’s seat this spring as the intense competition for the few homes for sale is forcing many buyers to be aggressive in their offers,” said Yun. “Buyers are showing resiliency given the challenging conditions. However, at some point — and the sooner the better — price growth must ease to a healthier rate. Otherwise sales could slow if affordability conditions worsen.”

Yun forecasts for existing-home sales to be around 5.64 million this year, an increase of 3.5 percent from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 5 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost just -2 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.  The market saw its lowest rates on Monday and its highest rates on Tuesday.

With just a two basis point change for an entire week, MBS were trapped in a fairly narrow range.  We had a mixed bag of economic data with a weaker than expected 1st QTR GDP report but had very strong manufacturing and consumer sentiment readings.  The Trump administration avoided a government shut down and released some “core principals” in the form of a tax plan outline but the markets are awaiting more granular details that we wont see until June.

Domestic Flavor:
GDP: We got the first glimpse at the the first quarter Gross Domestic Product and it was a very mixed bag.  If you look at the headline GDP reading it fell short of expectations (0.7% vs est of 1.1%).  But the Prices Paid PPI jumped to 2.2% vs est of 2.0%, the Employment Cost Index was also higher than expected (0.8% vs est of 0.6%) and PCE (QoQ) was 2.4% vs est of 2.3%).  So, by every metric other than the headline reading, this was stronger than expected as far as inflation/wages.  Historically, the final reading is always higher than the preliminary reading so its very probable that when the smoke clears that this reading is back closer to 1.0%.  Still fairly tame though.

Chicago PMI: The April reading was much higher than expected (58.3 vs est of 56.4) and was the highest reading since January 2015.

Consumer Sentiment:  The final reading for April (mid month reading was 98) came in at 97 vs est of 97.9.  This is the second best reading of the year and very solid.

Pending Sales: Were a little better than expected for March, falling -0.8% vs a larger pull backed expected of -1.0%.

Durable Goods:  This report has been all over the place and we get another mixed reading.  The March headline reading missed expectations (0.7% vs est of 1.2%), but more than offsetting that is the upward revision to Feb from 1.7% to 2.3%.  Same story when you strip out Transportation.  It missed with a reading of -0.2% vs est of 0.4%, but Feb was revised upward from 0.4% to 0.7%.

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
Broker/Owner
Office: 832-794-2136
Cell: 832-794-2136
taff@firstimperialmortgage.com

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

www.firstimperialmortgage.com

Copyright © 2016 Powered by www.MBSauthority.com