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.
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