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Pending Home Sales Better than Expected

By Taff Weinstein at

Pending Home Sales Better than Expected

Pending Home Sales Better than Expected:

Pending Home Sales in November (signed purchase contracts that are not yet closed) were much stronger than expected (+0.2% vs market expectations of -0.5%) on a month-over-month basis.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 0.2 percent to 109.5 in November from 109.3 in October. With last month’s increase, the index remains at its highest reading since June (110.0), and is now 0.8 percent above a year ago.

Lawrence Yun, NAR chief economist, says contract signings mustered a small gain in November and were up annually for the first time since June. “The housing market is closing the year on a stronger note than earlier this summer, backed by solid job creation and an economy that has kicked into a higher gear,” he said. “However, new buyers coming into the market are finding out quickly that their options are limited and competition is robust. Realtors® say many would-be buyers from earlier this year, stifled by tight supply and higher prices, are still trying to buy a home.”

“The strengthening economy, and expectation that more millennials will want to buy, serve as promising signs for solid home buying demand next year, while also putting additional pressure on inventory levels and affordability,” said Yun.
Source: National Association of Realtors

What Happened to Rates Last Week?



Mortgage backed securities (FNMA 3.50 MBS) gained +43 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly lower for the week.

Overview:  We had a holiday-shortened week with bond trading closed on Monday for Christmas and closed early on Friday for New Years.  We had very strong economic data that would normally pressure MBS (causing higher mortgage rates) but instead we saw some demand for long bonds as traders "parked" their money in safe, low return bonds over the holiday week and end of year which drove up MBS prices which pushed mortgage rates temporarily lower.

Jobs, Jobs, Jobs: Initial Weekly Jobless Claims came in at 245K vs est of 240K and matched the prior week's 245K. The more closely watched 4 week moving average is still below 240K at 237,500.

Manufacturing: The December Chicago PMI (aka the "business barometer") was much higher than expected (67.6 vs est of 62.0) and is the highest reading of the year. In fact, its the highest reading in 6.5 years.

Trade Balance: Our trade deficit (importing more than exporting) jumped to $-69.7B vs est of $-67.7B, although our Exports did increase by 3.0%.

Taking it to the House: Pending Home Sales in November (signed contracts not yet closed) were much stronger than expected (+0.2% vs est of -0.5) on a MOM basis. The October Case-Shiller Home Price Index showed a YOY gain of 6.4% in their 20 metro city index. The median price from the Existing Homes report is a much better data set and gets more attention than this reading but still, it is yet another housing report showing steady appreciation.

Consumer Confidence: The December reading was lighter than expected (122.1 vs est of 128.0) however, it is still near a 17 year high and a very good reading.

What to Watch Out For This Week:

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