Housing inventory has been tight for a decade, due to strong housing demand from low unemployment levels, rising wages and super low mortgage rates. According to the National Association of Realtors, the Total housing inventory at the end of October sat at 1.77 million units, which sits at only a 3.9-month supply.
Between 2007 and 2017, about 730,000 homes were released into the US market by people aged 60 and older, according to Zillow. Between 2017 and 2027, that number is expected to spike to 920,000 per year. Between 2027 and 2037, it’s expected to rise to 1.17 million per year.
“This means more than 27% of today’s owner-occupied homes will become available by 2037,” Zillow said.
“The Silver Tsunami is estimated to hit in earnest as the number of seniors aged 60 or older who pass away each year rises during the 2020s and 2030s,” Zillow said in a news release.
The wave of homes becoming available will be so large that it will impact the economy in traditional retirement areas, Zillow predicted.
“Retirement hubs like Florida and Arizona are likely to feel the sharpest impact,” Zillow said. “If demand erodes because fewer people choose to retire there in the coming years, those areas might end up with excess housing. Also heavily impacted will be regions like the Rust Belt, which saw younger people move away in recent decades, leaving older generations to make up a larger share of the populations.”
What Happened to Rates Last Week?
Mortgage backed securities (FNMA 3.500 MBS) gained just +10 basis point (BPS) from last Friday's close which caused fixed mortgage rates to remain at or near the same levels as the prior week.
Overview: We had a holiday-shortened week with really only three full trading sessions. Long bonds (including mortgage backed securities which are what control mortgage rates) moved sideways. We some very strong economic data which is negative for rates but very low inflationary data which is positive for rates.
GDP: The 3rd QTR GDP was revised upward from the preliminary release of 1.9% to 2.1%.
Manufacturing: The November Chicago PMI remained in contractionary territory (anything below 50) but was in line with estimates (46.3 vs est of 46.0) and was an increase from October's reading of only 43.2. October Durable Goods Orders were much stronger than expected (+0.6% vs est of -0.8%). Ex Transportation it was +0.6% vs est of +0.1%.
Inflation Nation: The Fed's key measure of inflation, PCE Core (ex food and energy) YOY actually moved lower from 1.7% to 1.6%.
Consumer: Personal Income was flat at 0.0% vs est of 0.3%, Spending did pick up though with a MOM reading of 0.3% vs est of 0.3%.
Taking it to the House: The trailing September 20 Metro City Case Shiller Home Price Index YOY hit 2.1% which matched expectations. The FHFA Housing Price Index MOM showed a gain of 0.6% which beat out forecasts of 0.2%. New Home Sales in October hit 733K vs est of 709K, plus September was revised higher from 701K to 738K
Consumer Confidence: The Conference Board's November reading was lower than expected, 125.5 vs est of 126.9.
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.