Rates ended the week similar to last week (30 yr fixed no points at 6.875). This week, housing was front and center. Let's take a look!
Let's start with inventory. Redfin reported that new listings (defined by Redfin as being on the market for < 14 days) are down 31% year over year. Active listings (which accounts for all properties that are available) are down 15% year over year. Redfin also reported that bidding wars are occurring on almost half of transactions and the average sale to list price was over 100% for the first time in a year. With inventory down and demand up it’s not surprising to see Zillow, Black Knight and FHFA all reporting record high home values.
With regards to new construction, Single Family Housing Starts (homes breaking ground) were down 7% in June and are down 7.4% year over year. Single Family Permits (which is forward looking) were up 2.2% last month but are still down 2.7% year over year. So not only is inventory tight but there’s not a lot of help on the way as builders continue to try to play catch up. Related to that, builders remain optimistic on what they are seeing. They reported in the National Association of Home Builders (NAHB) survey that confidence, present circumstances and buyer traffic are all improving.
On the resale front, existing home sales fell 3.3% in June and are down 18.9% year over year. Lawrence Yun, Chief Economist for NAR had this to say, “(During) the first half of the year… fewer Americans were on the move despite the usual life-changing circumstances. The pent up demand will surely be realized soon, especially if mortgage rates and inventory move favorably. There are simply not enough homes for sale. The market can easily absorb a doubling of inventory.” That aligns pretty well with the fact that pre Covid there were more than twice the number of homes for sale relative to what we currently have. Personally I think it’s when mortgage rates improve that will cause the increase in inventory and not that the problem will correct itself regardless.
Next week is real busy as the Fed will be meeting (expectations are for a .25% rate hike), we’ll be receiving home appreciation data with Case Shiller and FHFA and then we’ll be receiving the Fed’s favorite inflation metric in the form of Personal Consumption Expenditures (CPE). It’ll be very interesting to see if the Fed’s tone changes at all. Unfortunately the CPE reading will come out on Friday and the Fed is meeting on Wednesday. Unfortunate only because the chances are high that that’ll be a real favorable reading and it’d be nice if the Fed had that info before deciding on a hike. At the very least a positive CPE report will help bonds and thus mortgage rates so... we shall see!
(post courtesy of Aaron Stuafer, Elevations Credit Union)
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