Home Sales Rise

 

Since mortgage rates moved sharply higher, we’ve counseled on the need to retain equanimity: Stay level and focus on the big picture, which includes an improving economic outlook and steady employment prospects. Mortgage rates are an important variable, to be sure, but they’re not the be-all and end-all of everything housing related.


Recent sales data support our contention. Home sales -- new and existing -- improved in November, a month when mortgage rates surged.


Existing-home sales surprised most market watchers by rising 0.7% to a 5.61 annualized rate last month. This is the high in the recovery cycle and exceeds the previous high set in October by over 100,000. Looking at the particulars, single-family sales were “flattish,” declining 0.4%. Condo sales, on the other hand, surged ahead 10%. The median price of an existing home rose to $234,900, which puts the year-over-year gain at 6.8%.


As for new-home sales, they didn’t miss a beat. Sales jumped 5.2% to a 592,000 annualized rate. New-homes sales are up 16.5% compared to November 2015. Some discounting has helped keep sales on an upward trajectory. The median price -- at $305,400 -- is 3.7% lower than the median price a year ago. If you want to move more inventory, lower the price, as the trend in new-home sales and new-home median price proves.


Looking to the future, the pending home sales index points to sales growth taking a breather over the next month or two. The index fell 2.5% in November. Because the index focuses on existing home sales, we wouldn’t be surprised if existing-home sales are flat in December.


Flat purchase-application activity since early November also points to a flat month or two for existing-home sales. That said, the Mortgage Banker Association’s latest survey showed that purchase applications were up 3% the week before Christmas. This suggests that the market is adjusting to the new normal of 4%-plus on the 30-year fixed-rate mortgage.


As for the new normal, it has held steady over the past two weeks We’ve seen the yield on the 10-year U.S. Treasury note actually decline a few basis points since Christmas. We’ve seen a similar decline in mortgage rates. Quotes had been as high as 4.5% on a top-tier 30-year loan. A quote closer to 4.375% is a regular occurrence, with quotes of 4.25% happening more often.


We won’t be surprised to see a range of 4.125%-to-4.25% develop and hold on the 30-year loan until the Jan. 20presidential inauguration, if not beyond. All the perceived positives and negatives associated with a new incoming president are baked into the market. Barring an outlier event, things should hold steady over the next few weeks.


 

Keeping you informed on events this week that may create volatility in mortgage rates.

Economic Event Release Date and Time Consensus Estimate Analysis

Construction Spending
(November)

Tues., Jan. 3,
10:00 am, ET

0.5% (Increase)

Moderately Important. Residential spending continues to lift overall spending, and it likely will continue to do so in 2017.

Employment Situation
(December)

Fri., Jan. 6,
8:30 am, ET

Unemployment Rate: 4.7%
Payrolls: 160,000 (Increase)

Important. Moderate and steady job growth will enable the Federal Reserve to implement an interest-rate increase or two sometime in 2017.

       
       


 

 

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