|10 year government bond yield||3.20%|
|30 year fixed rate mortgage||4.93%|
Stocks are higher this morning after Chinese and Italian markets rallied on benign political comments. Bonds and MBS are flat.
Existing home sales fell 3.4% in September, according to NAR. Pretty much every part of the country saw a decline. Rising rates are affecting affordability and this is dampening sales. That said, the median home price did still rise 4.2% to 258k. Inventory improved a hair, increasing to 4.4 months’ worth from 4.2 months worth in August. Lawrence Yun, NAR chief economist, says rising interest rates have led to a decline in sales across all regions of the country. “This is the lowest existing home sales level since November 2015,” he said. “A decade’s high mortgage rates are preventing consumers from making quick decisions on home purchases. All the while, affordable home listings remain low, continuing to spur underperforming sales activity across the country.” Days on market rose to 32 days, and the first time homebuyer accounted for 32% of sales. Historically that number has been closer to 40%.
Refis dipped to 29% of all originations in September, according to the Ellie Mae Origination Insight report. As rates rise, you are seeing an increase in ARM origination, which rose to 7.2%. Credit quality also ticked up, with the average FICO rising to 727.
Bank of America is teaming up with the Neighborhood Assistance Corporation of America (NACA) to offer no-downpayment, no MI, below market rate mortgage loans to people with bad credit. BOA has promised to allocate $10 billion in mortgage credit to the program. The only requirements are the home has to be owner-occupied, and the borrower has to go through a counseling process where they learn about budgeting and getting the required documents in. The company is betting that borrowers will act like they have skin in the game, even if they don’t have any equity in the home. So far, no foreclosures in the past 6 years (which corresponds to the bottom of the real estate market. Not sure why Bank of America is hot to lend money at below market rates to uninsured low FICO borrowers without a down payment, but I suspect they are doing it for the PR or to keep the fair lending types off their back.
With the bankruptcy of Sears, and the latest housing starts data, it is interesting to look back on the company’s involvement in homebuilding. Yes, you could order a house via the Sears catalog. The heyday of the movement was the early 20th century – between 1908 and 1940, Sears sold about 75,000 kit homes. Prices were anywhere from $1,200 to $5,000 for 10 room quasi-mansions.