Morning Report: Existing home sales rise

Vital Statistics:

S&P futures4,636-5.2
Oil (WTI)71.370.18
10 year government bond yield 1.45%
30 year fixed rate mortgage 3.33%

Stocks are flattish as investors start getting ready for the Christmas holiday. Bonds and MBS are down small.

Third quarter GDP was revised upward to 2.3% as consumption was increased to 2%. Fourth quarter GDP estimates are a lot higher. Separately, the economy decelerated in November, according to the Chicago Fed National Activity Index.

Existing home sales rose 1.9% to 6.46 million, according to NAR. The median home price rose 13.9% to $353,900. Current housing inventory is down 13% to 1.1 million, or about a 2.1 month supply at the current pace. This represents a highly imbalanced market – six months is roughly a balanced market.

“Determined buyers were able to land housing before mortgage rates rise further in the coming months,” said Lawrence Yun, NAR’s chief economist. “Locking in a constant and firm mortgage payment motivated many consumers who grew weary of escalating rents over the last year.

Yun’s point is important – rents have been increasing at a fast clip, rebounding after the foreclosure and eviction moratoriums of the COVID pandemic. FWIW, NAR does see rates rising, with the 30 year fixed rate mortgage rising to 3.7% by the end of next year.

NAR forecasts that home prices will rise 5.7% as rates rise. Like the MBA and Corelogic, they forecast that home price appreciation has been pushed as far as it can. IMO they are downplaying the effect of rising wages, and that will be a powerful increase in buying power – much more important than interest rates.

Mortgage applications decreased by 0.6% last week as purchases fell 3% and refis rose 2%. “Mortgage applications fell last week, driven by a 3 percent decline in purchase applications,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Both conventional and government purchase applications were down, while the average purchase loan increased for the second straight week to $416,200 – the second highest amount ever. The elevated loan size is an indication that activity is more on the higher end of the market. Home-price appreciation growth remains faster than historical averages and inventory, particularly for starter homes, continues to trail strong demand.”


Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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