Morning Report: Despite rising rates, there are still 11 million potential refis out there

Vital Statistics:

 LastChange
S&P futures4,611-47.2
Oil (WTI)84.871.03
10 year government bond yield 1.84%
30 year fixed rate mortgage 3.67%

Stocks are lower this morning on fears of inflation and aggressive Fed countermeasures. Bonds and MBS are down.

We won’t have much market-moving data this week, however we will get bunch of housing data with the NAHB Housing Market Index, housing starts, and existing home sales. Earnings season is underway, with a slew of bank earnings this week.

Rising rates have cut the number of high quality refinance candidates to just 7.1 million, the lowest since November 2019. “The latest numbers from Freddie have cut the number of high-quality refinance candidates to just 7.1 million – down from about 11 million at the end of December, and from as high as nearly 20 million earlier in 2020,” Black Knight said. “The last time the population was this small was back at the start of November in 2019, when rates were around 3.75%.”

Black Knight is counting high quality candidates as those with <80 LTV, >720 FICO, and current rates 0.75% above current interest rates. If you relax the LTV and FICO constraints, the number increases to 12 million. Despite these numbers, anyone who has a lot of credit card debt should take a look at a cash-out debt consolidation refi.

Bidding wars are cooling off, however they are still elevated compared to a year ago, according to Redfin. 60% of homes received multiple offers, which was down from 75% in April but up from 54% a year ago. “Buyers should anticipate that they may not win a house until their sixth or seventh bid. If you’re the type of person who falls in love with a house, this is not your market,” said Candace Evans, a Redfin team manager in New York. “If you show a house to 10 buyers, you’ll probably get eight offers. An agent on my team just put a home in the Bronx on the market and started receiving offers even though there hadn’t been a single open house or tour yet. The house ultimately received over 10 offers and went for well above the asking price.”

Given the abject lack of new construction, expect this to continue. Note that lumber is back up near the tops of last summer.

Author: Brent Nyitray

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

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