Morning Report: Home prices decline in July.

Vital Statistics:

S&P futures3,71444.25
Oil (WTI)78.281.51
10 year government bond yield 3.89%
30 year fixed rate mortgage 6.72%

Stocks are rebounding after yesterday’s bloodbath. Bonds and MBS are down again.

The FHFA House Price index fell 0.6% MOM in July, but is still up 13.9% on a YOY basis. This index only looks at mortgages within the conforming loan limits, so it is more centered on the median home since it ignores the luxury market and cash-only transactions.

“U.S. house price index posted its first month-over-month decrease in July since May 2020 when the U.S. economy experienced lockdowns as a result of COVID-19. This decline was widespread as eight of the nine census divisions saw a decrease,” said Will Doerner, Ph.D., Supervisory Economist in FHFA’s Division of Research and Statistics. “The 12-month change in house prices remains at historically high rates, but the rate of growth continues to moderate across all census divisions.”

The actual FHFA house price index number for July was 395.2. The index level at the end of September 2021 was 353.6. So, if we were to reset the new conforming loan limit for 2023 today, it would come out to $723,341.

This means if the FHFA House Price index declines another 1.1% between August and September, those originators who are funding loans up to $715k in anticipation of the new 2023 limits might have a problem on their hands.

The rise in mortgage rates has more homebuyers backing out of deals. This is most prevalent in some of the hottest markets in the Sun Belt and Florida.

“Some homebuyers are finding that by the time they go under contract and lock in their mortgage rates, rates could be much higher than they were when they toured the home and/or got pre-approved. That can kill the deal because the buyer is no longer financially comfortable with the purchase,” said Sam Chute, a Redfin real estate agent who works with sellers in Miami. “I advise sellers to price their homes competitively based on the current market because deals are falling through and buyers are no longer willing to pay pie-in-the-sky prices.”

Durable Goods orders fell 0.2% MOM in August according to the Census Bureau. July’s numbers were revised downwards. Ex-transportation they rose, and core capital goods orders (a proxy for business capital investment) increased as well.


Author: Brent Nyitray

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

3 thoughts on “Morning Report: Home prices decline in July.”

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