Pending Home Sales Jump
|Pending home sales rebounded strongly in January, according to the National Association of Realtors®. All four major regions saw growth last month, including the largest surge in the South.|
The Pending Home Sales Index is a forward-looking indicator based on contract signings. It increased 4.6 percent to a reading of 103.2 in January which is up significantly from December’s reading of 98.7.
Lawrence Yun, NAR chief economist, had expected an increase in January home sales. “A change in Federal Reserve policy and the reopening of the government were very beneficial to the market,” he said.
Yun also said “Homebuyers are now returning and taking advantage of lower interest rates, while a boost in inventory is also providing more choices for consumers.”
Additionally, Yun noted year-over-year increases in active listings from data at realtor.com to illustrate the potential rise in inventory. Denver-Aurora-Lakewood, Colo., Seattle-Tacoma-Bellevue, Wash., San Diego-Carlsbad, Calif., Los Angeles-Long Beach-Anaheim, and Nashville-Davidson-Murfreesboro-Franklin, Tenn., saw the largest increase in active listings in January compared to a year ago.
Yun says positive pending home sales figures in January will likely continue. “Income is rising faster than home prices in many areas and mortgage rates look to remain steady. Furthermore, job creation will help lift home buying.”
Source: National Association of Realtors
What Happened to Rates Last Week?
|Mortgage backed securities (FNMA 4.00 MBS) lost -33 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher compared to the previous week.|
Overview: We had a very big week for economic data with stronger than expected 4th QTR GDP and very solid manufacturing and income readings. Mortgage backed securities moved lower (higher mortgage rates) due to some perceived positive momentum in U.S./China trade talks, strong economic data and the Federal reserve which continued to make it clear that they are open to raising rates if economic growth continues (the markets had discounted any interest rate hikes for all of 2019)
GDP: We finally got the Preliminary (will be revised several times) GDP report for the 4th QTR which was delayed due to the government shutdown and it came in much better than expected with a solid growth rate of 2.6% vs estimates in the 1.8% to 2.3% range. 4th QTR 2017 to 4th QTR 2018 is now 3.1% and the calendar year is at 2.9%. Either way you slice it, its a solid 3.0% growth rate for 2018.
Inflation Nation: The Fed’s primary measure of inflation was released and it remained just a smidge below their 2% target rate with a reading of 1.9%. The December Personal Income was more than double the market estimates (1.0% vs est of 0.4%). Personal Spending for December was -0.5% vs est of 0.3%. No one believes that number as it coincides with the same department that released the awful Retail Sales report for that same period which has been proven to be wrong by every possible metric available.
Manufacturing: The bell-weather Chicago PMI was a block-buster, coming in at 64.7 vs est of 57.0. Any reading above 50 is expansionary and readings above 60 are extremely strong.The February ISM Manufacturing reading was lighter than expected (54.2 vs est of 55.5) and a pull back from January’s level of 56.6. But any reading above 50.0 is expansionary.
Taking it to the House: Weekly Mortgage Applications increased by 5.3%. Purchase applications were up 6.0% and Refinances were up 5.0%. January Pending Home Sales were much better than expected with a nice gain of 4.6% vs est of only 0.4%.
The Talking Fed: Fed Chair Powell gave his semi-annual monetary report to the Senate and House committees on Tuesday and Wednesday. There were really no surprises as the Fed Chair basically reminded everyone that we are at or near full employment and are at nor near their target interest rate and that the economy is growing at a moderate pace. The only two points that he made that were interesting (but did not move bond prices) were:
|What to Watch Out For This Week:|
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.