Mortgage rates had a wild day Friday. If you were checking rates on Friday, it’s important to understand just how immense the swings have been. Let’s start with the good news. The average conventional 30yr fixed rate quote thundered to its best levels in more than 5 months Friday morning, making it easily to 3.75% for almost any lender and even as low as 3.625% for quite a few lenders. This, after the big jobs report came in significantly weaker than expected.
The bad news is that the afternoon saw a fairly substantial reversal in the bond markets that underlie mortgage rates. When those trading levels begin losing ground, mortgage lenders are increasingly at risk of recalling rate sheets and sending out new, higher rates (aka “mid day reprice”). By the early afternoon, most lenders had pulled back their earlier, more aggressive offerings, leaving us with rates that are still better than the day prior, but not nearly as low as Friday morning’s.
The fact remains that the jobs report provided a compelling negative argument against a Fed rate hike and against general economic growth itself. Without a strong growth outlook, it will be hard for longer term rates to move higher, no matter what the Fed does with short term rates. There can still be plenty of volatility in the near-term though. That makes today’s 5-month lows yet another good opportunity to lock for those that aren’t interested in wading through the volatility. Doing so could prove beneficial, but only at the risk of being forced to accept a higher payment or fees if markets move against you. In general, the less time you have and the less flexibility on payment/costs, the more it makes sense to lock.
WASHINGTON (September 28, 2015) — Pending home sales retreated in August but remained at a healthy level of activity and have now risen year–over–year for 12 consecutive months, according to the National Association of Realtors®. A modest increase in the West was offset by declines in all other regions.
The Pending Home Sales Index,* a forward–looking indicator based on contract signings, decreased 1.4 percent to 109.4 in August from 110.9 in July but is still 6.1 percent above August 2014 (103.1).
Lawrence Yun, NAR chief economist, says even with the modest decline in contract signings, demand continues to outpace housing supply and elevate price growth in numerous markets. “Pending sales have leveled off since mid–summer, with buyers being bounded by rising prices and few available and affordable properties within their budget,” he said. “Even with existing–housing supply barely budging all summer and no relief coming from new construction, contract activity is still higher than earlier this year and a year ago.”
According to Yun, sales in the coming months should be able to roughly maintain their current pace. However, he warns that there are looming speed bumps that have the potential to impact housing.
“The possibility of a government shutdown and any ongoing instability in the equity markets could cause some households to put off buying for the time being,” adds Yun. “Furthermore, adapting to the changes being implemented next month in the mortgage closing process could delay some sales.”
The national median existing–home price is expected to increase 5.8 percent in 2015 to $220,300. Yun forecasts total existing–home sales this year to increase 7.0 percent to around 5.28 million, about 25 percent below the prior peak set in 2005 (7.08 million).
The PHSI in the Northeast fell 5.6 percent to 93.3 in August, but is still 8.9 percent above a year ago. In the Midwest the index inched down 0.4 percent to 107.4 in August, and is now 6.5 percent above August 2014.
Pending home sales in the South declined 2.2 percent to an index of 121.5 in August but are still 4.1 percent above last August. The index in the West rose 1.8 percent in August to 104.9, and is now 7.6 percent above a year ago.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
Sources: CNBC,Bloomberg, NAR, MND