Lack of inventory continues to push prices higher

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Published Date 3/19/2018

Realtor Report

Lack of inventory continues to push prices higher

It’s a great time to be a seller, but not such a thrill being a rookie buyer. Soaring home prices and the shortage of properties on the market are taking a toll on beleaguered first timers.

The share of first-time homeowners fell to just 29% of all existing home buyers in January, according to the most recent National Association of Realtors report, down from 32% in December and 33% in January 2017.

In the report, economist Joseph Kirchner expresses concerns this could further depress homeownership rates down the line, citing fewer affordable homes for those embarking on their version of the American Dream.

Nationally, the lack of inventory also drove down the number of existing (previously lived in) homes sold, while monthly sales dropped 3.2% and annual sales decreased 4.8%.

“There’s plenty of demand, but people just cannot find a home on the market that meets their needs and they can afford," Kirchner says in the report, predicting that the shortage will continue.

Across the country, there were 15.5% fewer existing homes in January selling for $250,000 or less compared to a year ago, while there were 25% more homes selling for $500,000 or more.

Sales of coveted single-family homes hit 4.76 million in January, falling 3.8% from December and 4.8% from the same month a year earlier. Lower priced condos and co-ops fared a bit better than single-family homes, with the number of monthly sales rising 1.6% in January to approximately 620,000. But that's down 4.6% from January of 2017.

January’s median existing home price was $240,500, a 2.4% drop from December but representing a 5.8% jump from January of the previous year. However, the cost was still substantially less than the median price of a newly constructed dwelling. New homes median pricing was at $335,400 in December, according to the most recent joint report by the U.S. Census Bureau and U.S. Department of Housing and Urban Development. That's nearly 39.5% more than an existing home.

Southern states had the most existing home sales in January at about 2.26 million, while the Midwest had the second most home sales at 1.25 million. There were 1.14 million existing homes sold in the West, a 5% drop from the previous month and a 9.5% fall from the previous year. The Northeast had the fewest existing home sales, at just 730,000. That was also down, both by 1.4% month-over-month and 7.6% year-over-year.

Meanwhile, prices of existing homes were up in every region. They were the most expensive in the West, at a median $362,600 in January, an 8.8% jump over January 2017.

NAR Chief Economist Lawrence Yun is quoted as saying, ”It’s very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth.”

Source: TBWS

This Week's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning. Last week the MBS market improved by +13bps. This probably wasn't enough to improve mortgage rates or fees. Mortgage rates continue to move sideways with relatively low volatility.

This Week's Rate Forecast: Neutral

Three Things: These are the three items that have the greatest ability to impact mortgage rates this week. 1) Fed, 2) Across the Pond and 3) Geopolitical.

1.) Fed: Tuesday starts two days of meetings for the Federal Open Market Committee (FOMC) which will culminate with Wednesday's policy announcement. This meeting will be closely watched as it is widely expected to be the first rate hike of the year. But equally important is the release of their Economic Projections which includes the famous "dot plot chart' which shows the market what the mean expectations are from all of the Fed members (both voting and non-voting) of the Fed Funds Rate from now through 2020. This is where the market gets the expected number of rate hikes for this year and the next year. This will also be Fed Chair Powell's first live press conference following a Fed meeting, and rate hike and his comments will drive the markets.

2.) Across the Pond: The G20 Finance Ministers meeting among the world's largest 20 economies will get a lot of attention Monday and Tuesday. But it is news/rumors of the ECB announcing a new policy to end their QE soon that will drive markets the most.

3.) Geopolitical: The focus is on Brexit with EU leaders meeting in Brussels to sign off on the new Brexit guidelines. Also, the bond market will continue to react to news out of the U.S. regarding Tariffs.

This Week's Potential Volatility: Average

Mortgage rates are likely to move sideways until the Fed meeting on Wednesday. While the market is expecting the Fed to increase rates, it will be paying close attention to the Fed's outlook on future hikes. This could cause some rate volatility for the end of the week.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

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