The Mortgage Corner
The NAR reported that Existing-home sales saw a minor decline in April, continuing March’s drop in sales, according to the National Association of Realtors®. Two of the four major U.S. regions saw a slight dip in sales, while the West saw growth and the Midwest essentially bore no changes last month.
Lawrence Yun, NAR’s chief economist, said he is not overly concerned about the 0.4 percent dip in sales and expects moderate growth very soon. “First, we are seeing historically low mortgage rates combined with a pent-up demand to buy, so buyers will look to take advantage of these conditions,” he said. “Also, job creation is improving, causing wage growth to align with home price growth, which helps affordability and will help spur more home sales.”
Interest rate are back to almost historic lows last seen during the Fed’s QE programs, with the 30-year conforming fixed rate down to 3.50 percent, and High-Balance fixed rate @ 3.75 percent for a 1 point origination fee.
Refinancing applications jumped 8 percent last week, and purchase applications are 7 percent over last year, according to the Mortgage Bankers Association, because of the most recent rate declines, which are largely due to economic uncertainties (with outcomes of the trade wars, in particular).
And housing starts rose 5.7 percent on the month to a higher-than-expected annual rate of 1.235 million while permits gained 0.6 percent to 1.296 million, which is slightly higher than expected. But the battle is still uphill for housing as year-on-year comparisons show: at minus 2.5 percent for starts and minus 5.0 percent for permits.
Total existing-home sales, https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 0.4 percent from March to a seasonally adjusted annual rate of 5.19 million in April. Total sales are down 4.4 percent from a year ago (5.43 million in April 2018).
Existing-sales of single-family homes, the key component in this report, did fall 1.1 percent in the month to a 4.620 million rate but here too the 3-month average is positive, at 4.733 million for the best showing since August last year. Condo sales, the second and much smaller component in the report, were a big positive in April, up 5.6 percent to a 570,000 rate.
Housing data are often volatile and 3-month averages can offer a more balanced view, as we know, and on this basis April’s results are still good at a 5.293 million rate for the best showing since September last year.
I see 2019 housing purchases continuing to improve, largely because there is a disconnect between a fully employed economy (at 3.4 percent unemployment rate) and record-low interest rates. It really means too much uncertainty in the financial markets, which translates to low demand, which leads to low overall inflation (reason for all the retail discounting), and bottom-level interest rates.
Consumer sentiment is also soaring at the moment, with the U. of Michigan survey at a 15-year high. It will continue to boost builder optimism and housing construction that is struggling to keep up with sales, as long as optimism prevails. Sentiment can change on a dime, however, should we have what is called a ‘black swan’ event (a term for something totally unexpected, such as another trade war, or real war). And that seems to be how this administration likes it, unfortunately.
Harlan Green © 2019
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