Existing Home Sales Show Tight Market

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Existing Home Sales Show Tight Market:
The National Association of Realtors released their recent Existing Home Sales report for July and it showed a very tight housing market.  Existing Home Sales are the single best measure of the health of the housing market as they are completed transactions of single family homes, townhomes, condominiums and co-ops.

Here are some highlights:
– On average, homes listed for sale went under contract in under 30 days for the fourth straight month. Fifty-one percent of homes sold in July were on the market for less than a month.
– The median existing-home price for all housing types in July was $258,300, up 6.2 percent from July 2016 ($243,200). July’s price increase marks the 65th straight month of year-over-year gains.
– Inventory is still a major issue (not enough of it) with only 1.92 million existing homes available for sale, and is now 9.0 percent lower than a year ago (2.11 million) and has fallen year-over-year for 26 consecutive months. Unsold inventory is at a 4.2-month supply at the current sales pace, which is down from 4.8 months a year ago.
– First-time buyers were 33 percent of sales in July, which is up from 32 percent both in June and a year ago.
– All-cash sales were 19 percent of transactions in July, up from 18 percent in June but down from 21 percent a year ago
– Existing Home Sales came in at a seasonally adjusted annual rate of 5.44 million in July from a downwardly revised 5.51 million in June. July’s sales pace is still 2.1 percent above a year ago, but is the lowest of 2017.

Overall, the above data is very solid showing steady appreciation and demand, it appears that only the lack of available inventory is keeping Existing Home Sales from grown at an even faster pace.
What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +7 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.

At a weekly change of just +7 basis points, it was not enough of a move to cause mortgage rates to change.  There were no major domestic economic releases that had any impact on rates and pricing last week.  The bond market focus was squarely on world central bankers and economists meeting together in Jackson Hole, Wyoming.

Jackson Hole, WY Economic Symposium.
Dallas Fed President Robert Kaplan (voting member), the key takeaways from his speech is that in his opinion the current “neutral” Fed fund rate is “around” 2.5%.  Currently the Fed Fund rate is 1.25%.  So, in order for the Fed to move from it’s accommodative stance, they will need to gradually raise rates by another 1.25%….and the Fed WANTS to get back to a “neutral” bias.  Also, he said that he did not expect the impending reduction in their balance sheet to impact markets “materially”.

Kansas City Fed President Esther George (non voting member) said that the Fed’s mandate is “price stability” and not really inflation.  She said that there is certainly price stability as well as steady growth and that is supportive of another rate hike this year.

Fed Chair Janet Yellen spoke on Friday. You can read the official transcript of her speech here. https://www.federalreserve.gov/newsevents/speech/yellen20170825a.htm
Basically, she did not address monetary policy and focused on financial stability.

European Central Bank President Mario Draghi also did the side step and did not really address future monetary policy or QE.  Instead he warned against “protectionism” as something that could hinder global growth.  And that global growth was needed to continue to bring the Eurozone forward in its slow recovery.

What to Watch Out For This Week: