Homeowners Would Rather Upgrade

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Homeowners love their homes, and they would rather upgrade than leave their love nest and purchase a different home.

Given a choice between spending a fixed amount of money on a down payment for a new home or using that same money to fix up their current home, 76 percent of Americans will choose to renovate, according to the new Zillow Housing Aspirations Report.

For people who are 55 years or older, the share is even higher: 87 percent. And retirees are higher still, with 91 percent saying they’d stay put and upgrade rather than use the same money toward a down payment.

Staying put makes sense when 83 percent of homeowners love their homes – a finding from the 2018 Zillow Group Report on Consumer Housing Trends. Indeed, most homeowners – 63 percent – have no plans to sell their homes. The top reasons for not moving are that they love their home and they don’t want to deal with the hassle of moving.

Rising mortgage rates also could be a factor. Since the beginning of the year, rates have risen and homeowners who have a low mortgage rate may not want a new mortgage at a higher rate even though by historical standards, fixed mortgage rates are well below normal.

The desire among homeowners to stay where they are could be contributing to an ongoing inventory shortage. Nationally, the number of homes for sale has fallen on an annual basis for 43 straight months, although the pace of its decline has slowed in recent months. It also can become a self-fulfilling cycle: If homeowners hesitate to sell because they see few options on the market, they stay in their current homes – and inventory remains low.

Among the 20 metros surveyed for the Zillow Housing Aspirations Report, residents of Boston and Detroit were most likely – 80 percent – to choose renovating over buying. In Los Angeles, the smallest share of respondents – just over two-thirds – prefer renovations.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained just +9 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways for the week which was very welcome after 4 straight weeks of rising rates.

Overview:  We had a holiday-shortened week but that didn’t mean that we did not have any volatility.  MBS had a swing of 42 basis points from our best pricing of the week (lowest rates) to our worst pricing of the week (highest rates).

Inflation Nation: The September Consumer Price Index was a little lighter than expected with the Headline CPI YOY coming in at 2.3% vs est of 2.4% and Core PPI YOY at 2.2% vs est of 2.3%. Import Prices MOM were more than double market expectations (0.5% vs est of 0.2%) and YOY they rose by 3.5% vs est of 3.2%. Atlanta Fed Business Inflation Expectations, the October survey showed a slight increase in expected inflation from 2.2% in Sept to 2.3% in October.

Wholesale Inventories: The Final August Reading was revised upward from the preliminary release of 0.8% to 1.0%. This will cause many to increase their 3rd QTR GDP guestimates.

Small Business Optimism:
 The September NFIB Index came in at a very robust 107.9 which is just off of August’s all time high of 108.8 and is the third highest reading in history. 38 percent of business owners reported job openings they could not fill in the current period, while 61 percent reported hiring or trying to hire, with 87 percent of those reporting few or no qualified workers. A record net 37 percent of owners reported raising overall compensation, up 5 points from August and surpassing the previous record of net 35 percent set in May.

Economic Optimism: 
The Investor’s Business Daily TIPP report jumped to a reading of 57.8 in October vs expectations of 54.6.

What to Watch Out For This Week:

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

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.