housing costs up

New Home Sales Jump

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New Home Sales Jump:
Sales of new single-family houses in May 2018 were at a seasonally adjusted annual rate of 689,000, according to estimates released jointly today by the U.S.Census Bureau and the Department of Housing and Urban Development.

This is 6.7 percent above the revised April rate of 646,000 and is 14.1 percent above the May 2017 estimate of 604,000.

The median sales price of new houses sold in May 2018 was $313,000. The average sales price was $368,500.

Supply still remains very tight with The seasonally-adjusted estimate of new houses for sale at the end of May was 299,000. This represents a supply of 5.2 months at the current sales rate.

Sales in the South appeared to drive last month’s growth. New-home purchases in the region rose 17.9%, the largest gain since the end of 2014. Meanwhile, sales in the Northeast and West declined and purchases were flat in the Midwest in May.

Source: U.S. Census Bureau

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained just +4 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways for the week.

Overview:  We had a net change of just 4 basis points.  Generally, it takes around a 21 basis point movement for rates to be impacted.  We traded in a very narrow range with significant resistance at our 50 day moving average.

Taking it to the House: Weekly Mortgage Applications jumped by 5.1%. Refinances led the way with a 6.0% increase. Purchase applications increased by 4.0%.  Existing Home Sales were close to expectations (5.43M vs est of 5.52M) in May. As usual, tight inventory and rising prices are restricting sales at higher levels. May Housing Starts were stronger than expected with a seasonally adjusted annualized pace of 1.350M Units. When you strip out the multi-family sector, SFR saw a 3.9% increase with a 936K pace. Building Permits were lighter than expected with a pace of 1.301M units. SFR Permits decreased by 2.2% with a 844K pace.

The Talking Fed:
Fed Chair Jerome Powell said that there is robust growth and a generational low in unemployment. In his prepared remarks the said “Earlier in the expansion, as the economy recovered, the need for highly accommodative monetary policy was clear, but with unemployment low and expected to decline further, inflation close to our objective, and the risks to the outlook roughly balanced, the case for continued gradual increases in the federal funds rate is strong.”

Trade Wars: After last week’s $50B in tariffs, President Trump directed the U.S. Commerce Department to identify $200 billion worth of China goods for an additional 10% of tariffs. China said that it would respond “in-kind” but they cant as they purchase less than $200B worth of goods from the U.S. Actually, when you back out the $50B that they have already announced, that would leave only $150B that they could issue tariffs on but they don’t buy that much from us…so it is unclear as to how they could match the U.S. tit-for-tat.

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.