Daily Rate Update: August 22nd-26th

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Thursday – August 25, 2022

Q2 2022 Gross Domestic Product 2nd read improved to -0.6% from the first read of -0.9%. There will be one more final reading, which will determine whether the U.S. had back-to-back quarters of negative growth or a recession. Currently, the Atlanta Fed GDPNow suggests a gain of 1.4% in Q3 and down from the +2.4% originally estimated. Weekly Claims inched lower to 243,000 from 245,000 and below 253,000 expected.

Mortgage rates jumped this week but seem to be stabilizing after the surge in borrowing costs in the past 12 months. Freddie Mac reports that the 30-year fixed-rate mortgage increased to 5.55% from 5.13% last week with an average of 0.8 in points and fees. A year ago the rate was 2.87%. The 15-year jumped to 4.85% from 4.55% last week with a 0.8 point. A year ago that 15-year was 2.17%. “The combination of higher mortgage rates and the slowdown in economic growth is weighing on the housing market,” said Sam Khater, Freddie Mac’s Chief Economist. “Home sales continue to decline, prices are moderating, and consumer confidence is low. But, amid waning demand, there are still potential homebuyers on the sidelines waiting to jump back into the market.”

As the housing market cools to more normal historical levels, homebuyer affordability increased for the second month in July, reports the Mortgage Bankers Association. The national median payment fell to $1,844 in July from $1,893 in June. This is according to the Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI), which measures how new monthly mortgage payments vary across time – relative to income. “Affordability conditions improved modestly in most of the country in July, as slightly lower mortgage rates and a decrease in the median loan amount led to the typical homebuyer’s mortgage payment falling $49 from June,” said Edward Seiler, MBA’s Associate Vice President.

Courtesy of Mortgage Market Guide 

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Wednesday – August 24, 2022

The housing market continues to revert back to more normal levels as rates rise and demand cools. The National Association of REALTORS reports that Pending Home Sales in July fell nearly 20% from a year ago and down 1.8% monthly from June. June saw an 8.9% loss. Sales have fallen 8 out of the nine last months. Sales fell in three of four major regions, with a small increase in the West. The Pending Home Sales Index is a forward-looking indicator of home sales based on contract signings. “In terms of the current housing cycle, we may be at or close to the bottom in contract signings,” said NAR Chief Economist Lawrence Yun.

Mortgage rates surged in the MBA’s latest survey and borrowing costs seem to be topping out near current levels. The 30-year fixed-rate mortgage rose to 5.65% from 5.45% with 0.68 points for the week ended August 19, 2022. Within the data, it showed that the Market Composite Index fell 1.2%, the Refinance Index lost 3% and the Purchase Index was down 1%. Spokesperson Joel Kan said, “Mortgage applications continued to remain at a 22-year low, held down by significantly reduced refinancing demand and weak home purchase activity.”

Consumers continue to see some relief at the pump with gas prices falling after hitting record highs in June. The national average price for a regular gallon of gasoline fell to $3.88 this week from $4.36 a month though up from $3.15 a year ago. AAA finds that drivers are making significant changes to cope with high pump prices. In a recent survey, almost two-thirds of U.S. adults say they are are driving less and combining errands. Andrew Gross, AAA spokesperson said, “Now we need to keep an eye on the weather as hurricane season arrives. These storms can affect prices by disrupting oil production in the Gulf of Mexico and impacting large coastal refineries.”

Courtesy of Mortgage Market Guide 

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Tuesday – August 23, 2022

Sales of new single‐family houses in July 2022 fell 12.6% from June to an annual rate of 511,000 versus 575,000 expected. This is down 29.6% from the July 2021 estimate of 726,000. Sales fell in the Midwest, West and South with gains seen in the Northeast. The median sales price of new houses sold in July 2022 was $439,400 up from $406,000 in July 2021. The average sales price was $546,800 up from $462,100 in July 2021. The estimate of new houses for sale at the end of July was 464,000. This represents a supply of 10.9 months at the current sales rate.

The headline Flash U.S. PMI Composite Output Index fell to 45.0 in August from 47.7 in July, the second straight monthly decline. The decline in output was far-reaching, with manufacturers and service providers revealing lower activity. Service sector firms fell at a faster pace with activity falling sharply, while goods producers saw a slight drop in output. Sian Jones, Senior Economist at S&P Global Market Intelligence said: “August flash PMI data signaled further disconcerting signs for the health of the U.S. private sector. Demand conditions were dampened again, sparked by the impact of interest rate hikes and strong inflationary pressures on customer spending, which weighed on activity.”

Fannie Mae reports that housing activity is expected to soften through 2023 due to higher mortgage rates and home price gains in its August Economic and Housing Outlook. Tightening monetary policy and elevated inflation remain the primary causes of a stagnating economy despite strong job growth. Total home sales are expected to decrease 16.2% in 2022. The latest forecast also projects total mortgage origination activity at $2.47 trillion in 2022, down from $4.47 trillion in 2021, and then a further reduced $2.29 trillion in 2023.

Courtesy of Mortgage Market Guide 

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Monday – August 22, 2022

The housing market is starting to cool to more normal levels on both price and the huge demand due in part to higher borrowing costs and economic uncertainty. Redfin reports that July home sales fell 19% from July 2021 to lowest level since mid-2020. In addition, new listings were also lower as price growth eased. July home sales slid 4.1% from June, the sixth-straight monthly decline. “The buyers who are still in the game are finally getting a break from bidding wars, which means they can be picky,” said Raleigh, NC Redfin agent Pam Lewis.

The Mortgage Bankers Association reports that July mortgage applications for new home purchases fell 16.1% from July 2021 and were down 7% monthly from June. The MBA estimate that new single-family home sales were running at an annual rate of 591,000 units in July 2022. “The slide in purchase applications for new homes – now down for the fourth consecutive month and 16 percent lower than a year ago – is consistent with data on declining homebuilder sentiment and slowing permitting activity for new construction,” said spokesperson Joel Kan.

This week is risk event filled with the Fed’s Jackson Hole Economic Symposium at the end of the week. And that comes after the report highly watched inflation reading Core PCE report which is the Fed’s favorite inflation gauge. The Core PCE measures the cost of goods and services excluding food and energy. Several housing reports will be released along with the consumer Sentiment Index.

Courtesy of Mortgage Market Guide 

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