Daily Rate Update: March 21st-25th

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Friday – March 25, 2022

Consumers aren’t feeling that giddy across the nation given that extreme inflation has set in. More consumers mentioned reduced living standards due to rising inflation than any other time except during the two worst recessions in the past fifty years. The Consumer Sentiment index fell to a fresh 11-year low of 59.4 in the final reading for March. The report went on to read that strong job growth will continue to put upward pressures on wages, resulting in higher income and stronger job prospects. This strength will then act to expand consumer demand and ultimately lead to another cycle of price and wage increases.

The NAR reports that Pending Home Sales fell 4.1% in February from January to 104.9 while sales down 5.4% year over year. Contract signings fell for the fourth straight month and declined across all major U.S. regions except the Northeast. “Pending transactions diminished in February mainly due to the low number of homes for sale. Buyer demand is still intense, but it’s as simple as ‘one cannot buy what is not for sale,” said said Lawrence Yun, NAR’s chief economist.

The NAR recently reported on millennial homebuying. Here are a few points. Millennials now make up 43% of home buyers, the most of any generation, a jump from 37% last year. Generation X purchased the most expensive homes at a median price of $320,000. The largest share of buyers purchased in suburban areas and small towns. NAR spokesperson Jessica Lautz said, NAR’s vice president of demographics and behavioral insights. “While young buyers use new tech tools, they also use real estate agents at higher rates than other buyers to help find the right home and negotiate the terms of the transaction.”

Courtesy of Mortgage Market Guide 

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Thursday – March 24, 2022

Home borrowing costs rose this week as they continue their trek higher. Freddie Mac reports that the 30-year fixed-rate mortgage rose to 4.42% from 4.16% last week with an average of 0.8 in points and fees. The 15-year rose to 3.63% from 3.39%, also with a 0.8 point. Sam Khater, Freddie Mac’s Chief Economist said, “The rise in mortgage rates, combined with continued house price appreciation, is increasing monthly mortgage payments and quickly affecting homebuyers’ ability to keep up with the market.”

In economic news, February Durable Orders fell 2.2% versus the -0.5% expected as the economy slows. This suggests high prices and high energy prices are rattling consumer spending. And after the 7% rise in GDP in Q4 2021, the Atlanta GDPNow estimate is 1.3% growth for Q1 2022. Weekly Initial Jobless Claims fell to 187,000, the lowest since 1969. We will see how the final read on March Consumer Sentiment comes in tomorrow.

The MBA has introduced its new Purchase Applications Payment Index (PAPI), which measures how new monthly mortgage payments vary across time – relative to income. The index shows that homebuyer affordability fell last month, with the national median payment applied for by applicants rising 8.3% to $1,653 from $1,526 in January. The MBA says, “An increase in MBA’s PAPI – indicative of declining borrower affordability conditions – means that the mortgage payment to income ratio (PIR) is higher due to increasing application loan amounts, rising mortgage rates, or a decrease in earnings.” The opposite is true.

Courtesy of Mortgage Market Guide 

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Wednesday – March 23, 2022

The Census Bureau reports that New Homes Sales fell 2% in February from January to an annual rate of 772,000 units versus the 810,000 expected. Sales were down 6.2% from February 2021’s 823,000. The median home price fell to $406,000 in February from January’s $427,400 while the average sales price rose to $511,000 from $494,000. The median price is the middle point for real estate prices while the average sales price is calculated by adding up all of the individual values and dividing this total by the number of observations. Inventories of new homes for sale on the market were at a 6.3 month supply.

Mortgage rates rose last week but they have seem to be temporarily holding at those levels, reports the MBA. The 30-year fixed-rate mortgage rose to 4.50% last week from 4.27% in the previous week with 0.59 in points for the week ending March 18. Within the data it showed that the Market Composite Index fell 8.1%, the Refinance Index decreased 14% and was down 54% from a year ago and the Purchase Index fell by 2%. “The MBA’s new March forecast expects mortgage rates to continue to trend higher through the course of 2022,” said Mike Fratantoni, Senior Vice President and Chief Economist.

Courtesy of Mortgage Market Guide 

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Tuesday – March 22, 2022

Low inventories coupled with higher mortgage rates weighed on new home purchase applications in February, reports the Mortgage Bankers Association (MBA). The MBA’s Builder Application Survey revealed that mortgage applications for new home purchases fell 3.9% from a year ago, down 1% monthly from January. “New home purchase activity slowed in February, as for-sale inventories remained tight, and mortgage rates increased to their highest levels since 2019. February is typically the start of the spring home buying season, but applications to purchase a new home were down on a monthly and annual basis,” said spokesperson Joel Kan.

The cost of housing continues to increase due in part to supply constraints, low inventories and higher mortgage rates. And when borrowing costs for homeownership rise people tend to look to renting which has driven that cost to a record high. The average monthly asking rent in the U.S. jumped 15% year over year to a record high of $1,901 in February, reports Redfin. The national median monthly mortgage payment for homebuyers surged 31% year over year to $1,716, also the biggest increase. “The cost of housing is going up for homebuyers and renters, but it’s going up more quickly for homebuyers,” said Redfin Chief Economist Daryl Fairweather. “That’s because mortgage rates have increased sharply and will likely continue to do so.”

Fed Chair Powell was speaking in front of the National Association of Business Economists yesterday on the U.S. economy saying that the Fed may have to be more aggressive in hiking rates which could see 50bp hikes at future meetings. Up until just recently, the Fed seemed to be moving slowly on the inflation front but has now stepped up its stance. The bond Fed Fund Futures are now showing a 66% probability of a 50bp hike at the May FOMC meeting. The old EF Hutton quote, “When EF Hutton talks, people listen.” That can now read, “When Fed Chair Powell talks, people listen.”

Courtesy of Mortgage Market Guide 

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