Best Month In A Decade For Rates

Sellers – get on the market!!!!!

Mortgage rates moved lower for the 6th straight day, bringing them very close to the best levels since late 2017.  Perhaps more impressive (or telling) is the fact that rates haven’t even had a single “bad day” since March 1st.  It’s impressive because it’s been an incredibly long winning streak (we usually see a day here or there with rates nudging a bit higher).  It’s telling because it’s exactly what you’d expect to find as the backdrop for what has been the single best month for mortgage rates in more than a decade.

The past 2 weeks have acted as a forceful breakout after several months spent in an increasingly narrow range.  Such breakouts often carry momentum, especiallywhen there are surprising economic updates or central bank policy at the scene of the crime (as there was with last week’s Fed announcement and European economic data).

Now we’re waiting to see how low we can go.  It hasn’t made sense to bet on a bounce in rates so far, but that could change soon.  In general, there are only so many winning days that can be strung together before the rates market blows off a bit of steam.  When that happens, it will be important to note how big the bounce is and whether it lasts more than a single day.  If it simply presents itself as a single, token day of correction, rates will likely be heading even lower.

Link to MND

It’s Really Go Time Now!

Mortgage rates have continued their slide, and lenders should be offering fixed-rate loans with rates starting in the threes again, with little or no points!  The new pendings are flowing, but we still haven’t seen a flood of new listings:

NSDCC Detached-Home Listings and Sales in March

Year
March Listings
Median LP
March Sales
Median SP
2015
497
$1,275,000
298
$1,137,500
2016
532
$1,470,000
252
$1,143,665
2017
505
$1,395,000
258
$1,074,000
2018
446
$1,549,000
259
$1,397,500
2019
396
$1,514,497
153
$1,320,000

The latest numbers are month-to-date, and will increase considerably with four business days to go.  But the March sales will end up well under last year’s count, though the lower rates should help boost sales in April and May.

There are threes on the street:

For those who want to prepare for making an offer and would like to review our contracts, the California Association of Realtors have made available a sample copy with explanations:

https://www.car.org/riskmanagement/Consumer-RPA

Don’t be surprised if it’s a little clunky.

Mortgage Rates Should Stabilize

Rates with no points

It sounds like mortgage rates will be rangebound for the foreseeable future, which is good for buyers – but not necessarily for sellers.  Without the threat of rates going higher, buyers will be even more patient:

From MND:

It’s true that markets were already expecting a dovish Fed announcement.  This created an asymmetric risk that the Fed would only be as friendly as they needed to be and that rates would have been positioned too low for such a thing.  As it happened, however, the Fed was noticeably friendlier than most anyone guessed.

They dropped their verbiage pertaining to additional rate hikes.  This effectively begins an era where rates will remain at current levels until economic data or other considerations motivate a change.  Big news indeed!

They also dropped the reference to economic risks being balanced.  The only way to be any friendlier to bonds would have been to say that economic risks had tilted to the downside (which can already be inferred from this change).

They also said they were prepared to adjust the balance sheet normalization policy if needed (i.e. they could start buying MBS again).  Unsurprisingly, MBS liked this news and improved at a faster clip than 10yr Treasuries.  Part of the 10yr’s problem was the big advantage the Fed’s announcement provided for shorter maturity Treasuries.  In other words, traders were buying Treasuries, but most of the love went to the 2-5yr sector.

In the bigger picture, this is just another decently-sized green day for 10yr Treasuries, but reading between the lines, there’s a bit more to like.  For MBS, it was easily the best day since January 4th.  Not only that, but there’s a chance we look back at this as the day the Fed confirmed the end of the rising rate environment of the past 2 years.  Granted, the past 2.5 months already did quite a bit in that regard, but it’s going to take a bit more time and stability to get comfortable with that idea.

Link to Article

Nice improvement today, and lowest in last 12 months – Jan 31st:

Due for a Surge?

Does weather affect home sales?

Yes, buyers don’t mind the distraction when the market is uncertain!

But now that the holidays are over, the Chargers are done, more houses are coming to market, and mortgage rates are a half-point lower than they were three months ago, we are (over)due for a surge of activity.

There are two big NFL games on Sunday afternoon, which leaves Saturday wide open – and it has the best weather of the week.

No big games the following weekend, so if the weather holds out, buyers should be fully engaged – and if they aren’t, then that says something too.

It’s hard enough just trying to sell – if you have to schedule around the weather and other conflicts (graduations, for example), it narrows down the chances even more.  But if we can anticipate opportunities, let’s take advantage.

What’s Needed to Boost Sales?

Click on images to enlarge

What’s it going to take to get the real estate market going?

You could say that sales and pricing were at full speed between 2013 and 2017.  What’s the common denominator? Low mortgage rates.

In the graph above, it’s apparent there’s been rate-tolerance up to the 4.2% range over the last few years – which had to fuel home sales.

In the Frenzy of 2013, rates didn’t matter much, but by 2014 you can see it took some incentive to keep the party going. National home sales:

The times when rates have risen over 4.2%, they retreated quickly – except in early 2018.  Once we got into the second half of last year and rates had risen into the high-4s, the housing market stalled out.

The stock market helped too, but now it’s nervous time over there:

A jittery stock market could help housing if people take money off the table, and diversify (which is code for Help the Kids With Their Down Payment).

Are mortgage rates going to go down further?

We dodged a bullet on Friday when the monster job report was released – there was enough concern about the negative variables that rates didn’t jump much:

We can’t count on any help coming from the Fed, the stock market, Trump, Congress, AOC, etc. – we’re going to have to handle it ourselves.

Whoever can solve the mortgage-rate riddle, and get them under 4.2% – or because of the other turbulence, under 4.0%, should win the game.

Mortgage Rates Have Improved

Mortgage rates have come down nicely – let’s hope they stick!

Higher rates are what keep buyers on the couch.  When they see rates go up, they expect sellers to lower their prices to compensate.

But if we can get rates back into the low four-percent range, or gasp, maybe under four percent (with some buydown), it might cool off the buyers’ demand for an offset.

The extra drama isn’t good for anyone.

If we can keep the focus on just one single thing – the price – we’ll be fine.

I think sellers are willing to be reasonable, it’s just a matter of when.

My Rule of Thumb for Sellers:

  • If you’re getting offers, your list price is about right.
  • If you are getting visitors, but no offers, then your price is 5% to 10% wrong – or yours is being shown to help sell the better-priced home down the street.
  • If you have no showings, your list price is more than 10% wrong.

Once we’re past the holidays and rates get reasonable, we’re out of excuses!

Fed Hikes Again

As with the other recent Fed hikes, mortgage rates actually dropped today on the news, and MND’s regular voice thinks it could keep going:

Today’s Fed Statement and forward guidance meshed with investors’ expectations, helping bonds maintain their recent gains.  Treasury yields breached resistance, dropping to 2.78% and MBS improved slightly.  While the trend to lower rates isn’t etched in stone, we do appear to be headed that way.  I’ll lock applications closing within 15 days, and risk averse clients closing within 30.  Looks like Christmas is coming a little early for borrowers and lenders! – Ted Rood, Senior Originator

http://www.mortgagenewsdaily.com/consumer_rates/890747.aspx

But will potential home buyers notice?

We’ll hear how rates are historically low and two more rate hikes are coming in 2019 so hurry up and buy now, but it sounds like sales talk to those who were already going to wait-and-see anyway.

Jumbo mortgage rates around 4.25% might get them back in the game!

Fed Hike?

A pause in the Fed hikes was looking good.

First, the WSJ posted an editorial on Sunday – a snippet:

If you think your job is tough, consider Federal Reserve Chairman Jerome Powell. He’s signaled for months that the Fed will raise interest rates again this week, but economic and financial signals suggest he should pause. Meanwhile, Donald J. Trump is beating him up almost daily not to raise rates.

What to do? The right answer is to ignore the politics, inside and outside the Fed, and follow the signals that suggest a prudent pause in raising rates at this week’s Open Market Committee (FOMC) meeting. Get the monetary policy that best serves the economy, and the politics will work itself out. Get the policy wrong, and Mr. Trump will be the least of Mr. Powell’s political worries.

Josh agreed in his tweet above, and it looked like we had a shot!

Trump could have just let it go…..but noooo, he had to tweet one more time:

In case the Fed is looking around for evidence, consider our recent home sales:

End-of-Year Detached-Home Sales and Pricing

Category
2017
2018
% change
NSDCC # of Sales, 10/1 – 12/15
600
537
-11%
NSDCC Median SP, 10/1 – 12/15
$1,200,000
$1,350,000
+13%
SD County # of Sales, 10/1 – 12/15
4,637
3,886
-16%
SD County Median SP, 10/1 – 12/15
$615,000
$640,000
+4%

The Fed is going to be tempted to make their rate decision based on politics, and show Trump who the boss is. Median pricing is like politics – it makes you want to make decisions based on less-relevant data.

Keep your eyes on sales – they are the precursor of what’s ahead.

Even if the Fed skips this rate hike, we are still going to see sales plummet next year.  They could help make it a softer plummet though!

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