CHM Blog

Whose market is this anyway?

Those of us in the real estate and mortgage industries are hard-pressed to find words to describe the market in which we find ourselves. Buyers’ market? Sellers’ market?

Realtor.com’s Margaret Heidenry says, “Try neither. Uncertainty about the future of inflation, the economy, mortgage rates, and more have seized up the market—and wrenched power away from buyers and sellers alike.”

Danielle Hale, Realtor.com’s chief economist, agrees. “Today, real estate is ‘nobody’s market. The number of homeowners deciding to sell continues to lag, but inventory and time on market continue to climb, reflecting still-hesitant buyers.”

While mortgage rates for a 30-year fixed-rate home loan have fallen from October’s 20-year high, they’re still high enough to leave a whole lot of buyers leery about closing the deal. In the meantime, median listing prices, which hovered around $400,000 in January, are still higher than they were last year. For the week ending Feb. 4, prices were up 7.7% compared with this same week a year earlier.

“With high home prices and mortgage rates pushing affordability to the brink for many potential buyers, market activity and pricing will be more dependent than usual on the trajectory for mortgage rates,” says Hale.

Those “For Sale” signs may need a bit of spit and shine, since they’re not getting noticed as much. “With home prices and mortgage rates still uncomfortably high, buyers just aren’t biting, leading to a glut of real estate listings gathering dust,” says Heidenry. “For the week ending Feb. 4, home inventory shot up by 70% over levels seen this same week a year earlier.”

New listings? As Tony Soprano might say, “Fuggetaboutit.” Many homeowners simply do not want to sell their homes as of late. New listings were down by 11% from one year ago for the week ending Feb. 4. Heidenry notes, “That marks 31 weeks that fewer sellers have put their homes on the market compared with last year, and for good reason: Sellers might not only struggle to sell, but if they succeed, many might have to face the same steep home prices and mortgage rates as other buyers, making it a lose-lose scenario all round.” And Hale adds, “High costs and mortgage rates can significantly up the ante for homeowners hoping to trade up and remain in their current area. People are simply deciding to just stay put and hey — it’s still a free country.

Any silver linings in all this? Perhaps. In January, homes lingered on the market for 75 days. And for the week ending Feb. 4, listings sat for 19 days longer compared with this time last year. That translates into opportunities for buyers willing to comb through old listings for bargains. “January data also reveals a significant increase in the share of homes for sale with a price reduction, more than double compared to the same period last year,” says Hale.

So at the least, expect a slow trudge. “Looking ahead, in addition to a slowing decline in existing-home sales in December, both new-home sales and pending home sales saw an uptick,” says Hale. “These indicators, which track early stages of transactions, jibe with the sentiment data that shows a very modest improvement.”

So perhaps both buyers and sellers might shake hands on more deals soon enough. After all, the year has just begun.

Realtor, TBWS

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market.  This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events.  When MBS pricing goes up, mortgage rates or pricing generally goes down.  When they fall, mortgage pricing goes up.  Tracking these securities real-time is critical.  For more information about the rate market, contact me directly.  I’m among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are moving sideways today. The MBS market worsened by -90 bps last week. This was enough to increase mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Higher

Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Inflation, 2) The Fed and 3) Domestic News.

1) Inflation: We will get a very anticipated CPI report on Tuesday. This report is key as it will reflect the new weighting and methodology for the new CPI calculations. This will result in a big YOY drop but a large MOM gain. December has already been revised upward from its original release due to the new formula. We will also get PPI this week as well.

2) The Fed: Last week we got a collective effort from all of the Fed speakers to move the markets towards expecting more hikes and "higher for longer". It worked, as MBS sold off as a result. This week we hear from Bowman, Williams, Cook and Mester

3) Domestic News: We get some heady economic data this week which include Retail Sales and a lot of manufacturing news with regional Philly Fed, Empire Mfg and Industrial Production and Capacity Utilization.

This Week's Potential Volatility: High

This morning markets have a very small negative trend. Volatility has started at higher levels as traders return from the weekend.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

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