“I can pick up some time to unwind and ease my mind.” (Eddy Arnold) Existing Home Sales and Housing Starts declined while the Fed announced plans to unwind.

High prices and low inventories curtailed existing home sales in August. The National Association of REALTORS® (NAR) reported that existing home sales fell 1.7 percent from July to an annual rate of 5.35 million units versus the 5.42 million expected. NAR said that gains in the Northeast and Midwest were outpaced by declines in the South and West. From August 2016 to August 2017, sales were up just 0.2 percent.

The median existing home price in August was also up 5.6 percent from August 2016, marking the 66th straight month of year-over-year gains.

New construction may still encourage buyers yet this fall, but the numbers weren’t favorable in August. The Commerce Department reported that housing starts fell for the second straight month, slipping 0.8 percent from July to an annual rate of 1.18 million units. On a positive note, year-over-year housing starts rose 1.4 percent. Single-family starts, which make up the biggest share of the housing market, rose 1.6 percent. Multi-family dwellings fell 5.8 percent from July and are down 23 percent from August 2016. Building permits, a sign of future construction, rose 5.7 percent from July, hitting their highest level since January.

Finally, mortgage bonds fell modestly after the Federal Reserve announced it will begin to unwind its massive $4.5 trillion balance sheet starting on the ninth business day of October and continuing every ninth business day of the month thereafter. The balance sheet is made up of Mortgage Backed Securities and Treasury bonds. The plan is designed to have little disruption to the market. Seeing that this has never been done before, it remains to be seen what happens to mortgage bond prices and the home loan rates tied to them over time.

For now, home loan rates remain near historic lows.

Will the mystery of low inflation creep up on the Federal Reserve? No spoiler here. Stay tuned for Friday’s release of the Fed’s favorite inflation gauge. Other news this week:

  • Housing data will come from Tuesday’s S&P/Case-Shiller Home Price Index and New Home Sales, followed by Pending Home Sales on Wednesday.
  • Consumer Confidence also will be released on Tuesday, followed by the Consumer Sentiment Index on Friday.
  • Durable Goods Orders will be released on Wednesday.
  • On Thursday, the third reading on second-quarter Gross Domestic Product will be shared along with weekly Initial Jobless Claims.
  • On Friday, the Fed’s favorite inflation gauge, Core Personal Consumption Expenditures, will be delivered along with Personal Income, Personal Spending and regional manufacturing data via the Chicago PMI.

If you or someone you know has questions about home financing or home loan rates please contact me. I’d be happy to help.

Related Articles

This past week, home loan rates ticked up again despite the Fed recently cutting rates by a full point and the 10-year Note remaining just above 1%. Why? Mortgage backed securities (MBS) are bonds that price home loan rates. This week, the spread or difference in yield between the 10-year…
Read More of the post Coronavirus and Extreme Volatility

The continued strength of the labor market, along with historically low mortgage rates, will keep positive housing momentum alive in 2020. The Unemployment Rate is currently at a 50-year low of 3.6% with expectations for the index to push even lower to 3.25% by year's end, matching lows last seen…
Read More of the post A Great 2020 Housing Story

Home loan rates continue to hover near three-year lows. There are some on Wall Street who say rates are going to push even lower at some point — and they may be right. But what if they're wrong? What if rates have bottomed for the foreseeable future? Yes, locking a…
Read More of the post What the Market Is Saying

Bonds love uncertainty and bad news. As a result, rates improve when not-so-good news emerges. That was the story this past week, as China has reported a new deadly coronavirus has started to spread in their country. The virus, which spreads through human contact, has taken several lives and has…
Read More of the post Uncertainty Helps Rates

We recognize this is a difficult time for many people. Click here or call 866-913-2951 for more information and to learn about current options available to our borrowers.