Mortgage Rates Decline As The Market Moves
This Week in Real Estate mortgage rates fell to the lowest levels in more than a year while new home sales are up 6.7% through the first four months of 2019 compared to the same time the prior year. Conclusion: the market is positioned for a strong summer selling season thanks in part to a healthy job market, continued low-interest rates and steady sales pace of new homes. Below are a few highlights from the third week of May that influence our business:
New Home Sales Post Solid Numbers in April. After an upward revision, March and April newly-built single-family homes sales data indicate that lower mortgage rates and price incentives increased the volume of transactions as the spring home-buying season stabilized after weakness in late 2018. Contracts for new, single-family home sales declined to a 673,000 seasonally adjusted annual rate according to estimates from the joint release of HUD and the Census Bureau. However, this decline was off a strong 723,000 sales pace in March, making that month’s sales rate the best since the Great Recession. Furthermore, the April rate was the third strongest of this cycle. The March data places the industry back on a trend line that has been in place since 2011. For the first four months of the year, new home sales are 6.7% ahead of the sales pace of the initial four months of 2018. However, those gains have distinct regional clustering. Year-to-date sales are up 10.3% in the South, 6.7% in the West (concentrated in the Mountain states), and 1.3% in the Midwest while recording a 17.6% decline in the Northeast.
Rates Are Back to Lowest Levels in More Than a Year. Mortgage rates fell again today as mortgage lenders got caught up with yesterday’s market movements. Mortgage rates are based on bond market trading levels, but mortgage lenders only adjust rates once per day unless there’s quite a bit of movement. Yesterday saw such movement, and in those cases, lenders typically adjust rates to reflect only part of the overall shift in markets until the shift is confirmed for a certain amount of time. As such, when bond markets began the day in similar territory to yesterday, lenders were able to bring mortgage rates even lower than yesterday. With that, the average lender is back to the lowest rates in more than a year. It should be noted that several lenders are still a bit higher than they were on March 27th and 28th of this year. Other lenders are in noticeably better shape, however. In outright terms, that means rate quotes of 4.125% are common, 4.0% is not uncommon, and 3.875% is possible for the most flawless scenarios–especially in cases where borrowers are willing to pay a bit more in upfront closing costs to buy down the rate.
Grocery Store is Most-Desirable Neighborhood Amenity, Federal Reserve Report Shows. When the Federal Reserve released on Thursday its Survey of Household Economics and Decision-making, known to economists as the SHED report, the biggest number covered by the financial media was: Four in 10 American adults wouldn’t be able to cover an unexpected $400 expense. But buried in the 64-page annual report there were nuggets about the housing market. For example, people said the most important neighborhood amenity is a grocery store. About 87% of respondents said it is “moderately or very important” to have nearby. Next on the list of desired neighborhood amenities was a combined category of “shops or restaurants,” which 75% of people cited as being important to have nearby. The next slot went to banks, with 65% of people citing them as important, then places of worship, at 48%, a library, at 48%, a park or playground, at 43% and public transportation, at 37%. Another housing-related data nugget was insight on “boomerang kids,” the pop term for adult children who return to live at home. About 61% of Americans ages 18 to 21 years are living with parents, according to the Fed report. The share drops to 51% for 22- to 24-year-olds and 26% for 25- to 29-year-olds. About 13% of 30- to 39-year-olds continue to live with their parents.