Best Real Estate Market In 10 Years

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Published Date 5/22/2017

Realtor Report

Best Real Estate Market In 10 Years:

More homes are predicted to be sold this year than in more than a decade. In 2017, the number of existing-home sales is expected to increase about 3.5 percent to 5.64 million. By 2018, existing-home sales will likely rise another 2.8 percent to 5.8 million, according to forecasts by the National Association of REALTORS®.

The rise in new jobs, pent-up household formation, and increasing consumer confidence are helping to propel the housing market forward, says Lawrence Yun, NAR’s chief economist.

Lawrence Yun, chief economist for the NAR, recently presented his 2017 midyear forecast. According to Yun, the first quarter saw the best quarterly existing-home sales pace in 10 years with 5.62 million. Yun said he expected that pace to stay on track and finish around 5.64 million, 3.5% above 2016 and the best rate since 2006. The national median existing-home price is also expected to rise around 5% this year, according to the NAR.

“The housing market has exceeded expectations ever since the election, despite depressed inventory and higher mortgage rates,” Yun said. “The combination of the stock market being at record highs, 16 million new jobs created since 2010, pent-up household formation and rising consumer confidence are giving more households the assurance and ability to purchase a home.”

The new-home sector is also expected to see a surge over the next year. New-home sales are expected to rise 10.7 percent this year to 620,000. The sector is also expected to tick up another 8 percent in 2018 to 670,000 sales, NAR predicts.

Buyers are likely to face higher prices on homes. Prices are expected to increase 5 percent in 2017 and another 3.5 percent in 2018, NAR predicts. "As a result, buyers are compromising on the number of rooms, length of a commute, or other home qualities," says Joseph Kirchner, senior economist of realtor.com®. "Meanwhile, builders are mostly building for the mid- to the upper-price range. This mismatch in supply and demand is making affordability more acute for those with modest incomes."

To still get in, buyers are devoting higher percentage of their incomes toward homeownership or compromising on smaller homes or a home farther from the city center where they work.

Source: Realtor.org

This Week's Mortgage Rate Summary

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.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning. Last week the MBS market improved by +42 bps. This was enough to improve mortgage rates or fees. Last week was a very volatile week for mortgage rates and the markets.

This Week's Rate Forecast: Neutral

Three Things: The following three areas have the greatest ability to impact mortgage rates week: 1) Geopolitical, 2) Fed and 3) Oil.

1) Geopolitical: In addition to the many "twists and turns" over Comey-gate, we will also see more details of the President's budget proposal and lots of headlines from his trip overseas. These will continue to be the main driving force in MBS pricing.

2) Fed: The bond market no longer has two more rate hikes plus a tapering in the place. In other words, they do not believe the Fed. This week, we will get the Minutes from the last FOMC Meeting and a slew of speeches:

05/22 - Neel Kashkari, Patrick Harker, Lael Brainard and Charles Evans
05/24 - FOMC Minutes, Robert Kaplan
05/25 - James Bullard
05/26 - John Willams

3) Oil: OPEC will hold their meeting on Thursday. The key is if they extend the timeline (expiration date) of the current production freezes and/or increase the production cuts. Their action (or inaction) will have a significant impact on global oil prices, and MBS will react to any inflationary impact.

Treasury auctions this week:

05/23 2 year note
05/24 5 year note
05/25 7 year note

This Week's Potential Volatility: Average

Mortgage rates today will likely move sideways with average to low volatility. However, this week we could once again see high volatility due to technical, fundamental and geopolitical issues noted above.

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.

Source: TBWS

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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