Pending Home Sales 2nd Best in Last 12 Months

Pending home sales, based on signed contracts but not yet closed, rose 0.2 percent in June compared to May and is 1 percent higher than June 2015, according to the National Association of Realtors (NAR).

The improvement puts sales at the second-highest level of the last 12 months.

“Until inventory conditions markedly improve, far too many prospective buyers are likely to run into situations of either being priced out of the market or outbid on the very few properties available for sale,” said Lawrence Yun, the NAR’s chief economist, in a release.

Housing inventory was almost 6 percent lower at the end of June compared to a year ago, and home prices, while easing up slightly, are still rising at a faster pace than wage and income growth. Realtors say the one positive development in the first half of this year was a decline in investor sales activity, from a high of 18 percent in February to a low of 11 percent in June. That is the smallest share since July 2009 and likely due to the drop in the number of distressed homes for sale.

“Limited selection of homes at bargain prices is reducing the number of individual investors willing or able to buy,” wrote Yun. “This will hopefully open the door for first-time buyers, who made some progress last month but are still buying homes at a subpar level even as rents increase at rates not seen since before the downturn.”

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 trending unchanged this morning. Last week the MBS market worsened by -21 bps. This was enough to worsen mortgage rates or fees. The MBS market was volatile last week.

This Week’s Rate Forecast: Neutral

Three Things:
These three items will have the greatest potential to drive mortgage rates this week:
1. Global Economic data,
2. A Glut of Debt hitting the market and
3. Domestic Economic data.

1. Global Economic Data: This week we get both PPI and CPI out of China as well as Retail Sales and Industrial Production. Out of Germany, we get CPI, 2nd QTR GDP, and Industrial Production.
2. A Glut of Debt – Treasury Auctions this week: (How the market do, absorbing so much long term debt all at once?) 08/09 U.S. 3 year note, Great Britain 30 year bond. 08/10 U.S. 10 year note, Germany 10 year bond. 08/11 U.S. 30 year bond, Great Brittan 10 year bond.
3. Domestic Economic Data: The biggest report of the week will be Friday’s Retail Sales data. But also of note is Unit Labor costs , Wholesale and Business Inventories, PPI and Consumer Sentiment.
Oil: WTI Oil was briefly under $40 two weeks ago and now is above $42.60. While there is still an oversupply of oil and economists’ models showing a global slowdown which will cause a higher oversupply, this is being offset by some OPEC members calling for a restrain in output. This is giving oil a lift. If it breaks above $44, then it will pressure mortgage rates.