2013 Record Home Sales

The Mortgage Corner

Home Sales Highest Since 2006

            The National Association of Realtors (NAR) just reported that for all of 2013, there were 5.09 million sales, which is 9.1 percent higher than 2012. It was the strongest performance since 2006 when sales reached an unsustainably high 6.48 million at the close of the housing boom, and is now back to the 2000 sales rate at the beginning of the housing bubble.

Graph: Calculated Risk

Lawrence Yun, NAR chief economist, said housing has experienced a healthy recovery over the past two years. “Existing-home sales have risen nearly 20 percent since 2011, with job growth, record low mortgage interest rates and a large pent-up demand driving the market,” he said. “We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population.”

But for sale inventories have declined and are putting upward pressure home prices.  The national median existing-home price for all of 2013 was $197,100, which is 11.5 percent above the 2012 median of $176,800, and was the strongest gain since 2005 when it rose 12.4 percent.

The is in large part because total housing inventory at the end of December fell 9.3 percent to 1.86 million existing homes available for sale, which represents a 4.6-month supply at the current sales pace, down from 5.1 months in November. Unsold inventory is 1.6 percent above a year ago, when there was a 4.5-month supply.

The median existing-home price for all housing types in December was $198,000, up 9.9 percent from December 2012. Distressed homes – foreclosures and short sales – accounted for 14 percent of December sales, unchanged from November; they were 24 percent in December 2012. The shrinking share of distressed sales accounts for some of the price growth.

Ten percent of December sales were foreclosures, and 4 percent were short sales. Foreclosures sold for an average discount of 18 percent below market value in December, while short sales were discounted 13 percent.

Interest rates will play a big part on home sales this year, needless to say, but will probably not rise much above current rates, even with higher economic growth.  This is because of the tremendous cash hoard of businesses that obviates their need to borrow, as well as consumers that are borrowing much less than in the past.   The 30-year conforming fixed rate is averaging 4.0 percent in California for a 0.5 point origination fee, and high-balance 30-year conforming is averaging 4.125 percent for a 1 point origination fee.

Harlan Green © 2013

Mortgage Rates Lowest In Three Weeks Ahead Of Election

BY MATTHEW GRAHAM

While some of the improvement came in the form of late day reprices on Friday, mortgage rates are appreciably lower to begin the week.  Movement varied this morning with some lenders holding fairly steady while others improved at much quicker paces.  Regardless of the stratification, the net effect is a Conventional 30yr Fixed Best-Execution rate that is firmly at 3.375%.  The closing costs associated with 3.375% are the lowest they've been since mid October for most lenders

Friday's Employment Report garnered a paradoxical reaction in markets.  Typically, a stronger-than-expected level of job creation leads to strength in stocks and rising rates in Fixed-Income securities like Treasuries and MBS (the "mortgage-backed-securities" that most directly influence mortgage rates).  But we saw the opposite this time around with stocks ultimately selling off and interest rates falling. 

One way to account for that phenomenon is to suggest that the stronger jobs numbers did something to increase the likelihood that Obama would stay in office.  If we had to guess, it seems that more talking heads think a Romney victory would be economically bullish.  There's no way to know if that would turn out to be the case, but if market participants THOUGHT it would turn out to be the case, it could make sense that stocks and interest rates would decline on Friday despite the stronger jobs numbers.

Whatever the case, we'll know a lot more tomorrow (and even more on Wednesday morning).  Tomorrow is election day and if there's a discernible reaction in markets, it will go a long way toward confirming or rejecting the theory laid out above (not our theory, for what it's worth, but the one we chose to talk about today).  Beyond the election, European drama is potentially increasing again with a good amount of headlines set to hit later in the week

Loan Originator Perspectives

"Lenders passed along some love this morning but rate sheets dont reflect the recent gains in my opinion. The consensus has been if Obama wins re-election rates should hold to move lower. If Romney wins, rates should hold to move higher. That said, i would definitely lock if you feel Romney wins tomorrow. If you feel Obama wins, i would float. If you are unsure, i would lock as today's rates are as good as they have been in quite some time." -Victor Burek, Benchmark Mortgage.

"Looks like it's "risk off" in the capital markets today. Rates improved considerably, and clients who floated may want to consider taking advantage of that. Fundamentals haven't changed: European situation isn't curing itself and US economy is tepid as fiscal cliff looms. Doing a lot of loans for folks who thought 4.25% was a lifetime best rate. Still can't believe these rates, but at least they're one way to profit in this economy!" -Ted Rood, Senior Originator, Wintrust Mortgage.

"We work with clients to set rate targets they won't go above, pre-approve them, then lock the rates when MBS markets rally and rates dip. Today some clients are hitting their rate targets and we're locking those rates accordingly. These are the first such opportunities we've seen since rates spiked a few weeks ago. The key to this approach is to set the rate target AND to fully pre-approve the loan. Locking blindly when rates dip, then figuring out the loan after almost always leads to problems (with a loan approval factor that wasn't pre-screened, or with a rate lock expiring before the loan closes)." Julian Hebron, Branch Manager, Loan Agent, RPM Mortgage.

Today's Best-Execution Rates

• 30YR FIXED -3.375%
• FHA/VA - 3.25% (varies more between lenders than conventional 30yr Fixed)
• 15 YEAR FIXED -  2.875% - 2.75%
• 5 YEAR ARMS -  2.625-3.25% depending on the lender

Ongoing Lock/Float Considerations

• Rates and costs continue to operate near all time best levels
• Rates could easily move higher or lower, but given the nearness to all time lows, there's generally more risk than reward regarding floating
• This will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn't always mean they're done improving.
• (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario.  There can be all sorts of reasons that your quoted rate would not be the same as our average rates, and in those cases, assuming you're following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).