Sellers Still Expect Prices to Rise

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Published Date 9/11/2017

Realtor Report

Sellers Still Expect Prices to Rise

The Fannie Mae Home Purchase Sentiment Index® (HPSI) increased 1.2 points in August to 88.0, just below the all-time high set in June.

The net share who reported that now is a good time to sell a home rose 8 percentage points in August and is now up 21 percentage points compared to the same period last year.

“In the early stages of the economic expansion, home selling sentiment trailed home buying sentiment by a significant margin. The reverse is true today,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “The net good time to sell share is now double the net good time to buy share, with record high percentages of consumers citing home prices as the primary reason for both perceptions. Such a sizable gap between selling and buying sentiment, if it persists, could weigh on the housing market through the rest of the year.”

Meanwhile, the net share who said it’s a good time to buy fell 5 percentage points in July and is down 16 percentage points year-over-year. Respondents continue to cite high home prices as the primary reason behind the bad time to buy and good time to sell indicators. The net share of those who believe mortgage rates will go down increased 4 percentage points, while the net share of Americans who believe home prices will go up increased 1 percentage point. Americans also expressed a reduced sense of job security, with the net share who say they are not concerned about losing their job falling 1 percentage point. Finally, the share of consumers who reported that their income is significantly higher than it was 12 months ago remains unchanged.

Source: FNMA News Release

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: Higher

Mortgage rates are trending slightly higher this morning. Last week the MBS market improved by +43 basis points. This was enough to improve mortgage rates or fees. Mortgage rates were relatively volatile yesterday.

This Week's Rate Forecast: Higher

Three Things: These three things have the greatest ability to impact mortgage rates this week: 1) Geopolitical, 2) Across the Pond and 3) Domestic

1) Geopolitical: God Bless America as we all reflect and remember September 11.

It appears as if (recently downgraded) Tropical Storm Irma has been devastating, but it was not as severe as projected. Still, half of Florida does not have power.

North Korea, did not lob another missile on Saturday. The markets were expecting one to go along with a key celebration over there. It could mean that they had technical difficulties or it could mean that the threat of tougher U.N. sanctions and an oil embargo has had an impact.

2) Across the Pond: We will hear from the Bank of England on Thursday. While the markets do not expect a rate hike at this time, we will be paying close attention to the vote. The market expects a vote of 7-2 (two members wanting to raise rates). If that hits 6-3 or 5-4, then MBS will sell off. We will also get key inflationary data points from China and Germany.

3) Domestic Flavor: We have a very light week for economic data, but we do have two very important reports. They are Wednesday's CPI and Friday's Retail Sales. The closer that the Core YOY CPI is to 2.0%, the worse it will be for rates. Retail Sales are expected to see a minimal improvement.

Treasury Auctions This Week:

09-11 - 3-year note
09-12 - 10-year note
09-13 - 30-year bond (most important)

This Week's Potential Volatility: Average

We could see some mortgage rate volatility as rates move a little higher on the better than expected outcome of Irma and the fact that North Korea didn't launch any missiles. While we do expect mortgage rates to drift a bit higher today and this week, we don't expect too high of mortgage rate volatility.

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

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