In 2020 and 2021, housing grew rapidly and house prices plummeted at the pace many think. Unsustainable.. The role of 2022 is to get things back in the other direction.
In other words, things are “Normalization“After a period of enthusiastic movement. If the normalized ones are very large, different and fast, the normalization process may look scary. Home demand, home prices, rates are all possible It’s no exaggeration to say that it worked in the same way. It’s big, different, and fast.
As the normalization process unfolds, it’s natural to wonder if it’s a sign of more dire progress. in the end, Mortgage rates The market surged to the 6% range last week as the market prepared for the impact of the Fed’s policy announcement.At that time, we just thought we saw Highest rate of the year.. This week has only been added to those hopes.
If you saw other news this week, it suggested high Mortgage ratesRest assured, the news is date.. Even with the June 23 release date, it’s almost certain that you’re still using Freddie Mac’s weekly mortgage rate survey. The survey only captures interest rate movements at the beginning of the week and reports on Thursday morning.
If you look at the actual daily average, you’ll see that Tuesday’s rates weren’t much different from last Friday, but the next two days improved significantly and fell slightly on Friday.
Larger than usual size of improvement has to do with the method Mortgage rates Will be decided. This is a complex topic, so if you don’t care about “WHY”, skip the next two paragraphs.
Mortgages essentially turn into bonds, which determine the rates that lenders can offer. Mortgages can only be placed on specific bonds, depending on the interest rate of the underlying loan. For example, one of these bonds can be loaned at an interest rate of 5.25% to 6.125%. That is, the value of a 6.25% loan is determined by the next highest bond. If an investor puts a premium on a lower bond (as in an environment where there is a desire to exceed the rate), the lender actually sells a 6.125% loan rather than a 6.25% loan for more money. Can earn.
This is what is happening with many lenders’ ratesheets today, which means that only modest improvements in the bond market are needed for lenders to be able to offer significantly lower rates. In some cases, the borrower will have to pay points, but if you hated the idea in the past, now is one of the most logical times to at least see how low your points are. Please note that there is. Rate estimate.
In a more stable era, 1point Usually suitable for reduction 0.25% rate.. However, at this point, assuming a starting point of 6.25% or higher, a 0.50% drop is common. For the same reason, if the mortgage market improved by 1 point during normal hours, the market would fall 0.25%, but now the same market improvement could bring it down 0.50%.
From here, last week Peak horror Regarding inflation and the Fed’s policy response.Unless some new story takes hold, its peak should coincide with the peak of Degree of interest.. But as I said last week, this is only true to the extent that economic data confirms that inflation has leveled off.
Several economic reports have contributed to the concept this week, most notably the decline in consumer inflation expectations on Friday. Prior to that, data from purchasing managers showed slowing prices and slowing growth (both suitable for rates).
in terms of Housing-specific data This week was a mix bag. The biggest surprise was Friday’s new home sales data. Not only was the previous month (April) revised upwards, but the newly reported month (May) crushed expectations. The median economist forecast demanded a pace of 588k per year, but the actual number was 696k.Between the revisions and the surge in current data, new home sales appear to be less of them “Volatility reversal” Other “It will gradually level off.” You might even call it normalization …
New homes are only a small part of the market compared to existing homes. At the beginning of the week, the National Association of Real Estate Agents (NAR) will release existing home sales data for May. It has dropped significantly compared to April, but this drop is Almost completely lined up With prediction. If necessary, call this a volatile reversal. However, it only brings existing home sales back to what was considered a strong level before covid.