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Time is On Our Side Without a Doubt

11/24/2014
michael borodinsky, caliber home loans, real estate trends blog

The following was written by Michael Borodinsky, Vice President/Regional Builder Branch Manager of Caliber Home Loans

Last Week in Review: The housing sector continues to improve, as home loan rates remain near annual lows. 

Forecast for the Week: Look for news on housing, inflation, consumer confidence and the state of our economy—all ahead of the Thanksgiving holiday. 

Time is on our side. Time continues to be on the side of potential homebuyers, as home loan rates remain near 18-month lows. But, could a hint of inflation be creeping into our economy—and if so, could higher home loan rates be on the horizon? 

The housing sector continues to be a bright spot, as existing home sales in October reached their best level since September 2013, coming in at 5.26 million units. Low home loan rates and an improving job market are two key factors that drove buyer decisions. 

There was also a double dose of good news on the builder side. Building permits, a sign of future construction, reached their highest level since November of last year. And, the National Association of Home Builders (NAHB) reported that its November Housing Market Index rebounded to 58, up four points from October. The NAHB Housing Market Index gauges builder perceptions of current single-family home sales, and readings over 50 are seen as positive. 

The one downside from the housing sector came from October housing starts, which declined from September. It's important to note that within the report, starts for single family homes increased 4.2 percent, while multi-family dwellings fell by 15.4 percent. More housing reports are ahead in the coming week. Will they also signal a continued recovery in the housing sector? 

And, there's another thing to watch in the next week, as personal consumption expenditures (the Fed's favorite measure of inflation) will be released. While inflation on the consumer side via the Consumer Price Index remained tame in October, wholesale inflation came in hotter than expected. While one month doesn't constitute a trend—and expectations are for inflation to remain cool—remember that inflation is bad for bonds, as it impacts the value of fixed investments like bonds. This means inflation can also cause home loan rates to worsen, as home loan rates are tied to Mortgage Bonds. 

The bottom line is that at this time, home loan rates remain near some of their best levels of the year, and now is a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week:

A slew of economic reports will be released Tuesday and Wednesday, as the markets are closed on Thursday in observance of Thanksgiving. Both Stocks and Bonds will also be closing early on Friday.

  • Gross Domestic Product for the third quarter will be released on Tuesday. This is the second of three estimates for the quarter.
  • Housing data will be plentiful. On Tuesday, look for the S&P/Case-Shiller Home Price Index. New Home Sales and Pending Home Sales for October will be released on Wednesday.
  • We'll get a sense of how consumers are feeling with November's Consumer Confidence reading on Tuesday and the Consumer Sentiment Index on Wednesday.
  • Also on Wednesday, look for Weekly Initial Jobless ClaimsDurable Goods OrdersPersonal IncomePersonal Spending, the inflation-measuring Personal Consumption Expenditures, and manufacturing news via Chicago PMI.

 

Remember: Weak economic news normally causes money to flow out of stocks and into bonds, helping bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows mortgage backed securities (MBS), which are the type of bond on which home loan rates are based. 

When you see these bond prices moving higher, it means home loan rates are improving—and when they are moving lower, home loan rates are getting worse. 

To go one step further—a red "candle" means that MBS worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning. 

As you can see in the chart below, mortgage bonds have improved recently. Home loan rates remain near 18-month lows.

Date

ET

Economic Report

For

Estimate

Actual

Prior

Impact

Tue. November 25

08:30

Gross Domestic Product (GDP)

Q3

NA

 

3.5%

Moderate

Tue. November 25

08:30

GDP Chain Deflator

Q3

NA

 

1.3%

Moderate

Tue. November 25

09:00

S&P/Case-Shiller Home Price Index

Sep

NA

 

5.6%

Moderate

Tue. November 25

 10:00 

Consumer Confidence

Nov

NA

 

94.5

Moderate

Wed. November 26

10:00 

New Home Sales

Oct

NA

 

467K

Moderate

Wed. November 26

10:00

Consumer Sentiment Index (UoM)

Nov

NA

 

89.4

Moderate

Wed. November 26

09:45

Chicago PMI

Nov

NA

 

66.2

HIGH

Wed. November 26

08:30

Personal Consumption Expenditures and Core PCE

YOY

NA

 

1.5%

HIGH

Wed. November 26

08:30

Personal Consumption Expenditures and Core PCE

Oct

NA

 

0.1%

HIGH

Wed. November 26

08:30

Personal Spending

Oct

NA

 

-0.2%

Moderate

Wed. November 26

08:30

Personal Income

Oct

NA

 

0.2%

Moderate

Wed. November 26

08:30

Durable Goods Orders

Oct

NA

 

-1.3%

Moderate

Wed. November 26

08:00

Jobless Claims (Initial)

11/22

NA

 

NA

Moderate

Wed. November 26

10:00

Pending Home Sales

Oct

NA

 

0.3%

Moderate

--

By: Michael Borodinsky

Vice President/Regional Builder Branch Manager | Caliber Home Loans

Call Michael: 732-382-2654

Email Michael: michael.borodinsky@caliberhomeloans.com

More From Michael Borodinsky: 

Home of the Brave - Highlights From a Quiet Week

Every day you may make progress, but more is needed 

Mortgage Rates Remain Relatively Stable

It's been said that the devil is in the details

 

More Posts 

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