Financial markets were deluged with important data last week and seemed at times to be struggling with understanding what it all meant. Much of the data was very clear, some not so clear, and some downright opaque, but ultimately, investors must make choices for themselves of the best places to put their money to work. Data is always subject to interpretation by the user, is weighed against expectations and often subject to revision, and is rarely without gray areas.
This week the financial markets will be preoccupied with choice, as the elections are upon us, although the outcome of millions of consequential choices by Americans may not be fully clear for some time. At nearly the same time, a consequential choice will be made by the Federal Reserve to lower short-term rates further or not. Where the political elections don't have a clear favorite, at least at the top of the ticket, the outcome of the Fed's choice this week does have an overwhelming majority in favor of a quarter-point cut in rates, at least according to futures market investors.
Reflective of the now-temporarily lower mortgage rates, the Pending Home Sales Index from the National Association of Realtors® showed a 7.4% increase for September. This measure of signed contracts to purchase existing homes leads the actual sales figures by a month or two, as it generally takes 45 to 60 days to complete a contract-to-closing process. If we assume that all these contracts make it to closing, and based on September's 3.84 million annual sales pace, we will see a lift for existing home sales to a 4.12 million pace, which would be the highest since April. However, the effect on sales will probably be spread out over October and November figures, some contracts will not come to fruition, and higher mortgage rates in October could also ding the increase, so the bump in sales might only make it to perhaps 4.03 million or so for October. With higher mortgage rates in place during October, it's likely that the next PHSI will show a decline, and not only due to seasonal effects.
Even with higher rates in place, folks will continue to buy homes. The Mortgage Bankers Association reported a 0.1% decline in requests for mortgage credit in the week ending October 25, with the top-line figure dragged backward by a 6.3% decline in requests for funds to refinance existing mortgages, a fifth consecutive retreat. That said, applications for funds to purchase homes rose by 5%, this component's first gain in a month. Folks that were hoping to get a loan to buy a home in October waited if they could see if mortgage rates would retreat; when they didn't, buyers had to pull the trigger on their deals despite higher rates.
While some have already chosen, most Americans also have choices to make this week, too, as elections take center stage. Whatever your choice or choices may be, make your decision and go vote.
The yields that most influenced fixed mortgage rates were flat last week, at least until Friday, when they flared higher again. Based on that alone, odds favor another increase in the average offered rate for conforming 30-year fixed-rate mortgages as reported by Freddie Mac. We've been undershooting the mark lately again and would have expected rates to remain pretty level until Friday's selloff. It would appear few investors have an interest in bonds right now and perhaps not mortgages either, or based on that, we may see another 8-10 basis point increase in rates this week.
This week the financial markets will be preoccupied with choice, as the elections are upon us, although the outcome of millions of consequential choices by Americans may not be fully clear for some time. At nearly the same time, a consequential choice will be made by the Federal Reserve to lower short-term rates further or not. Where the political elections don't have a clear favorite, at least at the top of the ticket, the outcome of the Fed's choice this week does have an overwhelming majority in favor of a quarter-point cut in rates, at least according to futures market investors.
Reflective of the now-temporarily lower mortgage rates, the Pending Home Sales Index from the National Association of Realtors® showed a 7.4% increase for September. This measure of signed contracts to purchase existing homes leads the actual sales figures by a month or two, as it generally takes 45 to 60 days to complete a contract-to-closing process. If we assume that all these contracts make it to closing, and based on September's 3.84 million annual sales pace, we will see a lift for existing home sales to a 4.12 million pace, which would be the highest since April. However, the effect on sales will probably be spread out over October and November figures, some contracts will not come to fruition, and higher mortgage rates in October could also ding the increase, so the bump in sales might only make it to perhaps 4.03 million or so for October. With higher mortgage rates in place during October, it's likely that the next PHSI will show a decline, and not only due to seasonal effects.
Even with higher rates in place, folks will continue to buy homes. The Mortgage Bankers Association reported a 0.1% decline in requests for mortgage credit in the week ending October 25, with the top-line figure dragged backward by a 6.3% decline in requests for funds to refinance existing mortgages, a fifth consecutive retreat. That said, applications for funds to purchase homes rose by 5%, this component's first gain in a month. Folks that were hoping to get a loan to buy a home in October waited if they could see if mortgage rates would retreat; when they didn't, buyers had to pull the trigger on their deals despite higher rates.
While some have already chosen, most Americans also have choices to make this week, too, as elections take center stage. Whatever your choice or choices may be, make your decision and go vote.
The yields that most influenced fixed mortgage rates were flat last week, at least until Friday, when they flared higher again. Based on that alone, odds favor another increase in the average offered rate for conforming 30-year fixed-rate mortgages as reported by Freddie Mac. We've been undershooting the mark lately again and would have expected rates to remain pretty level until Friday's selloff. It would appear few investors have an interest in bonds right now and perhaps not mortgages either, or based on that, we may see another 8-10 basis point increase in rates this week.