Morning Report: Home prices continue to rise

Vital Statistics:

  Last Change
S&P futures 3361 36.6
Oil (WTI) 36.91 -0.24
10 year government bond yield   0.67%
30 year fixed rate mortgage   2.92%

Stocks are higher this morning as a bunch of mergers are announced. Bonds and MBS are flat.

The September FOMC meeting begins this week. No changes are expected in the Fed Funds rate. We will get a new set of economic projections and dot plot. That could potentially be market-moving.

There are 19 million high quality refinance candidates, representing 43% of all 30 year mortgages. Black Knight defines “high quality” as a FICO > 720, 20%+ equity, current on the mortgage, and could save 75 basis points on their mortgage. “With rates near historic lows, millions of consumers have an opportunity to find savings by refinancing and, in many cases, significantly lowering their interest rate and monthly payments,” said Will Pendleton, senior managing director of third party originations at Home Point Financial. “We feel that the low-rate environment is likely to persist well into 2021, and a great amount of focus in the lending community is on building capacity to meet the explosion of consumer demand.”

Note that 19 million mortgages at $250k a pop works out to be about $5 trillion in originations… So this has a few years to run.

Home prices are up 13%, according to Redfin. “Home price growth this high is making the housing market especially difficult for first-time homebuyers right now,” said Redfin chief economist Daryl Fairweather. “Rising prices are just one more reason for people to leave expensive urban neighborhoods behind. The sudden rise of remote work has allowed homebuyers who are priced out of one neighborhood to expand their search to more affordable areas. In turn, they are pushing up home prices in those relatively affordable areas, causing more people to look to even more affordable areas, and so on. Price growth may slow in 2021, but even if it does, high prices are going to continue to make affordability a concern for buyers.”

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