By Ryan Casey Stephens, FPQP®
Special Contributor
Mortgage rates drifted slightly higher again last week as mortgage bonds’ slow ebb and flow continued. The market in June has been incredibly stagnant, with only three days that forced loan officers to consider locking their pipelines. Over the weekend another major world event unfolded and many asked, “What will this do to mortgage rates here at home?”
Finally, this week we’ll wrap up the month with critical new data on home sales and prices, jobless claims, and inflation. There’s plenty of juicy information to cover in this week’s Three Things to Know, so let’s jump right in.
The Shortest Civil War
In case you missed the news, Russian President Vladimir Putin faced a one-day civil war after the Wagner Group began to march toward Moscow. The conflict arose after the head of the Wagner group, a privately-contracted military unit, accused Putin’s defense leaders of gross mishandling in the war in Ukraine. The leader of Belarus stepped in to negotiate with the parties, and an agreement was quickly reached to return Russia to the status quo.
As the events were unfolding, speculation over the effect this would have on markets was flying between economists and pundits on Twitter. On the one hand, turmoil in Russia might have led to a pause or even an end to their occupation of Ukraine. That result would likely have been disinflationary and positive for mortgage rates here at home. On the other hand, a drawn-out civil war might have further destabilized global supplies and led to higher prices of goods, meaning more inflation to battle.
First Thing to Know:
The conflict is a reminder of the global nature of the economy and the way far-off events can affect our everyday lives. While the short-lived rebellion didn’t lead to any significant market changes Monday morning, it was an interesting exercise in speculation and a reminder that our battle against inflation is neither certain nor finished.
Housing Just Won’t Budge
We didn’t need to beg for positive news last week — it was abundant. Existing Home Sales rose from April to May (though down 20 percent from last year). The problem is ultimately one of inventory available because buyer demand remained strong. The National Association of Homebuilders Housing Market Index rose to the highest level since last July, indicating that builders believe that current sales conditions, sales expectations for the next six months, and buyer traffic are all in their favor.
The imbalance between supply and demand is certainly helping support home prices across the board, but I’m hearing agents and home buyers express frustration over the lack of choices available. Quality listings that are priced appropriately seem to be flying off the shelves as quickly as they hit the market. The housing sector nationwide is facing a significant shortage of inventory, and that doesn’t appear likely to change in the near future.
Second Thing to Know:
A lack of listings is the biggest problem facing housing at the moment. Builders and buyers seem to be feeling positive, leaving us to speculate that something is keeping sellers from listing. Could the problem lie with persistently high interest rates? If so, perhaps rates will cool later in the year and we may see the situation change.
A Look at The Week Ahead
We’re facing another big week for housing data with the release of May’s New and Pending Home Sales on Tuesday and Thursday. Tuesday will also shed more light on home prices via the FHFA House Price Index and the Case-Shiller Price Index, which is arguably the most accurate metric for home price changes. Because housing has remained strong these past months we expect to see home prices continue to hold, while new and pending home sales might point to us having reached a bottom.
The end of the week will shift our focus back on the Fed’s fight against inflation when we see the newest Jobless Claims figures Thursday and the Fed’s favorite inflation report — The Personal Consumption Expenditures (PCE), on Friday.
Third Thing to Know:
The average 30-year fixed mortgage rate continues to hover near 7 percent near its highest level since mid-May. While mortgage bonds aren’t dramatically losing ground, they’re not finding much more support either. If we want to see mortgage rates begin their steady march downward, positive results from this week’s reports will be crucial.
Ryan Casey Stephens FPQP® is a mortgage banker with Watermark Capital. You can reach him at [email protected].
