August 10th, 2022 - Market Update
Current position: Floating
Stocks and Mortgage Bonds are both sharply higher after a cooler than expected Consumer Price Index inflation report.
The July CPI showed that overall inflation was flat, which was lower than the 0.2% expected. Year over year, inflation declined from 9.1% to 8.5%, which was lower than the 8.7% expected.
The Core rate, which strips out food and energy prices, rose 0.3%, which was less than the 0.5% expected. As a result, year over year core inflation remained at 5.9%.
Rents rose 0.7% last month and are now up 6.3% year over year, which is up from 5.8%. Owner's equivalent rent, which tries to capture the rise in home prices but does a poor job, rose 0.6% and is up 5.8% year over year.
Looking at more of the internals - Energy prices fell 4.6% from a month ago, bringing the annual gain to 33%. Gasoline prices fell 7.7% and are up 44% year over year.
Food costs climbed another 1.1% in July, bringing the year-over-year gain to almost 11%. Used cars were fell by 0.4% and are up 6.6% year over year.
After pricing in a 76% of a 75bp rate hike yesterday, that is down to 40% right now, but before the September 21 meeting we will get another CPI report and Jobs Report, which could change things. Right now the markets are betting on a 50bp hike.
The MBA released their Mortgage Application data for last week, showing that Purchases fell by 1% last week and are down 19% year over year. Interest rates moved slightly higher from 5.43% to 5.47% and are 2.5% higher than this time last year. Refinances increased by 4% last week and are now down 82% year over year. Refinances made up 32% of all transactions, up from 31%.
CoreLogic released their Loan Performance Insights for May, showing that overall delinquencies dropped to a 23-year low. Loans 30 days or more past due declined from 2.9% to 2.7%, while loans seriously delinquent or 90 days plus, declined from 1.4% to 1.3%. Loans in foreclosure remained at 0.3%, which is near multi-decade lows.
The MBS Highway Survey, which is comprised of roughly 3,000 Mortgage and Real Estate Professionals, was just released for August. We created a new shareable image below, which is a great touch point for customers and referral partners.
There is certainly a slowdown in activity and pricing pressure from July to August, but 53% of respondents are still citing that their markets are active, while 47% note that it is slower.
16% of those surveyed are still seeing price increases, while 58% are seeing some degree of price decreases, although many of these are listing prices that are coming down to earth and not home value declines.
Almost half of the respondents are seeing the sales pace at normal levels, with homes selling near the asking price.
Source: MBS Highway
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