August 30th, 2022 - Market Update
Current position: Locking
Stocks and Mortgage Bonds are both higher to start the day, rebounding after the past two days of declines following the "pain" comments from Fed Chair Jerome Powell.
In housing news, the National Case-Shiller Home Price Index, which is considered the "gold standard" for appreciation, showed home prices rose 0.6% in June and 18% year over year, which is a decline from the previous reading of 19.9% in May, but still strong. Appreciation is clearly slowing, but as of June, still increasing at a robust rate.
Craig Lazzara from Case Shiller said, "Prices are clearly increasing at a slower rate. It's important to bear in mind that deceleration and decline are two entirely different things, and that prices are still rising at a robust clip.
June's growth rates for all three composites are at or above the 95th percentile of historical experience. For the first six months of 2022, in fact, the National Composite is up 10.6%. In the last 35 years, only four complete years have witnessed increases that large.
The FHFA (Federal Housing Finance Agency) released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. Different than Case Shiller, it does not include cash buyers or jumbo loans. The FHFA reported that prices rose 0.1% in June and are up 16.2% year over year, which is a decline from 18.3%, but again still very hot on an annual basis.
Apartment List released their monthly rental index, showing that rental prices rose 0.5% in August, which was half of the gain seen in July. Rents are up 10% year over year and 7.2% year to date. Looking at the monthly gain of 0.5%, if that were to be annualized with compounding going forward, it would equate to a rental increase of above 6% per year.
Mortgage Bonds continue to trade in a very wide range between support at 99.28 and overhead resistance at the 50-day Moving Average. The 10-year has managed to get back under 3.10%, which is a positive sign for now. If yields can remain under 3.10%, there is room to move lower until reaching 3%. Conversely, if they convincingly break above 3.10%, the next stop is 3.25%.
Begin the day with a locking bias.
Source: MBS Highway
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