THE BASIS POINT

More Signals Favor Home Buyers Over Sellers

Rates hit one-year lows last Thursday, but then rose again Friday to prevailing January range of 4.5%. Yes, ROSE to 4.5%. Rates are still in great shape.

The dip happened Wednesday after the Fed reassured rate markets they’d help keep overall rates in the economy low. The Fed controls overnight bank-to-bank lending rates, and when they raise (or lower) these, it impacts all rates including mortgages.

After 2 years of rate hikes, the Fed changed their promise Wednesday from “further gradual rate hikes” to being “patient” with “adjustments” which rate markets interpreted as rate hikes are over.

Hence the mortgage rate dip. But then rates rose again after Friday’s January jobs report was stronger than expected. Mortgages live in a bizarro world where good news causes rates to rise.

This week should be tamer as there are only business inflation reports, which impact rates less than the Fed and jobs reports.

So again: rates are in great shape.

Plus home sales volume looks to be in a sweet spot favoring buyers. Last week’s weaker existing home sales and accompanying headline hysteria makes sellers nervous. So while long term existing home sales look ok, it helps buyers short term.

Last week we learned New Home Sales spiked 17% for November* but prices plummeted. Makes sense: builders lower the prices on newly constructed homes, and sales increase.

But one month isn’t a trend. We need to watch this one closely because New Home Sales can tell us where the housing market might be going whereas Existing Home Sales tell us where the market has been.

So is it a buyer’s or seller’s market right now?

You can only perfectly view a shift from buyer’s to seller’s market after the fact. But a lot of signals favor buyers right now: super low rates, sellers worried that sales might slow, and fewer bidding wars in most markets to temper prices.

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Reference:

– *New Home Sales a month behind because of gov’t shutdown.

Why We’re Seeing Huge Moves In Home Sales, Prices, Rates (Mortgage News Daily)

Mortgage rates end last week even after mid-week dip to 1-yr lows (Mortgage News Daily)