The drama over the debt ceiling pushed bond yields higher last week, pushing mortgage rates to new 2023 highs in the middle of the spring home sales season. Thankfully, active housing inventories showed some gains last week. Purchase application data fell for the second week in a row.
Here’s a quick recap of last week:
- Increased available inventory 8,914 Week by week, even though new listings data still tend to hit record lows into 2023.
- Mortgage rates rise to 2023 high 7.12% Bond yields rose due to debt ceiling negotiations.
- Purchase requests data turned negative for the second straight week as the consistent theme of rising interest rates impacted the weekly data.
10-Year Yield and Mortgage Interest Rates
The White House and Republicans announced a tentative deal on the debt ceiling on Saturday, ending the drama we’ve all had to deal with for the past two weeks.
And on Wall Street, many traders are shorting the bond market, meaning there has been a lot of speculative trading betting that bond yields will rise soon. These two factors caused bond yields to skyrocket.
Of course, this pushed mortgage rates to all-year highs. 7.12% Last week was the second time this year that mortgage rates have risen 1% from their lows.
Mortgage rates are highly volatile, even though the 10-year bond yield hasn’t hit a new all-time high in 2023. The mortgage market has become increasingly stressed since the banking crisis began, and the recent debt ceiling problem has not helped. As you can see below, this last rally in bond yields was very sharp.
In my 2023 forecast, I wrote that if the economy held strong, the range of 10-year bond yields would be: 3.21% and 4.25%be equivalent to mortgage interest rates between 5.75% and 7.25%. I also noted that his 10-year level during this time was 3.37% and 3.42% Breaking lower than that will be difficult. I call it Gandalf’s lines in the sand. “you shall not pass. ” So far in 2023, that line has held up, as the red line in the chart above shows.
However, despite not reaching the peak of mortgage rates, 7.25%the mortgage market is far more stressed than I expected in 2023.
As I tagged peak interest rates, here begins banking crisis and debt ceiling uncertainty. 7.25% at 10 year yield 4.25%. The new variable of the banking crisis is important. Unless something unexpected happens, the debt ceiling problem is over for now, but the banking crisis and mortgage stress are still there.
Bond yields and mortgage stress may ease in the short term. But since the banking crisis began, the spread between 10- and 30-year mortgage rates has worsened. This week will be about how the bond market and mortgage spreads move.
Another aspect of my 2023 forecast is that if unemployment claims exceed 323,000 The 4-week moving average could fall below the 10-year yield. 3.21% And we’re heading towards 2.73%. That could push mortgage rates down to mid-5% levels. So far, unemployment claims have risen markedly from recent lows, but are still below the 323,000 four-week moving average. It’s employment week this week, and we’re looking at four different labor statistics.
from St. Louis Fed: Initial claims for unemployment benefits in the week ending May 20 increased by 4,000 to 229,000. The four-week moving average remained almost unchanged at 231,750.
weekly housing inventory
The growth of effective listed inventory this year is slow. There was some concern that the lockdown on mortgage rates would prevent inventories from rising this spring, but that’s not the case.
Although inventory growth is slow, we still see spring stock spikes every year. It’s just not very strong. As you can see from the data below, inventories are up from last year, but far from what is considered normal.
- Weekly Stock Fluctuation (May 19-26): Stock is 424,190 To 433,104
- Same week of the previous year (May 20-27): Inventory 338,399 To 357,582
- 2022 stock bottom price 240,194
- So far, the peak in 2023 is 472,680
- For context, see this week’s active list. 2015 it was 1,131,405
New listings data rose last week, but the trend of 2023 to see the lowest growth in new listings on record remains, according to Altos Research. But remember, there are still people selling homes where mortgage rates were low and buying homes in a higher interest rate environment. The total number of active listings is again higher than last year.
Here’s this week’s new listing data for the last few years:
- 2023: 62,765
- 2022: 83,105
- 2021: 74,984
This week, we want to highlight the big difference between the 2023 new listing data and the last two years.
In 2022, new listings data increased from the same week in 2021 as the housing market grappled with a sharp rise in mortgage rates. It could be argued that some sellers wanted to go public before interest rates rose further. reflected in the weekly data.
But after mortgage rates topped 6%, returned to 5%, and then surged to 7.37%, the total cost of buying a home last year rose so sharply that sellers decided not to list homes at the same rate. decided. Even with the biggest affordable hit of a lifetime in a year, this shouldn’t shock people. This will crush demand. Because sellers are traditional buyers, some people don’t put their homes on the list to sell and buy another one if it’s not affordable.
While new listings data for 2023 is at record lows and growth in active listings is disappointing, we still have more inventory this year than last year. Unfortunately, it doesn’t make much sense.
Purchase application data
Over the past seven months, the big story around housing has been a cascading drop in demand in 2022 and steady requisition data. Mortgage data showed a positive trend over his 12-week period, with mortgage rates dropping from his 7.37% to 5.99% from Nov. 9. The weekly report shows a significant increase in sales in the existing home sales report a few months ago.
Sales were still down as requisition data projected 30 to 90 days ahead, but the data laid the groundwork for a significant recovery in demand.
As you can see in the chart below, existing home sales fell for the fastest time ever in 2022, but then had one big rebound in sales. There have been no major changes since then, and the 2023 purchase application data continues to be a tug-of-war between plus and minus depending on mortgage interest rates, so we don’t expect sales above 4.55 million at this point. is for a week.
Purchase requisition data is highly seasonal. I usually weigh this in from the 2nd week of January to the 1st week of May, after May’s total trading volume has dwindled. As you can see in the chart below, we are working from a shallow level today and May is almost over.
We track weekly purchase requisition data regardless of season, as the last three years show this data occurred at the end of the year. In a recent podcast with Mike Simonsen, I talked about why I believe the seasonal bottom for inventory is coming later this year. As I said in my article, the seasonality period is coming to an end and the housing market has had a slightly positive year given today’s high mortgage rates. CNBC recently.
Next Week: Bonds and Work
During this short holiday week, I would like to focus first on the bond market’s reaction to the debt ceiling deal. The housing market fluctuates in tandem with 10-year yields, so it’s important to monitor this.
Second, Hiring Week begins again. vacancies, unemployment claims, ADP report, and the BLS Big Hiring Friday report. Let’s not forget that wage growth matters in the employment report.of federal reserve From their perspective, wage growth needs to slow down as soon as possible because Japan wants unemployment to rise and won’t let Americans make more money.
We also have house price data from the S&P CoreLogic Case-Shiller Home Price Index. FHFAMore this week.
Over the next week, the focus will be on the bond market’s reaction to the debt ceiling deal and whether mortgage rate and employment spreads improve. I hope my weekly tracker article has given you a sense of how important it is to track your housing data on a weekly basis. Forced to rely on outdated monthly data, people often do not understand market ups and downs.