Stocks are mixed and Mortgage Bonds are lower to start the day.
Mortgage Applications
The Mortgage Bankers Association (MBA) reported that mortgage rates fell to 6.13% from 6.15% and were 1.25% lower than this time last year. Purchase applications increased 1% last week, rising for the fourth week in a row and are up 2% year over year. This is the first time the purchase application index has been positive on a year over year basis in two years.
Refinance activity surged 20% higher last week and are up 175% year over year. Refinances made up 56% of total applications, up from 51% in the previous week. The refinance boom is here.
New Home Sales
New Home Sales, which measures signed contracts on new homes, fell 4.7% to a 716,000 unit annualized pace, beating estimates of 700,00 units. Additionally, July was revised higher by 12,000, causing today’s number to appear lower.
There were 467,000 new homes for sale at the end of august, which was up from a downwardly revised 459,000 in the previous report. At the current pace of sales, there is 7.8 month’s supply, which is up from 7.3.
However, only 105,000 are completed, and when looking at the pace of sales vs homes that are completed (available supply), there is only a 1.7 months’ supply, up from 1.6 in July. This means that 362,000 homes are either not started or under construction, and it’s unclear how many will actually make it to the finish line because financing and carrying costs are very high.
The median home price was reported at $420,600, which is down 2.9% from the previous month and down 4.6% from last year.
Bottom line – Unlike the Existing Home Sales counterpart, which measures closings and likely represented buyers hopping in June and July, this shows people signing contracts in August and shows that demand is picking up as rates have moderated…And this report does not include the further drop we have seen in September, which will likely lead to continued strength in the sales figures.
Technical Analysis
Mortgage Bonds are lower today, but continuing to trade above their 25-day Moving Average. If Bonds aren't able to stay above this level the next floor is down at the 50-day Moving Average.
The 10-year is challenging its 25-day Moving Average for the 5th day in a row. If this level fails to keep a lid on yields there is a lot of room until the next ceiling at the 50-day Moving Average.
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