Stocks are higher and Mortgage Bonds are slightly lower to start the day.
ICE Home Price Index
Mortgage rates have been on the rise and remain the focal point for most potential buyers. And while they are always important, it can be very effective to focus on the opportunity of tomorrow, especially given the resilient levels of appreciation we are seeing across most of the country.
ICE released their home price index for August, showing that home values nationwide on average rose by 0.21%. Year over year, they increased by 1.71%, which is the highest annual growth rate in 14 months.
Looking at the past six months of data and annualizing, ICE’s appreciation rates are on track for about 3% appreciation, which is right in line with our forecast. It’s also important to note that ICE seasonally adjusts their numbers, which means that it takes into account the seasonal strength seen in the spring months and adjusts for that.
Make sure you utilize the appreciation calculator within MBS Highway to illustrate the opportunity in home ownership in your local markets. The tool can pull in historical and forecasted appreciation, as well as custom rates that you choose.
Using a 3% rate of appreciation on a $500,000 home, a homeowner would gain $15,000 in the first year, $80,000 over 5 years, and $171,000 over 10 years. While 3% appreciation does not sound like that much, it is still very meaningful for wealth creation over time.
Walmart Q2 Earnings
Walmart released their Q2 earnings report, showing more signs of consumer stress. Walmart is the largest grocer and retailer in the country, so it gives some good signals and reads on the consumer.
Sales, when removing fuel, rose by 2.6%...but that was beneath expectations and the slowest growth in 6 years. Additionally, consumers still made a similar amount of transactions, but their spend per transaction fell by more than half. Walmart said that the consumer is trading down and that there were more higher income shoppers that are likely trying to save money.
Walmart is getting a tariff refund that is significant, but they are using the money to reduce prices, showing that they cannot pass along price increases to consumers because they are struggling.
Bottom line – There have been several reports lately showing that the consumer is under duress. While many think the Fed should hike, and the Bond market would likely react favorably, it may not be the right thing for the economy. Recent inflation reports have been tame and the jobs data has been weakening. And if the Fed were to hike, it would not impact oil prices, but it would cause consumers to spend more on credit cards, car loans, and anything else variable. It would exacerbate the situation consumers are already facing, and has the potential to be a catalyst for a recession.
This brings us to next week’s Jackson Hole meeting, where Kevin Warsh will be speaking next Friday. Historically, this has been an important meeting used to signal policy change. If the Fed were planning on hiking, this would be a spot for Warsh to signal to the markets that it’s coming. We know, however, that Warsh does not believe in being as transparent as the Fed has been in the past and he does not want to give forward guidance. It will be interesting to see what he says and it will be a very important meeting that the markets will be focused on.
News Next Week
Tuesday: ADP Weekly Employment Data, Case-Shiller & FHFA Appreciation Reports, New Home Sales
Wednesday: Mortgage Applications, Personal Consumption Expenditures (PCE) inflation data, Q2 GDP (second reading), Durable Goods Orders
Thursday: Jobless Claims
Friday: QCEW jobs revisions, Warsh speech at Jackson Hole Symposium
Technical Analysis
Mortgage Bonds are pretty quiet so far this morning, only slightly lower, but they have failed a test at the 25-day Moving Average and 101.39 Fibonacci ceiling. We must remain on guard, as there is 12bp of room to the downside before the next floor of support at 101.18.
The 10-year is right back at the 4.71% ceiling of resistance, which has been a critical line in the sand. Thus far, this level of resistance has prevented yields from moving higher, but if it’s convincingly broken, the next stop is 4.75%.
Get notifications when agents you follow schedule open houses, complete a transaction with another loan originator, post a new listing, or share content on social media.Start your trial now so you never miss an opportunity to connect with new or existing referral partners.
Create 60 second videos for clients with Social Studio, and take advantage of social share assets that help you start conversations and highlight the benefits of buying.
Show clients how they can take advantage of a cash-out refinance or restructure their debt to save them years of mortgage payments, or demonstrate how debt consolidation can bridge the gap in payment differential on a more expensive home. With personal debt balances at an all-time high, use Debt Consolidation to help your clients achieve their financial goals and gain a better position to build wealth for their family.
Demonstrate how delaying a purchase for even a year or two could cost buyers thousands in appreciation, amortization, equity and more. Increase deal flow by showing clients how delaying their purchase could have more of an impact on their long-term wealth than they realize.
