Double shot, on the house: Waiting for rates to come back to earth
U.S. equity indexes red: Nasdaq off most, down ~0.7%
Cons disc weakest S&P sector; Real Estate leads gainers
Euro STOXX 600 index ~flat
Dollar up; gold, bictoin crude all down >1% each
U.S. 10-Year Treasury yield rises to ~4.24%
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DOUBLE SHOT, ON THE HOUSE: WAITING FOR RATES TO COME BACK TO EARTH
Two housing indicators greeted investors on Wednesday, about halfway through a busy earnings week. Together, they seem to suggest that potential homebuyers have deferred any decisions for now.
Sales of pre-owned U.S. homes USEHS=ECI dipped by 1.0% in September to 3.84 million units at a seasonally-adjusted annualized rate (SAAR).
That's the lowest level since October 2010 and 0.5% shy of the 3.86 million units SAAR consensus.
Indeed, it's even lower than the May 2020 reading, which was the nadir of the COVID shutdown panic.
The good news is that August data was revised to show a shallower decline than originally reported, to 2.0% from 2.5%.
Scratching below the surface of the National Association of Realtors' (NAR) report, single-family homes - which account for the lion's share of the total - dropped by 0.6%, while coops/condo sales slid 5.1%.
Median home prices dipped by 2.3% and the number of available homes on the market increased. At September's rate of sales, it would take 4.3 months for every home on the market to be sold. That's up from 4.2 months in August.
"There are more inventory choices for consumers, lower mortgage rates than a year ago and continued job additions to the economy," writes Lawrence Yun, NAR's chief economist.
But those rates are still elevated.
"High mortgage rates and high prices remain significant obstacles for buyers," says Carl Weinberg, chief economist at High Frequency Economics. "Expectations of lower mortgage rates to come are an incentive for them to defer purchases if they do not have to move."
Well, yes. The Federal Reserve embarked on a its rate-cutting phase just last month, so would-be buyers are likely biding their time, waiting for rates to deflate a bit.
While we're on the Fed, Chairman Jerome Powell has warned that it could take several years for housing inflation to normalize.
"Several years" might be too long for many Americans. Housing has become less affordable and the delinquency rate of residential loans is on the rise.
Unsurprisingly, monthly housing payment as a percentage of total income tracks mortgage rates fairly closely:
Speaking of which, the cost of financing home loans was unchanged last week but would-be borrowers were unmoved.
According to the Mortgage Bankers Association's (MBA) weekly report, the average 30-year fixed contract rate USMG=ECI held firm at an elevated 6.52%, matching the previous week's highest level since mid-August.
As a result, applications for loans to purchase homes USMGPI=ECI and refinance existing mortgages USMGR=ECI slid by 5.1% and 8.4%, respectively.
"Application activity decreased to its lowest level since July, as both purchase and refinance applications saw declines," notes Joel Kan, MBA’s deputy chief economist.
Over the last 12 months the 30-year fixed rate has cooled by 1.38 percentage points. Including last week's declines, demand for purchase loans is up 3.4% over the same time period, while refi applications have jumped 90.0%.
(Stephen Culp)
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FOR WEDNESDAY'S EARLIER LIVE MARKETS POSTS:
WALL STREET SLIDES AS TREASURY YIELDS, EARNINGS WEIGH - CLICK HERE
NASDAQ COMPOSITE: KNOCKING ON THE DOOR OF NEW HIGHS - CLICK HERE
AUTOS AND PARTS TO REMAIN UNDER PRESSURE - CLICK HERE
EUROPEAN STOCKS HAVE HIGH TRUMP PREMIUM PRICED IN - BARCLAYS CLICK HERE
EUROPE STRUGGLES FOR DIRECTION, EARNINGS MIXED - CLICK HERE
EUROPE BEFORE THE BELL: FUTURES DIP AFTER RAFT OF EARNINGS - CLICK HERE
ELECTION AND FED JITTERS GRIP MARKETS -CLICK HERE
Existing home sales https://reut.rs/3YzwRjF
Housing affordability https://reut.rs/3YyqxsB
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