Daily Commentary by Larry Baer: Sales
of existing homes have been slowly trending higher since mid-2011, consistent
with improvements in the job market. The
latest numbers from the National Association of Realtors show the pace of
existing home sales in April improved 3.4% on a month-over-month basis. Sales of single-family homes increased 3.0%
while those of multifamily properties including condominiums and townhouses
rose 6.0%. During the month of April
the average rate on a 30-year fixed-rate mortgage fell to an all-time low of
3.79% in the week ended May 17th, according to records from Freddie
Mac going back to 1971. The average
15-year rate dropped to 3.4%, also a new all-time record low.
The existing homes data showed what appears
on its face to be an astounding 10% month-over-month price appreciation
rate. The price appreciation rate is a
statistical distortion created by a declining share of distressed sales. Distressed homes sell at a discount and
although tight supplies of distressed properties for sale are narrowing this
discount, the discount is still substantial.
Fewer distress sales relative to non-distress sales are driving up the
month-over-month and year-over-year comparison of house prices. I realize the distressed sale story may be a
bit confusing - just know that this aberration with regard to recent big jumps
in home price appreciation rates will falter noticeably once the large
inventory of distressed properties move through the foreclosure pipeline and
end up on the market.
Uncle Sam will be in the credit market today
looking to peddle $35 billion worth of 2-year notes. The offering will likely draw decent demand
from domestic and foreign investors alike.
If this assessment proves accurate, this event will not likely influence
the trend trajectory of mortgage interest rates one way or the other. Today's debt sale will conclude at 1:00 p.m.
ET and I'll post the result on my website as soon as possible thereafter.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
