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Rates increased slightly this week. The price of Mortgage Backed Securities (MBS) tested the 25 day moving average early in the week before bouncing back down below the 50 day trading averages. Rates are approximately the same as this time last year.
Housing Demand– fewer entry level homes are being built measured both by volume and percentage of homes constructed. Since 2015 the rate of homeownership for 25-34 year olds has increased 5% to 45%. There will be an estimated gap of 4.35M homes by 2020 and the gap widens every year by 370,000 homes. An estimated 1.2M of these homes are for low-to-moderate income families and 2.6M are for economically disadvantaged (earn 50% less than neighbors).
Jobs – the number of people filing for unemployment for the first time dropped to 348K – a post pandemic low. Approximately 11.7M individuals are still receiving some type of unemployment benefits (20M was pandemic peek, 2M was approx. number pre-pandemic).
Mortgage Applications to purchase homes decreased by 1% last week and are down 19% year over year. Cash buyers account for 23% of purchases (up from 16% last year). Refinances are down 5% from the previous week and 8% year over year.
Manufacturing – Industrial Production rose 0.9% in July. Factories’ capacity utilization is at 76.1% (slight increase from 75.4% over the previous month) but not so high to expect price inflation.
Fed – many of the Fed members, even the most dovish, are making comments in support of tapering the purchase of Mortgage Backed Securities (MBS). I anticipate that after August Jobs report is released, the Fed will make an announcement in September to begin tapering their purchase of MBS in early 2022. This will likely have a nominal impact on rates as they will still be purchasing a huge number.
Do you like fresh baked sourdough pizza and waterfront views? Come by for a pie made by yours truly on Thursday!