Let’s get to it…

Monthly Round-Up

Mortgage rates dipped back down below 3% as of Thursday last week but quickly jumped higher again on Friday (so not reflected in the 2.99% number below) after the September Jobs Report landed.

The Jobs Report was a mixed bag of fun and misery.

The US economy only added a dismal 194,000 jobs, well below the expectation of 500,000. That’s 2 months in a row of piss-poor results.

Usually, a result like that brings mortgage rates down because it signals a weak demand for labor which is bad news for economic growth (good for mortgage rates), but the details of the report tell a different story. Employers are ravenously hungry to hire people, but employees are historically aloof.

It appears bond investors aren’t really sure how to react to that, but they did react to the positive signs for the economy (bad for mortgage rates) scattered in the details of the report:

• The Unemployment Rate fell lower than expected to 4.8% from 5.2% previously.
• Wages increased 0.2% more than expected.
• Workweek hours increased 0.1 more than expected (this is actually significant by when we consider the 161.4 million people in the labor force).

So for now, mortgage rates appear to be continuing their march higher.

CHART

Median price for detached homes reversed its 2-month seasonal slide in September.

As theorized last month, the larger drop in median price in August looks to be just the result of a drop in volume of sales closed in the $2m price point.

As expected, that was just a timing issue of closings. September saw a big increase in volume in that same category and lo and behold detached median price is back to where we were in July.

The attached median continued its trend higher. Many buyers are being priced out of detached homes. With rents rising fast and interest rates still super low, the attached segment of the market is an attractive option for these folks.

The % to original list price metric continues to showcase the slowing (not crashing) of the market. That steep rise and fall in 2021 pretty bonkers when visualized like this…

I think this metric is being exacerbated by sellers who are pricing their homes as if we were still in the crazy market of Q1 2021.

Combined inventory fell below 3,000. New listings are down by over 1,000 compared to this month last year.

That’s nuts.

There’s still a theory circulating that all these mortgage forbearances are going to turn into a glut of distressed listings and thus cause a correction in home prices. So, I feel I need to address that directly – I simply don’t agree.

Yes, a lot of homeowners signed up for forbearance plans. But I think a healthy portion of those people signed up because they could, not necessarily because they had to. And once signed up, why would they leave a program that gives them the option not to pay their mortgage with little to no negative side effects? Exactly…

Also, with such tremendous equity gains over the last 18 months, homeowners have a lot more options than just letting their homes go back to the banks.

As forbearance periods expire, the data shows that a lot of homeowners are exiting successfully. Check out these bullets pulled from Black Knight’s most recent press release:

• The national delinquency rate on first-lien mortgages fell to 4.00% in August, the lowest it’s been since pandemic-related impacts caused mortgage delinquencies to spike in early 2020.
• Though the number of loans in active foreclosure saw the first monthly rise of 2021 (+2,000), volumes remain near record lows and are still down 44% (-97,000) from pre-pandemic levels
• The month’s 300k new delinquencies are down 28% from August 2019’s pre-pandemic level, with inflow coming in at or below pre-pandemic levels in every month so far in 2021