Vital Statistics:
Stocks are flattish as we await the PCE inflation data. Bonds and MBS are up small.
Personal incomes rose 0.8% MOM in February, according to the BEA. This was well above the 0.4% expectation. Personal spending was flat however, versus an expected 0.5% increase. The PCE Price Index rose 0.3% MOM and 2.5% YOY, which was in line with expectations. The core rate was a little hot, rising 0.4% MOM and 2.8% YOY, both 10 bp above expectations.
January personal income growth was revised downward.
Pending home sales rose 2.4% in February, according to NAR. “Despite the modest monthly increase, contract signings remain well below normal historical levels,” said NAR Chief Economist Lawrence Yun. “A meaningful decline in mortgage rates would help both demand and supply – demand by boosting affordability, and supply by lessening the power of the mortgage rate lock-in effect.”
NAR also introduced new forecasts: the 30 year fixed rate mortgage is expected to average 6.4% this year, while home prices are expected to rise 3%. New home sales are expected to rise 10%, while existing home sales will rise by 6%.
“Considering the Federal Reserve’s recent forecast for slower economic growth, we expect mortgage rates to slide moderately lower,” said Yun. “But the current high national debt will prevent mortgage rates from falling drastically – and certainly not to the 4%-to-5% range seen during President Trump’s first term.”
In other economic news, fourth quarter GDP came in at 2.4%, while consumption was revised down from 4.2% to 4%. Initial Jobless Claims dropped 1K to 224K.
The median monthly housing payment rose 5.3% YOY to $2,807, according to research from Redfin. Higher home prices and lower mortgage rates have somewhat offset each other. That said, we are starting to see more activity, with listings up 7.5% compared to a year ago.
“Buyers are cautious because they’re worried about the economy and potential layoffs, and they’re wondering if mortgage rates will come down later this year. But because other buyers are cautious too, some house hunters are getting homes for under asking price,” said Kimberly Freutel, a Redfin Premier agent in Sammamish, WA. “If you love a home and you see yourself living there for at least four or five years, make an offer you’re comfortable with, even if it’s a little below list. Don’t assume it will escalate out of your price range, because the seller might actually take it. I’m asking my clients, ‘Would you be sad if this home ends up selling for less than asking price to someone else?’”
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