– The 10-year yield has been volatile, reaching a high of 4.93% and dropping to 4.48%.
– Mortgage rates move in line with the 10-year yield.
– We saw a drop in mortgage rates due to softer labor market data and the Fed’s decision not to hike rates.
– Housing inventory growth has slowed down, reaching its peak for the year.
– New listings data has been consistently low.
– Despite higher home prices, the percentage of homes with price cuts is lower than last year.
– Purchase application data has been mixed, with more negative prints than positive.
– The focus for the week ahead is on whether mortgage rates will continue to fall and if there will be a boost in purchase application data.
Mortgage rates and the 10-year yield
The 10-year yield has had a wild ride this week, especially during overnight trading. The 10-year yield hit a high of 4.93% after hours on Halloween, then dropped as low as 4.48% on Friday. As I have stressed, mortgage rates move with the 10-year yield, and we saw a noticeable move lower this week.
So what happened triggered the drop? Three of the four labor reports were softer than anticipated on jobs week. At this stage of the economic cycle, softer labor market data is vital not only for the Fed to pivot, but for the 10-year yield and mortgage rates to go lower.
Job openings data was fine, but the ADP jobs report came in as a miss, jobless claims came in worse than anticipated, and the jobs Friday report showed a slowdown in job and wage growth.
The Fed had its meeting on Wednesday and didn’t hike rates, but added the term that financial conditions and credit conditions now will lead to lower economic activity in the future. These variables put together sent bond yields and mortgage rates lower, and the slow dance between the 10-year yield and mortgage rates continued as it has since 1971.
Weekly housing inventory data
All I want for Christmas is one week of active inventory growth to be between 11,000-17,000 and not even Santa Claus can help me out here because the inventory growth rate has slowed down once again. I am running out of time as seasonality is kicking in, which means we are getting closer to the seasonal inventory decline for 2023. It looks like I will bat a whopping 0 in 2023 for my higher rates inventory growth level forecast.
- Weekly inventory change (Oct. 27-Nov. 3): Inventory rose from 562,556 to 566,882
- Same week last year (Oct. 28-Nov. 4): Inventory fell from 578,089 to 574,973
- The inventory bottom for 2022 was 240,194
- The inventory peak for 2023 so far is 566,882
- For context, active listings for this week in 2015 were 1,140,753
New listings data has been trending at the lowest levels ever for 15 months now, and not too much has changed from that trend. Six weeks ago, I talked about the new listings data and how we should have some flat to positive year-over-year prints on CNBC. That has happened, but I caution people not to read too much into this. We need to find growth in this data line during the spring and early summer months of the year so we can regain the levels we had in 2021 & 2022.
Weekly new listings data for this week:
- 2023: 51,986
- 2022: 51,144
Traditionally, one-third of all homes have price cuts before they sell. When mortgage rates rise and demand decreases, the percentage of homes with price cuts can grow. This is the crazy stat for 2023: even with higher home prices and higher speeds, not only is inventory still negative year over year, but the price cut percentages are still running 4% below last year. Here are the price cut percentages for this week:
- 2023: 39%
- 2022: 43%
- 2021: 28%
Purchase application data was down 1% last week versus the previous week, making the year-to-date count 18 positive prints, 23 negative prints, and one flat week. If we start from Nov. 9, 2022, it’s been 25 positive prints versus 23 negative prints and one flat week.
The week ahead: Will mortgage rates keep falling?
We won’t have a lot of economic data this week, but after the wild week we just had, the one thing I will be watching is whether the bond market gives back some of its gains and whether we see a noticeable boost in purchase application data. The bar is low for purchasing apps to grow. This is similar to what happened a year ago when rates started to fall, but then we rates were falling for some time. For purchase applications to grow, we need mortgage rates to fall and stay low with duration.
Property Chomp’s Take:
Hey there! Let’s talk about mortgage rates and the 10-year yield. It’s been quite a rollercoaster ride for the 10-year yield this week, particularly during overnight trading. On Halloween, the yield reached a high of 4.93%, but then dropped to as low as 4.48% on Friday. As I’ve mentioned before, mortgage rates tend to move in tandem with the 10-year yield, so we witnessed a noticeable decrease in rates this week.
Now, you might be wondering what caused this drop. Well, three out of the four labor reports turned out to be weaker than expected during jobs week. At this point in the economic cycle, softer labor market data is crucial not only for the Fed to make a pivot but also for the 10-year yield and mortgage rates to go down.
The job openings data seemed fine, but the ADP jobs report missed the mark, jobless claims were worse than anticipated, and the jobs report on Friday showed a slowdown in both job and wage growth. Additionally, during the Fed’s meeting on Wednesday, they decided not to increase rates but did mention that financial and credit conditions could lead to lower economic activity in the future. These factors combined resulted in lower bond yields and mortgage rates, continuing the dance between the 10-year yield and mortgage rates that has been going on since 1971.
Now, let’s shift gears and talk about the weekly housing inventory data. I’ve been hoping for a Christmas miracle in the form of active inventory growth between 11,000 and 17,000 for just one week. Unfortunately, even Santa Claus can’t help me out here because the inventory growth rate has once again slowed down. Time is running out as seasonality kicks in, bringing us closer to the seasonal decline in inventory for 2023. It seems like my forecast for higher rates inventory growth will end up being a complete miss for 2023.
Last year, the peak for housing inventory seasonally was on October 28, according to Altos Research. We might have already reached the peak in inventory last week or it could be next week.
To give you some numbers, the inventory rose from 562,556 to 566,882 between October 27 and November 3 this year. In comparison, during the same week last year, the inventory fell from 578,089 to 574,973. The lowest point for inventory in 2022 was 240,194, while the peak for 2023 so far is 566,882. Just to put things into perspective, in 2015, the active listings for this week were 1,140,753.
Moving on, let’s talk about new listings data. It has been consistently trending at the lowest levels ever for the past 15 months, and not much has changed in that regard. Six weeks ago, I mentioned the new listings data and how we might see some flat to positive year-over-year prints. That did happen, but it’s important not to read too much into it. We need to see growth in this data line during the spring and early summer months to reach the levels we had in 2021 and 2022.
For this week, the weekly new listings data shows 51,986 listings in 2023 compared to 51,144 in 2022.
Now, here’s an interesting stat for 2023. Traditionally, one-third of all homes have price cuts before they sell. When mortgage rates rise and demand decreases, the percentage of homes with price cuts tends to grow. However, this year is different. Despite higher home prices and higher speeds, inventory is still negative year over year, and the percentage of price cuts is running 4% below last year. Here are the price cut percentages for this week: 39% in 2023, 43% in 2022, and 28% in 2021.
Let’s move on to purchase application data. Last week, it was down 1% compared to the previous week. So far this year, we’ve had 18 positive prints, 23 negative prints, and one flat week. If we start counting from November 9, 2022, we’ve had 25 positive prints, 23 negative prints, and one flat week.
Looking ahead to the coming week, there won’t be a lot of economic data to analyze. After the wild week we just had, I’ll be watching to see if the bond market gives back some of its gains and if we observe a noticeable boost in purchase application data. The bar is set low for purchasing apps to grow. This situation is similar to what happened a year ago when rates started falling, but this time we need rates to stay low with duration for purchase applications to increase.
That’s all for now. Keep an eye on the mortgage rates and the 10-year yield as they continue to influence the housing market.