What the latest housing numbers and market moves mean for you

Category: News
Read Time: 4min

Although the housing market remains competitive, buyers aren’t showing any signs of slowing down or calling it quits.

Sales of existing single-family homes went up 2% to 5.28 million in July with first-time home buyers making up 30% of those purchases, according to a recent report from the National Association of Realtors. Inventory of unsold homes increased 7.3% to 1.32 million from June to July while the median existing-home sales price rose 18% to $367,000 from July 2020.

This may suggest that, for prospective buyers, entry into the market might not be as difficult or intense as previous years. Most regions in the United States continue to see home sale gains even as the housing stock enjoys a fairly modest increase.

“Some upward movement aside, the factors that have frustrated buyers for months continue to persist,” said Donny Kirby, vice president of sales for Wyndham Capital Mortgage. “Inventory is low. Demand is high. And prices continue to go up. If you’re ready to enter the market, keep watch on whether the slight uptick in inventory helps level out home prices over the next few months.”

But what about those treasuries, though?

Kirby indicated that besides the housing market, there is one more factor homebuyers should keep an eye on: the 10-Year Treasury. After a jobs report showed numbers more than half what many economists expected for August, yield on the Treasury rose about 3 basis points to 1.32%.

Before we go any further, let’s break down some key definitions to help frame your understanding of treasuries and why they matter to mortgages.

  • Treasury bonds: These are loans to the federal government that mature over a period of time. The government auctions these loans to investors, who often buy them when the economy is more active. That’s because these bonds, which get the full backing of the federal government, are considered generally safe investments When investors feel good about the economy, prices on treasuries drop and yield – or the amount of return investors will realize on the bond – rises. That’s because investors are more confident they can get higher returns on other kinds of investments, so they often take a risk. But when things are shaky, prices rise and yield falls because there’s more demand for safe investments and more aversion to risk.
  • 10-Year Treasury: The 10-Year Treasury is considered a key indicator of investor confidence and mortgage rates. When the yield on the 10-Year Treasury rises, so do mortgage rates. Higher mortgage rates mean higher monthly payments.

That brings us back to the 10-Year Treasury’s recent activity. While a small rise in basis points is nothing to fret about (yet), we should keep paying attention to trends over the last year.

In March, yield on the 10-Year Treasury went up significantly, hitting 1.75% at one point and placing upward pressure on mortgage rates. Yield has since fallen, but many economic observers aren’t ready to say whether the zigzag movement suggests a sustained downward trend in rates.

And that’s wise given recent sentiment from the nation’s central bank. The Federal Reserve has indicated plans to ease back its purchase of $120 billion in Treasury bonds and mortgage-backed securities in a process called tapering.

“In response to the pandemic, the Fed started buying government debt to make borrowing money easier and more affordable — a strategy it uses to help stimulate and support the economy in times of crisis,” Kirby said.

But now policymakers are saying the economy doesn’t need as much policy support, warranting its decision to reduce the amount of bonds it buys each month.

But before the Fed can make a move, it faces some major headwinds with inflation being chief among them.

Following the Fed

Inflation has spiked this year, overshooting the Fed’s 2% target. Couple that with last month’s jobs report, and it may persuade the central bank to hold off on ending its bond-buying program.

If the Fed pauses its plans, money will remain cheaper to borrow, which means mortgage rates may stay historically low for the foreseeable future.

“For aspiring homebuyers, that’s good news. But it’s also cautionary news,” Kirby said.

Other factors to consider
No one really knows what the economy will do as the COVID-19 Delta variant continues to spread. Plus, the economy is dealing with rapid inflation, and the end of eviction moratoriums may potentially fuel more housing shortages.

There are many other economic factors at play that determine the shape of the housing industry in the months to come. Just know that the Fed’s actions (or inaction) will affect mortgage rates. If the Fed determines the economy is healthy enough, it could decide to raise federal interest rates, which will raise mortgage rates.

Fed Chairman Jerome Powell has said the central bank won’t pursue that option before the economy reaches maximum employment. We may learn more during the Fed’s direction at upcoming meetings.

Until then, if you’ve considered buying a home, now may be a good time to get in touch with one of our loan officers to discuss your options. Rates are inherently unpredictable, so there’s no telling what they could look like in a few months. Let’s see if we can make homeownership a reality in your life now.

Gene King is the Director of Communications and PR at Wyndham Capital Mortgage. Gene has over 20 years of experience writing and creating content in the financial services industry, having led communications at H&R Block and Ally Bank. Gene oversees Wyndham Capital’s content strategy, social media, media relations and internal communication to help establish WCM’s brand, recruit and retain employees and drive customers. His team does this with relevant and reliable information to help customers make informed homebuying, selling and refinancing decisions. Gene earned a Master’s Degree in Integrated Marketing Communications and a Bachelor's Degree in Journalism from the University of Kansas. Gene, a regular speaker on measurement and content strategy, also earned his Accreditation in Public Relations. He is an avid sports fan and enjoys traveling.

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