Housing is Still a Good Investment

By Taff Weinstein at

Housing is Still a Good Investment

The Federal Reserve Bank of New York just released their latest monthly Survey of Consumer Expectations and the results are encouraging for the housing market.

The survey showed that attitudes toward owning a home as a good financial investment remained strongly positive, with 65% of all respondents regarding the buying of property in their zip code as a “very good” or “somewhat good” investment. The survey showed that only 9% of respondents regard housing as a “bad” investment, which is down from 10.6% a year ago.

Another component of that same survey showed that expectations that their Household Finances would be better off one year from now was quite strong with 42.3% expecting to be better off and 45.95% saying they would be in About the Same financial position.  So, that means that 88.25% expect to have the same or better household finances a year from now which bodes well for the housing market as potential home buyers are more likely to invest in real estate if they feel their situation is stable or will improve.

The survey also found that expectations of future mortgage rate increases rose about 50 basis points at both the one- and three-year horizons, with older respondents assigning a higher likelihood to a mortgage rate increase than younger respondents.

Source: Federal Reserve Bank of New York

What Happened to Rates Last Week?


Mortgage backed securities (FNMA 4.00 MBS) gained +7 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways (unchanged) compared to the previous week.

Overview:  We had a lot of housing news and it all pointed to a very healthy housing market but the markets focused more on the Federal Reserve and the release of their Minutes from their last FOMC meeting.  Overall, the Minutes really supported a "middle of the road" bias by the Fed which matched their prior statement.  

Taking it to the House: Weekly Mortgage Applications rose by 2.4%, led by a nice jump of +8.0% in Refinance Applications.  Purchases dropped by -2.0%.  April New Home Sales hit 673K vs expectations of 675K which would appear to be a miss.  But in fact, this was A VERY STRONG HOUSING REPORT.  This is due to the fact that March was revised upward to 723K which was the highest reading since October 2007!  And April, it turns out was the third best reading since 2007.  Median prices jumped to $342,200 with the average sales price at $393,700.  The April Existing Home Sales Report showed an annualized pace of 5.19 million units which is just off of March's pace of 5.21M. The market was expecting a little better reading of 5.35M. Sales of single-family homes, the key component in this report, now has a 3-month average that is positive, at 4.733 million for the best showing since August last year. Inventory moved up from 3.8 months in March to 4.2 months in April which is still extremely tight.  Median home prices rose yet again, this time by 2.9% to $267,300.

The Talking Fed:  We got the Minutes from the last FOMC meeting.  You read the official release here.

Here are some key points:

  • Many participants viewed the recent dip in PCE inflation as likely to be transitory. Survey-based measures of longer-run inflation expectations were little changed.
  • A number of participants observed that some of the risks and uncertainties that had surrounded their outlooks earlier in the year had moderated, including those related to the global economic outlook, Brexit, and trade negotiations.
  • Members observed that a patient approach to determining future adjustments to the target range for the federal funds rate would likely remain appropriate for some time, especially in an environment of moderate economic growth and muted inflation pressures, even if global economic and financial conditions continued to improve.
  • The Committee noted that it is prepared to adjust the size and composition of the balance sheet to achieve its macroeconomic objectives
  • With regard to the post-meeting statement, members agreed to remove references to a slowing in the pace of economic growth and little-changed payroll employment, consistent with stronger incoming information on these indicators.


What to Watch Out For This Week:

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.




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