Shiny Trinket

Price drops begin to surface in higher-end markets

Some buyers have been waiting for it, especially those frustrated by losing out on bidding wars: it appears the real estate market may be shifting to one many would call “more normal.” According to a Forbes article by Zillow Chief Economist Svenja Gudell, the share of pricier homes available for sale at a discount from their original list price is growing, even as sellers of less-expensive homes seem somewhat less willing to consider a price cut.

Gudell says that in June, 14.2 percent of all U.S. homes listed for sale on Zillow had at least one price cut, up slightly from 13.4 percent in June 2017, but more or less within the roughly 12 to 14 percent range in which the data have hovered since mid-2013. “Still, price cuts could be increasingly more common in coming months if more recent trends continue to hold,” she says. “Since the beginning of the year, the share of listings nationwide with a price cut increased 1.2 percentage points, the greatest January-to-June increase ever reported, and more than double the January-to-June increase last year.”

And as home value growth begins to slow in some larger markets, the local price cut phenomenon is more pronounced. In two-thirds of the nation’s 35 largest housing markets, the overall share of listings with at least one price cut has risen over the past year.

“In San Diego, 20 percent of all listings had a price cut in June 2018, up from 12 percent a year ago. In Seattle, 12 percent of all listings had a price cut in June, the greatest share since October 2014. Portland, Sacramento, Calif. and Riverside, Calif., were also among the markets that experienced an increase in the share of listings with a price cut in June compared to a year ago,” says Gudell.

It seems higher priced home markets tend to lead the way for other markets to follow, she says. “Since the beginning of the year, the share of higher-priced listings with a price cut – those priced in the top one-third of all homes listed for sale – rose 0.9 percentage points, to 16.2 percent. Over the same time, the share of lower-priced listings with a price cut (those priced in the bottom one-third of all homes) fell 0.1 percentage points, to 11.2 percent.”

Gudell also reports that higher-priced listings have seen a disproportionately large increase in price cuts in 23 of the 35 largest metros analyzed by Zillow since the beginning of the year. “Markets with the largest disparities between shares of listings in the top tier versus the bottom tier with a price cut in June included Dallas (21.9 percent in the top tier, 8.7 percent in the bottom tier, a 13.2 percentage point difference), Orlando (12.5 percentage points) and Houston (12.2 percentage points). Las Vegas, San Antonio, Charlotte, Phoenix and Columbus all had at least a 10 percentage point differential between the share of top-tier listings with a price cut and the share of bottom-tier listings with a price cut.”

Within the nation’s most affordable housing markets, there are fewer listings with price cuts — places like San Antonio, Phoenix, Philadelphia and Houston reported a smaller percentage of listings with a price cut in June than a year ago. In San Antonio, where the median home value is $185,000, 17.8 percent of all listings had a price cut in June, down from about 20 percent of listings a year ago, according to the article.

It may be too soon to begin calling it a buyer’s market, but this may very well be the tip of the iceberg in the sea of change that constantly defines the industry.

How Rates Move:

Conventional overnment (FHA and VA) lenders set their rates based on the pricing of Mortgageand G-Backed Securities (MBS) which are traded in real time, all day in the bond market.  This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events.  When MBS pricing goes up, mortgage rates or pricing generally goes down.  When they fall, mortgage pricing goes up.  Tracking these securities real-time is critical.  For more information about the rate market, contact me directly.  I’m among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning.  Last week the MBS market worsened by -2bps.  This was not enough to move rates higher last week. There was very little mortgage rate volatility last week.

This Week's Rate Forecast: Neutral

Three Things: These are the three things that have the highest ability to impact mortgage rates this week: 1) Trade, 2)Fed and 3) Across the Pond

1) Trade: Top White House officials say they are on the "verge" of crafting a final deal with Mexico but Canada has not been a part of the deal with Mexico. Meanwhile, a contingent from China will be in D.C. this week as part of their "road map" to a meeting between the two Presidents this Fall.

2) Fed: We will get the Minutes from their last FOMC meeting on Wednesday. While they won't raise rates at that meeting, the policy statement was more "hawkish" than the prior statement and set the table for a rate hike at the next meeting. The Kansas City Fed will host their Annual Jackson Hole Wyoming Symposium, and we will hear from Fed Chair Powell on Friday at that symposium.

3) Across the Pond: Our domestic data will not have an impact on MBS (mortgage rates), and most likely neither will the data from overseas but there are some very key releases which include manufacturing PMI and GDP from several of the top 5 world economies.

This Week's Potential Volatility: Average

Mortgage rates continue to move sideways in a very tight channel. There's nothing scheduled this week that is likely to push rates higher or lower. The one thing that can drive rates and cause volatility is something unexpected with trade.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

30 years experience lending in Austin and Texas.

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.