Homebuyer Activity In January Was Notably Subdued. According to the National Association of Realtors This Week in Real Estate, pending home sales in January decreased by 4.6% from December and were down 5.2% compared to January 2024. The Commerce Department reported a significant decline in U.S. consumer spending in January, marking the first decrease in two years and the largest drop in nearly four years, as both the Personal Consumption Expenditure (PCE) price index and PCE inflation rose by 0.3%. Despite these trends, mortgage rates have been steadily declining, with the 30-year fixed-rate mortgage averaging 6.76%, down from the previous week’s average of 6.85%, according to Freddie Mac. This marks the sixth consecutive week of easing rates, reaching their lowest level in over two months. A year ago, the 30-year fixed-rate mortgage averaged 6.94%. This week, attention turns to labor data as the Bureau of Labor Statistics is set to release the latest jobs report on Friday. Recent economic trends suggest that labor data is currently of greater significance to the bond market than inflation. Below are key events from the final week of February impacting our business:
PENDING HOME SALES WANED 4.6% IN JANUARY. The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – fell 4.6% to 70.6 in January, an all-time low. (Last year’s cyclical low point in July 2024 was revised from 70.2 to 71.2.) Year-over-year, pending transactions declined 5.2%. “It’s evident that elevated home prices and higher mortgage rates strained affordability,” said NAR Chief Economist Lawrence Yun. Housing affordability suffered in January as mortgage rates ranged from 6.91% to 7.04%. The Northeast PHSI rose 0.3% from last month to 63.4. The Midwest index contracted 2.0% to 72.8 in January. The South PHSI plunged 9.2% to 81.0 in January. The West index fell by 1.2% from the prior month to 57.6. “Even a slight reduction in mortgage rates will likely ignite buyer interest, given rising incomes, increased jobs and more inventory choices,” added Yun. Read the full story here.
MORTGAGE RATES EASE SLIGHTLY IN FEBRUARY AMID ECONOMIC UNCERTAINTY. Mortgage rates declined marginally in February, with the average 30-year fixed-rate mortgage falling to 6.84%. After climbing steadily since December and peaking at 7.04% in mid-January, rates have been trending downward. According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage decreased 12 basis points (bps) from January. The 10-year Treasury yield declined 11 bps to an average of 4.52% in February. Read the full story here.
THE HOUSING DATA TRENDS TO WATCH IN 2025. “Big picture 2025, our view is that it will be slightly better than 2024 in terms of originations and sales, but unfortunately it probably won’t feel much better,” Ryan McKeveny, the managing director of mortgage and real estate at Zelman & Associates, told attendees of HousingWire’s Housing Economic Summit on Wednesday. “If you are not focused on mortgage spreads, you probably should be,” McKeveny said. “The most recent data point from last week shows a 234-basis point spread between mortgage rates and the 10-year treasury yield. The good news is that we have compressed from north of 300-points in the highs of 2022 and 2023, but the long-term average is about 170-basis points. So, we have seen improvements, but we are still at elevated levels.” Read the full story here.
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