The Census Bureau reported New Home Sales for April today, and at face value, the news is good.  Economists expected an annual pace of 692k, but were instead treated to a surprisingly high 743k–just edging out 3 of the best months over the past 3 years. Unlike many of the other reports we cover, there’s really no glaring counterpoint when we zoom out to a wider frame of reference.  Sure, sales were higher during the post-pandemic housing frenzy, but unlike existing homes and other housing data, New Home Sales are as good or better than their pre-pandemic levels.  So what’s the catch? It’s too soon to say.  In some sense, today’s results are cheapened by the fact that last month’s numbers were revised quite a bit lower.  Granted, big revisions are not-at-all uncommon for this data series, but if we’re going to award titles like “best levels in 3 years,” it’s worth noting that this will not be the case if we see even a fraction of the same sort of downward revision next month. Geographically, the surprising surge was led by the South and Midwest.  The Western region held mostly steady and the Northeast lost ground. 

Northeast

23k (down 4k from March)

Midwest

84k (up 22k from March)

South

478k (up 50k from March)

West

158k (up 5k from March)

A Little Early Excitement

Bonds began the day with a bit of excitement following Trump comments on raising EU tariffs to 50%.  The reaction was bigger than warranted based on the time of day/week as well as the fact that it’s the Friday before a 3 day weekend. All that to say, markets were easier than normal to push around with seemingly relevant headlines.  By the time human traders were sorting things out, stocks and bonds were moving back in the opposite direction. The day ultimately ended with modest gains, but at levels that represent the 4th weakest close in 3 months. Ho hum in the bigger picture, but better than a sharp stick in the eye.

Econ Data / Events

New Home Sales

 743k vs 692k f’cast, 724k prev

Market Movement Recap

10:07 AM Initial pop toward lower yields on EU tariff escalation is slowly reversing.  MBS still up 2 ticks (.06) and 10yr still down 2.4bps at 4.512

11:13 AM MBS up 1 tick (.03) but down a quarter point from AM highs.  10yr down 1.7bps at 4.519 vs AM lows of 4.45

The bond market is scheduled to close 3 hour earlier than normal today–a common practice surrounding federal holiday weekends. This means 3 fewer hours where trading volatility can have an impact on mortgage rate movement.  Said more simply: the day is basically over when it comes to potential intraday rate changes. There is almost always a bit of rate movement overnight as mortgage lenders react to a new market landscape each morning. Today’s happened to be good news for rates, but not quite good enough to get the average top tier 30yr fixed scenario back under 7%. 7% rates aren’t new, but it’s been more than 3 months since we’ve seen them with any regularity.  Nonetheless, they are quite regular in the bigger picture over the past few years. With a long term high of 8.03% in October 2023 and a subsequent low near 6% about a year later, 7% is exceedingly “middle of the road.” 

The Mortgage Bankers Association’s (MBA) weekly application survey has been doing a good job of tracking with the more granular daily rate data from MND. Both are in agreement that rates were on their way up to the highest levels in several months last week–a fact that seems to have taken a toll on both purchase and refinance applications. “Mortgage rates jumped to their highest level since February last week, with investors concerned about rising inflation and the impact of increasing deficits and debt,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Higher rates, including the 30-year fixed rate increasing to 6.92 percent, led to a slowdown across the board. However, purchase applications are up 13 percent from one year ago.” Here’s the full breakdown on MBA’s surveyed rates from last week:

30yr Fixed: 6.92% (+0.06) | Points: 0.69 (+0.01)

Jumbo 30yr: 6.94% (+0.09) | Points: 0.72 (+0.23)

FHA: 6.60% (+0.01) | Points: 0.96 (+0.07)

15yr Fixed: 6.21% (+0.09) | Points: 0.72 (+0.13)

5/1 ARM: 6.16% (+0.07) | Points: 0.36 (−0.38)

Two months ago, existing home sales came in at the highest levels in a year according the the National Association of Realtors (NAR). Last month’s report showed a fairly sharp decline to 5 month lows. The latest data, out this week is less sensational by comparison. Granted, we can now technically say that existing sales are at 6 month lows, but they really didn’t change much from a month ago. As has been and continues to be the case, zooming out on the same chart results in an entirely different impression of the home resale market. Then again, there is perhaps some solace in zooming out even more. “Home sales have been at 75% of normal or pre-pandemic activity for the past three years, even with seven million jobs added to the economy,” said NAR Chief Economist Lawrence Yun. “Pent-up housing demand continues to grow, though not realized. Any meaningful decline in mortgage rates will help release this demand.” Here’s a regional breakdown of sales activity and prices from this report:

Northeast

Sales : 480,000 annual rate (↓2.0% from March)

Median Price : $487,400 (↑6.3% YoY)

Midwest

Sales : 970,000 annual rate (↑2.1% from March)

Median Price : $313,300 (↑3.6% YoY)

South

Sales : 1.81 million annual rate (unchanged from March)

Median Price : $365,300 (↓0.1% YoY)

West

Sales : 740,000 annual rate (↓3.9% from March)

Median Price : $628,500 (↓0.2% YoY)

The notion that the enterprises could be a source of revenue has led to a suggestion that the funds from a public offering could be reinvested in housing.

The 14.3% rate for deals withdrawn in any April is the highest level other than in Covid-impacted 2020, as homebuyers reexamine the market, Redfin said.

The Republican-led bill heading to the Senate extends and expands numerous business and consumer tax benefits included in Trump’s 2017 cuts.

Bond yields are shooting up for the second time in as many months. Federal Reserve Gov. Christopher Waller attributes the volatility to concerns about rising national debt levels.

Yields on the 10-year Treasury have been climbing because of the Moody’s U.S. downgrade, the tax bill under debate in Congress and possible GSE reform.