Existing Home Sales Jump Again:
Despite bad weather, U.S. home sales jumped more than expected in December. Sales of previously occupied homes soared 12.3 percent last month which far surpassed national forecasts of an increase of only 4.5%. This marks the second straight month of significant gains in sales. In November, Existing Home Sales surged 6.1%. The national median home price in December was $169,300 which was only 0.2% lower than levels a year ago. This is important to note because 36% of homes sold in December where under the “distressed” category. And even though this is a larger than normal percentage of sales, the national median home price barely moved. In fact, it actually increased in some ares such as the Midwest (+3.3%).
In other news, Housing Starts decreased from 553K to 529K. While the media has had a field day of reporting this as bad news…it is actually good news! The number one reason that the housing industry fell was over supply. And with supply levels still above where they need to be, any addition to those levels (for example by building even more homes) is not a good idea.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) lost -54BPS from Tuesday’s open (Monday was closed due to the holiday) to Friday’s close which caused 30 year fixed rates to move higher. MBS generally trade in the opposite direction of positive economic news. And last week we had a lot of positive economic news with strong results from Existing Home Sales, Initial Jobless Claims, Leading Economic Indicators and more.