Lawler: Early Read on August Existing Home Sales, and Update on Mortgage/MBS Yields and Spreads
From housing economist Tom Lawler:
Early Read on Existing Home Sales in August
Based on publicly-available local realtor/MLS reports released across the country through today, I project that existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 3.90 million in August, down 2.7% from July’s preliminary pace and down 0.8% from last August’s seasonally adjusted pace. Unadjusted sales should show a larger YOY % decline, reflecting this August’s lower business day count compared to last August’s.
Local realtor/MLS reports suggest that the median existing single-family home sales price last month was up by about 2.2% from a year earlier.
CR Note: The NAR is scheduled to release August Existing Home sales on Thursday, September 25th at 10:00 AM. Last year, the NAR reported sales in August 2024 at 3.93 million SAAR.
Update on Mortgage/MBS Yields and Spreads
Also from Tom Lawler:
Mortgage rates and MBS yields have continued to decline through yesterday, with the current-coupon MBS yield falling to 4.99% -- the lowest level since October 2nd of last year. Primary mortgage rate measures have also declined significantly: the Mortgage News Daily 30-year mortgage rate – based on its survey of lender rate sheets for zero-point mortgages to “top tier” borrowers -- was 6.13%, the lowest level since September 17th of last year, while the Optimal Blue 30-year rate for loans with an LTV <=80% and a FICO score >740 – based on actual rate-locks – was 6.085%, its lowest level since October 2nd of last year. (Note: the Optimal Blue methodology does not capture points paid).
The decline in mortgage rates/MBS yields reflects not just falling Treasury yields, but also a substantial narrowing in MBS/Treasury spreads. For example, the CMBS/10-year Treasury spread yesterday was 95 bp, down from 134 bp at the end of May and the tightest spread since March 1, 2022, while the CCMBS/7-year Treasury spread yesterday was 121 bp, down from 157 bp at the end of May and the tightest spread since September 18th of last year.
Note: this chart goes back further than the previous chart.
One reason (but just one) for the narrowing of MBS/Treasury spreads has been the decline in interest-rate volatility. For example, the ICE BofAML MOVE index, based on implied rate volatility from one-month options of Treasury futures across the curve, averaged only 75.6 over the last four days, the lowest level since January of 2022. It is not clear why the options markets and MBS markets have become so complacent about potential interest-rate volatility.
