Trends in New Home Sales

"Pending" Home Sales, "Existing" Home Sales, and "New" Home Sales - take your pick. They all show something slightly different, and economists have their favorites. Housing and jobs play critical roles in the United States economy, thus the abundance of various statistics for each one. What have New Home Sales been doing recently? The numbers measure sales of newly built homes, and are a lagging indicator since the number comes out late in the subsequent month. Remember that sales can head higher, or lower, for different reasons. For example, do sales drop because no one wants a home, they're too expensive, or there are none for sale?

April's numbers just came out yesterday. We learned that new U.S. single-family home sales tumbled over 11% from near a 9-1/2-year high in April, down to a seasonally adjusted annual rate of 569,00 units last month. March's sales pace was revised up to 642,000 units, which was the highest level since October 2007. New home sales increased 0.5 percent on a year-on-year basis. April's sales drop came after three straight months of increases - so no big deal apparently. The key takeaway from the report is that upward revisions to prior months more than made up for the shortfall in April relative to the consensus estimate. The median selling price fell to $309,200 from $318,700 in March. That statistic can easily be affected by selling prices, i.e., home values are not declining but cheaper homes are seeing more sales. Sales in the West declined by 26.3%.

It isn't hard to find very high permit prices, rising building material costs, shortages of lots, and fewer laborers. All that has helped keep house prices elevated. The inventory of new homes on the market increased 1.5 percent to 268,000 units last month, the highest level since July 2009. Still, new housing stock remains less than half of what it was at its peak during the housing boom in 2006. (A six-month supply is viewed as a healthy balance between supply and demand.)

In February new home sales maintained a strong momentum by rising by more than 6% from January and by nearly 13% from a year ago.

New home sales rose 5.5% YOY to 555,000 in January. This was 3.7% above the revised December reading. The median new home price was $312,900 and the average price was $360,900. At the end of the month, there were 265,000 new homes for sale, which represents a 5.7-month supply. The press took note since we were barely back to pre-1990 levels which doesn't even consider things like population growth and obsolescence. January's data followed a downwardly revised 535K in December.

Sales fell in December to a seasonally adjusted annual rate of 535k/month, a 10-month low. This data series is volatile, so new home sales for FY 2016 were still up 12.2% to 563k. The median sales price was up 7.9% y/y (4.3% m/m) to $322,500. Analysts noted that lower sales pushed available supply up to 5.8 months of sales. There were about 259,000 units for sale at the end of December, which represents a 5.8-month supply.

The month before, new home sales increased 5.2% in November to a seasonally adjusted annual rate of 592,000. That was 16.5% higher than the estimate for the same period a year ago, interesting since November's move came despite rising mortgage rates (or maybe because of them as some buyers rushed to lock in lower rates), providing a nice leading indicator for economic activity.

Continuing our look back, September's new home sales rate came in below expectations at 593,000/year. In August sales came in at an annualized rate of 575k, a little better than expected, but below last month's 659k pace. The median sales price of new houses sold in August 2016 was $284,000; the average sales price was $353,600. The seasonally adjusted estimate of new houses for sale at the end of August was 235,000, a supply of 4.6 months at the then current sales rate.

New home sales in the U.S. leapt to an eight-year high of 654K (seasonally adjusted annual rate) in July 2016 although the median selling price fell 0.5% y/y to $294,600. Inventory fell to 4.3 months' worth of sales. And in May sales fell to a seasonally adjusted annual rate of 551K in May from 586K in April (revised down from 619K). The downturn in May featured a 33.3% decline in sales in the Northeast, although every region experienced a sales drop except for the Midwest (+12.9%). Notably, the South and the West -- the two biggest regions for new home sales -- saw sales decline 0.9% and 15.6%, respectively.

Going back to summer of last year, new home sales came in much stronger than expected, at an annual rate of 619,000. This was the highest level since early 2008.

Capital Markets

Looking at interest rates through the bond market, yesterday things were quiet until - are you ready for this? - a 52-week Treasury bill auction was met with very weak demand. The metrics of the $20 billion auction weren't good ("sloppy"), giving folks an excuse to sell fixed-income securities. Once the selling gathered some steam, even a warm reception for the $26 billion 2-year Treasury auction could not stem the tide. And yes, new home sales were poor, but not catastrophic enough to cause rates to drop. The 10-year note worsened about .250 while the 5-year and agency MBS prices sold-off .125.

But today is a brand-spankin'-new day, right? We've already had the MBA's read on last week's applications (driven entirely be refinances it was +4.4%, but still 30% lower than a year ago). Coming up are the non-market moving FHFA Home Price Index and existing home sales. This afternoon are the minutes from the May 2-3 FOMC meeting to be released at 2PM ET. Market participants will look for expanded thinking regarding the Fed's balance sheet strategy. We start the day with rates little changed compared to Tuesday's close: the 10-year is yielding 2.28% and agency MBS prices are better by a smidge depending on coupon.

Jobs, Professional Opportunities, and Products

"Recognized as one of the top performing banks in the country, Northpointe Bank is actively searching for a Director of Business Development Community Lending. This position requires a minimum of five years of mortgage experience, contacts within the Community Banking arena, and exceptional customer service along with the ability to turn prospects into customers. The Northpointe Community Lending platform is an origination fulfillment channel that offers a completely private label and customer-branded solution focused on community banks and credit unions. The Northpointe Community Lending platform scales the regulatory burden so it is affordable for the customer, the ability to leverage leading technology is a huge benefit to community lenders without the need for large capital investment or systems upgrade." To learn more about this position contact Sheri duChemin.

A mature, heavily experienced retail production and Ops team is seeking $4M in investment capital (equity or a combination of debt/equity) to finalize a $1.5M purchase of a profitable, $15M-20M/month HUD endorsed, GSE approved, retail multi state mortgage bank. This team, with the acquired mortgage bank has realistic growth projections that reflect retail production forecasts of $750M in 2018 and $1.4B in 2019 (mostly purchase business, 50/50 government-conventional business), with a net income projection of 55 and 70bps respectively - (net income of $4.1M and $9.8M net profit projections for each of these years). With additional capital growth, aggressive plans for servicing 10% and 40% of all loans in 2018 and 2019. If you are an investment bank or investor, interested in this financial investment, contact Rob Chrisman for a confidential inquiry. Seriously interested parties only please. A LOI is being negotiated and finalized, with the purchase deal closing by no later than July 1st. 

Media Center LLC, an industry leading provider of CRM has partnered with another leading technology innovator, Optimal Blue, to infuse its CRM/Automated Marketing platform with OB's real-time pricing information, which is 99.99% accurate at all levels for mortgage firms. Media Center has provided CRM/marketing since 1995 and recognizes that their platform must work seamlessly with other "Best in Class" solutions to maximize user benefits. Dan Harrington, founder of the Media Center, says, "It's really a dance that requires creative dexterity to connect the leading pricing technology (OB) with a CRM/marketing platform that's proven to be 'insanely simple' to use. When you get that right, as we've done in our partnership with Optimal Blue, the benefits for LOs are extraordinary." Originators whose companies are currently using Optimal Blue can learn more about the prospecting and data-mining benefits of OB's integrated pricing engine working within the Media Center's CRM by contacting Paul Harrington, Business Development, at 720-931-2375.

"Are you ready to join a winning team? Provident Bank Mortgage, a full-service lender headquartered in Riverside California since 1956, is seeking an experienced Retail Mortgage Professional for a Sales Manager position in the Santa Barbara area. Please contact/email resumes to Amy Fishel, Recruiter, at (951) 782-6184. And if you're looking to keep your Sales and Ops team together yet be a part of a strong financial institution with an entrepreneurial philosophy, email Mike McIlrath for more details. Provident offers a decentralized lending platform allowing branches to control processing, underwriting, docs, and funding. We also have a full menu of Conventional, FHA, VA, CalHFA, jumbo and portfolio products. Plus, we offer competitive compensation, excellent benefits and a great work environment. AAP/EEO Statement: Provident Bank is an equal opportunity employer. It is the bank's policy to grant equal employment opportunity (EEO) to all qualified persons without regard to race, sex, religion, age, national origin, physical or mental disability, or veteran's status. The bank provides equal opportunities in employment, promotion, wages, benefits, and all other privileges, terms, and conditions of employment. It is our policy to make reasonable accommodations for the disabled. We will endeavor to concentrate on the disabled person's abilities and not disabilities. This policy has the support of the highest levels of management. Provident Bank is an 'at will' employer."

Due to Caliber Home Loans' commitment to developing its jumbo business, it has recently hired two new executives with extensive jumbo background. Taking on new roles are Dan Koch as SVP of Product Development and Graham Treece as VP of Jumbo Product Mortgage. Both Koch and Treece join Caliber from Two Harbors. Koch served as Managing Director and Head of Business Development for Jumbo Loan Conduit at Two Harbors and prior to that he worked at Redwood Trust where he served in various roles, including loan acquisition, securitization, business development and more. Koch began his career in jumbo loans at Morgan Stanley. Treece served as the Head Whole Loan Trader at Two Harbors, heading up trading initiatives including securitization and rate sheet generation, and prior to that was with JPMorgan in the Securitized Products Group. 

"C.L.A. Title & Escrow updates their national settlement fee to offer very aggressive pricing for lenders and homeowners using their service. John Coester is pleased to announce we have lowered our fees by $100 in every state. You can access our fees on Closing Corp, our free online calculator and by requesting a rate sheet from Kristin Ferguson."

"There is an average of 2,300 words in this e-mail. We only need 17: close your loans on time, reduce your stress level, and increase your compensation by joining Assurance Financial. Contact Recruiting Manager, Paul Peters, CMB, at 225-239-7948 about making a change or visit LendTheWay.Com/Careers.

Congrats to Valerie Ausband who Arch MI promoted to Senior Vice President of Field Sales where she will be "responsible for Arch MI's field sales strategies, including the management and coordination of sales, customer relationships and business development for six regions and 70 salespeople across the country."

Independent mortgage banker Guild Mortgage launched its "nationwide, competitively priced conventional loan program that requires only a 1 percent down payment from the first-time homebuyer. Combined with a 2 percent grant from Guild, the 3 percent equity results in a loan with a 97 percent loan-to-value (LTV) ratio. The grant does not need to be repaid. 'With the gift of a 2 percent grant, Guild is helping solve financing challenges for first-time and move-up buyers with low-to-moderate income,' said David Battany, EVP of Capital Markets. Because this is a down payment assistance program, there are income limits, required homebuyer classes and additional parameters. Income limits do not apply for properties in low-income census tracts. Key components of the Guild 1% Loan program include: Non-borrower household income can be used to qualify, boarder income can be used to qualify, debt to Income ratio (DTI) up to 50%."