Home sales present opportunity for credit unions
For the first time in seven months, the demand for homes is stabilizing. In October the sale of previously owned homes increased, which indicates that existing properties are becoming less scarce. While this bodes well for those in the buyer’s market, mortgage rates have yet to budge. More properties are available, yet the prices continue to rise. The mortgage rate is the highest it has been in eight years, and the Federal Reserve is expected to increase interest rates again in 2018 and into 2019. Although NAR Chief Economist, Lawrence Yun, has urged the Fed to pause interest rates to avoid stunting growth in the housing market.
Despite daunting mortgage and interest rates, home purchases actually rose in most of the country. In the West, South, and Northeast, home sales rose, meanwhile they declined in the Midwest. The 30-year current coupon option-adjusted spread is up to 30 basis points, which is the highest we’ve seen it in nearly 2 years. At the end of 2017, it was resting around 8 basis points, which has caused big players like Bank of America Inc. and JPMorgan Chase & Co. to move to an overweight position on mortgages. Many in the financial industry agree with the moves JPMorgan and Chase have made to overweight mortgages, and anticipate performance will be rocky through the end of the year. Moving forward into the New Year, mortgage OAS is expected to tighten 10 basis points compared to Treasuries.
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