The price of a home sold in March set a new record, as inventory dwindled and sales fell. March sales were 4.5% lower than the same period in 2021. The median price of an existing home sold in March was $375,300, an increase of 15% from March 2021. That’s the highest median price ever recorded by the Realtors. At the end of March, there were 950,00 homes for sale, a decrease of 9.5% year over year.
A brutal bond market sell-off wreaks havoc. Things are getting pretty bad for 30-year Treasury bonds. The reasons for the tumble are inflation fears that eat into fixed income, particularly at the far end of the curve; an unfriendly Federal Reserve that is battling price hikes with interest rate increases; and a seismic shift in global bonds that has seen negative nominal yields fade dramatically from the landscape.
Mortgage demand falls to nearly half of what it was a year ago. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.20% last week from 5.13%. Refinance demand fell another 8% for the week and was 68% lower than the same week one year ago. Mortgage applications to purchase a home fell 3% for the week and were 14% lower than the same week one year ago. Read more here.
Treasury yields pull back from 3-year highs. A selloff for U.S. Treasurys paused early Thursday, with yields pulling back from levels last seen more than three years ago. Russia’s invasion of Ukraine has exacerbated inflation fears, sending oil and other commodity prices soaring. The yield on the 10-year Treasury note TMUBMUSD10Y, 2.891% fell to 2.872%, compared with 2.911% at 3 p.m. Eastern on Wednesday.
Procter & Gamble posts its biggest sales gain in decades. Shoppers continue to pay for premium items such as fragrance-free diapers and high-end razors, despite rising prices. Organic sales rose 10% for the quarter ended March 31, the biggest jump since P&G started tracking the metric 20 years ago. Rather than switching to discount alternatives, consumers on average switched to even-pricier products. Read more here.
Single-family rents continue breaking records. Rent prices continued their double-digit climb in February, rising 13.1% overall compared to a year earlier. It marked another record for single-family rents. A shortage of available rentals is leading to a run-up in prices. Also, double-digit gains in home prices are pricing out some would-be home buyers and prompting them to rent instead.
Home purchasers are undeterred by high mortgage rates. Home purchases aren’t exclusively driven by the cost of capital. There is an imbalance of supply and demand in the United States, which keeps home prices propped up since we can’t build housing fast enough. There are evolutions in work trends related to remote work. Millennials are also starting to build a family. Demand is not going to slow down and we aren’t producing enough products. Read more here.
WHAT TO WATCH
Netflix to explore advertising. The company is aiming to establish its ad-supported strategy over the next year or two. During a quarterly earnings call with investors, Netflix CEO Reed Hastings explained that building adverts into the service would give consumers choice’. He also said that allowing consumers who would like to have a lower price, and are advertising-tolerant makes a lot of sense. Read more here.
Modest recession eyed in 2023, Fannie Mae economists predict. Home sales are now expected to decline by 7.4% this year and 9.7% in 2023, a dramatic adjustment from March when Fannie Mae forecast a 4.1% decrease in home sales this year and a 2.7% decrease in 2023. Higher mortgage rates are likely to cause home sales to decline by 7.4 percent this year and by 9.7 percent in 2023.
Energy giants Siemens Gamesa and SSE agree on a $628 million deal. If all goes to plan, the deal between SGRE and SSE is slated for completion by the end of September. In a statement released on Tuesday, SGRE said the sale included a pipeline of onshore wind projects in Greece, Spain, France, and Italy. SSE’s doubling down on its renewables efforts, and the announcement is evidence of management’s conviction.
The supply chain woes will worsen in the summer months. The United States may experience much worse supply chain pains in the coming summer months because of the massive lockdowns ongoing in China, a large trucking company warned. J.B. Hunt says it will get a lot worse as we come into the summer months, particularly with what’s happening in the supply chain from an ocean perspective or in China coming inbound. Read more here.
Expect homeownership tenure to increase with rising rates. Homeowners will rationally decide to hold onto their low fixed-rate mortgages for longer. The utilitarian value of a home has gone way up as more people are spending more time working from home since the pandemic began. Further, more people are recognizing the value of owning real estate for wealth creation, passive income, retirement income, and stability.