Big demand. Small inventory. Spring homebuyers are pounding the pavement at a furious pace, but the pickings are getting ever slimmer, according to news reports.

Spring is traditionally the busiest time of year to buy a home, but this year listings are getting snapped up with lightning speed as bidding wars have become par for the course. According to an article in NBC News, home prices have now surpassed their last peak, and at the entry level, where demand is highest, sellers are firmly in the driver’s seat.

The article cites a Realtor in Burbank, CA, who says, ”I’ve been selling real estate for 25 years, and this is the strongest seller’s market I have ever seen in my entire real estate career. A lot of our sellers are optimistically pricing their homes in today’s market, and I have to say in most cases we’re getting the home sold anyway.”

As an example, NBC News reported how a three-bedroom, two bathroom, 1,240-square-foot home in Burbank offered for $789,000 (considered an entry-level home in the LA market) had three offers before the first open house Sunday, drawing more than 100 potential but weary buyers.

As is customary in crazy markets like this, most of the listings are intentionally listed a bit low to garner attention. Then the bidding frenzy ensues, often getting a dozen or more offers on one property. According to the article, more homes came on the market in March, but fierce demand made “sold” signs go up quickly. “At the end of the month, the supply of homes for sale nationally was down 6.6 percent compared with a year ago, according to the National Association of Realtors. Unsold inventory is a slim 3.8-month supply. A balanced market between buyers and sellers has a five-to-six-month supply. Properties sold in March were on the market for an average 34 days, down from 45 in February and 47 in March 2016.”

All cash offers and contingency removals are common trends because in such a hot market, homes are appraising well below the sale price, making it even harder for first-time, mortgage-dependent buyers to succeed.

All this has caused home prices to hit new peaks each month, with prices nationally up 5.7 percent in February year over year, according to Black Knight Financial Services. Washington, Oregon, and Colorado are seeing the biggest price gains, as buyers flee high prices in California.

Big cities are the all-hat-no-cattle losers, however. Real estate brokerage Redfin studied which markets had the most people searching for homes outside their city. San Francisco, Los Angeles, and New York were the biggest losers. “Fast-growing coastal cities may be generating the high-paying jobs, but they haven’t created enough budget-friendly housing to keep pace,” said Nela Richardson, Redfin’s chief economist. “The price of real estate and desire for homeownership is compelling many to uproot and seek housing in more affordable communities.”

 
 
 
 
  This Week’s Mortgage Rate Summary
 
 
 
 

How Rates Move:

Conventional overnment (FHA and VA) lenders set their rates based on the pricing of Mortgageand G-Backed Securities (MBS) which are traded in real time, all day in the bond market.  This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events.  When MBS pricing goes up, mortgage rates or pricing generally goes down.  When they fall, mortgage pricing goes up.  Tracking these securities real-time is critical.  For more information about the rate market, contact me directly.  I’m among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning.  Last week the MBS market improved by +3bps.  This was not enough to move rates higher last week. There was low mortgage rate volatility last week.

This Week’s Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact your mortgage rates this week. 1) Trade Wars, 2)Oil and 3) Geopolitical.

1.) Trade Wars: Is last week’s opening furrow just the beginning? That is what all markets (stocks, bonds, etc) are concerned about and is a significant uncertainty for traders. While the first round of tariffs by the U.S. and China won’t kick in until July 6th, we will be looking for any movements in trade negotiations.

2.) Oil: A sharp rise in Oil prices were a major factor in a multitude of inflation readings over the past month which also pressured rates. But over the past couple of weeks, oil prices have dropped, and it has helped mortgage rates. This Fridaywe have a critical OPEC meeting, and their output targets will impact inflation expectations.

3.) Geopolitical: Merkel is on the chopping block in Germany which is very big for the markets. Spain and Italy still are of concern with their very recent leadership change and their huge amount of debt that has no way of being paid back.

Housing Data: While these reports do not generally impact your mortgage rates, we do get a ton of housing-related data this week that will give us a good understanding of the state of the housing market. This week we get the Home Builders’ Sentiment Index, Housing Starts, Building Permits, Weekly Mortgage Applications, Existing Home Sales and the FHFA Home Price Index.

This Week’s Potential Volatility: Average

Mortgage rates were very stable last week. This week, we have less market-moving economic data due for release. However, as of late, the markets are keeping a close eye on geopolitical events and tariff talks that can change markets at any time.

Bottom Line: