Home prices experience moderate rise, FHFA

Plus: Mortgage rates back over 7%, at 2-week highs ahead of Fed

July 26, 2023

Good morning. This is Mortgage Nuggets, the daily newsletter that gets you caught up with important news and updates. All in less time than it takes to pick a show on Netflix.

Disclaimer: Average mortgage rates as of July 25, 2023. © MND's Daily Rate Index.

1. Home prices experience moderate rise, FHFA

U.S. house prices showed a moderate uptick in May, rising by 0.7% from April and 2.8% year-over-year, according to the FHFA seasonally adjusted monthly House Price Index (HPI).

“U.S. house prices increased moderately in May, continuing the trend of the last few months,” said Nataliya Polkovnichenko, an economist at the FHFA. “However, house prices in some regions of the country remained below the levels seen one year ago.”

For the nine census divisions, seasonally adjusted monthly price changes from April 2023 to May 2023 ranged from -0.5 percent in the New England division to +1.7 percent in the Pacific division. The 12-month changes ranged from -2.7 percent in the Mountain division to +5.5 percent in the East North Central division. LINK

2. Catch up quick

💰 Rithm, the real estate investment trust that operates NewRez, Caliber, and several other businesses, acquires Sculptor Capital for $639M. (Reuters)

🏠 PulteGroup results beat estimates on higher new home sales. (Builder)

📊 Robert Shiller—who called the 2008 housing bubble—thinks he knows how the housing market will exit its latest period of exuberance. (Fortune)

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3. Mortgage rates back over 7%, at 2-week highs ahead of Fed decision

Mortgage rates moved moderately higher for the average lender at some point over the past 2 days.

As always, the motivations for such bumps are primarily tied to trading levels in the bond market. As bonds lose ground, the price of the bond falls and the yield (aka "rate") increases. This means we can often see a popular rate benchmark like the 10yr Treasury yield moving in concert with mortgage rates. Indeed, 10yr yields are also at 2 week highs.

Wednesday brings the latest announcement from the Federal Reserve (the Fed). The market already fully expects another 0.25% rate hike. Instead, it will be the verbiage with which the hike is delivered that matters. 

The Fed Funds Rate doesn't directly dictate mortgage rates. In other words, mortgage rates CAN move lower tomorrow even if the Fed hikes. They can also move higher depending on what Powell has to say about the Fed's policy stance.

Matthew Graham, MND

4. More homeowners insurance providers are pulling back in Florida

In response to persistent severe weather and extensive litigation, Farmers Insurance and AAA are discontinuing certain high-risk policies in Florida.

They join Allstate and State Farm, which made similar decisions. Despite these changes, neither company plans to exit the market entirely.

Florida, burdened by the country's highest property premiums and a surge of lawsuits against home insurers, also faces challenges from rising home prices and contentious flood insurance premiums. Efforts by Gov. Ron DeSantis to ease the crisis are still in early stages.

5. Banc of California and PacWest to merge into new firm called Pacific Western

PacWest, one of the hardest-hit lenders from the regional banking crisis, has agreed to merge with Banc of California in a sign that the fallout from the collapse of Silicon Valley Bank continues to reverberate across the industry.

The two California-based banks announced the deal yesterday, and said buyout groups Warburg Pincus and Centerbridge Partners would invest a combined $400mn in newly issued equity in the merged group.

“We are clearly better together. I believe this merger will be beneficial for all of our stakeholders,” Paul Taylor, PacWest’s chief executive, said.

☀️ See you on Friday!

Coming up…

At 7:00 am: US MBA Mortgage Applications data is due, and at 10:00 a.m., US June New Home Sales.

At 2:00 pm: the Federal Reserve Open Market Committee will release its rate decision. Powell will be speaking at 2:30 p.m.

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