Home Sales Rebound
The housing market, to the surprise of many, has rebounded quite robustly from the lows of March and April and this morning’s existing home sales report for July was no exception. A whopping 5.86M homes were sold last month easily surpassing expectations for 5.40M homes, as sales rose 24.7% from June and up 8.7% year-over-year. This strong existing home sales data comes after homebuilder sentiment jumped to an all-time high on Monday. New home sales for June were the highest since the summer of 2007 (per FactSet), and two weeks ago the average 30-year fixed mortgage hit 2.88%, the lowest rate in nearly 50 years per Freddie Mac.
Keeping an Eye on the Mortgage Market
Clearly there is cause for optimism around the recovery in housing, however, the mortgage market is something to monitor closely. Below we have included two charts, the first shows the percentage of mortgages that are past due, and the second indicates the percentage of mortgages for which the foreclosure process has begun. Historically these two charts have been closely correlated, however, in 2020 they have become wildly and unsustainably divergent. Some states such as MA and NY, as well as certain types of mortgages backed by the Federal Housing Administration have extended foreclosure bans, but the much broader moratoriums in the CARES Act expired at the end of July. Therefore, barring a surprising congressional agreement over the next couple weeks for a fifth coronavirus relief bill that renews the aforementioned moratoriums, we expect delinquencies and foreclosures to converge in the near future and will be closely watching for signs of fallout beyond the mortgage market.
Ian Browning, CFA | Director, Investment Strategies & Shareholder
Peter E. Simmons, JD | President & CEO