The number of Americans who signed contracts to buy homes in November rose to the highest level in a year and a half. The best reading on pending homes sales since a federal home-buying tax credit expired appeared to encourage traders on Wall Street.
The Realtors group said Thursday that its index of sales agreements jumped 7.3 percent last month to a reading of 100.1. A reading of 100 is considered healthy. The last time the index was that high was in April 2010, one month before the tax credit expired.
Contract signings usually indicate where the housing market is headed. There’s a one- to two-month lag between a signed contract and a completed deal.
Homes are the most affordable they’ve been in decades. Long-term mortgage rates are at historic lows and prices in most metro areas have tumbled since late 2006.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained +95 basis points from last Friday to the prior Friday which moved mortgage rates lower.
We had much better than expected U.S. economic data. Pending Home Sales, Consumer Confidence, and the Chicago PMI were all very strong.
Normally, these type of strong readings would cause bonds to sell off and your mortgage rates to rise. But last week was a holiday shortened week that saw very low volumes.
Traders simply “parked” their funds into the safe-haven of bonds over the holiday week which increased demand for bonds and temporarily lowered mortgage rates.
MICHAEL MCDEVITT 