Foreclosure starts fell to their lowest level in 18 years while low interest rates have increased prepayments by 5% from July to August, a three-year high. There were 36,200 foreclosure starts in August, down 23% from August 2018. August’s prepayment rate was up 62% from the same time last year and 2.5 times the 18-year low hit in January. Black Knight said the month's prepayment activity reflects June/July interest rates; as rates fell further in August and September, the peak in refinance-driven prepayments is likely still to come.
The decline in homes for sale on the market continued in August with inventories falling 5.5% from a year ago and down 1.5% from July, in 53 metro areas. Months Supply of Inventory decreased to 2.8 compared to 2.9 in July 2019 and eclipsed the previous August low in the report’s 11-year history. In addition, inventory has remained below four months in 39 of the last 42 months, dating back to March 2016. Six months is considered a market balanced between sellers and buyers. “The modest inventory growth that started last fall has been swallowed up by demand as buyers have returned to the market, likely spurred on by attractive interest rates,” said RE/MAX CEO Adam Contos.
There were no economic reports due for release today. The rest of the week's calendar features housing, consumer attitudes and spending, Gross Domestic Product, and the inflation reading Core PCE. The Treasury will be selling a total of $113 billion in Treasury notes this week beginning tomorrow, the results could impact bond prices and rates. Mortgage Bond prices begin the week near unchanged while US stocks are modestly higher. This week is typically the weakest week of the year for the S&P 500 stock index but it is getting off to a positive start.
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