January Pending Home Sales Rise, Market on Uptrend

Article by: National Association of REALTORS®

January Pending Home Sales Rise, Market on Uptrend

Pending home sales are on an upward trend, which has been uneven but meaningful since reaching a cyclical low last April, and are well above a year ago, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 2 percent to 97.0 in January from a downwardly revised 95.1 in December and is 8 percent higher than January 2011 when it was 89.8. The data reflects contracts but not closings.

The January index is the highest since April 2010 when it reached 111.3 as buyers were rushing to take advantage of the home buyer tax credit.

Lawrence Yun, NAR chief economist, said this is a hopeful indicator going into the spring home-buying season. “Given more favorable housing market conditions, the trend in contract activity implies we are on track for a more meaningful sales gain this year. With a sustained downtrend in unsold inventory, this would bring about a broad price stabilization or even modest national price growth, of course with local variations.”

PHSI by region:

• Northeast: rose 7.6 percent to 78.2 in January and is 9.8 percent above a year ago.
• Midwest: declined 3.8 percent to 88.1 but is 10.8 percent higher than January 2011.
• South: increased 7.7 percent to an index of 109.1 in January and are 10.5 percent above a year ago.
• West: fell 4.4 percent in January to 101.9 but is 0.7 percent above January 2011.

“Movements in the index have been uneven, reflecting the headwinds of tight credit, but job gains, high affordability and rising rents are hopefully pushing the market into what appears to be a sustained housing recovery,” Yun said. “If and when credit availability conditions return to normal, home sales will likely get a 15 percent boost, speed up the home-price recovery, and thereby significantly reduce the number of homeowners who are underwater.”

Source: NAR; Daily Real Estate News (February 27, 2012) | Blog distribution provided by Kenneth Bargers and Bargers Solutions, a proud member of Pilkerton Realtors, a residential real estate firm located in Nashville, Tennessee

New-Home Construction Bounces Back, Soars 9.3%

New-home construction and building permits — a future gauge of construction — surged last month, slowly helping to pull the new-home market out of one of its worst years for home building.

Builders broke ground on more homes in November, a 9.3 percent increase over October, reaching the highest level since April 2010, the Commerce Department reported Tuesday. Year-over-year, new-home starts were up 24.3 percent in November.

Home construction increased to a seasonally adjusted annual rate of 685,000 homes in November. However, while it’s an improvement, the rate is still below the 1.2 million home pace that economists consider healthy for the new-home sector.

November’s increase was mostly driven by construction of multi-family homes with at least two units, which soared 25.3 percent in November. Construction of single-family homes increased 2.3 percent for the month.

Building permits jumped 5.7 percent in November, the highest increase since March 2010, with the increase mostly driven by apartment construction permits.

Builders Feeling More Confident

Meanwhile, for the third consecutive month, builder confidence in the new-home market continued to edge up, according to the National Association of Home Builders/Wells Fargo Housing Market Index for December. The index is at its highest point since May 2010.

While the index reached 21 in December, it is still far below 50, a reading which indicates more builders view conditions as good rather than poor. The index hasn’t reached that point since the housing boom in April 2006.

“While builder confidence remains low, the consistent gains registered over the past several months are an indication that pockets of recovery are slowly starting to emerge in scattered housing markets,” Bob Nielsen, chairman of the National Association of Home Builders, said in a statement. “However, the difficulties that both builders and buyers continue to experience in accessing credit for new homes are holding back potential sales even in areas where economic conditions are improving.”

Source: Daily Real Estate News; “Apartment Construction Spurs 9.3% Jump in Housing Starts, But Level Remains Low,” Associated Press (Dec. 20, 2011); “U.S. Nov. Housing Starts +9.3% to 685K; Consensus +0.3%,” Dow Jones International News (Dec. 20, 2011); and National Association of Home Builders; Blog distribution provided by Kenneth Bargers and Bargers Solutions, a proud member of Pilkerton Realtors, residential real estate services located in Nashville, Tennessee

September Home Sales Increase; Third Quarter Numbers Also See Increase

NASHVILLE, Tenn. (Oct. 6, 2011) – There were 1,832 home closings reported for the month of September, according to figures provided by the Greater Nashville Association of REALTORS®. That number is up 16.9 percent from the 1,567 closings reported for the same period last year.

Third quarter numbers have increased from 2010 with 5,900 closings reported, which is 20 percent higher than last year’s third quarter closings of 4,906.

Year-to-date closings for the Greater Nashville area are 15,531. That total is down 2.5 percent from the 15,929 closings reported through the third quarter of 2010.

“Home sales have increased for the third consecutive month” said GNAR President Alice Walker. “The increase in sales seen in Middle Tennessee during the third quarter is certainly good news. Year-to-date numbers, which are down only slightly, still reflect the market distortion seen by last year’s tax credit – which was still in effect until early in the third quarter of 2010. It is encouraging to see that we have nearly caught up with last year at this point in the year. ”

“Most every category saw an increase in closings compared to September last year. The increase in sales of farms, land and lots is particularly important as those sales are often indicators of coming developments.”

“Median prices are down in the range of about 5 percent. While we don’t like to see a drop in price, being down only single-digit percentages is much more desirable than the double-digit decreases other areas of the country are currently seeing,” said Walker.

“Pending sales were up again for the fourth consecutive month, an encouraging sign of a potential market recovery,” noted Walker. “Inventory was down compared to last year, but in this case, being down is positive news. The best case scenario is to have six months of inventory available on the market, and currently we have about 10 months. At this time last year we there was about 15 months worth of inventory available. This level makes for a much healthier market and still provides plenty of options for potential home buyers.”

There were 1,729 sales pending at the end of September, compared with 1,588 pending sales at this time last year. The average number of days on the market for a single-family home was 94 days, compared with 92 days for September 2010.

The median residential price for a single-family home during September was $163,000, and for a condominium, it was $144,900. This compares with last year’s median residential and condominium prices of $171,820 and $155,000, respectively.

Inventory at the end of September was 20,718, down from 23,549 in September 2010.

“The Greater Nashville market continues to strengthen and fare better than many other cities,” said Walker. “In fact, the latest numbers from the National Association of REALTORS® show the national median price for a single family home is $168,300 and we’re slightly under that number. That keeps the Greater Nashville area attractive to both companies and families.”

The Greater Nashville Association of REALTORS® is one of Middle Tennessee’s largest professional trade associations and serves as the primary voice for Nashville-area property owners. REALTOR® is a registered trademark that may be used only by real estate professionals who are members of the National Association of Realtors and subscribe to its strict code of ethics.

Source: Greater Nashville Association of REALTORS; Blog distribution provided by Kenneth Bargers and Bargers Solutions, a proud member of Pilkerton Realtors, residential real estate services located in Nashville, Tennessee

Mortgage Applications Surge Amid Falling Rates

More people are applying for mortgages: Applications for home mortgages had their largest increase in three months due to falling record-low interest rates, the Mortgage Bankers Association reports.

MBA’s seasonally adjusted index of mortgage application activity increased 13 percent for the week ended June 10. That marks the index’s biggest gain since March. The index measures applications for refinancing and purchase demand.

Most of the spike was from refinancing applications, which increased 16.5 percent from last week. However, requests for mortgage applications for home purchases also rose 4.5 percent.

“Mortgage rates have declined for 8 of the past 9 weeks,” Michael Fratantoni, MBA’s vice president of research and economics, said in a statement. “Coming off of the Memorial Day holiday, refinance application volume increased significantly, as borrowers jumped to lock in the lowest mortgage rates since last November.”

Source: “Mortgage Applications See Biggest Gain in 3 Months: MBA,” Reuters News (June 14, 2011); Blog distribution provided by Kenneth Bargers and Bargers Solutions, a proud member of Pilkerton Realtors, residential real estate services located in Nashville, Tennessee

Housing Starts Jump 14.6% in January

Housing starts in January reached their highest rate in four months, increasing more than analysts expected, the Commerce Department reports. Housing starts jumped 14.6 percent to a seasonally adjusted annual rate of 596,000 units. 

Housing starts in January were helped by a 77.7 percent jump in multi-family homes. Single-family home construction, on the other hand, fell 1 percent.

Meanwhile, new home completions dropped to a record low of 512,000 units in January, falling 9.5 percent from the previous month. 

And after housing permits surged in December by 15.3 percent, housing permits for future housing projects sank in January. New building permits dropped 10.4 percent to a 562,000-unit pace in January–mostly pulled down by a drop in multi-family and single-family unit permits. 

Source: “U.S. Housing Starts Surge in Jan., Permits Tumble,” Reuters News (Feb. 16, 2011); Blog distribution provided by Kenneth Bargers and Bargers Solutions residential real estate services located in Nashville, Tennessee

Market Comment for Week of September 27, 2010…

MARKET COMMENT   Mortgage bond prices ended near unchanged last week keeping mortgage interest rates historically low. The Fed meeting Tuesday went as expected. The Fed kept interest rates unchanged and noted they will keep rates low for an extended period of time. Mortgage rates were positive through the middle portion of the week. Unfortunately stronger than expected data and surging stock prices the latter portion of the week eroded the earlier positive movements. Despite those negative movements rates finished near unchanged overall for the week. 

The Treasury auctions will be important this week. If foreign demand for US debt remains strong mortgage interest rates may remain lower. Consumer confidence will set the tone for trading the beginning of the week. 

LOOKING AHEAD 

  • 2-year Treasury Note Auction; Sept. 27; Important. $36 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
  • Consumer Confidence; Sept. 28; Consensus Estimate 53.9; Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
  • 5-year Treasury Note Auction; Sept. 28; Important. $35 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
  • 7-year Treasury Note Auction; Sept. 29; Important. $29 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
  • Q2 GDP 3rd revision; Sept 30; Consensus Estimate Up 1.7%; Important. The aggregate measure of US economic production. Weakness may lead to lower rates.
  • Personal Income and Outlays; Oct. 1; Consensus Estimate Up 0.2%, Up 0.3%; Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
  • PCE Core Inflation; Oct. 1; Consensus Estimate Up 0.1%; Important. A measure of price increases for all domestic personal consumption. Weakness may lead to lower rates.
  • U of Michigan Consumer Sentiment; Oct. 1; Consensus Estimate 67; Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
  • ISM Index; Oct. 1; Consensus Estimate 55.0; Important. A measure of manufacturer sentiment. A large decline may lead to lower mortgage rates.

MARKET CONDITIONS   There is a Chinese proverb that states, “May you live in interesting times.” It is often argued that the word interesting is meant to be a synonym for turbulent or dangerous. This phrase hits the bull’s-eye given the current state of the financial markets. While stocks and bonds are swinging around wildly there is some good news. Interest rates for conforming and FHA/VA loans are historically low. 

Remember, low rates are not a given considering the uncertainty in the financial markets. Inflation, real or perceived, erodes the value of bonds causing bond prices to fall and rates to rise. The last thing the economy needs now is higher mortgage interest rates. If inflation emerges that very well may happen despite the continued Fed efforts to keep rates low. With so much uncertainty, a cautious approach to float lock decisions, especially heading into the inflation data this week, would be wise. 

Source: Courtesy of Todd Kabel, US Bank, Nashville, Tennessee

Market Comment for Week of September 20, 2010…

MARKET COMMENT   Mortgage bond prices rose last week pushing interest rates slightly lower. Tame inflation readings helped to counter the better than expected weekly jobless figures. Core producer and consumer price data was generally bond friendly. The Philadelphia Fed report showed tremendous weakness in that region. Industrial product and capacity use data also came in below estimates, which helped rates improve. 

Rates fell by about 3/8 of a discount point for the week. 

The Fed meeting Tuesday will be the most important even this week. The housing data the beginning and end of the week can result in mortgage interest rate movements. Expect more volatility, as stocks and bonds are likely to continue their back and forth trading pattern. 

LOOKING AHEAD 

  • Housing Starts; Sept. 21; Consensus Estimate Down 0.7%; Important. A measure of housing sector strength. Larger than expected decreases may lead to lower rates.
  • Weekly Jobless Claims; Sept. 23; Consensus Estimate 440k; Important. An indication of employment. Higher claims may result in lower rates.
  • Existing Home Sales; Sept. 23; Consensus Estimate Down 7.3%; Low importance. An indication of mortgage credit demand. A significant decrease may lead to lower rates.
  • Leading Economic Indicators; Sept. 23; Consensus Estimate Up 0.1%; Important. An indication of future economic activity. Weakness may lead to lower rates.
  • Durable Goods Orders; Sept. 24; Consensus Estimate Down 2.2%; Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.
  • New Home Sales; Sept. 24; Consensus Estimate Down 8%; Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.

INFLATION   Inflation is an increase in the level of prices of goods and services over a period of time. Signs of inflation do not generally bode well for mortgage bonds. Inflation erodes the value of fixed income securities generally causing bond prices to fall and interest rates to rise. Tame inflation readings are usually well received. 

The mortgage bond market received mixed inflation data last week. The producer price index, a major gauge of inflation at the producer level, rose 0.4%, higher than the expected 0.3% increase. However, the core rate, which excludes volatile food and energy, rose 0.1% as expected. 

The relatively flat core producer price figure helps reinforce the belief that inflation remains in check. However, the higher than expected producer price figure supports the opposite conclusion. The consumer price release followed the same pattern. Consumer prices rose 0.3%, higher than the expected 0.2% increase. However, the core, which excludes volatile food and energy prices, was unchanged and lower than the expected 0.1% increase. Tame core inflation readings are generally good for fixed income securities such as mortgage bonds. We saw an example of this Friday morning as bond prices rose and interest rates fell. 

If future data echoes that of the core consumer price data, then it is a real possibility that mortgage interest rates can remain low. However, if future data shows inflation spikes be ready for a jump in rates. Floating in this environment is risky. The good news is that mortgage interest rates currently are historically favorable. 

Source: Courtesy of Todd Kabel, US Bank, Nashville, Tennessee