May 2009

Pending Home Sales Rise in March – Another Sign That Housing Is Recovering

For the second consecutive month, the number of homes under contract to sell increased — further evidence that housing markets may have already bottomed.

As reported by an industry trade association, the Pending Home Sales Index rose by 3-plus percent last month.

A “pending” home is one that’s under contract but has yet to close. This is one reason why the Pending Home Sales Index is an imperfect statistic.

Just because a home is under contract doesn’t mean it will actually sell. A lot can go wrong between the date of agreement and the date of closing. Deals fall apart all the time. But, when the number of pending contracts rises, we can infer that buy-side demand for homes is strong.

It’s likely that the number of homes under contract is being influenced by a combination of low mortgage rates, relatively inexpensive homes, and various tax credits for certain homebuyers. Overall, it’s spurring demand and that’s part of what’s captured by the Pending Home Sales Index.

So long as the demand for homes outpaces its supply, home prices are expected to rise.

What’s Ahead For Mortgage Rates This Week: May 4th

Mortgage markets faced a broad sell-off last week, sparked by the Federal Reserve and consumer sentiment.

This caused mortgage rates to spike from Wednesday to Friday and it caused the “lowest rates of all-time” to seem like an opportunity lost.

It’s the first time in 4 weeks that mortgage rates rose overall.

Last week was a strange week, to say the least. Aside from the large docket of economic data, there was also:

• A Federal Reserve meeting
• 160 of the S&P 500 firms reporting earnings
• A global public health emergency

It all combined to make for a volatile week in mortgages and the biggest losers were the people that hadn’t yet locked a mortgage rates. Based on the current market, each quarter-percent that mortgage rates rose added $32 per month per $100,00 borrowed.

This week, the market should be similarly jumpy.

Early in the week, there’s not much data to sway markets, nor is there much in the way of public policy. Therefore, expect external factors like the Swine Flu to dictate the market’s path. If the outbreak’s intensity grows, look for Safe Haven to lower rates much like it did last Monday.

Also, be aware and listen for Stress Test rumors.

Thursday, the government is expected to release its bank Stress Test results. However, history shows that markets often make large movements before news is ever official — mostly on rumors. As a result, expect mortgage markets to carve out wide ranges on Tuesday and Wednesday in advance of the reports, making it very hard to “time” low mortgage rates.

And lastly, Friday brings us April’s employment data. There’s nothing the report can show us that we don’t already know so the biggest risk here is that employment is not as bad as we all expect it to be.

If that’s the case, stock markets will rally and mortgage rates will rise.

Like always, mortgage markets can change in an instant — especially when there’s outside influences on “normal” trading like we’re seeing with Swine Flu and the Stress Test. If you’re offered a rate and it fits your budget, consider locking right away. It may not last long.

The Decline in Home Values Slowed in February, Says Case-Shiller. Probably in March and April, Too.

The Case-Shiller Index is a popular reporting tool for the nation’s home prices. Each month, researchers measure home values in 20 large cities, compile their findings, and then publish them to the public.

The Case-Shiller Index is not a perfect measurement by any means. It gives more weight to expensive homes than inexpensive ones, for example, and its sample set includes just 37 states. But that doesn’t diminish its importance to the housing sector.

Because the Case-Shiller Index comes from the private sector, it’s an excellent counter for the U.S. government’s home value reporting tool — the House Price Index.

In this current market, the Case-Shiller Index tends to report housing in a more negative light than does the government. This doesn’t make either method more accurate, it just provides a helpful point/counter-point.

And that’s why February’s Case-Shiller Index is so important.

Despite reporting falling values in each of its 20 tracked cities, the Case-Shiller Index showed values falling with a lesser speed and intensity than in months prior.

It’s a small victory, but if the Case-Shiller Index shows that home prices are starting to mend, you have to pay attention — especially because the index is on a 2-month delay and doesn’t account for Spring Buyers or the $8,000 first-time homebuyer tax credit.

One month doesn’t make a trend, but if often-negative Case-Shiller Index turns in similar numbers for March, it could be the signal that housing has bottomed.

« Previous Page