Today's Real Estate Reality Blog
Pending Home Sales Suggest Strong April-May Homes Sold
April 27, 2012 by WelcomeHomeNWI · Leave a Comment
After a series of worse-than-expected data last month, the housing market appears to be back on track.
The Pending Home Sales Index posted 101.4 in March, a four percent gain from the month prior and the index’s highest reading since April 2010 — the last month of that year’s federal home buyer tax credit.
A “pending home” is a home under contract to sell, but not yet closed. The Pending Home Sales Index is tracked and published by the National Association of REALTORS® monthly.
Click here to apply for your FREE home loan approval.
The March report marks the index’s first 100-plus reading in nearly two years.
To home buyers and sellers throughout Northwest Indiana and suburbs of Chicago Illinois, this is statistically significant because the Pending Home Sales Index is normalized to 100, a value corresponding to the average home contract activity in 2001, the index’s first year of existence. 2001 was an historically-strong year for the housing market.
The March 2012 Pending Home Sales Index, therefore, puts current market activity on par with market activity from 2001.
You wouldn’t know it from reading this week’s papers, though. There have been stories about how the Case-Shiller Index put home values at new loans; and how the Existing Home Sales figures unexpectedly dropped off; and how the New Home Sales report was a laggard.
Click here to apply for your FREE home loan approval.
But this is why the Pending Home Sales Index can be so important.
What makes the Pending Home Sales Index different from those other data points is that the Pending Home Sales Index is a “forward-looking” housing market indicator.
Unlike most data which aims to tell us how the housing market performed at some point in the past, the Pending Home Sales Index attempts to tell us how the housing market will perform at some point in the near-term future.
80% of homes under contract close within 2 months. Many more close within months 3-4. Therefore, on the strength of the March Pending Home Sales Index, we should expect a strong April and May nationwide
If you’re shopping for homes right now, consider taking advantage while the market remains somewhat soft. Mortgage rates are low and home prices are, too. It can make for a good home-buying conditions.
Click here to apply for your FREE home loan approval.
The Federal Reserve Statement (April 25, 2012) Explained
April 25, 2012 by James K Barath, CMPS® · Leave a Comment
The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent Wednesday.
For the fifth consecutive month, the Fed Funds Rate vote was nearly unanimous. Just one FOMC member, Richmond Federal Reserve President Jeffrey Lacker, dissented in the 9-1 vote.
The Fed Funds Rate has been near zero percent since December 2008. It is expected to remain near-zero through 2014, at least.
In its press release, the Federal Reserve noted that the U.S. economy has been “expanding moderately” since the FOMC’s last meeting in March. Beyond the next few quarters, the Fed expects growth to “pick up gradually”.
Click here to see today’s mortgage rates.
This key phrase will likely be repeated by the press. It suggests that the economy is no longer contracting; instead moving along a path of slow, consistent expansion.
In addition, the Fed acknowledged that “strains in global financial markets” continue to pose “significant downside risks” to long-term U.S. economic outlook. This is in reference to the sovereign debt concerns of Greece, Spain and Italy, and the potential for a broader European economic slowdown.
The Fed’s statement included the following notes:
- The housing sector remains “depressed”
- Labor conditions have “improved in recent months”
- Household spending has “continued to advance”
Click here to see today’s mortgage rates.
Also, with respect to inflation, the Fed said that the higher oil and gasoline prices from earlier this year will affect inflation “only temporarily”, and that inflation rates will return to stable levels soon.
At its meeting, the Federal Reserve neither introduced new economic stimulus, nor discontinued existing market programs. The Fed re-affirmed its intentions to hold the Fed Funds Rate at “exceptionally low” levels through late-2014, and to buy mortgage-backed bonds in the open market.
Immediately following the FOMC’s statement, mortgage markets improved slightly, pressuring mortgage rates lower in Northwest Indiana and suburbs of Chicago Illinois.
The FOMC’s next scheduled meeting is a two-day event slated for June 19-20, 2012.
Click here to see today’s mortgage rates.
New Home Sales Down in March, Revised Higher in February
April 25, 2012 by WelcomeHomeNWI · Leave a Comment
Sales of new homes ticked lower in March, unexpectedly.
Based on Census Bureau data, the number of new, single-family homes sold in March slipped 7 percent from February — the largest one-month drop in more than a year.
On a seasonally-adjusted, annualized basis, buyers in Northwest Indiana and nationwide purchased 328,000 newly-built homes last month. The decrease in sales from February to March can be attributed, in part, though, to a massive upward revision in February’s figures.
Last month, the Census Bureau had reported 313,000 new home sales in February on a seasonally-adjusted, annualized basis. This month, those sales were re-measured to be 353,000 — an increase of 13 percent.
Click here to apply for your FREE home loan approval.
January’s sales were revised higher, too.
The long-term trend in the market for new homes remains “up”. This is no more apparent than when we look at the available new home inventory.
At the close of March, just 144,000 new homes were available for purchase, down 2,000 from the month prior and representing the most sparse new home housing supply since at least 1993, the year that the Census Bureau starting tracking such data.
At the current pace of sales, the new home housing stock would be sold out in 5.3 months. A six-month supply is believed to represent a market in balance.
Click here to apply for your FREE home loan approval.
For new home buyers in Northwest Indiana and suburbs of Chicago Illinois, March’s New Home Sales report does not represent a housing market pull-back. It may represent a home buyer opportunity, however.
From October 2011 to February 2012, housing data was uniformly strong. Home sales were higher, home supplies were lower, and confidence was rising. In March, it was the reverse. This is normal because growth is rarely linear.
In any market, it’s a few steps forward and a single step back, and housing is likely showing a similar pattern. With mortgage rates still low and builder confidence down, it’s a terrific time to shop new construction.
There are deals to be found for buyers who seek them out.
Click here to apply for your FREE home loan approval.
Mortgage Rate Strategy As Fed Starts 2-Day FOMC Meeting
April 24, 2012 by James K Barath, CMPS® · Leave a Comment
The Federal Open Market Committee begins a 2-day meeting today in the nation’s capitol. It’s the group’s third of 8 scheduled meetings this year. Mortgage rates are expected to change upon the Fed’s adjournment.
Led by Chairman Ben Bernanke, the FOMC is a 12-person, Federal Reserve sub-committee. The FOMC is the group within the Fed which votes on U.S. monetary policy. “Making monetary policy” can mean a lot of things, and the action for which the FOMC is most well-known is its setting of the Fed Funds Funds.
The Fed Funds Rate is the overnight interest rate at which banks borrow money from each other. It’s one of many interest rates set by the Fed.
However, one series of interest rates not set by the Fed is mortgage rates. Instead, mortgage rates are based on the prices of mortgage-backed bonds and bonds are bought and sold on Wall Street. There is little historical correlation between the Fed Funds Rate and the common, 30-year fixed rate mortgage rate.
Click here to see today’s mortgage rates.
As the chart above shows, since 1990, the Fed Funds Rate and the 30-year fixed rate mortgage rate have followed different paths. Sometimes, they’ve moved in the same direction. Sometimes, they’ve moved in opposite directions. They’ve been separated by as much as 5.29 percent at times, and have been as near to each other as 0.52 percent.
Click here to see today’s mortgage rates.
Today, that spread is roughly 3.65 percent. It’s expected to change beginning 11:30 PM CT Wednesday. That’s when the FOMC will adjourn from its meeting and release its public statement to the markets.
The FOMC is expected to announce no change in the Fed Funds Rate, holding the benchmark rate within in its current target range of 0.000-0.250%. However, how mortgage rates in and around Northwest Indiana and suburbs of Chicago Illinois respond will depend on the verbiage of the FOMC statement.
In general, if the Fed acknowledges that the U.S. economy is in expansion; growing from job growth and consumer spending, mortgage rates are expected to rise. If the Fed shows concern about domestic and global economic growth, mortgage rates are expected to fall.
Any time that mortgage markets are expected to move, a safe play is to stop shopping your rate and start locking it. Today may be one of those times.
Click here to see today’s mortgage rates.
The Week Ahead for Mortgage Rates: April 23, 2012
April 23, 2012 by James K Barath, CMPS® · 1 Comment
Mortgage markets were mostly unchanged last week, breaking a three-week winning streak. Wall Street grappled with surprising demand on Spain’s debt issuance and a series of weaker-than-expected data points on U.S. housing.
Conforming mortgage rates across Northwest Indiana and suburbs of Chicago Illinois rose slightly according to the weekly Freddie Mac Primary Mortgage Market Survey.
Nationwide, the 30-year fixed rate mortgage rate climbed 2 basis points to 3.90%. This rate is available to homeowners willing to pay 0.8 discount points and a full set of closing costs, where 1 discount point is equal to 1 percent of the borrowed amount.
Prior to last week’s survey, just 0.7 discount points were required.
Click here to see today’s mortgage rates.
This week, mortgage rates are expected to be volatile. There is a lot of economic data due for release, the Eurozone’s issues with sovereign debt remain unresolved, and the Federal Open Market Committee gets together for a scheduled, 2-day meeting.
In regards to key economic data, the week starts with Tuesday’s Consumer Confidence figures and the government’s New Home Sales report. Both have the power to move mortgage rates. The week then concludes with the Pending Home Sales Index; the GDP release; and a series of Treasury auctions.
With respect to Europe, demand remains strong for debt from Spain, but at much higher rates as compared to several weeks ago. The same is true for Italy. Both nations are feared to be at risk of default on their respective sovereign debt. It’s a similar situation to that which occurred in Greece throughout 2011.
Long-term, lingering concerns for Spain and Italy would likely help keep U.S. mortgage rates suppressed.
Click here to see today’s mortgage rates.
Lastly, the Federal Reserve will make a statement to markets Wednesday afternoon. The Fed is the nation’s central banker and its post-meeting press releases have tremendous influence on bond markets, including those for mortgage-backed bonds.
By extension, therefore, the Federal Reserve’s statement has the power to move mortgage rates in and around Northwest Indiana and suburbs of Chicago Illinois.
If you’re shopping for mortgage rates, it’s as good of a time as any to lock with your lender. Rates have more room to rise than to fall.
This is The Week Ahead for Mortgage Rates: April 23, 2012.
Click here to see today’s mortgage rates.
Quick general rule of thumb when keeping an eye on mortgage rates.
Strong Economic News: $$$ from Bonds —> Stocks = Home Loan Rates Go Up
Weak Economic News: $$$ from Stocks —> Bonds = Home Loan Rates Go Down
If you or someone you know is thinking about buying a home, the combination of low home loan rates and affordable home prices make this an ideal time to buy a home. Want to know if you can afford a new home? Call or text me at 512-522-7284 to discuss your personal situation and your home loan options!
