July, 2011 | Arizona Mortgage

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Archive for July, 2011

Pending Home Sales Rise For 3rd Straight Month

Pending Home Sales 2009-2011 Buyers are writing contracts at a furious pace nationwide.

On a seasonally-adjusted basis, the Pending Home Sales Index rose 2 percent last month to reach its highest level since March.

A “pending home sale” is a home under contract to sell, but not yet closed.

The forward-looking Pending Home Sales Index is up 11 percent from its low of the year, according to the National Association of REALTORS®, and well ahead of its rolling 6-month average.

Unfortunately, national data isn’t always helpful for buyers and sellers in Mesa and nationwide. To help make data more relevant, therefore, the official Pending Home Sales Index report includes a region-by-region breakdown.

Between May and June 2011, results were mixed:

Northeast Region: -0.4%
Midwest Region : -3.7%
South Region : +4.4%
West Region : +6.4%

However, even the value of regional data may be dubious.

The West Region, for example, which showed big gains in June, is comprised of multiple states containing thousands of cities and towns. Some of those areas outperformed the region, and some of them underperformed. The Pending Home Sales Index doesn’t show which towns did which. It can’t.

For everyday buyers and sellers , it’s the local data that matters.

The Pending Home Sales Index shows that more contracts were written in June than in April or May — a good sign for housing overall. And because 80% of all contracts close within 60 days, we can expect the summer’s home resale activity to be high.

This leads home prices higher.

With mortgage rates low and home sales spiking, now may be the best time to buy a home in 2011. Home prices appear to be rising and mortgage rates should, too.

16 of 20 Case-Shiller Cities Show Improvement In May

Case-Shiller Index May 2011

Standard & Poors released its May 2011 Case-Shiller Index this week. The index measures change in home prices from month-to-month, and year-to-year, in select U.S. cities.

May’s Case-Shiller Index showed a 1 percent increase from April 2011. Home values rose in 16 of the Case-Shiller Index’s 20 tracked markets. Only Detroit, Las Vegas and Tampa fell. Phoenix was flat.

Don’t look too far into the findings, though. Like the FHFA’s Home Price Index, the Case-Shiller Index is rife with flaws.

The first flaw of the Case-Shiller Index is its limited geography. Despite being positioned as a national housing index, Case-Schiller Index is sourced from just 20 cities nationwide. There are more than 3,100 municipalities nationwide.

The Case Shiller Index’s second flaw is that it ignores all home types excepts for single-family, detached homes in its findings. Condominiums, multi-family homes, and new construction are not included in the Case-Shiller Index.

In some markets, these excluded home types outnumber the included ones.

Furthermore, the Case-Shiller Index is flawed in that it takes 60 days to release.

The Case-Schiller Index reports on a housing market from 2 months ago — hardly helpful for today’s buyers and sellers in Phoenix , trying to make sense of today’s real estate market data.

When you want real-time housing market data, therefore, look past the Case-Shiller Index and talk to a real estate professional instead. It’s where you’ll get your best, most relevant information.

New Home Supplies Keep Shrinking; Prices Pressured Higher

New Home Supply 2010-2011 Home builders are slowly reducing inventory.

According to Census Bureau data, the number of new homes slid 1 percent from May. On a seasonally-adjusted, annualized basis, home buyers bought 312,000 newly-built homes last month.

It’s the third straight month of falling sales and the headline data casts the Mesa housing market in a negative light.

Upon closer inspection, however, the numbers appear quite strong.

First, sales are down marginally. Total units sold have dropped just 2 percent from the highs of the year. And, second, the number of newly-built homes for sale is down markedly from last year

There are 22% fewer new homes for sale today as compared to June 2010

At today’s sales pace, the complete new home inventory would be sold in 6.3 months — the quickest sell-out window since the expiration of the 2010 federal home buyer tax credit.

Builders are feeling better about their business, too.

After falling to a 9-month low, homebuilder confidence rebounded this month, boosted by expectations for a strong fall season. For buyers across AZ , this could be seen as a market-shifting signal.

When builder confidence rises, negotiating for upgrades and price reductions can be tougher; “good deals” get scarce.

If you’re a home buyer and are considering new construction, don’t let the headlines fool you. Sales figures are slipping, but that’s because there are fewer homes are for sale nationwide. The inventory is shrinking and that can push home prices higher.

With mortgage rates still low, today’s market may be your best value of the year.

Is An FHA Mortgage Better Than A Conforming One?

FHA vs Conforming Mortgage Rates 2005-2011

The FHA is insuring a greater percentage of loans than during any time in recent history. In 2006, it insured roughly 5 percent of the purchase mortgage market. Today, it insures one-quarter. “Going FHA” is more common than ever before — but is it better?

The answer — like most things in mortgage — depends on your circumstance.

Like its conforming counterpart, an FHA-insured mortgage is available as a fixed-rate loan and as an adjustable-rate one. Payments are made monthly and come without prepayment penalties.

That’s where the similarities end, however, and decision-making begins. For homeowners and buyers across Scottsdale , FHA mortgages carry a different set rules as compared to conforming loans through Fannie Mae or Freddie Mac that can render them more — or less — attractive for financing.

For example:

FHA mortgages can be assumed by a subsequent buyer. Conforming loans may not.
FHA mortgages require mortgage insurance, regardless of downpayment. Conforming loans do not.
FHA mortgages do not have loan-level pricing adjustment. Conforming loans do.

FHA mortgages also require smaller downpayment requirements versus a comparable conforming mortgage. FHA calls for a minimum downpayment of 3.5%. Conforming mortgages often require 5 percent or more.

And, lastly, FHA mortgages are priced differently from conforming ones. Since 2005, the average FHA mortgage rate has been below the average conforming mortgage rate more than 50% of the time, meaning that an FHA mortgage’s principal + interest payment is lower than a comparable Fannie/Freddie loan.

Today, conforming mortgage rates are lower.

So, which is better — FHA loans or conforming ones? Like most things in mortgage, it depends. FHA-insured loans can be big money-savers or money-wasters. To find out which is best for you, ask your loan officer for today’s market interest rates and study the results.

With less than 20% equity, the answer is often clear.

What’s Ahead For Mortgage Rates This Week : July 25, 2011

Congress debates the debt ceiling Mortgage markets worsened last week as the Greek sovereign debt situation came closer to final resolution, and as the U.S. housing market showed signs of life.

After many weeks, European leaders agreed on a financial package for Greece that featured favorable loan terms designed to slow Eurozone contagion, along with a built-in, 37 billion euro “haircut” for private-sector investors.

The accord pleased Wall Street. Equities rallied after the announcement. Mortgage bonds sank.

Bonds also sank after a strong home builder confidence report Monday.

Last week, conforming and FHA fixed mortgage rates increased in AZ and for the first time in 3 weeks. Adjustable-rate mortgages slipped slightly.

The interest rate spread between the Freddie Mac 30-year fixed rate and 5-year ARM is back near its all-time high.

This week, mortgage rates will be guided by Congress’s on-going U.S. debt ceiling debate. The United States government is expected reach its legal $14.294 trillion debt limit August 2, 2011. Congress must either vote to raise the debt ceiling, or take steps to reduce debt prior to August 2.

The debt ceiling was last raised February 12, 2010.

It’s unclear in which direction Congress will vote. Therefore, mortgage rates may be erratic until a deal is reached. If the debt limit is raised, expect mortgage rates to rise. This is because carrying high levels of debt can devalue the U.S. dollar and mortgage bonds are less valuable as the dollar weakens.

On the other hand, if Congress votes to make cuts in the budget, mortgage rates should fall. This is because fewer treasury securities will be issued, creating fewer inflationary pressures on the U.S. economy. Inflation is linked to higher mortgage rates.

Also this week : New Home Sales (Tuesday), Pending Home Sales (Thursday), Consumer Sentiment (Friday), plus Treasury auctions of 2-year, 5-year and 7-year notes. Each event can move mortgage rates so be ready to lock at a moment’s notice.

Mortgage rates remain low. By August 2, they could be much higher.

Home Prices Rise For The 2nd Straight Month

Home Price Index since the April 2007 peak A strong spring season helped home values recover, says the government.

According to the Federal Home Finance Agency’s Home Price Index, home prices rose a seasonally-adjusted 0.4 percent from April to May.

It’s the HPI’s second straight increase, and puts the monthly index at its highest point since January 2011.

As a home seller in Mesa , you may appreciate news such as “rising home prices”, but it’s important to remember that the Home Price Index has a several built-in flaws — the biggest of which its age.

Today, the calendar nearly reads August, yet, we’re still discussing May’s housing data. A 2-month delay does little to help buyers and sellers wanting to know the “right now” of housing.

Unfortunately, the Home Price Index data is even more aged than that.

Because the FHFA’s Home Price Index measures home prices as recorded at closing, the actual sales prices included in the index are from real estate contracts written 30-60 days prior.

In other words, when we look at the Home Price Index report for May, what we’re really seeing is a snapshot of the housing market as it existed in March. March’s housing market has little to do with the forces driving home prices today.

Today’s real estate market is driven by today’s economics.

The Home Price Index is a useful gauge for economists and law-makers; it shows long-term national trends in the housing market which can be used to allocate resources to a project, or to form new policy. For home buyers across the state of AZ , though, it’s less helpful.

For today’s real estate buyers and sellers, there’s no substitute for real-time data. For that, talk to a real estate professional.

Existing Home Sales Fall To 8-Month Low

Existing Home Supply June 2010-June 2011

Home resales slipped for the 3rd straight month, according to data from the National Association of REALTORS®.

The Existing Home Sales posted a 1 percent drop from May as the number of homes sold fell to a seasonally-adjusted, annualized 4.77 million units. It’s the monthly report’s lowest reading since November 2010.

The report also showed the national supply of homes for sales rising to 9.5 months — also its highest reading since November 2010.

Home Supply is the amount of time it would take to exhaust the complete home inventory at the current pace of sales.

June’s Existing Home Sales data would have been stronger if not for a high contract cancellation rate. As compared to May’s 4 percent rate, June’s cancellation rate was 16 percent; an elevated figure that “stands out in contrast” to what’s typical, according to the REALTOR® trade group.

By region, home resale activity varied:

Northeast : -5.2% from May
South :+0.5% from May
Midwest : +1.0% from May
West : -1.7% from May

This disparity from region-to-region highlights an important housing market concept. Namely, that all real estate is local. Because just as the Existing Home Sales varies on a regional level, it varies on a state-wide level, too.

What’s true for California housing is not necessarily what’s true for Florida housing, for example. Each of the 50 states has its own trends, and within those 50 states, there are thousands of cities and neighborhoods, each with their own trends, too.

The “national housing market” doesn’t exist, so national data is rendered somewhat useless.

For data in Mesa or your local market, talk to your real estate agent.

Housing Starts Surge 9 Percent; Signal A Strong Fall Season

Single-family housing starts

Builders are busy once again.

According to the Census Bureau, Single-Family Housing Starts rose to 453,000 on a seasonally-adjusted, annualized basis in June — a 9 percent spike from the month prior and the highest reading in 3 seasons.

A “Housing Start” is defined as a home breaking ground on new construction.

June’s reading is largest one-month jump since June 2009. The reading surprised Wall Street despite that the Homebuilder Confidence survey may have foreshadowed the results.

Monday, the National Association of Homebuilders reported that builders are more confident about the future of the new home sales market, and forecast a large increase in sales over the next 6 months.

For buyers of new construction, the news is mixed. Rising confidence may mean that builders in Mesa are less willing to negotiate on upgrades and/or price, but rising construction levels add inventory to an already fragile market.

Adding to the nation’s home supply without a corresponding increase in buyer demand shifts negotiation leverage away from builders.

The Census Bureau also reported on Building Permits.

In June, permits for single-family homes rose by 1,000 units nationwide on a seasonally-adjusted, annualized basis. This, too, bodes well for housing because 89 percent of homes with permits start construction within 60 days.

Momentum should carry forward into fall.

If you’re buying new construction in AZ , ask your real estate agent about local home supply, and how the market is trending. With mortgage rates low and the fall buying season approaching, you may find some of your best deals in the next few weeks.

Led By Expectations Of A Strong Fall Season, Homebuilder Confidence Bounces Back

Housing Market Index (Homebuilder Confidence)

Homebuilder confidence is bouncing back.

One month after an unceremonious dip highlighted by poor sales figures and dim prospects for the future, the National Association of Homebuilder’s Housing Market Index rebounded two points to 15 in July.

The monthly Housing Market Index is scored on a 1-100 scale. Readings above 50 indicate favorable conditions for homebuilders and the “new home” market. Readings below 50 indicate unfavorable conditions.

The Housing Market Index has not read higher than 50 in more than 5 years.

As a housing metric, the HMI is actually a composite of three separate surveys, self-reported by builders. The surveys ask about current single-family home sales volume; projected single-family home sales volume; and current buyer foot traffic levels.

In July, the responses read as follows :

Current single-family sales : 15 (+2 from June)
Projected single-family sales : 22 (+7 from June)
Buyer foot traffic : 12 (Unchanged from June)

The most noteworthy reading is the rapid rise in Projected single-family home sales. Although builders aren’t experiencing more foot traffic, they think sales will spike between now and the New Year.

That could spell bad news for Scottsdale home buyers.

When builders harbor higher expectations for the future, they’re less willing to make concessions for upgrades and/or price. Your likelihood of getting “a great deal” as a buyer diminishes.

That’s why it’s good that mortgage rates are still so low. Low mortgage rates help with home affordability and can offset slight jumps in sale price.

Mortgage rates remain just above their lowest levels of 2011, and of all-time.

What’s Ahead For Mortgage Rates This Week : July 18, 2011

Greece roiling mortgage markets Mortgage markets worsened last week as concerns for the global economy drove new rounds of “safe haven” buying. Fear continues to dominate mortgage bond market movement and Arizona rate shoppers are benefiting.

Conforming and FHA mortgage rates fell for the second straight week last week, and closed out Friday with favorable momentum to the downside.

There were three main mortgage market drivers last week.

The first is tied to the Eurozone.

Although the Greek Parliament reached agreement on austerity measures for the nation-state two weeks ago, concerns that a debt crisis could spill into Italy, Portugal, Ireland, and/or Spain resurfaced last week. The debt of both Ireland and Portugal was downgraded to Junk status, and Italy and Spain may follow soon.

U.S. bond markets gained on the news.

The second story was the just-released Fed Minutes. Notes from the FOMC meeting showed that Ben Bernanke & Co. debated a slowing U.S. economy, the weakening domestic jobs market, and whether a third round of economic stimulus would be necessary. This, too, dragged mortgage rates lower.

The third story is one that’s still forming — the U.S. Debt Ceiling Debate. For now, the issue remains on the market periphery, but as the August 2 debt limit deadline nears, expect more influence over day-to-day mortgage rates.

Other factors in mortgage rates this week include the Existing Home Sales report; Housing Starts data; Homebuilder Confidence Survey; and, Jobless Claims.

Mortgage rates are low but remain volatile. If you’re wondering whether now is a good time to lock your rate, consider that it’s better to be safe than sorry. If mortgage rates rise this week, the rise may be permanent.

Rates can only stay low for so long.

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Archive for July, 2011

Pending Home Sales Rise For 3rd Straight Month

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