The National Association of Realtors pending home sales index tracks the number of existing homes that went into contract to be sold.  When a home seller and buyer agree to the price and terms of a home sale, they sign a contract that outlines the transaction details and the property is said to be “under contract.”  The home sale process is typically completed four-to-six weeks after the property goes under contract so the pending homes sales index is a leading indicator, or predictor, for the real estate market.  An increase in the index reflects an increase in existing home sales while a decrease in the index reflects a decrease in existing home sales.  It is important to point out that the index tracks existing home sales as opposed to new home sales, or homes that are recently constructed that have not been lived in previously.  When people purchase a home they typically get a mortgage so the index also forecasts future activity in the mortgage market. The pending home sales index is released on a monthly basis and provides figures for the prior month.

In somewhat of a setback for the real estate and mortgage markets, the pending home sales index report for January 2015 showed that pending home sales in December decreased 3.7% on a month-over-month basis (as compared to November 2014).  The decrease in the index compares to a 0.6% increase in the index reported for November and fell short of analyst expectations for an increase of approximately 1.0%.  The pending home sales figure came as a surprise given the strength of existing and new home sales figures for December. The pending home sales index declined across all regions of the country.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

Despite positive readings from the existing and new home sales reports for December and a strong start to 2015 for mortgage applications, the December pending homes sales figure is a sign that the real estate and mortgage market remains relatively inconsistent in its trajectory.  With low interest rates and an improving economy, analysts had expected stronger pending home sales results to close out 2014.  Although interest rates remain low, down payment requirements and tight credit standards remain significant obstacles for home buyers to overcome, especially for first-time home buyers.  Government initiatives introduced in January designed to ease the down payment requirement could benefit home buyers although it may take some time for these initiatives to impact the real estate and mortgage markets.  First-time home buyers should review our First-Time Home Buyer Cheat Sheet to prepare for the mortgage process and keep tabs on interest rates for lenders in their area using our INTEREST RATES feature.

The FREEandCLEAR Mortgage Expert

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At FREEandCLEAR, we follow the Mortgage Bankers’ Association (MBA) mortgage applications index which measures both purchase and refinance applications for mortgage lenders across the country.  An increase in the MBA applications index reflects an increase in mortgage applications while a decrease in the index reflects a decline in mortgage applications.

After a torrid start to 2015 which saw a huge jump in refinance and purchase mortgage applications, the composite mortgage application index, which includes both home purchase mortgages and refinancings, fell 3.2% for the week ended January 23rd as compared to the 14.2% increase in the prior week.  Refinancings dropped 5.0% as compared to the 22.0% increase last week and the 66.0% increase in the week before that. Purchase applications were basically flat, declining 0.1% as compared to the 3.0% decline for the prior week and 24.0% increase in the week before that.  The mortgage market, and particularly the refinance market, cooled off somewhat after consecutive weeks of robust activity.  Interest rates continue to be low although the average interest rate for conforming loans (mortgage amount less than $417,000) increased slightly to 3.83% as compared to 3.80% for the prior week.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

After two strong weeks, a slowdown in mortgage application activity did not come as a surprise as lenders work through the onslaught of applications they received to start 2015.  A huge uptick in mortgage activity can make it challenging for borrowers to get the appropriate level of customer service they deserve so the slowdown over the last week is not necessarily a negative sign.  Interest rates remain low making this a good time for prospective home buyers and people seeking to refinance their mortgages.  With the high level of mortgage activity it is more important than ever for borrowers to contact multiple lenders to make sure they are getting the best terms for their mortgage.  Because many lenders have a lot of business they may not be inclined to compete for your mortgage so it is important to shop around to make sure you get a mortgage with the lowest interest rate and fees.  Use the INTEREST RATES feature on FREEandCLEAR to contact multiple lenders in your area to compare mortgage proposals and find the loan that is right for you.

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In our effort to cover important trends that affect the mortgage market, FREEandCLEAR keeps a close eye on new home sales, which is the number of newly constructed housing units that are sold in a month.  The new home sales figure is reported separately from the existing home sales figure, which is the number of previously constructed homes that are sold in a month.  The new home sales market is smaller than the existing home sales market but it is still an important indicator for the real estate and mortgage markets.  In addition to reporting the number of housing units sold, the new home sales report also includes information on the supply of units for sale as wells as the median and average new home sales price.

The new home sales report, issued on a monthly basis, includes statistics for the prior month.  The report for January 2015 showed that new home sales in December increased 11.6% to an annualized 481,000 units as compared to the revised 431,000 units figure for for November.  The December figure came in significantly above estimates as analysts had projected approximately 452,000 annualized units.  The December median home sales price increased 2.2% on a monthly basis and 8.2% on an annual basis to $298,000.  The number of new homes available for sale, known as supply, increased 2.3% to 219,000 although supply as compared to monthly sales declined from 6.0 months in November to 5.5 months in December due to the increase in monthly sales.  The uptick in new home sales was driven by strength in the South and Northeast while the Midwest and West showed declines.  The strong New Home Sales report follows the positive Existing Home Sales report for December which came in at the high end of expectations. (Source: Bloomberg)

What it Means for Mortgage Borrowers

Strong new and existing home sales reports for December suggest that low interest rates and stabilizing prices pulled home buyers into the market to finish 2014.  We will keep an eye on the decline in new home supply and the increase in median new home sales price in future reports as these factors could weigh down the housing market.  In the near term, low interest rates should continue to make buying a home more affordable and could potentially pull first-time home buyers into the real estate market.  Additionally, builders could respond to the decrease in supply and uptick in buying activity by increasing the construction of new homes.  After a bumpy year, the real estate market finished 2014 on a positive note, setting the stage for a strong start to 2015. Use the Mortgage Qualification Calculator on FREEandCLEAR to determine what size mortgage you can afford and keep track of low interest rates by using our INTEREST RATES feature.

The FREEandCLEAR Mortgage Expert

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There are two primary measures of housing prices that we track at FREEandCLEAR: the Federal Housing Finance Agency (FHFA) House Price Index, which uses certain nationwide mortgage activity to track home prices and the S&P / Case-Shiller Home Price Index, which tracks home prices in 20 U.S. metropolitan markets.  Both indices are reported on a monthly basis and include information for the month that is two months prior to the reporting date.

The FHFA House Price Index for January 2015 showed that November housing prices increased 0.8% as compared to October and increased 5.3% on a year-over-year basis (so as compared to November 2013).  The FHFA House Price Index for November came in above analyst projections for a 0.4% increase on a month-over-month basis and the annual change increased as compared to the 4.5% annual increase in October.  The S&P / Case-Shiller Home Price Index for January 2015 showed that housing prices increased 0.7% in November as compared to October and increased 4.3% on a year-over-year basis, which represents a slight decline as compared to the 4.5% year-over-year growth reported in October.  The S&P / Case-Shiller Home Price Index figures came in within analyst expectations with both the monthly and annual figures declining slightly as compared to October.  The positive performance for both the FHFA House Price and S&P / Case-Shiller Home Price indices suggests that the housing market remains relatively steady although prices are increasing at a slower pace than in 2012 and 2013.  It is important to highlight that these indices reflect the trend in nationwide housing prices and housing prices for a specific region or city can vary significantly.  The S&P / Case-Shiller Home Price Index which tracks individual cities showed price notable appreciation in Atlanta, Tampa Bay and San Francisco. (Source: Bloomberg)

What it Means for Mortgage Borrowers

A significant increase in housing prices encourages homeowners to consider selling but makes buying a home less affordable for prospective buyers. The positive readings from the latest FHFA Housing Price Index and S&P / Case-Shiller Home Price Index show an underlying strength to the housing market although home price appreciation remains relatively constrained as compared to the past several years.  The most recent new and existing home sales reports showed similar data, reporting a modest increase in home prices.  A more significant increase in home prices could put a damper on the real estate and mortgage markets and FREEandCLEAR will continue to monitor the FHFA Housing Price Index and S&P / Case-Shiller Home Price indices to track changes in home prices.  Continued low interest rates help to offset an increase in home prices and you can use the INTEREST RATES function on FREEandCLEAR to keep tabs on interest rates and fees for lenders near you.  Additionally, if you are currently renting and thinking about buying a home, use our Rent Payment Mortgage Affordability Calculator to determine what size mortgage you can afford based on your monthly rent payment.

The FREEandCLEAR Mortgage Expert

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In our effort to cover important trends that affect the mortgage market, FREEandCLEAR keeps a close eye on existing home sales, which is the number of previously constructed housing units that are sold in a month.  The existing home sales figure is reported separately from the new home sales figure, which is the number of newly constructed homes that are sold in a month.  An increase in existing home sales reflects improvement in the housing market while a decrease in existing home sales reflects a weakening of the housing market.  In addition to reporting the number of housing units sold, the existing home sales report also includes information on the supply of units for sale as wells as the median and average existing home sales price.

The existing home sales report, issued on a monthly basis, includes statistics for the prior month.  The report for January 2015 showed that existing home sales in December 2014 increased 2.4% on a month-over-month basis to an annualized 5.04 million units (so if you take the home sales figure for December and multiplied it by twelve), which came in at the high end of industry analyst expectations.  The number of existing homes available for sale, known as supply, decreased by 23,000 units to 1.85 million units as compared to 2.08 million units in November.  The 1.85 million unit supply figure represents 4.4 months of supply available on the market, down from 5.1 months of available supply in November.  The median existing home sales price increased 6.0% on a year-over-year basis and 1.1% on a monthly basis to $209,500 as compared to $205,300 in November.  Low interest rates and relatively mild winter weather in December boosted existing home sales, in a positive development to end the year.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The boost in existing home sales suggests that home buyers became more active in the real estate market following the drop in interest rates at the end of 2014.  Although the report showed positive purchase activity, the decline in housing supply and uptick in prices could be negative factors for the mortgage and real estate markets going forward.  A reduction in supply and increase in prices makes finding an affordable home more challenging for home buyers, especially first-time home buyers who have been reluctant to enter the market.  Low interest rates, however, offset these factors by making owning a home more affordable.  Use the Mortgage Selector Calculator on FREEandCLEAR to determine what size mortgage you can afford and the mortgage program that is right for you and check out mortgage rates and fees for lenders in your area using our INTEREST RATES feature.

The FREEandCLEAR Mortgage Expert

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A key report that reflects the strength of the housing market is the monthly Housing Starts report released jointly by the U.S. Census Bureau, U.S. Department of Commerce and U.S. Department of Housing & Urban Development.  The Housing Starts report includes two pieces of data: starts and permits.  A housing start is counted when construction begins on a new single or multifamily property.  A permit is counted when a permit is issued by a local government to a property owner or builder to begin construction on a new single or multifamily property. Because construction typically begins soon after a new permit is issued, housing starts and permits are typically highly correlated.

The Housing Starts report issued in January 2015 showed steady results for December 2014 after a relatively positive report for November.  The December report showed that housing starts increased 5.3% on an annual basis to approximately 1,089,000 units while permits increased 1.0% to 1,032,000.  Housing starts exceeded analyst expectations while the permit figure came in below analyst expectations.  The increase in housing starts was driven by the single family segment which had lagged the multifamily segment for the past several months.  Single family permits increased 4.5% as compared to an 11.8% decline for multifamily permits.  The single family segment of the housing market is larger than the multifamily segment so the improvement in that component of the housing market is a positive.  The Housing Starts report tends to fluctuate significantly on a monthly basis but overall activity remains relatively steady. (Source: Bloomberg)

What it Means for Mortgage Borrowers

The most recent housing starts report suggests that housing supply will remain relatively steady as home builders on a nationwide basis remain active but not overly aggressive in new construction.  The shift toward single family housing is an interesting development and suggests that home buyers could have more single family home options in the future.  As opposed to condominiums or multi-family properties, single family homes typically do not require the owner to pay a monthly homeowners association fee (HOA fee) or co-op fee which results in lower total monthly housing expense for the borrower and potentially makes single family properties more affordable.

It is important to highlight that the housing starts report addresses the new home market as opposed to the larger existing home market.  Use the FREEandCLEAR Mortgage Qualification Calculator to determine what price home you can afford based on your monthly income and debt and other factors including if the property requires HOA fees.  Additionally, interest rates continue to be very attractive to mortgage borrowers so use the INTEREST RATES feature on FREEandCLEAR to monitor rates for lenders in your area.

The FREEandCLEAR Mortgage Expert

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At FREEandCLEAR, we follow the Mortgage Bankers’ Association (MBA) mortgage applications index which measures both purchase and refinance applications for mortgage lenders across the country.  An increase in the MBA applications index reflects an increase in mortgage applications while a decrease in the index reflects a decline in mortgage applications.

For the week ended January 16th, the composite mortgage application index, which includes both home purchase mortgages and refinancings, jumped 14.2%, an impressive showing considering that the composite index increased a massive 49.1% in the prior week.  Refinancings continue to drive the mortgage market as the refinance application index increased 22.0% as compared to a 66.0% increase in the prior week.  Purchase applications fell back 3.0% for the week as compared to the 24.0% increase in the purchase application index for the prior week.  The mortgage market, and particularly the refinance market, continue to respond to low interest rates with the average interest rate for conforming loans decreasing to 3.80% as compared to 3.89% for the prior week.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

Interest rates remain at very attractive levels making this a good time to refinance your mortgage or consider buying a new home.  If you have not refinanced your mortgage, FREEandCLEAR recommends that you contact several lenders to understand how much money you could potentially save.  If you have been thinking about buying a home, the low interest rates means now could be the right time to pull the trigger.  Housing prices fluctuate by market and saving for a down payment can be challenging but low interest rates can save you  thousands of dollars over the life of your mortgage.  Use the INTEREST RATES feature on FREEandCLEAR to review mortgage rates and fees for lenders in your area and then use our Mortgage Refinance Calculator to determine how much money you could save by refinancing and our Fixed Rate Mortgage Calculator to review your monthly mortgage payment and total interest expense for different mortgage amounts and interest rates.

The FREEandCLEAR Mortgage Expert

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The National Association of Home Builders Housing Market Index is one of the key housing market statistics that we track at FREEandCLEAR.  The Housing Market Index incorporates factors such as current and expected new home sales and interest level from potential new home buyers.  It is important to highlight that the index focuses on new home sales, so homes built by builders that have never been lived in before, as opposed to existing home sales, which represents a larger portion of the overall housing market.

For January 2015, the Housing Market Index came in at 57 as compared to 58 in December 2014.  Any figure above 50 is considered strong and January represents the 7th consecutive month with the index above 50.  The January figure met industry analyst expectations with strong showings from the present new home sales and future sales components of the index.  The third component of the index, home buyer traffic, came in weaker than expected at 44, continuing a lackluster trend over the past several months.  The January figure provides a positive start for new home sales and the housing market although for the market to really take off we will need to see an increase in traffic, especially among first-time home buyers. (Source: Bloomberg)

What it Means for Mortgage Borrowers

The housing market has started off the new year in positive fashion although the lack of participation and interest from first-time home buyers remains an ongoing theme.  Interest rates continue to be at multi-year lows which could eventually pull more first-time buyers into the market.  Real estate market conditions vary greatly by market but with prices appearing to stabilize on a national basis, conditions could prove ripe for home buyers.  If you are in the home buying market for the first time, check out the FREEandCLEAR First-Time Home Buyer Mortgage Cheat Sheet to understand the basics of getting a mortgage.  You should also monitor the INTEREST RATES feature on FREEandCLEAR to keep track of mortgage rates for lenders in your area as rates continue to be very attractive for borrowers.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com