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 a positive sign for the real estate and mortgage markets, the pending home sales index report for February 2015 showed that pending home sales in January increased 1.7% on a month-over-month basis (as compared to December 2014).  The increase in the index compares to a 3.7% decrease in the index reported for December and fell within the range of  analyst expectations.  The increase in the pending home sales index was driven by gains in the two largest housing regions, the South and the West while the Northeast was flat and the Midwest declined slightly.  The February pending home sales index report is viewed as a mildly positive development in comparison to the mixed results from other housing and mortgage market reports such as the mortgage application index and new and existing home sales.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The small uptick in the pending home sales report suggests that home purchase mortgage application activity should increase moderately over the next month as an increase in pending home sales typically translates into more mortgages for home buyers.  The relatively small increase in the index, however, underscores the lack of momentum in the housing and mortgage markets.  Many prospective home buyers have yet to take advantage of low interest rates while homeowners are staying in their homes longer which reduces the housing inventory available for sale and overall market activity.  Market participation by first-time home buyers remains low and will need to significantly increase for the housing market to gain any sustained momentum.  Many prospective first-time home buyers are overwhelmed by the mortgage process so we created our First-Time Home Buyer Mortgage Cheat Sheet to help them prepare for and better manage the process.  We will continue to monitor the pending home sales index along with all the important housing and mortgage market metrics so stayed tuned to the FREEandCLEAR Blog for the latest news, insights and updates.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com

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 February 2015 showed that December housing prices increased 0.8% as compared to November and increased 5.4% on a year-over-year basis (so as compared to December 2013).  The FHFA House Price Index for December came in at the high end of the range of analyst projections and built upon comparable results for November 2014 which showed a 0.7% increase on a monthly basis and a 5.2% increase on a year-over-year basis.  The S&P / Case-Shiller Home Price Index for January 2015 showed similar results with housing prices increasing 0.9% in December as compared to November and increasing 4.5% on a year-over-year basis, which represents a slight increase as compared to the 4.3% year-over-year growth reported in November.  The monthly increase in the index represented the largest increase in nine months.  The S&P / Case-Shiller Home Price Index figures came in at the top end of analyst expectations with both the monthly and annual figures increasing slightly as compared to November.  The positive performance for both the FHFA House Price and S&P / Case-Shiller Home Price indices to close out 2014 shows stability in housing values but contrasts with more recent data on housing prices in the February new and existing home sales reports, which both showed declines in median home sales prices in January.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

Home price appreciation is a positive for homeowners but a negative for home buyers looking to enter the market, although the February reports are not all negative for home buyers.  The strong showings from the FHFA Housing Price Index and S&P / Case-Shiller Home Price Index for the second consecutive month may cause more homeowners to consider selling which would bring more supply on the housing market for buyers. Additionally, housing market statistics continue to be mixed as more recent reports on home sale prices showed that prices softened in January as home sales declined.  Plus, interest rates continue to be relatively low which means buyers can afford larger mortgages and buy more house for their money.  A more significant increase in the indices would be cause for concern but FREEandCLEAR believes that now continues to be a favorable time to consider buying a home.  Use the FREEandCLEAR Mortgage Qualification Calculator to determine what size mortgage you can afford and review our Mortgage Process Guide to master the mortgage process from start to finish.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com

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.

Although composite mortgage application activity continues to decline in February, for the week ending February 20th, the purchase mortgage application index snapped a six week losing streak, increasing 5.0% as compared to the prior week. The composite mortgage application index, which includes both home purchase mortgages and refinancings, continued its downward slide, declining 3.5% on the week as compared to a 13.2% decline for the prior week and a 9.0% decline for the week before that. Refinancing applications continue to drag down the composite index, dropping 8.0% on the week following a 16.2% drop in the prior week and a 10.0% drop in the week before that. Interest rates continued to edge up with the average interest rate for conforming loans (mortgage amount less than $417,000) increasing to 3.99% as compared to 3.93% for the prior week. The gradual increase in interest rates is putting a damper on refinance activity while purchase mortgage application activity is showing some signs of life after a month and a half lull. (Source: Bloomberg)

What it Means for Mortgage Borrowers
Overall mortgage application activity continues to decline during February but the positive performance for the purchase application index is a bright spot. Homeowners with existing mortgages should use our Refinance Calculator to determine if they can save money by refinancing despite the moderate increase in interest rates. Now continues to be a favorable time for home buyers as interest rates remain relatively attractive, despite their increase, and home prices remain stable as indicated by the existing and new home sales reports for February. Check out our Mortgage Selector Calculator to determine what size mortgage you can afford and the mortgage program that is right for you. As always, use the INTEREST RATES function on FREEandCLEAR to keep track of mortgage rates for lenders in your area.

The FREEandCLEAR Mortgage Expert
www.freeandclear.com

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.  Coming off a strong January report that showed new home sales spiked 8.1% to an annualized 482,000 units in December 2014, the February new home sales report showed continued momentum with new home sales coming in at an annualized 481,000 units in January 2015.  The January new home sales figure exceeded expectations as analysts were anticipating a drop-off as compared to the robust December figure.  The January median new home sales price decreased 2.6% to $294,000 as compared to $298,000 in December.  The number of new homes available for sale, known as supply, remained relatively flat at 218,000 units.  Supply as compared to monthly sales declined slightly to 5.4 months in January as compared to 5.5 months in December.  The sustained activity in the new home sales market and the relatively low supply figures are welcome developments for both home buyers and builders.  The strong February new home sales report contrasts with the disappointing existing home sales report which showed an unexpected drop in sales.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The housing market is off to a mixed start in 2015 with strong new home sales and weak existing home sales.  Because the existing home sales market is significantly larger than the new home sales market, the overall trend for the housing market is sluggish.   From a home buyer and mortgage borrower’s standpoint, both reports showed a decline in the median home sales price which is a positive for prospective home buyers.  Additionally, interest rates remain relatively low which helps borrowers afford larger mortgages and buy more house for their money.  Check out our Mortgage Qualification Calculator to determine what size mortgage you can afford at today’s mortgage rates and use the INTEREST RATES feature on FREEandCLEAR to compare rates and fees for lenders in your area.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com

In her semi-annual testimony to the Senate Banking Committee, Federal Reserve Chair Janet Yellen expressed uncertainty about the labor and housing markets and indicated that any increase in interest rates would be indicated well in advance of a rate change.  Based on Ms. Yellen’s statement, industry analysts predicted that the earliest that the Federal Reserve would increase interest rates would be June.  It is important to note that although the interest rate policy implemented by the Federal Reserve is one of the most important factors that determines mortgage rates, it is not the only factor.  Mortgage rates are influenced by multiple factors including broader housing, economic and geopolitical conditions.

What it Means for Mortgage Borrowers

The Federal Reserve Chair’s testimony did not have a significant impact on current mortgage rates.  Most industry analysts had predicted that June would be the earliest that the Federal Reserve would possibly raise interest rates so Ms. Yellen’s testimony did not come as a surprise to the market.  Although mortgage rates have crept up over the past several weeks, they remain relatively low and now continues to be a good time to buy a home or refinance.  Ms.  Yellen’s testimony did signal that the Federal Reserve is inclined to raise interest rates some time this year, potentially as early as June, which means that mortgage rates are likely to increase over the course of 2015.  It is impossible to predict interest rates and the Federal Reserve remains concerned about the relatively unsteady labor and housing markets but it would not surprise the FREEandCLEAR Mortgage Expert to see interest rates increase over the second half of 2015.  Now may be a good time to pull the trigger if you are thinking about buying a home or refinancing and use the INTEREST RATES feature on FREEandCLEAR to monitor mortgage rates for lenders in your area.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com

According to a recent report from the U.S. Census Bureau, the rate of homeownership hit a 20 year low of 64.5%  in 2014.  The Census Bureau defines the homeownership rate as the percentage of households that own the house in which they live.  The home ownership rate peaked at 69.0% in 2004 and has been declining over the past ten years.  1994 was the last year that the home ownership rate was as low as 64.5% meaning that 2014 officially erases two decades of home ownership growth in the U.S.

There are many factors that have contributed to the decline in home ownership in the U.S. such as the housing market collapse, economic recession, employment uncertainty and tighter lending standards including higher down payment requirements.  Additionally, FREEandCLEAR believes that the increased complexity of the home buying and mortgage processes has made getting a mortgage and purchasing a home more difficult for more people.  Many people believe that buying a home is out of reach and lack the tools and resources to successfully manage the mortgage process.  The rate of home purchasers that are first time home buyers also continues to decline, a sign that more people are deciding to rent longer instead of buying.

The decline in the home ownership rate and housing market participation by first-time home buyers is one of the reasons we developed FREEandCLEAR.  Our goal is to empower people with high-quality, easy-to-use tools and resources that enable them to understand and better manage a mortgage process that can be overwhelming and confusing.  With the right knowledge, informed borrowers can make better decisions and save money when they get a mortgage.  FREEandCLEAR offers a detailed first-time home buyer cheat sheet, mortgage process guide and mortgage topic instructional videos to guide people through the mortgage process step-by-step.  Although getting a mortgage and buying a home remains a challenging process, borrowers can use FREEandCLEAR to take control of the mortgage process and buy their dream homes.

FREEandCLEAR Mortgage Expert

www.freeandclear.com

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 February 2015 showed that existing home sales in January decreased 4.9% on a month-over-month basis to an annualized 4.82 million units (so if you take the home sales figure for January and multiplied it by twelve), which came in below industry analyst expectations.  Poor weather across much of the country may have negatively impacted existing home sales as every region reported a decline in sales.  Both single family and multi-family properties experienced a drop-off with single family existing home sales declining 5.1% and multi-family property sales declining 3.5%.  The drop in existing home sales led to a jump in available inventory to 4.7 months of supply available on the market as compared to 4.4 months of supply in December 2014.  The median existing home sales price declined 4.1% to $199,600 as compared to $209,500 in December.  Low interest rates and flat-to-declining home prices failed to lure buyers into the market.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

With home buyers remaining cautious, the housing market got off to a sluggish start in 2015. The disappointing existing home sales report shows that issues such as tighter lending standards, down payment requirements and the lack of affordable housing inventory continue to deter buyers from entering the market in force.  On the positive side, an increase in housing inventory and a decline in the median existing home sales price create positive conditions for prospective home buyers.  Additionally, although mortgage rates have crept up over the past couple of weeks, interest rates remain low which is another positive for home buyers.  A relatively flat housing market is actually good for buyers and more housing inventory means more options for buyers.  If you are thinking about buying a home over the next six-to-twelve months get prepared by reviewing our comprehensive mortgage process guide and keep track of interest rates and fees for mortgage lenders in your area using our INTEREST RATES feature.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com

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 February 2015 showed sluggish results for January 2015 after a relatively neutral report for December.  The January figures showed that housing starts declined 5.3% to approximately 1,065,000 annualized units while permits declined 0.7% to 1,053,000.  Both housing starts and permits failed to meet analyst expectations as the new home construction market got off to a slow start in 2015.  The relatively disappointing housing starts figure was driven down by the single family segment which declined 6.7% as compared to the prior month.  On a brighter note, multi-family housing starts increased 7.5% after increasing 5.6% in December.  The single family segment of the housing market is larger than the multifamily segment so the decline in that component of the housing market drags down the overall index.  Although single family housing starts were up in December 2014, that segment of the market has lagged the multi-family segment for the past several months. (Source: Bloomberg)

What it Means for Mortgage Borrowers

The overall housing market is off to a mixed start in 2015 and cannot really seem to gain significant momentum.  The February housing starts report reinforces two points about the real estate market.  First, home builders seem to be shifting their focus to multi-family properties.  Second, builders remain cautious about creating excessive supply in light of inconsistent demand from prospective buyers, especially first-time home buyers.  Although interest rates have edged up, they remain relatively low which is a positive for both home builders and buyers.  The housing starts report tends to fluctuate significantly on a monthly basis due to factors such as weather and we will monitor future reports to see if housing starts can break out of the current sluggish trend.  The housing starts figure is relevant for mortgage borrowers because it is a sign of future housing supply.  Although the February housing starts report was relatively disappointing, continued low interest rates means now is a good time to start the mortgage and home search processes.  Use our Mortgage Qualification Calculator to determine what size mortgage you can afford and our INTEREST RATES feature review interest rates and fees for lenders in your area.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com