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 March 2015 showed that January housing prices increased 0.3% as compared to December and increased 5.1% on a year-over-year basis (so as compared to January 2014).  The FHFA House Price Index for January came in at the low end of the range of analyst estimates and softened relative results for December 2014 which showed a 0.7% increase on a monthly basis and a 5.4% increase on a year-over-year basis.  The FHFA House Price Index shows that home prices are appreciating at a moderate pace which is relatively positive news for both home sellers and buyers.  The S&P / Case-Shiller Home Price Index for March 2015 showed similar results with housing prices increasing 0.9% in January as compared to December and increasing 4.6% on a year-over-year basis, which represents a slight increase as compared to the 4.4% year-over-year growth reported in December.  The S&P / Case-Shiller Home Price Index for January came in at the top end of the range of analyst projections and improved slightly relative results for December 2014.  The positive performance for both the FHFA House Price and S&P / Case-Shiller Home Price indices to start 2015 continues the momentum seen at the end of 2014.  Improving home prices may encourage more home owners to sell while the relatively gradual pace of home price appreciation is positive news for home buyers.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

Home prices continue to increase although not at a rate that should be alarming for home buyers.  An uptick in home prices should bring more supply on the market which is good news for prospective home buyers who benefit from increased housing inventory.  A more significant jump in home prices in the coming months, however, could have a negative effect on the mortgage and real estate markets.  Both the FHFA House Price and S&P / Case-Shiller Home Price indices for January showed moderate-to-slowing price growth on a monthly and annual basis which bodes well for home price stability going forward.  In another positive for home buyers, interest rates continue to be low, which helps to offset an increase in home prices for prospective buyers. Before you start the home search process, use the Mortgage Qualification Calculator on FREEandCLEAR to determine what price home you can afford and use our INTEREST RATES function to review mortgage rates and fees for lenders in your area.

The FREEandCLEAR Mortgage Expert

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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.

A continued bright spot for the real estate and mortgage markets, the pending home sales index report for March 2015 showed that pending home sales in February increased 3.1% on a month-over-month basis (as compared to January 2015).  The increase in the index follows a 1.2% increase in the index reported for January and significantly exceeded  analyst expectations.  The increase in the pending home sales index was driven by gains in the West and Midwest, which more than offset small decreases in the Northeast and the South, the nation’s largest housing market.  The pending home sales index is showing some meaningful momentum, increasing in consecutive months for the first time in almost a year.  Additionally, in another positive from the report, market participation by first-time home buyers inched up to 29% from 28%, increasing for the first time since November 2014.  The March pending home sales index report is viewed as another positive for the mortgage and real estate markets following last week’s robust new home sales report.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

Continued momentum in the pending existing home sales market should result in an uptick in mortgage borrowing activity.  The favorable pending home sales report and recent strong new home sales report demonstrate that borrowers are taking advantage of low interest rates to buy homes.  The small increase in market participation by first-time home buyers is a welcome development although that figure remains near a multi-decade low.  First-time home buyers will have to jump into the market in force for the housing and mortgage markets to really take off.  With the Spring home buying season fast-approaching, first-time and experienced home buyers should review our comprehensive downloadable mortgage process guide for money and time-saving tips on the mortgage process.  Additionally, check out the INTEREST RATES feature on FREEandCLEAR to compare mortgage rates and contact lenders in your area to get pre-approved for your mortgage before you start the home search process.

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 about two straight months of disappointing results, the mortgage applications index finally showed some signs of life.  For the week ending March 20th, the composite mortgage application index, which includes both home purchase mortgages and refinancings, increased 9.5% as compared to a 3.9% decrease for the prior week.  Home purchase mortgage applications increased 5.0% as compared to a 2.0% decline the prior week and refinance applications jumped 12.0% as compared to a 5.0% decline the prior week. Mortgage applications were boosted by lower interest rates as the average interest rate for conforming loans (mortgage amount less than $417,000) decreased to 3.90% as compared to 3.99% for the prior week.  The latest mortgage application index report is welcome news for the mortgage and real estate markets after weeks of lackluster application activity.   (Source: Bloomberg)

What it Means for Mortgage Borrowers

The rebound in mortgage activity is a sign that mortgage borrowers are finally responding to low interest rates by buying homes or refinancing their mortgages.  While the increase in applications means that lenders are likely to be more focused on processing mortgages, the lack of activity over much of the year means that lenders should continue to aggressively pursue new mortgage business, which is a positive for mortgage borrowers.  Whether you are thinking about buying a home or refinancing an existing mortgage, now may the right time to take advantage of low interest rates.  Use the INTEREST RATES function on FREEandCLEAR to compare interest rates and fees for lenders in your area and then use our Mortgage Qualification Calculator to determine what size mortgage you can afford or our Mortgage Refinance Calculator to determine how much money you can save by refinancing.

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 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 of strong reports for the past two months, the March new home sales report report blew past expectations, with the February new home sales coming in at an annualized 539,000 units. The February new home sales figure greatly exceeded the average analyst estimate for 459,000 annualized new home units sold. Attractive interest rates and a drop in prices seems to have pulled buyers into the market. The February median new home sales price decreased 4.8% to $275,000. Driven by the jump in sales, supply as compared to monthly sales declined slightly to 4.7 months in February as compared to 5.1 months in January. The robust March new home sales report combines with a positive February report for the strongest back-to-back monthly performance since Spring of 2008. The consistently positive activity in the new home sales market over the past several months represents a bright spot for the housing and mortgage markets. Similar to February, the strong March new home sales report contrasts with the disappointing existing home sales report which showed a relatively small gain in sales. (Source: Bloomberg)

What it Means for Mortgage Borrowers
The March new home sales report provides several bright spots for mortgage borrowers. First, the increase in sales activity suggests that buyers are finding attractive homes to purchase and are able to successfully arrange mortgage financing. Second, the decrease in median sales price is a positive for home buyers as lower prices make purchasing a home more affordable for prospective buyers. The dip in new home inventory is a minor concern for home buyers as less supply could drive up prices in the medium-to-long term. The boost in home sales, however, should motivate developers to produce more housing which will alleviate pressure on supply. All in all, the March new home sales report is a positive for mortgage borrowers as low interest rates and favorable home prices create attractive conditions for home buyers. If you are thinking about buying a home use our Mortgage Selector Calculator to determine what size mortgage you can afford and the mortgage program that is right for you. You can also use the INTEREST RATES feature on FREEandCLEAR to keep a close eye on mortgage rates and costs for lenders in your area. FREEandCLEAR reminds you that comparing rates from multiple lenders is the best way to save money on your mortgage.

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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 March 2015 showed that existing home sales in February increased 1.2% on a month-over-month basis to an annualized 4.88 million units (so if you take the home sales figure for February and multiplied it by twelve), which came in within industry analyst expectations.  On a year-over-year basis, existing home sales increased 4.7%, the highest reading since October 2013.  Single family existing home sales outpaced multi-family properties with single family existing home sales increasing 1.4% on a monthly basis and 5.9% on a year-over-year basis as compared to multi-family property sales which were flat on a monthly basis and declined 3.6% on year-over-year basis.  The small increase in existing home sales led to a small decrease in available inventory to 4.6 months of supply available on the market down from 4.7 months of supply in January 2015.  The median existing home sales price increased to $202,600 which represents a 2.5% increase on a monthly basis and a healthy 7.5% increase on a year-over-year basis.  Although mostly positive, the existing home sales report for March underscores the lack of any true strength or momentum in the housing and mortgage markets.    (Source: Bloomberg)

What it Means for Mortgage Borrowers

The most noticeable developments in the March existing home sales report for mortgage borrowers were the upticks in single-family purchase activity and the median home sales price.  Despite poor weather across much of the country, home buyers increased purchases of single family properties.  The decline in existing home sales price reported for January and continued low interest rates may have brought buyers into the market.  The increase in median existing home sales price reported for February is something FREEandCLEAR will continue to monitor as rising home prices makes purchasing a home less affordable for prospective buyers.  Existing home inventory remains relatively low but steady suggesting that there are opportunities for home buyers in the marketplace.  Use our Mortgage Qualification Calculator to determine how much home you can afford at today’s low rates and use our INTEREST RATES feature to compare mortgage rates and fees 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 ending March 13th, the composite mortgage application index, which includes both home purchase mortgages and refinancings, declined 3.9% as compared to a 1.3% decrease for the prior week.  The decrease in composite index was driven by a 5.0% decline in the refinance index which followed a 3.0% decline for the prior week.  Purchase applications decreased a modest 2.0% on the week, exactly reversing the 2.0% increase for the prior week.  In positive news for mortgage borrowers, interest rates dropped with the average interest rate for conforming loans (mortgage amount less than $417,000) decreasing slightly to 3.99% as compared to 4.01% for the prior week.  A sluggish housing market and poor weather offset a decline in interest rates to drag down the application index.   (Source: Bloomberg)

What it Means for Mortgage Borrowers

The mortgage applications index report has proven to be lackluster yet again, continuing an almost two-month trend.  While a sluggish mortgage application market is negative for lenders it is actually positive for mortgage borrowers.  The lack of mortgage activity means that lenders should be as aggressive as ever in generating new customers.  Borrowers can use this dynamic to their advantage to potentially negotiate a lower interest rate or closing costs.  Additionally, the drop in interest rates is another positive for borrowers.  Whether you are refinancing or thinking about buying a home, now continues to be a great time to talk to lenders about your mortgage objectives.  Use the INTEREST RATES feature on FREEandCLEAR to compare and contact lenders in your area.  Gathering proposals from multiple lenders is the best way to ensure that you get a mortgage with the lowest interest rate and fees.

The FREEandCLEAR Mortgage Expert

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The Federal Reserve determines monetary policy in the United States, and monetary policy, in turn, is one of the most important factors in determining mortgage interest rates.  So when the Federal Reserve speaks, FREEandCLEAR listens closely and passes along our insights to the the FREEandCLEAR community.  One of the key tools that the Federal Reserve uses to control monetary policy is the Federal Funds Rate.  In short, the Federal Funds Rate is the interest rate that banks pay when they borrow money from each other overnight to make sure they have enough money in reserve.  The Federal Reserve sets a target for the Federal Funds Rate which influences other interest rates, including mortgage interest rates.  Although there are other factors involved, the lower the Federal Funds Rate, the lower mortgage interest rates and the higher the Federal Funds Rate, the higher mortgage interest rates.  The Federal Open Market Committee (FOMC) is the policy-making unit of the Federal Reserve that is responsible for determining the Federal Funds Rate and meets eight times a year to discuss what the target rate should be.  After every meeting, the FOMC releases a policy statement that discusses the target Federal Funds Rate as well as other monetary policy and economic issues.  The FOMC announcement can have a significant impact on mortgage rates depending on if the FOMC changes the target Federal Funds Rate and the language the statement uses to discuss monetary policy and the economy.

In its most recent FOMC announcement released on March 18th, the Federal Reserve left the target Federal Funds Rate unchanged at 0 to .25%.  The major development coming out of the FOMC announcement was the removal of word “patience” with respect to future increases of the Federal Funds rate.  Janet Yellen, Chair of the FOMC, communicated that dropping “patience” from the FOMC statement did not mean that the Federal Reserve intends to increase interest rates in the near term.  Additionally, weaker than expected economic data reported since the last FOMC statement supports the case for keeping the Federal Funds Rate at its current level.  Most industry analysts expected that the FOMC would drop or alter its use of “patience” in its statement so the FOMC’s action did not surprise or disrupt the mortgage market.  Although the FMOC’s decision to remove “patience” from its language provides more flexibility for raising the Federal Funds Rate in the future, most analysts expect that to happen in the medium-to-longer term, meaning toward the end of 2015 or the beginning of 2016.  Mortgage rates were relatively unchanged following the FOMC announcement with rates inching down on the week.

What it Means for Borrowers

The FOMC’s change in language is part of its stated plan to telegraph potential future increases in interest rates rather than surprise the market with policy changes.  The FOMC indicated that it would base any rate increases on economic data and recent soft GDP and wage growth data suggest that the FOMC will keep the target interest rate steady for the at least the next several months.  Economic conditions and data can change quickly, however, and the FOMC’s recent statement underscores that it is a matter of when, not if, the FOMC increases the target Federal Funds Rate.  Interest rates continue to be at historical lows making now a great time to buy a home or refinance your mortgage.  Although the FOMC is attempting to be deliberate with its interest rate policy, it is impossible to predict when mortgage rates will increase so FREEandCLEAR recommends starting the mortgage process sooner rather than later.  Check out the INTEREST RATES feature on FREEandCLEAR to compare mortgage rates and fees for lenders in your area and make your move before the FOMC does.

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 March 2015 showed sluggish results for February 2015 after a relatively negative report for January.  The January figures showed that housing starts declined 17.0% to approximately 897,000 annualized units.  Driven by poor weather across much of the country, the housing starts figure came in well below industry analyst expectations.  Housing starts declined across all regions, led by the Northeast Region which was down 56.6%. Single family housing starts declined 14.9% and multifamily starts declined 20.8%, reversing a 7.9% increase in January.  On a more positive note, housing permits increased 3.0% to approximately 1.092 million annualized units, exceeding analyst expectations  Taken together, the housing starts and permits figure paint a mixed and relatively disappointing picture of the housing market.  The negative impact of an especially harsh winter cannot be ignored, however, and we will be able to get a better sense of the new housing supply market after the country thaws out in Spring. (Source: Bloomberg)

What it Means for Mortgage Borrowers

The housing starts report continues a trend of relatively disappointing housing figures to start 2015 and suggests that anticipated new housing supply may be delayed in hitting the market.  From a home buyer and mortgage borrower’s perspective, less housing supply is a negative although inventory should pick-up as the weather improves and the spring home buying season arrives.  Additionally, interest rates continue to be attractive for mortgage borrowers so the housing starts report should not deter prospective home buyers from starting their home search.  The first step in the home buying process is determining what size loan you can afford and getting pre-approved for your mortgage.  Use the Mortgage Qualification Calculator on FREEandCLEAR to asses what size mortgage you qualify for and then use our INTEREST RATES function to contact lenders in your area and get pre-approved.  FREEandCLEAR offers everything you need to be ready for the home buying season when Spring eventually arrives!

The FREEandCLEAR Mortgage Expert

www.freeandclear.com