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.

After reaching a nine-year high in May, the pending homes sales index reversed course in June.  Pending home sales fell short of analyst expectations with the June pending home sales index dropping 1.8% on a month-over-month basis (as compared to May 2015). Analysts were expecting an increase of approximately 1.5%.  The decline in the index was surprising given the recent string of positive housing market reports including a very strong existing home sales report for June.  The pending home sales index was dragged down by lackluster results in the South and Midwest while the West and Northeast regions edged higher.  Although the June figure disappointed, year-to-date the pending home sales index is up 8.2% showing the overall strength of the existing home sales market.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The pending homes sales index had reached a post housing market recovery high in May so it is not a total surprise to see the index pull back in June, especially in light of the modest increase in interest rates over the past several months.  If will be interesting to see if the soft June pending sales figure results in a dip in final existing home sales later this Summer.  Although the broader housing and mortgage markets appear to be gaining sustained momentum prospective home buyers can potentially take advantage of the dip in pending home sales to make their move.  As you navigate the home buying process use our Mortgage Qualification Calculator to determine what size mortgage you can afford and keep track of mortgage rates and fees for lenders in your area with 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.

The mortgage applications index remained relatively flat for the second week in a row.  For the week ended July 24th purchase applications held steady, dropping 0.1% after increasing 1.0% the prior week.  Refinance applications increased a modest 2.0% after decreasing a modest 1.0% the prior week.  The composite applications index, which includes both purchase mortgages and refinancings, increased 0.8% on the week after inching up 0.1% the prior week.  In positive news for borrowers, mortgage rates dipped with the average interest rate for conforming loans (mortgage amount less than $417,000) sliding to 4.17% as compared to 4.23% for the prior week.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

After some pretty wild gyrations over the course of the first half of the year, mortgage application activity was relatively calm to close out July.  Steady application activity and a drop in interest rates are both positive developments for borrowers.  If you have been thinking about refinancing now may be a good time to start the process.  Use our Refinance Calculator to determine how much money you can save by refinancing your mortgage.  If you are a prospective home buyer you should consider taking advantage of lower interest rates to make your move.  Use our Mortgage Qualification Calculator to determine what size mortgage and home you can afford based on today’s mortgage rates.

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.  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 rates and the higher the Federal Funds Rate, the higher mortgage rates.  The Federal Open Market Committee (FOMC) 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 July 29th, the Federal Reserve left the target Federal Funds Rate unchanged at 0% to .25%.  The FOMC highlighted improvements in employment but also pointed out continued challenges in household spending and business investment. FOMC members review a wide range of economic statistics and indicators but is broadly focused on promoting low unemployment and maintaining reasonable inflation.  There were no significant changes or surprises included in the FOMC announcement and mortgage rates dipped slightly following its release.  Following the announcement most industry analysts affirmed their expectations that the FOMC will raise interest rates in either September or December of 2015.  No members of the FOMC offered their dissent in the statement which indicates that the committee is generally unanimous on its interest rate policy.

What it Means for Borrowers

In short, the July FOMC announcement proved to be a non-event.  With no changes to the target Federal Funds Rate and very few changes to the language used by the FOMC to communicate interest rate policy, mortgage rates remained relatively unchanged following the announcement and have actually declined moderately over the past month.  Despite the lack of market reaction the FOMC appears on track to raise the target Funds Rate by the end of 2015.  FREEandCLEAR will be watching the September FOMC meeting closely as most analysts predict that this is the soonest the Federal Reserve would consider raising interest rates.  You can keep a close eye on mortgage rates for lenders in your area using the INTEREST RATES feature on FREEandCLEAR.

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 July reports for the FHFA House Price Index and S&P / Case-Shiller Home Price Index showed mixed results for May.  While the FHFA House Price index moved up, the S&P / Case-Shiller Home Price Index surprising moved in the opposite direction.  The FHFA House Price Index for July 2015 showed that May housing prices increased 0.4% as compared to April and increased 5.7% on a year-over-year basis (so as compared to May 2014).  The FHFA House Price Index figures came in at the the midpoint of analyst estimates and were flat compared to April 2015, which also showed a 0.4% monthly increase and a 5.3% year-over-year increase.  The housing price appreciation reflected in the FHFA House Price Index does not come as a surprise given the favorable trends in the recent new and existing home sales reports.  What does come as a surprise is that the S&P / Case-Shiller Home Price Index showed that May housing prices decreased 0.2% as compared to April while increasing 4.9% on a year-over-year basis.  Both figures came in below analyst expectations.  Of note in the S&P / Case-Shiller Home Price Index report is that twelve of 20 cities included in the index showed price declines, up from eight cities in April.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

We always like to point out that there is a two month lag in the data reported by the FHFA House Price and S&P / Case-Shiller Home Price indices but both reports showed that home price appreciation moderated in May.  Cooling housing prices are a positive for borrowers as they makes housing more affordable.  For example, softening May housing prices are likely one of the factors that contributed to strong housing sales in June.  It is important to highlight that housing price trends vary significantly by market but the overall trend in May benefited borrowers.  It is uncertain what direction housing prices will take in the future but prospective home buyers can use our Mortgage Qualification Calculator to determine what size mortgage you can afford today.  Additionally, you should use the INTEREST RATES feature on FREEandCLEAR to compare mortgage rates and fees for lenders in your area and find the mortgage that is right for you.

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 new home sales price.  The new home sales report, issued on a monthly basis, includes statistics for the prior month.

In an outlier compared to other strong housing and mortgage market indicators, the new home sales report for July fell significantly below expectations.  June new home sales broke a two month winning streak with sales decreasing 6.8% to 482,000 annualized units as compared to a 2.2% increase in May.  The June new home sales figure came in over 50,000 annualized units below industry analyst expectations.  Although home sales declined there were several positive developments for buyers in the report.  First, the median new home sales price stayed relatively flat in June at $281,800, up 0.5% on a monthly basis but down 1.8% on a year-over-year basis.  New home inventory also expanded with the number of new homes available for sale up 3.4% on a monthly basis to 215,000 units.  The increase in inventory coupled with the drop in sales caused supply as compared to monthly sales to jump to 5.4 months as compared to 4.8 months in May.  New home sales declined in three out of four regions with the Northeast being the sole region in positive territory.  After mostly positive reports for 2015, the July new homes sales report showed that home buyer behavior fluctuates from month-to-month.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

Stable new home sales prices and increased housing supply are both positives for prospective home buyers and compare favorably to the existing home sales market which saw a record-setting median home sales price and decreased inventory in June.  After a strong first half of the year, it is not overly surprising or concerning to see the new home market pull back for a month. At least for the month of June, buyers showed a much stronger preference for existing homes and it will be interesting to see if the trend continues when the July figures are released.  If you are a prospective home buyer weighing a new or existing property be sure to check out our Mortgage Expert Insights about the Differences Between Buying a New and Existing Home.

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.

Over the past month, mortgage applications have seemingly jumped up and down on a weekly basis but both applications and interest rates remained relatively flat for the week ended July 17th.  Purchase applications increased a modest 1.0% after dropping 8.0% the prior week.  Refinance applications decreased 1.0% after increasing 4.0% the prior week.  The composite applications index, which includes both purchase mortgages and refinancings, was basically flat, inching up 0.1% after dropping 1.9% for the prior week.  Similar to applications, mortgage rates held steady with the average interest rate for conforming loans (mortgage amount less than $417,000) remaining at 4.23% for the third consecutive week.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

Flat mortgage applications are a positive for prospective buyers as lenders should be aggressively competing for new mortgage business.  Flat interest rates are also a plus for borrowers given the increase in rates over the past several months.  If you are thinking about buying a home or refinancing consider taking advantage of the lull in activity to establish relationships with three-to-four lenders.  Comparing proposals from multiple lenders is the best way to find the mortgage with the lowest rates and fees. Check out the INTEREST RATES feature on FREEandCLEAR to compare rates and fees for lenders in your area and find the mortgage that is right for you.

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 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 July 2015 showed that existing home sales in June reached their highest level since the real estate market collapsed and the median home sale price hit an all-time high. June existing home sales increased 3.2% on a month-over-month basis to an annualized 5.49 million units (so if you take the home sales figure for June and multiply it by twelve), which exceeded  industry analyst expectations.  On a year-over-year basis, existing home sales have increased 9.6%, up from a 9.2% year-over-year increase in May.  The increase in sales pushed up the median existing home sales price to a record $236,400 as compared to $228,700 in May.  Existing home sales increased across all regions, with the Midwest leading the charge.  The inventory  of existing homes for sale increased moderately to 2.30 million in June from 2.29 million in May.  Relatively flat inventory coupled with an increase in buyer demand caused inventory relative to sales to drop to 5.0 months of available supply, down from 5.1 months of supply in May.  The only negative coming out the report is that first-time home buyers comprised 30% of sales down from 32% in May.  Weak and inconsistent demand from first-time home buyers, however, did not hinder the overall performance of the housing and mortgage markets which are showing significant momentum.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The June existing home sales report is the latest in a string of very positive news for the housing and mortgage markets.  Buyers are finding homes to buy and successfully arranging mortgage financing.  Additionally, the rise in interest rates over the past several months does not seem to be slowing down home buying activity.  The one negative for prospective home buyers is that the median home sales price continues to rise while inventory continues to decline.  Sustained price appreciation could eventually push prospective buyers out of the marketplace.  It will be interesting to see if prospective sellers react to improved prices by bringing more inventory onto the market.  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.   With the real estate market heating up now may be the time to make your move.

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 multi-family 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 on a monthly basis, includes statistics for the prior month.

The housing starts report for July showed continued strength in the housing construction market with a particularly positive showing in the multi-family segment of the market.  The report is a positive sign for home buyers and borrowers as it suggests more inventory should be hitting the market the second half of 2015.  The July figures continue a positive trend following strong June and record-breaking May reports.

June housing permits increased 7.4% to 1.343 million annualized units, following a 11.8% increase in May.  The permit figure significantly exceeded the high end of analyst expectations by almost 80,000 units.  Multi-family permits increased 15.3% while single family permits increased 0.9%.

Housing starts also showed strength, increasing 9.8% to 1.174 million annualized units in June after dropping 11.1% in May.  The housing starts figure came in at the top end of industry analyst expectations.  Multi-family permits skyrocketed 29.4% while single family permits decreased 0.9%.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The housing starts report has strung together three consecutive months of positive results as home builders respond to increased demand from home buyers and appreciating property values.  In a positive for home buyers, the increase in supply forecast by these reports should help offset upward pressure on housing prices.  The big jump in both multi-family permits and starts, however, means that a significant chunk of the new inventory will address the rental market.  If you are weighing renting versus buying, use our Buy Versus Rent Comparison Calculator to understand the financial trade-offs between the two and check out our Rent Payment Mortgage Affordability Calculator to review how a rent payment equates to a mortgage amount.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com