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 October 2014 showed that housing starts and permits rebounded in September after a significant decline in August.  The report showed that housing starts increased 6.3% in September to approximately 1,017,00 units while permits increased 1.5% to 1,018,000.  Housing starts exceeded analyst expectations while the permit figure came in slightly below analyst expectations.  The increase in housing starts was driven by a 16.7% jump in the multifamily segment while single family starts showed a more modest increase of 1.1%.  Multifamily permits increased 1.5% in September while single family permits declined by 0.5%.  The single family segment is larger than the multifamily segment.  The Housing Starts report continues to fluctuate on a monthly basis as the September increases compare to a 14.4% decline in starts and a 5.6% decline in permits in August. (Source: Bloomberg)

What it Means for Mortgage Borrowers

Because the Housing Starts report is so volatile, it is challenging to draw significant conclusions from any single month but the October report continues the trend of the multifamily segment out-performing the single family segment.  Additionally, the relatively positive housing starts figures for October are in comparison to disappointing figures for September but the overall pace of new home construction activity continues to increase, albeit at a relatively slow rate. The relative strength of the multifamily segment as compared to the single family segment means that home buyers should have more multifamily options such as condominiums or duplexes when looking for a newly constructed home.  Additionally, it will be interesting to see if the slowdown in single family housing starts pushes more home buyers into the existing home sales market, which showed weakness according to the most recent existing home sales report.  Whether you are thinking about buying a new or existing home, use the FREEandCLEAR Mortgage Qualification Calculator to determine what size mortgage you can afford and check out our Mortgage Expert Insights for money and time-saving mortgage advice and tips.

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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 October 2014, the Housing Market Index declined to 54 as compared to 59 in September 2014.  The weaker-than-expected October figure reflected decreases in the three components that comprise the index — home buyer traffic, new home sales and future sales.  The October figure is disappointing in comparison to the positive September Housing Market Index figure which was boosted by increases in all three index components, including especially strong home buyer traffic.  In short, the index suggests that demand for newly constructed houses, especially from first-time home buyers, remains inconsistent and relatively fragile, despite the recent decline in interest rates. (Source: Bloomberg)

What it Means for Mortgage Borrowers

The decline in Housing Market Index may make builders more aggressive as they seek to sell newly constructed homes.  Home buyers could benefit from increased financial incentives or potential price reductions, although this is less likely.  Additionally, lower interest rates may also bring first-time home buyers into the marketplace, although the recent pullback in rates did not appear to have an immediate impact on the new home sales or buyer traffic.  Potential home buyers looking to take advantage of favorable market conditions can use the FREEandCLEAR Mortgage Qualification Calculator to determine what size mortgage they can afford and the COMPARE LENDERS feature on FREEandCLEAR to keep track of interest rates.

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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.  Driven by a significant increase in refinance application activity due to lower interest rates, the mortgage application index for the week ended October 10th, 2014 increased for the second consecutive week.

For the week ended October 10th, the refinance application index increased 11.0% as compared to the prior week.  The purchase application index decreased 1.0% as compared to the prior week. The composite index, which includes both purchase and refinance mortgage applications, increased 5.6% as compared to the prior week.  The increase in the index is attributed to the recent decline in interest rates, which drives refinancing applications, although purchase applications remained relatively lackluster.  The average interest rate for conforming loans declined to 4.20%, its lowest level since June 2013.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The decline in interest rates is having an immediate impact on existing borrowers who are prudently refinancing to lock in a lower interest rate and monthly mortgage payment.  FREEandCLEAR believes that continued lower interest rates will eventually pull more home buyers into the market especially if housing prices continue to stabilize.  If first-time home buyers become more active in the marketplace this could have a significant impact on the real estate and mortgage markets.  If you are thinking about buying a home for the first time, check out the FREEandCLEAR First-Time Home Buyer Mortgage Cheat Sheet.  Existing homeowners can review our Refinance Process Guide to walk them through the process step-by-step.  Additionally, use the COMPARE LENDERS feature on FREEandCLEAR to check interest rates in your area.

The FREEandCLEAR Mortgage Expert

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At FREEandCLEAR, we follow the 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.  Mortgage application activity for the week ended October 3rd, 2014 increased slightly, reversing the recent flat-to-downward trend in the index .

For the week ended October 3rd, the purchase application index increased 2.0% as compared to the prior week.  The refinance application index increased 5.0% as compared to the prior week. The composite index, which includes both purchase and refinance mortgage applications, increased 3.8% as compared to the prior week.  The increase in the index is attributed to the recent decline in interest rates, which drives refinancing applications, and signs of improvement in the home sales market, especially the new home segment which has shown strong growth recently.  (Source: Bloomberg)

What it Means for Borrowers

The increase in the mortgage application index is a welcome development for mortgage lenders who have experienced a decline in applications over much of 2014.  Borrowers appear to be wisely taking advantage of the pullback in interest rates by refinancing their existing mortgages while home buyers may be starting to be pulled into the market by flattening prices and attractive opportunities in the new home market.  Homeowners can use the FREEandCLEAR Mortgage Refinance Calculator to determine how much money they can save by refinancing and home buyers can use our Mortgage Qualification Calculator to determine what size mortgage they can afford.  Additionally, check out the COMPARE LENDERS feature on FREEandCLEAR to monitor interest rates for lenders in your area and see if they continue their recent downward trend, which is always good news for borrowers.

The FREEandCLEAR Mortgage Expert

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At FREEandCLEAR, we follow the 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.  Mortgage application activity for the week ended September 26th, 2014 was relatively flat, continuing the overall lackluster trend observed over the past quarter.

For the week ended September 26th, the purchase application index was unchanged as compared to the prior week.  The refinance application index declined a modest .3% as compared to the prior week. The composite index, which includes both purchase and refinance mortgage applications, declined .2% as compared to the prior week.  In total, mortgage application activity held steady as compared to the prior week, consistent the recent general trend showing flat-to-declining mortgage applications.  The decline in the index is attributed to a cooling housing and refinancing market after years of strong performance.  On the positive side, interest rates declined slightly for the week although this did not have an immediate impact on mortgage applications.  (Source: Bloomberg)

What it Means for Borrowers

Borrowers welcomed the slight decrease in interest rates after a slight increase in rates over the past several weeks.  Additionally, the longer the mortgage market remains lackluster, the more aggressive lenders will become for borrowers’ mortgage business.  Always remember to compare multiple lenders when shopping for a mortgage or refinancing.  Borrowers can use increased lender competition to their advantage by negotiating better terms for their mortgage such as a lower interest rate or reduced closing costs.  Check out the COMPARE LENDERS feature on FREEandCLEAR to review interest rates and fees for multiple lenders in your area.

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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.  For example, the report released in September contains information on housing prices in the month of July.

In welcome news for prospective home buyers, the FHFA House Price Index for September 2014 showed that July housing prices increased only 0.1% as compared to June and 4.4% on a year-over-year basis (so as compared to July 2013).  FHFA House Price Index figures for July came in below analyst expectations and declined relative to the June figures on both a month-over-month and year-over-year basis.  The S&P / Case-Shiller Home Price Index for September 2014 showed that housing prices declined 0.5% in July as compared to June but increased 6.7% on a year-over-year basis, although this increase was less than the 8.1% year-over-year increase reported for June 2014.  Similar to the FHFA House Price Index figures, the S&P / Case-Shiller Home Price Index came in below expectations and declined relative to the June figures. The most recent FHFA and S&P / Case-Shiller home price indices show that nationwide housing prices continue to flatten.  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.  In general, however, all signals point to a cooling off of housing prices after years of significant price increases. (Source: Bloomberg)

What it Means for Mortgage Borrowers

Home buyers who had been deterred by a lack of affordable housing inventory could potentially enter the real estate market as prices stabilize.  First-time home buyers have been particularly reluctant to enter the market so flattening prices combined with relatively low interest rates could bring a new wave of buyers into the marketplace.  It is important to emphasize that each city has a unique housing price dynamic and prices in certain markets continue to rise, but the but on a national basis, housing prices are gradually becoming more affordable for more people.  Check out the COMPARE LENDERS function on FREEandCLEAR to review interest rates for lenders in your city and use our First-Time Home Buyer Mortgage Cheat Sheet as your starting point for the mortgage process.

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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.  For example, the pending home sales index report released in September contains figures for August.

The pending home sales index report for September 2014 showed that pending home sales in August declined 1.0% on a month-over-month basis (as compared to July 2014) and declined 2.2% on a year-over-year basis (as compared to August 2013).  The lack of affordable housing supply, reluctance of first-time home buyers to enter the housing market and a focus on new homes as opposed to existing homes continues to hold back the existing home sales market as reflected by the index figures for August.  The pending home sales index figures for August are consistent with the existing home sales report for August, which we also covered on the FREEandCLEAR Mortgage Expert Blog, which showed that existing home sales in August decreased 1.8% on a month-over-month basis and decreased 5.3% on a year-over-year basis. (Source: Bloomberg)

What it Means for Mortgage Borrowers

The pending homes sales index report suggests that existing home sales will continue to be flat for the next several months which should result in flat mortgage activity as well.  This is actually positive news for borrowers as lenders should be more aggressive in pursuing new mortgage business and more willing to negotiate a lower interest rate or closing costs.  Additionally, with relatively low interest rates and the existing housing market showing signs of slowing down (in certain geographies), home sellers may be more open to negotiate on price which could lead to more affordable housing options for buyers. Use our Mortgage Qualification Calculator to determine what size mortgage you qualify for and our COMPARE LENDERS feature to monitor interest rates so that you can take advantage of increasingly favorable market conditions for home buyers.

The FREEandCLEAR Mortgage Expert

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In our effort to cover important trends that affect the mortgage market, the 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 September 2014 showed that new home sales in August increased 18% on a month-over-month basis to an annualized 504,000 units (so if you take the home sales figure for August and multiplied it by twelve).  The number of new homes available for sale, known as supply, increased slightly from 201,000 units in July to 203,000 units in August.  Despite the increase in demand, the median new home sales price decreased 1.6% on a month-over-month basis to $275,600.  The August new home sales figure came in well above market expectations as buyers attracted by flattening house prices and relatively low interest rates appear to be increasingly focused on the new home market. (Source: Bloomberg)

What it Means for Mortgage Borrowers

The robust new home sales figure for August mirrors the continued strength in the housing market index which we reviewed in a recent blog post.  The housing market index also focuses on the new home sales market and gauges existing and projected new home sales as well as buyer interest level.  Both statistics for August indicate that buyers appear to be shifting their attention to the new home market, potentially as a result of being able to buy more house for their money.  With home prices stabilizing on a nationwide basis, first-time home buyers may finally be feeling more confident about entering the market.  Our Rent Payment Mortgage Affordability Calculator is great for first-time home buyers who want to understand what size mortgage they can afford based on their monthly rent payment.

The FREEandCLEAR Mortgage Expert

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