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.

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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.

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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.

The housing market index carried its strong momentum from the June report in July.  For July 2015, the Housing Market Index came in at 60 as compared to 59 in June 2015.  Any figure above 50 is considered positive and July represents the 13th consecutive month with the index above 50.  The July figure came in at the top end of the range of industry analyst expectations  and reached its highest level in almost ten years.  The future and present home sales components of the index inched up while the home buyer traffic component of the index dropped one point, once again dragged down by disappointing participation from first time home buyers.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The most recent housing market index report reinforces the strength and momentum of the housing and mortgage market.  The impressive figures for the overall index and the present and future home sales specifically show that borrowers are finding homes to buy and arranging mortgage financing.  Although the first-time home buyer segment of the market continues to lag, the broader housing and mortgage markets appear to be very healthy.  If you are thinking about buying a home, use our Mortgage Selector Calculator to determine the mortgage program that is right for you and what size mortgage you can afford.  Borrowers should also use the INTEREST RATES feature on FREEandCLEAR to monitor mortgage rates and costs for local lenders.

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.

Mortgage applications seem to be up and down on a weekly basis and this week purchase and refinance applications moved in opposite directions.  Refinance applications increased 4.0% after increasing 3.0% the prior week.  In contrast to refinance applications, purchase applications dropped 8.0% after increasing 7.0% the prior week.  The composite applications index, which includes both purchase mortgages and refinancings, dipped 1.9% after increasing 4.6% for the prior week.  After falling slightly last week, mortgage rates held steady with the average interest rate for conforming loans (mortgage amount less than $417,000) remaining at 4.23%.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The dip in purchase applications is likely the results of weekly fluctuations rather than a longer trend as recent housing market indicators have been very positive.  The jump in refinance applications over the past two weeks is somewhat surprising given the increase in interest rates over the past several months although borrowers could be rushing to refinance before rates potentially move higher later in the year.  It is a positive sign that borrowers are able to refinance their mortgages because it shows they have sufficient equity in their properties and are able to meet lenders’ mortgage qualification standards.  If you are thinking about refinancing, now may be the time to move forward to lock-in your interest rate.  Use our Mortgage Refinance Calculator to determine how much money you can save by refinancing and use the INTEREST RATES function on FREEandCLEAR to keep track of refinance 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.

Mortgage applications continue to fluctuate on a weekly basis with the mortgage applications index bouncing back for the week ended July 3rd as interest rates dipped moderately.  Purchase mortgage applications jumped 7.0% after dropping 4.0% the prior week.  Refinance applications increased 3.0% after decreasing 5.0% the prior week.  The composite applications index, which includes both purchase mortgages and refinancings, rose 4.6% reversing the 4.7% decline for the prior week.  Mortgage applications have bounced up and down over the past several weeks as shifting interest rates have contributed to inconsistent mortgage market activity.  After rising last week, mortgage rates pulled back with the average interest rate for conforming loans (mortgage amount less than $417,000) sliding to 4.23% as compared to 4.26% for the prior week.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

Although mortgage applications continue to fluctuate, weekly upticks in the index show that borrowers remain resilient and are able to successfully access the mortgage market.  In a positive sign, applications for both home purchases and refinancings increased on the week, showing demand from both components of the mortgage market.  As expected, the mortgage market continues to be sensitive to interest rates and it will be interesting to see how potentially rising rates impact the housing market, which has showed strong signs of surging recently.  Borrowers should continue to take advantage of dips in interest rate to lock in their refinancing or home purchase mortgage at favorable terms.  Use our Mortgage Refinance Calculator to determine how much money you can save by refinancing and our Mortgage Qualification Calculator to understand what size mortgage you can afford.  Prospective and current home owners should use the INTEREST RATES function on FREEandCLEAR to keep tabs on interest rates and costs for local lenders so you can move quickly when rates reach your target level.

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.

Interest rates are wreaking havoc on the mortgage market as the applications index continues to seesaw with fluctuations in mortgage rates. After a moderate uptick last week, the mortgage applications index dropped significantly for the week ended June 26th. The composite applications index, which includes both purchase mortgages and refinancings, declined 4.7% after increasing 1.6% for the prior week. Purchase applications dropped 4.0% following a 1.0% increase for the prior week and a 4.0% decline two weeks ago. Refinance applications decreased 5.0% following a 2.0% increase for the prior week and a 7.0% decrease two weeks ago. After dipping slightly last week, mortgage rates bounced back with the average interest rate for conforming loans (mortgage amount less than $417,000) jumping to 4.26% as compared to 4.19% for the prior week. (Source: Bloomberg)

What it Means for Mortgage Borrowers
Despite very positive signs for the real estate and mortgage markets from the June new, existing and pending home sales reports, mortgage application activity continues to be dependent on interest rates. Although application activity is up on a year-over-year basis the increase in interest rates over the past several months has slowed down mortgage applications recently. Prospective home buyers or borrowers seeking to refinance should use this time to get prepared for the mortgage process. Check out our home purchase mortgage and mortgage refinance checklists to organize the personal and financial information you need when you apply for your mortgage. Additionally, monitor changes in mortgage rates using our INTEREST RATES feature so that you are ready to move quickly when mortgage rates hit your target zone. Although interest rates have increased, the continue to be attractive on a historical basis and now may be the right time for you to purchase a home or refinance.

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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 June reports for the FHFA House Price Index and S&P / Case-Shiller Home Price Index showed that home price appreciation slowed in April.  Before drawing too strong of a conclusion from the reports, it is important to reiterate that although both reports are released in June, they contain data for the month that is two months prior to the release date, so April in this case.  Numerous housing market indicators with more recent data, including the June new and existing home sales reports showed much stronger trends.  That said, the FHFA House Price and S&P / Case-Shiller Home Price indices offer interesting insights into home price performance.  The FHFA House Price Index for June 2015 showed that April housing prices increased 0.3% as compared to March and increased 5.3% on a year-over-year basis (so as compared to April 2014).  The FHFA House Price Index figures came in at the low end the range of analyst estimates and were relatively flat compared to March 2015, which also showed a 0.3% monthly increase and a 5.3% year-over-year increase.  The S&P / Case-Shiller Home Price Index for June 2015 showed very similar results.   The S&P / Case-Shiller Home Price Index showed that April housing prices increased 0.3% as compared to March and increased 4.9% on a year-over-year basis.  The monthly increase came in below analyst expectations and the year-over-year change came in at the bottom of analyst expectations.  Of note in the S&P / Case-Shiller Home Price Index report is that eight of 20 cities included in the index showed price declines while several cities, such as San Francisco, posted double-digit price gains.  Although both reports showed moderate home price growth for April, market dynamics clearly vary by city.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

Because of the two month lag in data and recent reports that show a robust real estate market in May, the FHFA House Price Index and S&P / Case-Shiller Home Price Index reports should be discounted somewhat by borrowers. Despite an increase in interest rates over the past several months, the real estate and mortgage markets are showing significant momentum as we head into the Summer months.  In fact, rising interest rates coupled with higher rents may be pushing more home buyers into the marketplace.  Prospective buyers should use our Mortgage Selector Calculator to determine what size mortgage you can afford and the mortgage program that is right for you.  Additionally, borrowers should use the INTEREST RATES feature on FREEandCLEAR to select the lender offering the lowest mortgage rate and fees in their 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.

Pending home sales increased for the fifth consecutive month and hit a nine year high with the pending home sales index for May rising 0.9% on a month-over-month basis (as compared to April 2015).  The increase in the index in May exceeded the high end of analyst expectations and builds upon a 2.7% increase in the index reported for April.  The increase in the pending home sales index was driven by gains in the West and Northeast as improved weather and strong demand boosted activity in those regions.  The South and Midwest regions showed small month-over-month declines but both regions are up significantly on a year-over-year basis in 2015.  Although the rate of growth in the index declined as compared to the April figure, the index reached its highest level since 2006, near the peak of the housing boom.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The robust pending home sales index report for June follows strong reports for both Existing and New Home Sales to show strength in the housing and mortgage markets across almost all indicators.  The increase in the pending home sales index bodes well for the mortgage market as pending home sales typically require mortgage financing to become closed transactions.  The increase in interest rates over the past couple of months does not appear to be hindering home buyer demand and in fact may actually be pushing buyers into the market before rates move any higher.  Additionally, rising rents across the country are make home ownership financially more attractive on a relative basis.  You can use our Rent Payment Mortgage Affordability Calculator to determine how your monthly rent payment translates into a mortgage amount. Additionally, prospective borrowers should use our INTEREST RATES feature  to compare rates and fees for lenders in your area to select the mortgage that is right for you.

The FREEandCLEAR Mortgage Expert

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