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 bounced back strongly in June following a decline in May.  For June 2015, the Housing Market Index came in at 59 as compared to 54 in May 2015.  Any figure above 50 is considered positive and June represents the 12th consecutive month with the index above 50.  The June figure came in well above industry analyst expectations as all three components of the index rose as compared to May.  The present home sales component of the index led the way, jumping 7 points to 65.  In a strong sign for pending new home sales, the future sales component of the index increased 6 points to 69.  Although the home buyer traffic component of the index failed to break 50, which is the benchmark for a positive reading, it did increase 5 points to 44 in June, lead by slowly increasing interest from first-time home buyers.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

After a relatively disappointing housing market index report for May, the June report reinforces the strength of the new home market which has outperformed the existing home market for the past several months.  Combined with the record-setting May housing starts report, the housing market index report shows that home builders and developers are bringing new supply onto the market to meet surging demand from new home buyers.  All indications point to a strong Spring home buying season in the new home sector despite the increase in mortgage rates over the past six weeks.  A slowly improving economy and job market appears to be giving prospective home buyers the confidence needed to start the home search process.  If you are thinking about buying a home in the next six-to-twelve months consult our Mortgage Process Guide to understand the ins and outs of the mortgage process and use our Mortgage Qualification Calculator to determine what size mortgage you can afford.  Additionally, with mortgage rates fluctuating, regularly check the INTEREST RATES feature on FREEandCLEAR to review 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.

Despite a dip in interest rates, mortgage applications continued their six week slide for the week ended May 29nd.  The composite applications index, which includes both purchase mortgages and refinancings, dropped 7.6% after declining 1.6% for the prior week.  The purchase applications index declined 3.0% after increasing 1.0% for the prior week.  The decline in purchase applications was attributed to the increase in interest rates over the past month.  Also dragged down by rising interest rates, the refinance applications index dropped a whopping 12.0 on the week after decreasing 4.0% for the prior week.  The positive news in the mortgage applications index report is that Interest rates ticked down after gradually increasing over the last month with the average interest rate for conforming loans (mortgage amount less than $417,000) falling to 4.02% from as compared to 4.07% for the prior week.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

There appears to be little doubt the the slow but steady rise in interest rates over the past five weeks has negatively impacted mortgage activity.  Although overall mortgage application activity is up in 2015 as compared to 2014, the market has slowed significantly over the past several weeks.  It will be interesting to see if the drop in interest rates on the week stimulates mortgage activity going forward, especially as we move into the peak Spring home buying season.  It is important to emphasize that even with the recent increase in rates, mortgage rates remain at historical lows.  Interest rates will continue to fluctuate based on economic and market conditions so it is more helpful than ever to use the INTEREST RATES function on FREEandCLEAR to monitor 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.

Pending home sales increased for the fourth consecutive month with the pending home sales index for April rising 3.5% on a month-over-month basis (as compared to March 2015). For the year, pending home sales are up 14.1% as compared to 2014. The increase in the index in April exceeded the high end of analyst expectations and builds upon a 1.2% increase in the index reported for March. The increase in the pending home sales index was driven by gains in the Midwest and Northeast as improved weather boosted activity in those regions. The West and South regions showed smaller gains coming off very strong showings for March. The steady growth in pending home sales shows that buyers are increasingly finding attractive homes to purchase and are qualifying for mortgages.  (Source: Bloomberg)

What it Means for Mortgage Borrowers
The strong pending home sales index report for May should translate into increased existing home sales over the next several months after a dip in April. Growing strength in the pending home sales index is a positive sign for the real estate and mortgage markets. Although interest rates have inched up over the past month they remain relatively low and attractive to prospective home buyers. Prospective home buyers can use the INTEREST RATES feature on FREEandCLEAR to monitor mortgage rates and fees for lenders in your area. Additionally, before you start the home search process, use our Mortgage Qualification Calculator to determine what size mortgage you can afford.

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 slow increase in interest rates is putting a damper on mortgage applications.  For the week ended May 22nd, the composite applications index, which includes both purchase mortgages and refinancings, decreased 1.6% after declining 1.5% for the prior week.  The purchase applications index managed to gain a modest 1.0% after dropping 4.0% for the prior week.  The small increase in purchase applications was the sole bright spot in the report.  The refinance applications index dropped 4.0% on the week after increasing 0.3% for the prior week.  Interest rates continue to climb with the average interest rate for conforming loans (mortgage amount less than $417,000) increasing to 4.07% as compared to 3.85% four weeks ago.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The increase in interest rates over the past month is having a negative impact on mortgage applications with refinance applications being affected more than purchase applications. Although small, the increase in the purchase application index for the week shows the resiliency of a relatively inconsistent housing market.  Despite the increase in rates, the May pending home sales and housing starts reports point to a significant jump in home purchases.  Although interest rates have risen, they remain relatively attractive on a historical basis and low enough to pull home buyers into the marketplace.  If you are renting right now, check out our Rent Payment Mortgage Affordability Calculator to determine what size mortgage you can afford based on your monthly rent payment.  Additionally, use our INTEREST RATES feature to monitor mortgage rates and fees for lenders in your area as rates change on a daily basis.

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.

The May new home sales report showed that new home sales bounced back in April after a disappointing March.  New home sales increased 6.8% in April to 517,00 annualized units, as compared to a 11.4% decline in March.  The April new home sales figure fell within the top half of industry analyst expectations and builds upon an incredibly strong May housing starts report to show growing momentum in the new home market.  The increase in demand for new homes boosted prices with the April median new home sales price increasing 4.1% on a monthly basis and 8.3% on a year-over-year basis to $297,300.  Although the number of new homes available for sale increased modestly to 205,000, a greater increase in sales caused supply as compared to monthly sales to drop from 5.1 months in March to 4.8 months in April.  Sales in the South, the largest housing region, jumped 5.8% in April as compared to a 11.8% decline in March.  This is the fourth positive new home sales report in the past five months indicating that the market is moving in the right direction more consistently than in the past.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The May new home sales report coupled with the May housing starts report suggests that buyer attention is shifting to the new home market.  The increased demand for new homes appears to be coming at the expense of the existing home sales market, which saw a disappointing result for May.  Growing demand for new homes should give home builders and developers more confidence to bring new housing supply to the market which is positive news for prospective home buyers.  Borrowers should monitor housing prices which continue to creep up in the new home segment although future increases in inventory could help offset pricing pressure.  Strong activity in the new home market shows that qualified buyers are able to obtain mortgages.  If you are thinking about buying a new home, use our Mortgage Selector Calculator to determine what size mortgage you can afford and the mortgage program that is right for you.  You should also review our Mortgage Expert Insight on the Differences Between Buying a New and Existing Home for helpful tips.

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 FHFA House Price Index for May 2015 showed that March housing prices increased 0.3% as compared to February and increased 5.2% on a year-over-year basis (so as compared to March 2014).  The month-over-month FHFA House Price Index figure came in below the range of analyst estimates and declined relative to results for February 2015 which showed a 0.7% increase on a monthly basis and a 5.4% increase on a year-over-year basis.  The March FHFA House Price Index figures shows that home prices continue to go up albeit at a slower pace, which good but not great news for both home buyers and sellers.  The S&P / Case-Shiller Home Price Index for May 2015 showed stronger month-over-month results with housing prices increasing 1.0% in March, as compared to February.  On a year-over-year basis, the S&P / Case-Shiller Home Price Index increased 5.0% in March 2015, the same increase reported for February 2015.  The S&P / Case-Shiller Home Price Index March figures fell within the top half of the range of analyst expectations.  Both the FHFA House Price and S&P / Case-Shiller Home Price indices indicate that home prices continue to climb although at different rates.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

Moderate increases in home prices are generally positive because they reflect increased buyer demand and bring additional inventory onto the housing market.  A significant and sudden increase in prices, however, can push many prospective home buyers out of the market.  The May FHFA House Price Index and S&P / Case-Shiller Home Price Index reports show relatively steady price appreciation which is a positive for the overall housing and mortgage markets.  It will be interesting to see what the June report figures show for April, which is when the Spring home buying season starts in full force.  Additionally, it is important to highlight that both indices reflect nationwide trends and home prices vary widely by market.  Overall, however, the national housing market appears to be gaining momentum.  If you are considering buying a home in the next six-to-twelve months, use our Mortgage Qualification Calculator to determine what size mortgage you can afford.  You can also use our INTEREST RATES feature to compare lenders in your area to find the mortgage with the lowest rate and closing costs.

The FREEandCLEAR Mortgage Expert

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Janet Yellen, the chairman of the Federal Reserve, the body that determines interest rates in the United States, gave a speech today in which she indicated that the Federal Reserve is likely to raise interest rates later this year.  Although there are other factors involved, an increase in interest rates by the Federal Reserve typically results in an increase in mortgage rates.  Yellen’s comments did not come as a surprise as the Federal Reserve has been pointing to an increase in rates some time in 2015 but her comments reinforce the idea that mortgage borrowers should expect a rate increase within the next six months.

Although they remain low on a historical basis, mortgage rates have inched up by approximately .25% over the past month.  With a probably rate hike by the Federal Reserve in the not-so-distant  future, now is a good time to start the home buying or refinance process.  Use our Mortgage Qualification Calculator to determine what size mortgage you qualify for and our Refinance Calculator to determine how much money you can save by refinancing.  Additionally, use the INTEREST RATES function on FREEandCLEAR to keep track of mortgage rates for lenders in your area.

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 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 May 2015 showed that existing home sales in April dropped 3.3% on a month-over-month basis to an annualized 5.04 million units (so if you take the home sales figure for April and multiplied it by twelve), which came in below the range of industry analyst expectations.  On a year-over-year basis, existing home sales increased 6.1%, down from a 10.4% jump in March.  The disappointing April results followed one of the biggest gains in the history of the existing home sales report in March.  The decrease in sales was led by the nation’s largest housing region, the South, which saw a 6.8% drop.  On a positive note, existing homes available for sale increased in April to 2.21 million from 2.01 million in March.  The increase in inventory combined with the dip in sales caused inventory relative to sales to increase to 5.3 months of available supply, up from 4.6 months of supply in March 2015.  Despite the drop in demand, prices moved up with the median existing home sales price rising to $219,400, representing a 4.1% increase on a monthly basis and a 8.9% increase on a year-over-year basis.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The lackluster existing home sales report for April reflects the overall inconsistency of the broader housing and mortgage markets.  Additionally, the report along with the recent strong Housing Starts report for May, reflects a potential shift in home buyer demand from existing homes to new homes.  On the positive side, the increase in existing homes for sale means that prospective buyers will have more options in the marketplace.  Increased supply coupled with an extended drop in demand could also offset some of the price appreciation experienced over the past several months.  With interest rates creeping up and potentially moving higher later in the year, now is a good time to start your home search.  Prospective buyers can use our Mortgage Qualification Calculator to determine what size mortgage you can afford. Use our INTEREST RATES function to compare lenders in your area to find the mortgage with the lowest rate and fees.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com