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 February 2015 showed that existing home sales in January decreased 4.9% on a month-over-month basis to an annualized 4.82 million units (so if you take the home sales figure for January and multiplied it by twelve), which came in below industry analyst expectations. Poor weather across much of the country may have negatively impacted existing home sales as every region reported a decline in sales. Both single family and multi-family properties experienced a drop-off with single family existing home sales declining 5.1% and multi-family property sales declining 3.5%. The drop in existing home sales led to a jump in available inventory to 4.7 months of supply available on the market as compared to 4.4 months of supply in December 2014. The median existing home sales price declined 4.1% to $199,600 as compared to $209,500 in December. Low interest rates and flat-to-declining home prices failed to lure buyers into the market. (Source: Bloomberg)
What it Means for Mortgage Borrowers
With home buyers remaining cautious, the housing market got off to a sluggish start in 2015. The disappointing existing home sales report shows that issues such as tighter lending standards, down payment requirements and the lack of affordable housing inventory continue to deter buyers from entering the market in force. On the positive side, an increase in housing inventory and a decline in the median existing home sales price create positive conditions for prospective home buyers. Additionally, although mortgage rates have crept up over the past couple of weeks, interest rates remain low which is another positive for home buyers. A relatively flat housing market is actually good for buyers and more housing inventory means more options for buyers. If you are thinking about buying a home over the next six-to-twelve months get prepared by reviewing our comprehensive mortgage process guide and keep track of interest rates and fees for mortgage lenders in your area using our INTEREST RATES feature.
The FREEandCLEAR Mortgage Expert