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In our effort to cover important trends that affect the mortgage market, the 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 September 2014 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 to an annualized 5.05 million units (so if you take the home sales figure for August and multiplied it by twelve). The number of existing homes available for sale, known as supply, decreased by 40,000 units, or 1.7%, to 2.31 million units. The median existing home sales price decreased 0.8% to $219,800. The August existing home sales figure came in below market expectations due to limited participation by first-time home buyers, the reduced supply of homes for sale and the decline in distressed inventory such as foreclosed homes for sale. (Source: Bloomberg)
What it Means for Mortgage Borrowers
Existing home sales continue to be correlated to the supply of affordable housing inventory and the decline in the supply of homes for sale and distressed inventory suggests that home buyers, and especially first-time home buyers, are taking a small step back from the existing home market and either sitting on the sidelines or focusing more on the new home market, as the Housing Market Index report for September indicates. Because the existing home sales market is larger than the new home sales market it has a larger impact on the mortgage market. Reduced mortgage activity that typically accompanies a decline in existing home sales means that lenders should be competing even more for your mortgage business. Use increased lender competition to your advantage by shopping your mortgage business and COMPARING LENDERS to find the mortgage with the best terms.
The FREEandCLEAR Mortgage Expert