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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