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 December 2014 showed that existing home sales in November decreased 6.1% on a month-over-month basis and increased 2.1% on a year-over-year basis to an annualized 4.93 million units (so if you take the home sales figure for November and multiplied it by twelve), which fell short of industry analyst expectations. The monthly decline in existing home sales was experienced nationwide as all four regions reported declines. The number of existing homes available for sale, known as supply, decreased by 15,000 units to 2.09 million units as compared to 2.24 million units in October. The median existing home sales price decreased 1.1% to $205,300 from $208,300 in October. After two months of positive results, the November existing home sales figure fell short of industry expectations as favorable weather, low interest rates and relatively steady home prices failed to stimulate a significant increase in purchase activity. (Source: Econoday)
What it Means for Mortgage Borrowers
The decline in existing home sales after two consecutive months of increases indicates that the mortgage and real estate markets continue to lack sustained momentum. First-time home buyers remain reluctant market participants which is a key factor holding back the overall market. On the positive side, home prices continue to moderate on a nationwide basis which when combined with low interest rates as well as a gradually improving economy and employment market may eventually pull first-time home buyers into the market. Potential first-time home buyers thinking about making a move in the next six months should check out the FREEandCLEAR First-Time Home Buyer Mortgage Cheat Sheet to get organized and informed before they embark on the home buying and mortgage processes.
The FREEandCLEAR Mortgage Expert