Jan 4, 2012 | The Economy
As the new year begins, there are no shortage of stories telling us what to expect in 2012. Housing finished 2011 with momentum and mortgage rates closed at the lowest rates of all time.
Some expect those trends to continue through the first quarter and beyond. Others expect a rapid reversal.
Who’s right and who’s wrong? A quick look through the newspapers, websites and business television programs reveals “experts” with opposing, well-delivered arguments views. It’s tough to know who to believe.
For example, here are some “on-the-record” predictions for 2012 :
The issue for buyers, seller, and would-be refinancers in Worcester and nationwide is that it can be a challenge to separate a “prediction” from fact at times.
When an argument is made on the pages of a respected newspaper or website, or is presented on CNBC or Bloomberg by a well-dressed, well-spoken industry insider, we’re inclined to (more…)
Dec 30, 2011 | Housing Analysis
Low home prices and mortgage rates have combined to push home affordability to record levels nationwide. Home buyers are taking advantage.
The Pending Home Sales Index rose 7 percent in November to rise to its highest level since April 2010, the last month of last year’s home buyer tax credit program.
The Pending Home Sales Index is published monthly by the National Association of REALTORS®. It measures homes under contract nationwide, but not yet “sold”.
In this way, the Pending Home Sales Index is different from other housing market indicators. It’s a “forward-looking” figure; a predictor of future home sales. According to the National Association of REALTORS®, more than 80% of homes under contract close within 60 days.
By contrast, housing data such as the Existing Home Sales report and the New Home Sales report “look back”.
November marks the second straight month of (more…)
Dec 29, 2011 | Housing Analysis
The government confirms what the private-sector Case-Shiller Index reported yesterday. Nationwide, average home values slipped in October.
The Federal Home Finance Agency’s Home Price Index shows home values down 0.2% on a monthly, seasonally-adjusted basis. October marks just the second time since April that home values fell month-over-month.
The Case-Shiller Index 20-City Composite showed values down 0.7 percent from September to October.
As a home buyer in Fitchburg , it’s easy to look at these numbers and think housing markets are down. Ultimately, that may prove true. However, before we take the FHFA’s October Home Price Index at face value, we have to consider the report’s flaws.
There are three of them — and they’re glaring. As we address them, it becomes clear that the Home Price Index — like the Case-Shiller Index — is of little use to everyday buyers and sellers.
First, the FHFA Home Price Index only tracks home values for homes backed by Fannie Mae or Freddie Mac mortgages. This means that homes backed by the FHA, for example, are specifically not computed in the monthly Home Price Index.
In 2007, this was not as big of an issue as it is today. in 2007, the FHA insured just 4 percent of the housing market. Today, the FHA is estimated to have more than one-third of the overall housing market.
This means that one-third of all home sales are excluded from the HPI — a huge exclusion.
Second, the FHFA Home Price Index excludes new home sales and cash purchases, accounting for home resales backed by mortgages only. New home sales is a growing part of the market, and cash sales topped 29 percent in October 2011.
Third, the Home Price Index is on a 60-day delay. The above report is for homes that closed in October. It’s nearly January now. Market momentum is different now. Existing Home Sales and New Home Sales have been rising; homebuilder confidence is up; Housing Starts are showing strength. In addition, the Pending Home Sales Index points to a strong year-end.
The Home Price Index doesn’t capture this news. It’s reporting on expired market conditions instead.
For local, up-to-the-minute housing market data, skip past the national data. You’ll get better, more relevant facts from a local real estate agent.
Since peaking in April 2007, the FHFA’s Home Price Index is off 18.3 percent.
Dec 28, 2011 | Housing Analysis
New home inventory is approaching bull market territory.
According to the Census Bureau, the number of new homes sold rose 2 percent in November. On a seasonally-adjusted, annualized basis, home buyers bought 315,000 newly-built homes last month.
November’s New Home Sales data marks the 4th straight month of rising sales volume, lifting the housing-market metric to a 7-month high, and adding to the housing market’s recent show of strength.
Last week, we learned that Existing Home Sales also climbed in November.
The big story in the New Home Sales report, though, is the remaining new home supply nationwide.
With just 158,000 homes “on the market” and the pace of home sales hastening, the complete, national inventory of “new homes” would now be sold in just 6.0 months, a 0.2-month improvement from October. This is the quickest home sales pace in (more…)
Dec 22, 2011 | Housing Analysis
Home resales moved to a 10-month high in November, the latest in a series of strong showings from the housing sector.
According to the National Association of REALTORS®, November’s Existing Home Sales rose to a seasonally-adjusted, annualized 4.42 million units nationwide — a 4 percent climb from October 2011.
An “existing home” is a home that has been previously occupied and cannot be categorized as new construction.
Home buyers and sellers throughout Massachusetts should take note of November’s numbers because — behind the headlines — there’s a series of statistics that foretell higher home prices ahead.
First, the total number of homes for sale nationwide dipped to 2.58 million, an 18% reduction from November 2010 and represents the fewest number of homes for sale since February 2007.
At the current sales pace, the complete home resale inventory would be sold in 7.0 months.
And, second, the real estate trade group reports that 33% of all homes under contract “failed” for some reason last month.
Contract failures can occur because of mortgage denials in underwriting; home inspection issues; and homes appraising for less than their respective purchase prices.
In other words, despite a reduction in the number of homes for sale, and a rash of failed contracts, Existing Home Sales volume is still on the rise.
Broken-down by buyer-type, here’s to whom home sellers were selling in November :
- First-time buyers : 35% of home resales, up from 34% in October 2011
- Repeat buyers : 46% of home resales, down from 48% in October 2011
- Investor buyers : 19% of home resales, up from 18% in October 2011
Given high demand for home resales and shrinking home supplies, we should expect that home prices will rise through December 2011 and into early-2012, at least. Recent Housing Starts data supports this notion.
Thankfully, mortgage rates remain low. Low mortgage rates help keep homes affordable.
