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 Pending Home Sales Index improvement. The housing market metric made big gains of 10 percent in October 2011, as well.
On a regional basis, each part of the country showed an increase in homes under contract.
- Northeast Region: +8.1 percent from October 2011
- Midwest Region : +3.3 percent from October 2011
- South Region : +4.3 percent from October 2011
- West Region : +14.9 percent from October 2011
However, here in Madeira, we must discount the value of even the regional data, somewhat. Like else in real estate, the volume of homes going under contract vary by locality.
Throughout the West Region, for example, the region in which pending home sales increased the most from October, there are nearly a dozen states. Undoubtedly, some of those states performed better than others in terms of “homes under contract”, but we don’t have an indication of which states those were.
In addition, within each state, every city, town, and neighborhood realized its own unique market in November, and produced its own sales statistics.
For buyers and sellers throughout Kentucky and the country, therefore, it’s more important to watch data on a local level than on a national one. Reports like the Pending Home Sales Index are helpful in showing national trends, but as an individual, what you need are local trends.
For local real estate data, be sure to ask your agent.
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 Mason , 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 in places like Oakley.
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.
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 nearly 6 years for the new construction market.
It’s even faster than in April 2010 — the buyer-deadline month of last year’s federal home buyer tax credit.
Home builders expect the trend to continue, too. Buyer foot traffic is on the rise and builders have a strong outlook for the next 6 months.
It’s an unsettling series of developments for today’s Madeira home buyers. As home supplies drop and builders gain confidence, the ability of an buyer to negotiate for price reduction and/or upgrades shrinks.
If you’re a home buyer in search of new construction, therefore, consider that the best new construction “deals” of the next 12 months may be the ones you find today.
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 Madeira 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 Oakley 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.
The new construction housing market continues to show strength across the country.
According to the U.S. Census Bureau, Single-Family Housing Starts rose to 447,000 units on a seasonally-adjusted, annualized basis in November — a 2 percent increase from October.
A “Housing Start” is defined as breaking ground on new home construction.
November’s figures mark the third straight month of Single-Family Housing Starts gains. The new construction metric is now 15 percent above its all-time low, set in February of this year.
None of this should be a surprise to new home buyers in Madeira.
Housing data has been trending better since September with sales volumes rising and home inventories falling. Basic economics tells us that home prices should soon rise.
The good news is that low mortgage rates should keep homes affordable.
Since mid-November, the average, conventional 30-year fixed rate mortgage has hovered near 4.000% nationwide with an accompanying 0.7 discount points plus closing costs. 1 discount point equals one percent of your loan size. This is down from near 4.500% six months ago, and the drop has made a big impact on home affordability.
- June 2011 : $200,000 mortgage costs $1,013.37 per month
- December 2011 : $200,000 mortgage costs $954.83 per month
This represents $700 in savings per year. It’s no wonder home builders report the highest buyer foot traffic in 3 years.
Meanwhile, the market shows little signs of slowing down. Building Permits are on the rise, too.
Permits for single-family homes rose to their highest levels of year in November and 89 percent of those homes will start construction within 60 days. This means that Single-Family Housing Starts should stay strong through the early part of 2012, and into the spring.
If you’re planning to buy new construction in Kentucky , therefore, talk to your real estate agent soon and consider moving up your time frame. With mortgage rates low and next year’s buying season approaching, you may find that the best “deals” will come within the next few weeks only.
In another good sign for the housing market, today’s home builders believe that the housing market has turned a corner.
For the third straight month, the Housing Market Index — a home builder confidence survey from the National Association of Homebuilders — reported strong monthly gains.
December’s Housing Market Index climbed 2 points to 21 in December after a downward revision to last month’s results. The index is now up seven points since September 2011, and sits at a 19-month high.
When home builder confidence reads 50 or better, it reflects favorable conditions in the single-family new home market. Readings below 50 reflect unfavorable conditions.
The Housing Market Index has not crossed 50 since April 2006.
The HMI itself is actually a composite reading; the result of three related home builder surveys. The National Association of Homebuilders asks its members about their current single-family home sales volume; their projected single-family home sales volume for the next 6 months; and their current buyer “foot traffic”.
The results are compiled into the single Housing Market Index tally.
In December, builder survey responses showed strength across all 3 questions :
- Current Single-Family Sales : 22 (+2 from November)
- Projected Single-Family Sales : 26 (+1 from November)
- Buyer Foot Traffic : 18 (+3 from November)
These results support the recent New Home Sales and Housing Starts data, both of which show an increase in single-family sales, and a decrease in new home housing supply.
When demand rises and supplies fall, home prices climb.
It’s also noteworthy that the Housing Market Index put buyer foot traffic at newly-built homes at its highest level since May 2008. With even more buyers expected to enter the market, new home prices are expected to rise across Mason in 2012 — especially in the face of shrinking home supplies.
For now, though, with home prices stable and mortgage rates low, buyers can grab “a deal”. 60 days forward, though, may be too late.
The Spring Buying Season unofficially starts February 6, 2012.
Foreclosure activity continues to concentrate over just a few states.
According to foreclosure-tracker RealtyTrac, November’s foreclosure filings fell 3 percent as compared to October, and 14 percent from November 2010.
“Foreclosure filing” is a catch-all term for the various “action steps” throughout the foreclosure process. The grouping comprises default notices, scheduled home auctions, and bank repossessions.
As in most months, though, foreclosure activity remains concentrated by state. More than half of last month’s bank repossessions can be traced to just 6 states.
- California : 14.8% of all bank repossessions
- Florida : 12.7% of all bank repossessions
- Texas : 7.0% of all bank repossessions
- Georgia : 6.9% of all bank repossessions
- Arizona : 6.7% of all bank repossessions
- Michigan : 6.3% of all bank repossessions
Meanwhile, with just 5 repossessions, South Dakota topped the list of states with the fewest bank repossessions in November. The Mount Rushmore State accounted for just 0.009% of REO nationwide in a month in which bank repossessions dropped to a 44-month low point across the United States.
The drop in REO is coming at a tough time for today’s Madeira home buyers. Distressed properties are in high demand — mostly because they sell at steep discounts.
According to the National Association of REALTORS®, distressed homes accounted for 28 percent of all home sales in October. As fewer bank-owned homes become available, though, there will be fewer “deals” to be had.
Especially as the broader housing market continues to signal its recovery.
If you plan to buy a bank-owned foreclosed property, do your research first. As supplies drop, the price for foreclosed homes throughout Ohio relative to non-distressed homes may rise, rendering REO properties less of a relative “value”.
Before you write a contract, therefore, talk with a licensed real estate agent. There’s plenty of foreclosure data available online but, when it’s time to buy, you should have an experienced agent on your side.
If you’re waiting for home prices to reach its bottom, you may have missed your window.
After 3 consecutive months of easing, the Pending Home Sales Index jumped 10 percent in October, lending credence to the belief that housing is in recovery.
The Pending Home Sales Index is a monthly publication from the National Association of REALTORS®. It measures the number of homes under contract to sell nationwide. October’s reading is the highest for all of 2011, and the second-highest dating back to April 2010.
April 2010 was the last month of the last year’s federal home buyer tax credit.
For buyers and sellers in Mason and nationwide, the Pending Home Sales Index is a housing metric worth watching. Different from the Existing Home Sales and New Home Sales reports which report on “the past”, the Pending Home Sales Index is a forward-looking housing market indicator.
According to the National Association of REALTORS®, 80% of homes under contract close within 2 months.
The majority of the rest close within Months 3 and 4.
The spike in October’s Pending Home Sales Index, therefore, foretells a strong Existing Home Sales report for November and December. Not that we should be surprised! Home builders have been telling us for weeks that the market is strengthening, and that home supplies are at multi-year lows.
The only wild-card is the market’s out-sized contract failure rate. One in three pending home sales failed to close in October — nearly double the rate of the month prior and 4 times the rate of October 2010. Should this high failure rate continue, the Pending Home Sales Index’s role as a forward-looking indicator would be muted.
Overall, though, new buyer demand for housing accompanied a smaller home supply will result in higher home prices through 2012. And, with mortgage rates expected to rise, monthly carrying costs will be higher, too.
Looking at the data, the best time to buy a home may be right now.
Standard & Poor’s released its September 2011 Case-Shiller Index this week. The index tracks home price changes in select cities between months, quarters, and years.
The Case-Shiller Index for September showed drastic devaluations nationwide.
As compared to August, home values fell throughout 17 of the index’s 20 tracked markets, led by Atlanta’s 5.9% drop. On an annual basis, home values have now returned to early-2003 levels.
That said, home buyers and sellers in the Hyde Park area should be cautious when referencing the Case-Shiller Index. The index is a flawed metric and, as such, can lead to improper conclusions about the housing market overall.
The Case-Shiller Index’s first flaw is its most obvious — its limited sample set.
According to Wikipedia, there are more than 3,100 municipalities nationwide. Yet, the Case-Shiller Index includes data from just 20 of them in its findings. These 20 cities account for fewer than 1% of all U.S. cities, and just a small percentage of the overall U.S. population.
The “national figures” aren’t really national, in other words.
Even on a city-by-city basis, the Case-Shiller Index gets it wrong.
By lumping disparate neighborhoods into a single, city-wide result, the index ignores the relative strength of one area at the expense of another. In the aforementioned Atlanta, there are areas that fared much better than September’s -5.9% as cited by Case-Shiller. Some areas fared much worse.
A second flaw in the Case-Shiller Index is it’s methodology for measuring changes in home value. The index only considers “repeat sales” of the same home in its findings, and those homes must be single-family, detached property. Condominiums, multi-family homes, and new construction are not included.
In some cities — Chicago, for example — “excluded” property types can account for a large percentage of total monthly sales.
And, third, the Case-Shiller Index is flawed by “age”.
Because Standard & Poor’s publishes on a 60-day delay, the Case-Shiller Index is reporting on a housing that no longer exists. Sales that closed in September are based on contracts written from June-August –a time-frame that’s 6 months aged.
The best use of the Case-Shiller Index is as an analysis tool for economists and policy-makers interested in the long-term trends of U.S. housing. The index does very little good for every day buyers and sellers, unfortunately.
For up-to-date, accurate market data, talk to a real estate professional instead.
If you plan to buy of new construction in Ohio sometime in 2012, don’t expect today’s low prices. Like everything in housing of late, the market for newly-built homes appears to be stabilizing and, in some markets, improving.
As foreshadowed by this month’s strong Homebuilder Confidence survey, the Census Bureau reports that the number of new homes sold rose to a 6-month high in October, climbing to 307,000 units on a seasonally-adjusted, annualized basis.
A “new home” is a home that is considered new construction. It’s the opposite of an “existing home”.
Home buyers are comparing new construction to home resales and liking what they see. At the current sales pace, the nation’s complete new home inventory would now be depleted in just 6.3 months. This marks the lowest home supply since April 2010 — the last month of the last year’s federal homebuyer tax credit.
By building only to meet new demand, builders are keeping home supplies in check, and home prices stable. They’ve also found a niche market — 80% of homes sold last month sold for less than $300,000.
Split by region, the Census Bureau reports October’s New Home Sales as follows :
- Northeast Region : +0.0% from September 2011
- Midwest Region : +22.2% from September 2011
- South Region : -9.5% from September 2011
- West Region : -14.9% from September 2011
Unfortunately, the data may be incorrect.
Although the October New Home Sales report says that sales climbed 1.3 percent last month, the government’s data was published with a ±19.7% margin of error. This means that the actual New Home Sales reading may have been as high as +21.0 percent, or as low as -18.4 percent. Because the range of values includes both positive and negative values, the Census Bureau assigned its October data “zero confidence”.
As home buyers, then, we can’t take our market cues from the published data. Instead, we should look to other metrics including Housing Starts data and the aforementioned homebuilder confidence survey. Each points to strength in the new home market, and foretells higher home prices in 2012.
If you’re in the market for new construction, consider writing an offer soon. Home prices remain low and mortgage rates do, too — a combination that keeps home payments low. Next year, that may not be the case.