Mortgage markets improved for the second consecutive week last week as demand for U.S. mortgage-backed bonds remained high. A series of economic reports showed strength in housing and a stability in jobs.
Wall Street looked past it, however, to send mortgage rates to their lowest levels in history.
One week into the Federal Reserve’s newest bond-buying program, the stimulus appears to be working.
According to Freddie Mac, the average 30-year fixed rate mortgage rate slipped to 3.49% last week for borrowers willing to pay an accompanying 0.6 discount points at the time of closing. Discount points are a one-time closing costs where 1 discount point is equal to one percent of your loan size.
3.49% marks a new all-time low for the 30-year fixed rate mortgage.
The 15-year fixed rate mortgage rate fell to a new all-time low last week, too, dropping to 2.77% with the same accompanying 0.6 discount points.
Mortgage rates in CA fell despite strong housing data.
- Housing Starts rose 5.5% to a 2-year high
- Existing Home Sales rose 7.8% to a 2-year high
- Building Permits rose 0.2%
Notably, according to the National Association of REALTORS®, the national existing home supply slipped to 6.1 months last month — very close to the 6.0-month marker which separates a “buyer’s market” from a “seller’s market”.
If supplies continue lower, home prices may rise more quickly than expected into 2013. Median home sale prices are already 9.5% higher as compared to one year ago.
This week, more housing data is set for release including the home value-tracking Case-Shiller Index and FHFA Home Price Index. Both are expected to show rising home prices as compared to the last recorded month, and one year ago. In addition, the National Association of REALTORS® releases its Pending Home Sales Index.
Lastly, and likely most important to mortgage rates and home affordability in Palm Desert , the government releases its Personal Consumption Expenditures (PCE) report Friday. PCE is the Federal Reserve’s preferred inflation gauge. An unexpected increase is expected to move mortgage rates higher.
The home resale market put forth another strong data set last week. Home sales prices are higher nationwide and sales volume has moved to a 2-year high.
According to the National Association of REALTORS®, 4.82 million “existing homes” sold on a seasonally-adjusted, annualized basis in August, representing a near 8 percent improvement from the month prior and a nine percent jump from August 2011.
An existing home is a home which has been previously occupied.
Home sales were unevenly split across price tiers, with more than half of all homes selling for less than $250,000. This suggests that the first-time home buyers and real estate investors continue to be active in today’s market as a foundation for growth is built.
According to the Existing Home Sales data :
- First-time buyers accounted for 31% of all home sales
- Real estate investors accounted for 18% of all home sales
- Other, repeat buyers accounted for 51% of all home sales
Also noteworthy is that “distressed homes” accounted for the smallest percentage of overall home sales since the real estate trade group starting tracking such data.
In August, homes in various stages of foreclosures accounted for 12% of all sales and sold at an average discount of 19 percent below market value. Short sale homes accounted for 10% of all sales and sold at an average discount of 13 percent below market value.
Of all the data in the August Existing Home Sales report, though, perhaps most relevant to today’s buyers is the shrinking national housing supply.
At August’s end, there were 2.47 million homes listed for sale nationwide, a three percent increase from the month prior. However, because the pool of available home buyers is increasing more rapidly than the number of homes for sale, housing supplies fell 0.3 months to 6.1 months.
This means that at the current pace of sales, the entire housing supply would be sold by March 2013.
For today’s home buyers, home affordability appears poised to worsen. Mortgage rates and home prices remain low today, but market conditions like these rarely last long. Talk to your real estate agent about what options you have ahead of you. 2012 is coming to a close.
By 2013, the housing recovery may be fully underway.
Home prices continue to rise nationwide.
According to the Standard & Poor’s Case-Shiller Index, home prices rose 6.9% between the first and second quarter of 2012, the largest quarter-to-quarter gain since the home-value tracker’s 1987 inception and another signal that the housing market is in recovery.
The private-sector metric’s results are similar to what the government’s Home Price Index showed for June, too — values rising quickly. In addition, for the second straight month, each of the Case-Shiller Index’s 20 tracked markets showed month-to-month improvement.
June would have marked three straight months if not for Detroit’s value-setback in April.
The top performing markets in June, as tracked by the Case-Shiller Index were :
- Detroit, Michigan : 6.0 percent gain
- Minneapolis, Minnesota : 4.8 percent gain
- Chicago, Illinois : 4.6 percent gain
However, it should be noted that the Case-Shiller Index pulls from a limited sample set. It does not include condominiums or multi-unit homes in its findings, nor does it account for new construction. These exclusions make a material impact on the results of both Minneapolis and Chicago, as examples. Both cities feature a large concentration of condos.
Overall, though, the June data looks sound. Said a spokesman for the Case-Shiller Index, “The market may have finally turned around.”
Furthermore, home buyers nationwide can corroborate what the Case-Shiller Index has uncovered. Falling home inventory and rising home demand have helped to move home prices higher in many U.S. markets.
Low mortgage rates make new homes affordable and rising rents are turning the Rent vs Buy equation on its head. In July, according to the National Association of REALTORS®, first-time home buyers accounted for 34% of all home resales. This trend is expected to continue into 2013.
As compared to one year ago, today’s home buyers have 8% more purchasing power and, with rising home prices, they’re going to need it.