The Housing Recovery Is Progressing

Housing Recovery  The Housing Recovery is progressing even if the pending sales of existing homes fell by 1.30 percent in July according to The National Association of REALTORS.  According to the organization’s Pending Home Sales Index, this was the second straight month that pending home sales dropped. July’s Pending Home Sales Index reading was 109.50.

Housing Recovery in Your Region

Signed Purchase Contracts For Existing Homes Tracked In The U.S.

  • Northeast:  – 6.60 percent
  • Midwest:    – 1.00 percent
  • West:        – 4.90 percent
  • South:       + 2.60 percent

What Impacts Housing Recovery?

  • Pending home sales were 6.70 percent higher year-over-year on a national basis. This indicates that the housing recovery is progressing, but at a slower pace.
  • Short supplies of available homes have also impacted sales. In some areas homebuyers are facing competition from multiple buyers for individual homes.
  • Another report released earlier in the week showed that the pace of rising home prices also slowed. This connects with fewer pending home sales, as when demand for homes cools, prices are likely to fall as well.
  • Pending home sales serve as an indicator for future home sales, as purchase contracts typically lead to completed home sales within two to three months.

Housing Market Developments Could Delay Fed Stimulus Decision

The Federal Reserve has indicated that it may begin reducing its stimulus program of buying $85 billion per month in U.S. Treasury bonds and mortgage-backed securities.

The Fed has repeatedly stated that continued monitoring of economic trends would weigh heavily on its decision if and when to modify its current stimulus program.

Mortgage rates have risen more than a percentage point since May when the Fed began discussing potentially “tapering” its monthly bond purchases.

The Fed may interpret the slower pace of rising home prices and pending home sales as a sign that it’s not yet time to reduce its stimulus program. This could help with lowering mortgage rates, which are expected to rise when the Fed reduces its monthly securities purchases and eventually ends its stimulus plan.

The housing recovery has led the economic recovery; faltering indicators in the housing sector suggest that the overall recovery is a fragile process.

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Fed Delivers Good News for Mortgage Rates

Federal Reserve Bank There was good news for mortgage rates on Wednesday as the Fed’s Federal Open Market Committee (FOMC) announced that its quantitative easing (QE) program would remain unchanged for the present.

Economists expect the Fed to begin tapering the amount of QE toward the end of the year in accordance with Chairman Ben Bernanke’s previous statements that “tapering” would likely begin near year-end.

No specific date for reducing the QE assets purchases was given.

Chairman Bernanke has previously indicated that the Fed will closely review domestic and global economic developments as part of its decision-making process for changing the QE program. Wednesday’s FOMC statement reaffirmed this plan.

Good News for Mortgage Rates

Fed Cites Economic Expansion and Improving Labor Conditions

The FOMC statement cited modest economic expansion, improving labor markets and continued high unemployment levels as a basis for continuing its current level of QE.

The Fed’s mandate requires it to support price stability and low unemployment; reversals in these or other economic areas could cause the Fed to continue its QE at present levels. At present, economists expect QE to end in mid-2014.

The FOMC statement also indicated that the target federal funds rate will remain between 0.00 and 0.25 percent at least until the national unemployment rate falls to 6.50 percent. Chairman Bernanke did not give a press conference after Wednesday’s statement was released.

Quantitative Easing: Monthly Purchase of MBS, Treasury Securities Intended to Control Mortgage Rates

The Fed currently purchases $40 billion in mortgage-backed securities (MBS) and $45 billion in Treasury securities monthly. These purchases are intended to control long-term interest rates including mortgage rates.

When the Fed begins tapering and eventually concludes these asset purchases, demand for MBS and Treasury securities are expected to fall and their prices will likely fall as well. When prices for bonds include MBS fall, mortgage rates traditionally rise.

With mortgage rates recently moving up, reducing the level of the Fed’s QE asset purchases is cause for concern. Higher mortgage rates make homes less affordable; the combination of rising home prices and mortgage rates presents challenges for first-time home buyers and others without sufficient funds for meeting higher down payments and monthly mortgage payments.

First Time Buyers, Boomerang Buyers would be wise to move up their plans to purchase a home while there is still time to lock in a good mortgage rate.  Don’t take the gamble of waiting only to find out the home you want may not be affordable.

Call Debra Obrock today at (480) 688-2000
for some good solid advice about how to
approach home buying in this Hot Sellers market.

What’s Ahead For Mortgage Rates This Week

Mortgage Rates  The past week was active for mortgage rates. The aftermath of the Fed’s indication that it may start dialing back its multi-billion dollar monthly purchases of Treasury and mortgage backed securities has sent mortgage rates to record highs.

What Impacted activity on Mortgage Rates

Tuesday’s Case-Shiller Composite Indices for April demonstrate the momentum of recovery in many housing markets. As of April, national home prices had increased by 12.10 percent as compared to April 2012. April’s reading also exceeded March’s reading of 10.10 percent year-over-year.

FHFA released its home prices report for April and noted that the average price for homes with mortgages owned by Fannie Mae or Freddie Mac increased by 7.40 percent, which slightly surpassed the March reading of 7.20 percent.

RE/MAX reported a double digit yearly gains in sales prices in May.

The Department of Commerce released New Home Sales for May and reported 476,000 new homes sold on a seasonally-adjusted annual basis. This exceeded expectations of 453,000 new home sales and also surpassed April’s reading of 454,000 new homes sold.

Wednesday brought the Gross Domestic Product (GDP) report for the first quarter of 2013. The GDP grew by 1.80 percent against expectations of 2.40 percent and the previous quarter’s growth, also 2.40 percent.

Freddie Mac’s Primary Mortgage Market Survey (PMMS) brought the days of bargain basement mortgage rates to a halt as average mortgage rates for a 30-year fixed rate mortgage moved from last week’s 3.93 percent to 4.46 percent. Average rates for a 15-year fixed rate mortgage rose from 3.04 percent 3.50 percent. This was the largest weekly jump in mortgage rates in 26 years.

Home buyers may also consider a 5/1 adjustable rate mortgage, which provides an average 5 year fixed rate of 2.74 percent.  The fixed mortgage rate converts to an adjustable rate after five years.

The National Association of REALTORS ® reported that Pending Home Sales in May rose by +6.70 percent to their highest level in 6 years.

Last week ended on a positive note with the Consumer Sentiment Index for June beating expectations of 83.0 and coming in at 84.1. May’s reading was 82.1; higher consumer confidence is likely driving demand for available homes.

Whats Ahead This Week

Next week’s scheduled economic news includes Construction Spending due on Monday and the ADP private sector jobs report is set for Wednesday.

Thursday the financial markets are closed as we celebrate the July 4th holiday.

Friday brings the Department of Labor’s Non-farm Payrolls Report and the National Unemployment Rate. If the unemployment rate stays steady at 7.60 percent, this may reduce fears that the Fed will start reducing its monetary easing program any time soon, which should help to slow the recent increases in mortgage rates.

If you’re thinking of buying a home, this may be the last chance for finding the best deal on mortgage rates; meanwhile, home prices continue trending up as well. Get started on looking for your new home by giving me a call: (480) 688-2000