Author Archives: joeglez

Pending Home Sales Index Suggests Housing Momentum Into 2013

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Pending Home Sales Index 09-2012The home resales is expected to finish the year with strength.

Last month, for the fifth straight month, the Pending Home Sales Index hovered near its benchmark value of 100, registering 99.5 in September.

he Pending Home Sales Index tracks homes under contract to sell, but not yet sold, and is published by the National Association of REALTORS®. The index is a relative one. It compares today’s housing market activity to the housing market activity of 2001 — the index’s first year of existence.

The Pending Home Sales Index has averaged 99.1 this year.

Among housing market indicators, the Pending Home Sales Index is unique. It doesn’t report on prior market activity as the Existing Home Sales and New Home Sales reports do. By contrast, the Pending Home Sales Index is a forward-looking indicator.

The real estate trade association tell us that 80% of U.S. homes under contract go to closing within 60 days, and many of the rest go within Months 3 and 4. In this way, the monthly Pending Home Sales Index can foreshadow to today’s Phoenixville home buyers and sellers what’s next for housing.

Based on September’s Pending Home Sales Index, then, we should expect to see closed home sales stay strong through November and December. That said, home sales are expected to vary by region.

Here is how the Pending Home Sales Index broke down by area last month as compared to one year ago on a seasonally-adjusted, annualized basis :

  • Northeast Region : +26.1% from September 2011
  • Midwest Region : +19.3% from September 2011
  • South Region : +17.6% from September 2011
  • West Region : +0.8% from September 2011

Often, the last few months of a year are considered to be a “slow” period for the housing market. Based on regional, annual Pending Home Sales Index improvements, though, 2012 may be different. The market looks poised to finish with momentum that may carry home prices higher into 2013.

For today’s home buyers, mortgage rates remain low and home prices have only started to climb.

What’s Ahead For Mortgage Rates This Week : October 29, 2012

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The jobs report puts the economy is focusMortgage markets ended the week slightly better last week. Wall Street took its cues from U.S. economic data, from developments in Europe, and from the Federal Reserve, moving mortgage rates lower in Pennsylvania and nationwide.

Pricing for both conforming and FHA mortgage rates improved between Monday and Friday, with the majority of gains occurring late in the week.

The timing of the gains explains why Freddie Mac’s weekly mortgage rate report showed the average 30-year fixed rate mortgage rate rising this week when, in fact, it did not. Because Freddie Mac conducts its mortgage rate survey at the start of the week, its survey respondents had no time to acknowledge late-week improvements.

Freddie Mac said the 30-year fixed rate mortgage rate rose to 3.41% for home buyers and refinancing households willing to pay 0.7 discount points at closing plus a full set of closing costs.

Mortgage applicants choosing zero-point mortgages should expect a higher rate.

The biggest event of last week was the Federal Open Market Committee’s seventh scheduled meeting of the year. The FOMC’s post-meeting press release described the U.S. economy as growing, and inflation as stable. The Fed re-iterated its pledge to QE3, a stimulus program geared at keeping mortgage rates suppressed. The group also said it would hold the Fed Funds Rate low until at least mid-2015.

Lastly, the Fed showed optimism about the broader U.S. housing market — and for good reason. Since October 2011, housing has trended higher and last week saw the release of the September New Homes Sales report and the September Pending Home Sales Index. Both showed strength.

This week, the market’s biggest story is Friday’s release of the October Non-Farm Payrolls report. Jobs are a keystone in the U.S. economic recovery so the monthly jobs report holds sway over mortgage rates. If the number of jobs created exceeds Wall Street expectations, mortgage rates in Collegeville will rise and purchasing power will shrink.

The U.S. economy has added jobs in each of the previous 24 months.

New Home Supply Remains Firmly In “Seller’s Market” Territory

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New Home Supply chartThe U.S. housing market appears headed for a strong close to 2012.

According to the U.S. Census Bureau, the number of new homes sold jumped to 389,000 units in September 2012 on a seasonally-adjusted, annualized basis.

Not since the expiration of the $8,000 federal home buyer tax credit in April 2010 have new homes sold at such volumes.

September’s tally marks a 5.7 percent increase from the month prior, and a 27 percent increase from September 2011. There are now just 145,000 new homes for sale nationwide and, according to the National Association of Homebuilders, buyer demand continues to grow.

At today’s pace of home sales, the entire U.S. inventory of new homes for sale would sell out in 4.5 months. By way of comparison, in January 2009, new home supply was 12.1 months.

When home supplies dip below 6.0 months, analysts say, it signifies a “seller’s market”; one in which sellers tend to benefit from negotiation leverage over buyers. The national New Home Supply has been below 6.0 months since October 2011.

Perhaps that’s one reason why the average new home sale price has climbed 14.5 percent over the past 12 months to $292,400; and why median new home sales prices have made a similar jump.

With builders reporting prospective buyer foot traffic at its highest level since 2006, home supplies are shrinking at a time when buyer demand is rising.  Low mortgage rates and affordable housing choices contribute, too.

30-year fixed rate mortgage rates have been under 4 percent for all of 2012, and are now under 3.50% nationwide. Low rates make for low monthly payments but, like home prices, conditions can’t remain buyer-friendly forever.

For today’s home buyers of new construction, the outlook for finding “great deals” in 2013 may be grim. New home prices are expected to rise and supplies will continue to get scarce. The best homes in the new construction market, therefore, may be the ones you buy today.

By early-next year, low home prices may be gone, and low mortgage rates may be, too.

Simple Explanation Of The Federal Reserve Statement (October 24 , 2012)

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Putting the FOMC statement in plain EnglishThe Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent Wednesday.

For the ninth consecutive meeting, the vote was nearly unanimous. And, also for the ninth consecutive meeting, Richmond Federal Reserve President Jeffrey Lacker was the lone dissenter in the 9-1 vote.

The Fed Funds Rate has been near zero percent since December 2008.

In its press release, the Federal Reserve noted that, since its last meeting six weeks ago, the U.S. economy has been expanding “at a moderate pace”, led by growth in household spending. However, “strains in global financial markets” continue to remain threat to U.S. economic growth, a comment which references to the Eurozone and its economy.

The Fed’s statement also included the following economic observations :

  1. Growth in employment has been slow; unemployment is elevated
  2. Inflation pressures remains stable, and below 2%
  3. Business spending on equipment and structures has slowed

In addition, the Fed addressed the housing market, stating that there have been “further signs” of improvement, “albeit from a depressed level”.

Finally, the Federal Reserve re-affirmed its commitment to its most recent stimulus program, a bond-buying program known as QE3.

Via QE3, the Federal Reserve has been purchasing $40 billion in mortgage-backed bonds monthly, with no defined “end date”. QE3 is meant to suppress U.S. mortgage rates.

Fed Chairman Ben Bernanke has said that QE3 will remain in place until the U.S. economy has recovered in full, at least. It’s a plan that may help home buyers in Pennsylvania and nationwide. Since QE3 launched, mortgage rates have moved to new all-time lows.

The Fed also used its meeting to announce that it intends to hold the Fed Funds Rate near its target range of 0.000-0.250 percent until mid-2015, at least.

The FOMC’s next scheduled meeting is a two-day event and its last of the year, December 11-12, 2012.

Home Supplies Drop To Multi-Year Low

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Existing Home Supply drops to 5.9 months

As the third quarter closed, home resales showed considerable momentum nationwide.

The National Association of REALTORS® reports Existing Home Sales at 4.75 million units in September 2012 on a seasonally-adjusted, annualized basis, an 11 percent increase from one year ago.

An “existing home” is a home that’s been previously occupied; a resale.

The reading marks the second-highest tally of the year — second only to August 2012 when 4.83 million homes were sold on a seasonally-adjusted, annualized basis. The real estate trade association reports that there are now just 2.32 million previously-occupied homes for sale nationwide.

It’s the thinnest national home supply since March 2005 and, at today’s sales pace, all 2.32 million homes would sell in 5.9 months.

A 6.0-month home supply is thought to represent a market in balance. September’s home supply, therefore, suggests a market which favors sellers. Buyers in many U.S. markets may have noticed this shift. Multiple-offer situations are increasingly common and “right-priced” homes are selling quickly.

The median Time on Market is down 31 percent from last year to 70 days nationwide.

Meanwhile, for purchasers of foreclosures and short sales, September Existing Home Sales report included interesting data on the relative value of buying “distressed” property :

  • Foreclosures sold at an average discount of 21% to market value last month
  • Short sales sold at an average discount of 13% to market value last month

And, although distressed homes remain a large part of the U.S. housing market, their relative size is shrinking.

In September, foreclosures and short sales accounted for roughly 1 in 4 home sales. Earlier this year, that figure was 1 in 3.

For today’s Collegeville home buyer, September’s Existing Home Sales report may be a “buy signal”. With home supplies down and demand for homes rising, home prices are poised to increase through the last three months of 2012 and into the start 2013.

The Most Expensive U.S. ZIP Codes (2012 Edition)

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Most expensive ZIP codes in the U.S.Since late-2011, home values have climbed in many U.S. markets.

The government’s Home Price index puts the increase at +3.7% an annual basis and the National Association of REALTORS® shows home sale prices up 11% since last year.

The price at which a home sells is determined by the economic force of supply-and-demand but location and amenities matter, too; establishing a baseline from which supply-and-demand can work.

Using data compiled by real estate market data firm Altos Research, Forbes Magazine recently presented America’s 10 most expensive ZIP codes for 2012. California and the New York Metro area dominate the list.

  1. New York, NY (10065) : $6,534,430
  2. Alpine, NJ (07620) : $5,745,038
  3. Atherton, CA (94027) : $4,897,864
  4. Sagaponack, NY (11962) : $4,180,385
  5. Hillsborough, CA (94010) : $4,127,250
  6. New York, NY (10014) : $4,116,506
  7. Los Altos Hills, CA (94022) : $4,016,050
  8. New York, NY (10021) : $3,980,829
  9. Rolling Hills, CA (90274) : $3,972,500
  10. New York, NY (10075) : $3,885,409

As an illustration of how home prices have climbed since Forbes publishes last year’s Most Expensive ZIP code list, this year’s #10 — Upper East Side, New York City, New York — would have ranked third in 2011.

The Forbes list may be interesting but, to home buyers or sellers in King of Prussia , it’s far from the final word in home values. Real estate remains a local market which means that — even within a given ZIP code — prices can vary based on street and neighborhood, and home characteristics.

Look past the general data and get to the specifics. Talk to your real estate agent for local market pricing.

How To Improve Your FICO Score

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The U.S. housing market recovery is underway. New home sales are at a multi-year high, housing starts are at pre-recession levels, and home builders plan for a strong 2013.

Since late-2011, falling mortgage rates have boosted buyer purchasing power. Now, today, in many U.S. markets, the number of active home buyers outnumbers the number of active home sellers. It’s among the reasons why home supplies remain scarce and why home prices are rising.

Roughly 20 percent of today’s home buyers purchase homes with cash. For everyone else, the ability to gain mortgage approval depends on income, assets, and, most importantly, credit scores. Your credit score is a predictor of your future payment performance and lenders pay close attention.

If you plan to buy a home in Collegeville or anywhere else in the next 12 months, spend some time with this The Today Show interview. It’s five minutes of practical credit scoring advice, including separation of credit score myth from credit score fact.

Among the credit scoring tips shared :

  • How to get your credit checked without harming your credit score
  • The value of using automatic payments with credit cards
  • How to use “old” credit cards to boost your credit score

You’ll also learn about utility companies and why you should never be late with payment.

As compared to August 2011, last month’s average, mortgage-financing home buyer’s FICO score improved 9 points to 750. The average “denied” mortgage applicant’s FICO score was 704. Clearly, standards are high. However, credit scoring is a system and, with time, you can improve your rating.

Watch the interview and find ways to make your credit score better. With better credit comes better mortgage rates.

Single-Family Housing Starts Rise To 4-Year High

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Housing StartsThe housing market continues to improve.

According to the U.S. Census Bureau, on a seasonally-adjusted, annualized basis, Single-Family Housing Starts rose to 603,000 last month, an 11 percent increase from the month prior and the highest reading in more than 4 years.

A “housing start” is a home on which construction has started and home builders are breaking ground at rates not seen even during the 2010 federal home buyer tax credit period.

It’s a signal to home buyers throughout Pennsylvania that the U.S. housing market may be permanently off its bottom.

At least, the nation’s home builders seem to think so.

Earlier this week, the National Association of Homebuilders reported home builder confidence at a 5-year high and nearly triple the levels of last September.

Buoyed by rising sales volume and the heaviest foot traffic since 2006, builders expect the next 6 months of sales to outpace the current rate. It may spell higher home prices for today’s new construction buyer.

Thankfully, mortgage rates remain low.

As compared to last year, today’s buyers have extended purchasing power. Assuming a 20 percent downpayment and a conforming home loan :

  • September 2011 : A $1,000 mortgage payment afforded a purchase price of $202,000
  • September 2012 : A $1,000 mortgage payment afforded a purchase price of $226,000

That’s an 11.9% increase in purchasing power increase over just twelve months. When combined with today’s rising rents throughout many U.S. markets, demand for new construction homes remains high and builders have taken notice.  Buyers should, too.

With mortgage rates low, low downpayment programs available and home prices poised to rise, it’s an opportune time to be a home buyer. Housing has been trending better since late-2011 and will likely carry that momentum forward into 2013.

If you’ve been shopping new construction, remember that as mortgage rates and home prices rise, home affordability drops.

Home Builder Confidence Moves To 6-Year High

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NAHB Housing Market IndexAs home prices rise, so does home builder confidence.

Tuesday, the National Association of Homebuilders reported its monthly Housing Market Index (HMI) at 41, a one-tick improvement from September and the highest HMI value since June 2006 — a span of 77 months.

The Housing Market Index is a homebuilder confidence indicator. When it reads 50 or better, the HMI suggests favorable conditions for home builders nationwide. Readings below 50 suggest unfavorable conditions for builders.

The HMI has not crossed 50 since April 2006 but the index has been making a run since last year, nearly tripling since the 14 reading of last year’s September.

In addition, builder confidence has climbed for six straight months.

For Phoenixville buyers of new construction, the Housing Market Index may help to set market expectations for the rest of 2012, and into early-2013. This is because the NAHB Housing Market Index is constructed as a composite survey, measuring builder sentiment in three specific areas — current home sales, future home sales, and buyer foot traffic.

What’s good for builders, though, may not be good for buyers.

When builders expect business to improve, they may be less willing to make concessions on price or product, holding home prices high and removing seasonal sales incentives.

This month, home builders are seeing strength in each of the three surveyed areas :

  • Current Single-Family Sales : 42 (Unchanged from September)
  • Projected Single-Family Sales : 51 (Unchanged from September)
  • Buyer Foot Traffic : 35 (+5 from September)

All three values are at multi-year highs but it’s the level of foot traffic that may concern today’s home buyers. Builders report foot traffic through model units to be at the highest rate since mid-last decade. This, combined with a shrinking supply of homes for sale, has contributed to a rise in new home sale prices and suggests even higher home prices in 2013.

Like most of the U.S. housing market, new construction appears to have bottomed in October 2011. One year later, the market looks stronger.

Buyers Win 6.6 Percent Increase In Purchasing Power

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Purchasing Power 2010-2012

Mortgage rates in Pennsylvania continue to troll near all-time lows, boosting the purchasing power of home buyers statewide.

According to Freddie Mac’s most recent Primary Mortgage Market survey, the average 30-year fixed rate mortgage is now 3.39 percent nationwide, just three ticks off an all-time low. At the start of last quarter, 30-year fixed rate mortgage rates averaged 3.62 percent.

One year ago, they averaged 4.12%.

When mortgage rates are falling, they present Collegeville home buyers with interesting options. Because of lower rates, buyers can choose to tighten their household budgets, buying an ideal home but paying less to own it each month. Or, for buyers who shop for homes by “monthly payment”, falling mortgage rates put more homes with affordability’s reach.

As a real-life example, for a buyer whose monthly principal + interest mortgage payment is limited to $1,000 per month, and whom opts for a 30-year fixed rate mortgage, as compared to January of this year, the maximum property purchase price has climbed 6.6%, or $14,000 in list price.

Consider this comparison:

  • January 2012 : A payment of $1,000 afforded a maximum loan size of $211,756
  • October 2012 : A payment of $1,000 affords a maximum loan size of $225,771

The 6.6 percent increase in affordability outpaces this year’s rise in home prices and is one reason why the U.S. housing market is improving. Slowly and steadily, the U.S. economy is improving and “good deals” in housing are becoming harder to find. In addition, because homeownership is now less expensive than renting in many U.S. cities, home demand among buyers continues to rise.

For today’s home buyer, market conditions appear ripe. Mortgage rates are near all-time lows, low-downpayment mortgage program remain plentiful, and home values have been rising since late-2011. Within 6 months, rates may be up and homes prices, too. Purchasing power would decline, decreasing home affordability nationwide.

The best “deals” in housing, therefore, may be the ones you find today.