Homebuilder Confidence ImprovesMortgage rates worsened last week in response to more indications that the U.S. economy and global economic trends are improving. Global economic data was stronger than expected; which generally boosts investor confidence and leads to higher mortgage rates in California and across the country.

According to Freddie Mac, the average rate for a 30-year fixed rate mortgage was 3.53 percent with borrowers paying all of their closing costs and 0.8 percent in discount points along with a full complement of closing costs.

The U.S Department of Commerce reported that Factory Orders for December improved over November; they rose from 0.0 percent in November to 1.89 percent in December, but fell short of Wall Street’s expectation of 2.5 percent.

The ISM Services Index for January was released Tuesday and fell to 55.2 from December’s reading of 56.1 and was slightly higher than against investors’ expectations of 55.0. Readings above 50 indicate expansion of the service sector of the economy. The ISM Services Index is also an indicator of future inflationary pressure.

Homebuilders Say Markets Improve For 6th Consecutive Month

On Wednesday, the National Association of Home Builders (NAHB) released its NAHB/First American Improving Markets Index (IMI), which provided good news for housing markets in all 50 states and Washington, D. C. Metro housing markets surveyed showed expansion of improving markets for the sixth consecutive month.

259 of the 361 metro areas surveyed in the IMI showed improvement in February. By comparison, only 12 improving metro markets were reported for September of 2011.

Increasing home prices and mortgage rates suggest that now may be the time for buying a home.

The weekly Jobless Claims report released on Thursday indicated that 366,000 new claims were filed, which was higher than Wall Street’s estimate of 360,000 new jobless claims, but lower than the previous week’s 368,000 new jobless claims.

Falling U.S. Trade Deficit Signals Economic Uptick

The best economic news for last week came on Friday, when the U.S. trade deficit fell to its lowest level since January 2010. The Trade Balance Report for December shows the trade deficit at -$38.5 billion against expectations of -$46 billion and November’s deficit of -$48.7 billion. While a great boost for the economy, this is another indicator that recent low mortgage rates and home prices may soon become history.

Economic News scheduled for this upcoming week includes U.S. Treasury Auctions set for Tuesday, Wednesday and Thursday.

Retail Sales for January will be released on Wednesday and watched closely by investors. Retail sales account for approximately 70 percent of the U.S. economy and are viewed as a strong indicator of the economy’s direction.

Jobless Claims on Thursday, Industrial Production and Consumer Sentiment on Friday round out the week’s economic reports.

Housing StartsThe market for newly-built homes remains strong.

As reported by the U.S. Census Bureau, July featured 502,000 single-family housing starts nationwide on a seasonally-adjusted, annualized basis, marking the fourth straight month during which single-family starts posted north of one-half million.

The last time this milestone occurred was in the four months ending April 2010 — the last month of that year’s federal home buyer tax credit.

A “housing start” is a home on which construction has started and the rise in single-family housing starts is yet one more signal to buyers in San Jose and nationwide that the housing market has likely put its worst days behind it.

Home builders, it appears, agree with that sentiment.

Last week, the National Association of Homebuilders reported builder confidence to be at a 5-year high. Sales levels have been growing since January and builders expect the next six months to be blowout.

One of the main drivers of today’s new construction market is rising rental costs throughout many U.S. markets. It has helped to create an influx of new home buyers at a time when low mortgage rates have helped to keep new homes affordable.

As compared to one year ago, today’s home affordability is high.

  • July 2011 : A $1,000 mortgage payment afforded a loan size of $196,200
  • July 2012 : A $1,000 mortgage payment afforded a loan size of $223,000

That’s a 13.7% purchasing power increase in just twelve months — one reason why builders report buyer foot traffic through new construction at pre-recession levels.

The ability for buyers to access low downpayment mortgage programs is helping home sales, too.

The FHA offers a 3.5% down payment program and today’s home buyers are taking advantage. FHA mortgages now account for an estimated one-third of purchase money mortgages, and the VA and USDA are gaining market share, too, with their respective 100% financing program for certain qualified buyers.

With low rates, low downpayments and soon-to-rise home prices, it’s a good time to be a home buyer. If you’ve been shopping new construction, consider going under contract soon. As mortgage rates and prices rise, your personal home affordability falls.

New Home Supply (2011-2012)The April New Home Sales report suggests that the market for newly-built homes is as strong as the market for existing ones. 

According to the U.S. Census Bureau, the number of new homes sold rose 3.3 percent in April to a seasonally-adjusted, annualized 343,000 units sold — its second-highest reading since April 2010.

April 2010 marked the last month of that year’s federal home buyer tax credit program.

April’s New Home Sales data also marks the 7th of eight consecutive months during which the number of new homes sold climbed nationwide, a streak unequaled in recent history. During this period, the supply of new homes for sale has dropped 13%. 

The complete new home inventory is down to 146,000 homes nationwide.

At the current pace of sales, home buyers in San Jose and across the county would exhaust the complete supply of newly-built homes in 5.1 months.

This, too, is a significant figure.

When home supplies fall below 6 months of inventory, it’s widely believed to indicate a “seller’s market” and there hasn’t been more than 6 months of a new home supply since October 2011. This has placed upward pressure on new home prices and helps to explain why the average home sale price is up 9% from just 6 months ago.

Homes are selling, and they’re rising in price — a trend that today’s buyers should expect to continue through the summer and fall months.

Record-low mortgage rates have moved home affordability to an all-time high with home builders now reporting the highest levels of buyer foot traffic at any time since 2007. As builder confidence grows, buyers can expect to find fewer “great deals” — especially as demand for homes outpaces supply. 

If you’re a home buyer in search of new construction, therefore, the best new construction “deals” of 2012 may be the ones you find today. By 2013, the deals may be gone.

NAHB HMI Homebuilder Confidence is on the rise once again.

After a brief dip in April, the National Association of Homebuilders reports that the Housing Market Index rose 5 points in May to 29. The increase marks the sharpest climb in homebuilder confidence on a month-to-month basis in 10 years, and raises the index to a 5-year high.

The Housing Market Index is scored from 1-100. Readings above 50 indicate favorable conditions in the single-family new home market overall. Readings below 50 indicate poor conditions.

The HMI has not been above 50 since April 2006.

The Housing Market Index itself is a composite reading as opposed to a straight-up homebuilder survey. The published HMI figure is a compilation of the results of three specific questionnaires sent to NAHB members monthly.

The survey questions are basic :

  1. How are market conditions for the sale of new homes today?
  2. How are market conditions for the sale of new homes in 6 months?
  3. How is prospective buyer foot traffic?

This month, builders are reporting strong improvement across all three surveyed areas. Current home sales are up 5 points; sales expectations for the next six months are up 3 points; and buyer foot traffic is up 5 points to its highest point since 2007.

With mortgage rates low and home prices suppressed, the market for new homes is gaining momentum, a conclusion supported by the New Home Sales report which shows rising sales volume and a shrinking new home inventory nationwide.

The basics of supply-and-demand portend higher new home prices later this year — a potentially bad development for buyers of new homes in California and nationwide. With demand for new homes rising, builders may be less likely to make sale price concessions or to offer “upgrade packages” to buyers of new homes.

If you’re shopping for new construction in or around San Jose , therefore, consider moving up your time frame. Home affordability is high today. It may not be tomorrow.

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NAHB Housing Market IndexFor the first time in 3 months, homebuilder confidence has slipped. 

As measured by the National Association of Homebuilders, the Housing Market Index dropped three notches in April to a reading of 25. The report measures homebuilder confidence in the newly-built, single-family housing market. 

When the Housing Market Index reads 50 or better, it reflects favorable market conditions. Readings below 50 reflect unfavorable conditions.

According to the scale, not since April 2006 have housing market conditions have been deemed “favorable” but, recently, homebuilder confidence has picked up. Between September 2011 and March 2012, confidence doubled.

April’s reading remains that second-highest since 2007.

So what does “builder confidence” mean? The formula is a little bit tricky.

The Housing Market Index is actually a composite figure. It’s the combined result of three separate surveys sent to homebuilders monthly. The surveys ask about current single-family sales volume; projected single-family sales volume over the next 6 months; and current home buyer “foot traffic”.

The NAHB compiles the results into the Housing Market Index.

In April, builder responses worsened on all 3 questions :

  • Current Single-Family Sales : 26 (-3 from March 2012)
  • Projected Single-Family Sales : 32 (-3 from March 2012)
  • Buyer Foot Traffic : 18 (-4 from March 2012)

At first glance, the data reveals a weakening market for newly-built homes and this may be true; we won’t know for another few months whether April’s confidence setback is an historical blip or the start of a trend. The change in builder psyche, though, is a change that today’s new home buyers in San Jose can exploit.

Two months ago, builders expected 2012 to be a banner year for home sales. Today, they’re not so sure.

Buyers of new construction, therefore, may find it easier to negotiate with builders for price reductions, “free upgrades”, and/or other concessions. Plus, with mortgage rates still resting near historical lows, financing a newly-built home is cheaper than at any time in recorded history.

The Spring Buying Season is underway. For buyers of new construction, there are deals to be found.

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HMI 2000-2012

Home builder confidence in the newly-built, single-family housing market remains high.

In March, for the second consecutive month, the National Association of Homebuilders reports the Housing Market Index at 28 — a doubling of the reading from just 6 months ago and, along with last month, the highest HMI value since June 2007.

When home builder confidence reads 50 or better, it reflects favorable builder conditions in the single-family, new home market. Readings below 50 suggest unfavorable builder conditions.

The HMI itself is a composite reading. It’s the result of three separate surveys sent to home builders by the trade association. The NAHB asks builders to report on 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”.

Approximately 400 surveys are returned each month. The results are compiled into the NAHB Housing Market Index.

In March, home builders provided mixed replies to the survey questions :

  • Current Single-Family Sales : 29 (-1 from February)
  • Projected Single-Family Sales : 36 (+2 from February)
  • Buyer Foot Traffic : 22 (Unchanged from February)

It’s noteworthy, despite slowing sales in March, that home builders expect a surge in new home sales over the next 6 months. The reasons for this are several and should be of interest to today’s home buyers.

First, the jobs market is heating up. The U.S. economy has added more than 1 net new million jobs over the last 6 months and that is increasing the pool of potential home buyers in California and nationwide. 

Second, the housing market, in general, is improving. Home sales are brisk in many U.S. markets and home supplies are dropping. This creates pressure on home prices to rise.

And, third, low mortgage rates have helped pushed home affordability to all-time highs. More home buyers earning the national median income can afford a median-priced home than at any time in history. 

It’s all culminated in a monthly Buyer Foot Traffic reading which, at 22, is nearly triple the foot traffic reading from just three years ago. Home buyers — in San Jose and everywhere else — are out in full-force, capitalizing on today’s buyer-friendly market.

If you’re looking to buy new construction in the second half of 2012, consider moving up your time frame. Market conditions are constantly changing, and may move out of your favor. As builder optimism increases, the price you pay for your new home may increase, too. 

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Gas prices risingMortgage markets worsened last week as the Eurozone moved closer to a bailout agreement with Greece, and the U.S. economy displayed more signs of growth.

In response, mortgage rates climbed last week.

Rate shoppers should not be surprised that rates ticked north. Since mid-2011, weakness in Greece has helped keep mortgage rates low and the same is true for a weak U.S. economy. Wall Street has sought “safe assets” as protection from risk and that’s driven mortgage rates down.

Now, the safe haven buying that served to anchor low rates appears poised to reverse.

Last month, it was shown, consumer spending rose to record levels and the housing market surpassed analyst expectation again. Homebuilder confidence is now at a 4-year high and Single-Family Housing Starts topped one-half million units for the second straight month.

Conforming mortgage rates in California rose for the first time in a month last week. Unfortunately, few shoppers knew because Freddie Mac’s weekly mortgage rate survey failed to capture the change. The survey deadline was Tuesday. Rates started rising Wednesday morning.

Freddie Mac’s weekly mortgage rate survey put the average 30-year fixed rate mortgage unchanged at 3.87% for borrowers willing to pay 0.8 discount points plus a full set of closing costs.

Rates are higher today.

Beyond Greece and the U.S. economy, inflation is another reason mortgage rates are up. Inflation is the enemy of mortgage rates and, an on annual basis, the core Consumer Price Index registered 2.3% — it’s highest reading since 2008. The Fed expects inflation to ease later this year but if gas prices stay high, the Fed’s forecast may be wrong.

This week is holiday-shortened. Look for Greece to dominate headlines (again) and watch for housing data toward the end of the week. Existing Home Sales is released Wednesday. New Home Sales is released Friday.

For now, mortgage rates remain low. It’s a safe time to lock a long-term rate.

Gas prices risingMortgage markets worsened last week as the Eurozone moved closer to a bailout agreement with Greece, and the U.S. economy displayed more signs of growth.

In response, mortgage rates climbed last week.

Rate shoppers should not be surprised that rates ticked north. Since mid-2011, weakness in Greece has helped keep mortgage rates low and the same is true for a weak U.S. economy. Wall Street has sought “safe assets” as protection from risk and that’s driven mortgage rates down.

Now, the safe haven buying that served to anchor low rates appears poised to reverse.

Last month, it was shown, consumer spending rose to record levels and the housing market surpassed analyst expectation again. Homebuilder confidence is now at a 4-year high and Single-Family Housing Starts topped one-half million units for the second straight month.

Conforming mortgage rates in California rose for the first time in a month last week. Unfortunately, few shoppers knew because Freddie Mac’s weekly mortgage rate survey failed to capture the change. The survey deadline was Tuesday. Rates started rising Wednesday morning.

Freddie Mac’s weekly mortgage rate survey put the average 30-year fixed rate mortgage unchanged at 3.87% for borrowers willing to pay 0.8 discount points plus a full set of closing costs.

Rates are higher today.

Beyond Greece and the U.S. economy, inflation is another reason mortgage rates are up. Inflation is the enemy of mortgage rates and, an on annual basis, the core Consumer Price Index registered 2.3% — it’s highest reading since 2008. The Fed expects inflation to ease later this year but if gas prices stay high, the Fed’s forecast may be wrong.

This week is holiday-shortened. Look for Greece to dominate headlines (again) and watch for housing data toward the end of the week. Existing Home Sales is released Wednesday. New Home Sales is released Friday.

For now, mortgage rates remain low. It’s a safe time to lock a long-term rate.

Gas prices risingMortgage markets worsened last week as the Eurozone moved closer to a bailout agreement with Greece, and the U.S. economy displayed more signs of growth.

In response, mortgage rates climbed last week.

Rate shoppers should not be surprised that rates ticked north. Since mid-2011, weakness in Greece has helped keep mortgage rates low and the same is true for a weak U.S. economy. Wall Street has sought “safe assets” as protection from risk and that’s driven mortgage rates down.

Now, the safe haven buying that served to anchor low rates appears poised to reverse.

Last month, it was shown, consumer spending rose to record levels and the housing market surpassed analyst expectation again. Homebuilder confidence is now at a 4-year high and Single-Family Housing Starts topped one-half million units for the second straight month.

Conforming mortgage rates in California rose for the first time in a month last week. Unfortunately, few shoppers knew because Freddie Mac’s weekly mortgage rate survey failed to capture the change. The survey deadline was Tuesday. Rates started rising Wednesday morning.

Freddie Mac’s weekly mortgage rate survey put the average 30-year fixed rate mortgage unchanged at 3.87% for borrowers willing to pay 0.8 discount points plus a full set of closing costs.

Rates are higher today.

Beyond Greece and the U.S. economy, inflation is another reason mortgage rates are up. Inflation is the enemy of mortgage rates and, an on annual basis, the core Consumer Price Index registered 2.3% — it’s highest reading since 2008. The Fed expects inflation to ease later this year but if gas prices stay high, the Fed’s forecast may be wrong.

This week is holiday-shortened. Look for Greece to dominate headlines (again) and watch for housing data toward the end of the week. Existing Home Sales is released Wednesday. New Home Sales is released Friday.

For now, mortgage rates remain low. It’s a safe time to lock a long-term rate.

NAHB HMI index 2010-2012

New construction buyers in San Jose , look out. The nation’s home builders are predicting a strong 2012 for new home sales. It may mean higher home prices as the spring buying season approaches.

For the sixth straight month, the National Association of Homebuilders reports that homebuilder confidence is on the rise. The Housing Market Index climbed four points to 29 in February, the index’s highest reading since May 2007.

The Housing Market Index is now up 8 points in 8 weeks. The last time that happened was June 2003, a month during which the U.S. economy was regaining its footing, much like this month. It’s noteworthy that June 2003 marked the start of a 4-year bull run in the stock market that took equities up 54%.

The NAHB’s Housing Market Index itself is actually a composite reading. It’s the end-result of three separate surveys sent to home builders monthly.

The association’s questions are basic :

  1. How are market conditions for the sale of new homes today?
  2. How are market conditions for the sale of new homes in 6 months?
  3. How is prospective buyer foot traffic?

In February, builders reported marked improvement across all three areas. Builders report that current home sales climbed 5 points; that sales expectations for the next 6 months climbed 5 points; and that buyer foot traffic climbed 1 point.

Most notable of all of the statistics, though, is that the nation’s home builders report that there are now twice as many buyers setting foot inside model units as compared to just 6 months ago.

This data is supported by the monthly New Home Sales report which shows rising sales and a shrinking new home inventory.

Because of this, today’s new home buyers throughout California  should expect fewer concessions from builders at the time of contract including fewer price breaks on a home and fewer free upgrades. Builders are optimistic for the future and, therefore, may be less willing to “make a deal”.  

This spring may mark the best time of year to buy a new home. 60 days forward, it may be too late.