Existing Home SalesMortgage markets worsened last week amid ongoing discussions budget and tax conversations in Washington, D.C., and the release of key housing and economic data.

Mortgage rates climbed in California and nationwide.

Freddie Mac reported the average 30-year fixed rate mortgage rate at 3.37 percent nationwide for borrowers willing to pay an accompanying 0.7 discount points at closing, plus closing costs — an increase of 0.05 percentage points from the week prior.

The average 15-year fixed rate mortgage rate was listed at 2.65 percent nationwide with an accompanying 0.7 discount points plus a full set of closing costs.

With certain government funding and tax reductions set to expire December 31, legislators appear unlikely to avoid what’s been called the “Fiscal Cliff”. Some economists believe that reaching January 1 with no agreement in place will set the economy in to recession.

Mortgage rates tend to improve on “negative” news for the economy, which partially explains why mortgage rates made a small comeback late in the week.

In other news, according the National Association of REALTORS®, Existing Home Sales reached their highest point since November 2009, climbing to 5.04 million homes sold on a seasonally-adjusted, annualized basis. In addition, the real estate trade group reports that the Existing Home Supply has dropped to 4.8 months — a figure firmly suggesting a “seller’s market”.

Separately, the Commerce Department reported single-family housing starts rising, too; down 4.1 percent in November but up nearly 23 percent as compared to November 2011.

This week, Fiscal Cliff discussions are likely to dominate mortgage markets. The trading week will be holiday-shortened and volume will be lighter-than-normal. This may lead to volatile pricing and rapid interest rate movements.

Markets close early Monday and remain closed through Tuesday. Wednesday, markets re-open with no new data set for release. Then, Thursday, scheduled economic news events resume Thursday with New Home Sales, Jobless Claims and Consumer Confidence due.

Friday, the Pending Home Sales Index is released.

Housing Starts November 2011Single-family housing starts took a small step back in November.

According to the monthly Housing Starts report from the U.S. Department of Commerce, single-family housing starts tallied 565,000 in November 2012 on a seasonally-adjusted, annualized basis. This marks a 4 percent decline from October, but is more than 100,000 higher than the count from 12 months ago.

Clearly, the nation’s new home construction market is expanding.

On a regional basis, single-family housing starts have been strongest in the Midwest; and Hurricane Sandy appears to have affected the number of starts across the Northeast.

As compared to one year ago:

  • Northeast Region : Housing starts down 19% on an annual basis
  • Midwest Region : Housing starts up 40% on an annual basis
  • South Region : Housing starts up 24% on an annual basis
  • West Region : Housing starts up 33% on an annual basis

It’s expected that new construction growth will continue into 2013, too. This is because the Department of Commerce report also showed Building Permits mostly unchanged for November at 565,000 units on a seasonally-adjusted annualized basis.

As compared to November 2011, this marks a 25% increase. Permits for multi-family homes are up 17%, too.

There are more building permits being issued today that at any time in the last 4 years.

For home buyers, this may be good news. Rising permits and housing starts suggests a more healthy U.S. economy, but it also means that home supplies may not be as tight throughout the next few months.

Overly-tight home supplies in some U.S. markets have contributed to rapidly rising home values. With more construction and larger home inventories, home prices may rise in 2013 less slowly.

The good news, though, is the mortgage rates in San Jose remain near all-time lows and low- and no-downpayment mortgage programs are abundant. For today’s home buyer, there are plenty of affordable ways to purchase a home.

Talk with your real estate agent and your loan officer to see which plan works best for you.

Housing StartsAccording to a joint release from the U.S. Census Bureau and the Department of Housing and Urban Development, Housing Starts rose 3.6% in October 2012, climbing to a seasonally-adjusted, annualized rate of 894,000 units.

A “housing start” is a new home on which construction has started and the report gives buyers and sellers across California yet one more reason to be optimistic for the 2013 housing market.

Regionally, Housing Starts varied.

The West and Midwest Regions posted gains between September and October 2012; and, the South and Northeast Regions posted declines. The latter was affected by the effects of Hurricane Sandy.

  • West Region : +17.2% from the month prior
  • Midwest Region : +8.9% from the month prior
  • South Region : -2.5% from the month prior
  • Northeast Region : -6.5% from the month prior

Single-family housing starts — starts for homes not considered multi-unit properties or to be apartment buildings — was mostly unchanged, slipping 1,000 units on a seasonally-adjusted annualized basis.

The Housing Starts data is the third housing-related release this week that hints at a strong start for the 2013 housing market.

Early in the week, the National Association of Homebuilders released its Housing Market Index (HMI), a measure of home builder confidence in the new construction market. The HMI posted 46 — the highest reading since 2006. With mortgage rates low and buyer traffic high, builders are expecting a rash of sales between now and the New Year, and an elevated number of closing over the next six months, in general.

The HMI is scored on a scale of 1-100. One year ago, it read 19.

Then, the National Association of REALTORS® showed Existing Home Sales climbing 2.1% and home supply fell to a multi-year low. At the current sales pace, the entire U.S. home inventory would be sold in just 5.4 months. Analysts believe that a home supply of less than 6.0 months favors home sellers.

In unison, these three housing market reports suggest a sustained, national housing market recovery. Home prices are expected to rise into next year’s housing market.

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 California 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. 

Existing Home Sales 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 California 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 San Jose , 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.

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Housing Starts chartThe new construction housing market continues to make gains.

Wednesday, the U.S. Census Bureau reported Housing Starts for single-family homes up 5.5 percent in August to a seasonally-adjusted, annualized count of 535,000 units nationwide.

The report marks the fifth month of six that single-family starts increased, and marks the highest starts tally since April 2010 — the last month of that year’s federal homebuyer tax credit program.

A “housing start” is a new home on which construction has started and the steady growth in single-family starts suggests a stronger California housing market into 2013.

All four U.S. regions showed single-family housing start growth on both a monthly basis and on an annual one :

  • Northeast Region : 4.5% monthly growth; 31.4% annual growth
  • Midwest Region : 15.6% monthly growth; 74.5% annual growth
  • South Region : 3.2% monthly growth; 17.2% annual growth
  • Midwest Region : 4.6% monthly growth; 23.9% annual growth

The data is just the latest in a series of signals that today’s San Jose new construction housing market has put its worst days behind it.

The nation’s home builders appear to agree, as well.

Earlier this week, the National Association of Homebuilders released its Housing Market Index, a monthly metric which measures homebuilder confidence in the new construction market.

The homebuilder trade association put the HMI at 40 — a 6-year high. Builders expect a strong finish to 2012 and for momentum to carry into 2013 and beyond.

The new construction market — like most of housing — has been fueled by a combination of the lowest mortgage rates in history, ample access to low- and no-downpayment mortgages, and an ever-shrinking supply of new homes for sale.

In July there were just 142,000 new homes for sale nationwide, down 14% from the year prior. As supply shrinks, all things equal, new home prices rise.

If you’ve been considering new construction, therefore, talk to builders sooner rather than later. As demand for homes heats up, prices are likely to rise.

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.

Housing StartsNew construction housing is in a post-recession rally.

As reported by the Census Bureau, on a seasonally-adjusted, annualized basis, last month’s Single-Family Housing Starts rose 5 percent to 539,000 units nationwide. This is the highest reading since April 2010, the last month of that year’s federal home buyer tax credit.

A “housing start” is a new home on which construction has started.

June’s strong numbers also mark the fourth consecutive month during which Single-Family Housing Starts have climbed. This, too, has not occurred since April 2010.

The data is yet one more signal to San Jose home buyers that today’s new construction market has its worst days behind it.

Home builders think so, too.

Earlier this week, the National Association of Homebuilders released its monthly Housing Market Index, a metric which tracks homebuilder confidence. Home builders report higher sales levels and massive foot traffic as compared to just 12 months ago. They also expect second-half sales in 2012 to climb sharply.

It’s no wonder that home builder confidence rose to a 5-year high. Builders are building homes and buyers are buying them.

Today’s market for new homes has been spurred forward by low mortgage rates, but rising rents have played a part, too. In many parts of the country, a comparable home is less expensive to own than to rent, which creates an incentive for renters to buy homes instead.

The availability of low downpayment mortgage programs via the FHA and other government agencies helps as well.

It’s a good time to be home buyer. Mortgage rates are at all-time records, home prices remain low nationwide, and the real estate market is believed to be entering the beginning of a sustained, multi-year recovery.  

If you’re undecided about whether now is a good time to buy a new home, speak with your real estate agent. The cost of home ownership may never be as low as it is today.

Housing StartsSometimes, the housing data headlines tell just half the tale. The stories on May’s Housing Starts figures are proving to be a terrific illustration.

Tuesday, the Census Bureau released its monthly Housing Starts report. A “housing start” is a home on which construction has started.

The report is separated by property type with a separate count for single family homes such as detached residences and town homes; for multiple-unit homes such as 2-unit, 3-unit and 4-unit structures; and, for buildings of 5-units of more such as new condominiums.

In May, Housing Starts fell 4.8 percent nationwide. This runs contrary to recent housing market statistics and home builder confidence data which both have suggested a recovery. The press picked up the story and ran the following headlines :

  • Housing Starts In U.S. Fall 4.8% In May (BusinessWeek)
  • Housing Starts Plunge, But Permits Surge In Mixed Market (CNBC)
  • Housing Starts Slump In May (US News)

Although factually correct, these headlines are somewhat misleading. 

Housing Starts did slip 4.8 percent last month but that figure accounts for all Housing Starts. It fails isolate the single-family starts that matter to today’s buyers and sellers throughout California. Homeowners rarely buy multi-unit homes or entire apartment buildings.

If we remove the report’s tally of 2-4 unit homes and apartment buildings, we find that, in May, single-family housing starts rose for the 4th straight month, registering 516,000 homes started on a seasonally-adjusted, annualized basis. This is the highest tally since April 2010, the last month of that year’s frderal home buyer tax credit. 

Single-family housing starts are up 26% as compared to last year. 

The housing starts report, therefore — headlines aside — is the latest in a series of housing market data that points to a sustained recovery nationwide. If you’re planning to buy a home in 2012, consider buying in between now and September because after that point, home prices and mortgage rates are likely to be higher.

Housing StartsThe new construction housing market continues to improve.

One day after the National Association of Homebuilders reported a 5-year high in homebuilder confidence, the U.S. Census Bureau reports that single-family housing starts rose 2 percent for the second straight month last month.

In April, on a seasonally-adjusted, annualized basis, the government reports 492,000 single-family housing starts. A “housing start” is a home on which ground has broken.

In addition, March’s single-family housing starts were revised higher. What was previously reported as a three percent loss was re-measured and changed to a 0.2% gain.

The April tally marks a six percent increase over the one-year moving average and, along with the March revision, suggests that the springtime housing market may have just been seasonal. 

In March, a number of reports suggested a housing retreat :

Since then, though, low mortgage rates and affordable home prices appear to have sustained the new construction market, which now appears poised for a strong 2012. 

As one mark of proof, active buyers of newly-built homes in San Jose and nationwide are scheduling “model home” showings at the fastest pace since 2007. The burst of foot traffic high has builders upping their sales expectations for the next 6 months.

A scenario like this would normally lead new home prices higher, but the pressure for prices to rise may be offset by the amount of new home supply coming online.

In addition to a rise in Housing Starts, the Census Bureau also reports that, in April, the number of Building Permits for single-family homes rose 2 percent to move to its second-highest level since March 2010 — the month preceding the end of the 2010 federal Home buyer tax credit.

86 percent of homes break ground within one month of permit issuance.

It’s unclear whether housing is on a steady path higher, but there’s a growing body of evidence that suggests the market bottom has already passed.