Homes were sold at a furious pace last month.
According the National Association of REALTORS® (NAR), the Pending Home Sales Index rose 5.2 percent in October, crossing the benchmark 100 reading, and moving to 104.8.
It’s a 5-point improvement from September’s revised figure and the highest reading April 2010 — the last month of that year’s federal home buyer tax credit.
October also marks the 18th consecutive month during which the index showed year-to-year gains.
As a housing market metric, the Pending Home Sales Index (PHSI) differs from most commonly-cited housing statistics because, instead of reporting on what’s already occurred, it details what’s likely to happen next.
The PHSI is a forward-looking indicator; a predictor of future sales. It’s based on signed real estate contracts for existing single-family homes, condominiums, and co-ops. Later, when the contract leads to a closing, the “pending” home sale is counted in NAR’s monthly Existing Home Sales report.
Historically, 80 percent of homes under contract, and thus counted in the Pending Home Sales Index, will go to settlement within a 2-month period, and a significant share of the rest will close within months 3 and 4. The PHSI is a predictor of Existing Home Sales.
Regionally, the Pending Home Sales Index varied in October 2012 :
- Northeast Region : 79.2; +13 percent from October 2011
- Midwest Region : 104.4; +20 percent from October 2011
- South Region : 117.3; +17 percent from October 2011
- West Region : 105.7; +1 percent from October 2011
A Pending Home Sales Index reading of 100 or higher denotes a “strong” housing market.
Of course, with rising home sales comes rising home values. 2012 has been characterized by strong buyer demand amid falling housing supplies. It’s one reason why the Case-Shiller Index and the FHFA’s Home Price Index are both showing an annual increase in home prices. Plus, with mortgage rates low as we head into December, the traditional “slow season” for housing has been anything but.
The housing market in South Orange County is poised to end 2012 with strength. 2013 is expected to begin the same way.
Sales of newly-built homes took a small step lower in October, but remain strong.
According to the Commerce Department, New Home Sales slipped 1,000 units last month, falling to 368,000 units on a seasonally-adjusted, annualized basis.
The final reading fell short of Wall Street expectations, and the government revised downward its initial findings from August and September by 2,000 units and 20,000 units, respectively.
A “new” home is a home that is considered new construction.
Furthermore, the number of new homes for sale nationwide ticked higher to 147,000 — the highest reading in 9 months.
However, in taking a broader look at October’s New Home Sales report, we see obvious strengths. For example, although home sales slipped last month, it remains the third-highest tally since the April 2010 expiration of the federal home buyer tax credit.
The highest reading? Last month’s 369,000.
In addition, the national new home inventory has dropped, off 8% from last year. Fewer homes for sales has been a driving force behind rising home prices. As compared to one year ago, the median new home price is up nearly six percent. More demand for buyers is a factor, too.
At the current sales pace, the complete U.S. inventory of new homes for sale would “sell out” in 4.8 months. This is a noteworthy data point because, as analysts point out, a 6.0-month supply of homes marks a market in balance.
Today’s new homes market, therefore, is a seller’s market; one in which home builders may be gaining pricing power and negotiation leverage over buyers. It’s one reason why home builder confidence has climbed to a 5-year high.
For buyers of new construction, then, in South Orange County and nationwide, 2013 is a critical year. Home prices may rise and mortgage rates may, too. And, along the way, it may get tougher to get a “great deal” on new construction.
If you’re planning to buy, therefore, consider moving up your time frame. After October’s small step backward, the time to buy a newly-built home may be now.
The housing market continues to expand.
According to the S&P/Case-Shiller Index, which was released earlier this week, U.S. home prices rose in September for the sixth straight month, climbing 0.3% as compared to the month prior.
On an annual basis, values are higher by 3.0%.
The Case-Shiller Index findings are a composite reading of 20 U.S cities, 17 of which showed home price gains in September. Detroit and Washington D.C. showed slight declines, and New York City showed no change.
Leading the recovery, though, appears to be Phoenix, Arizona. The previously hard-hit city has seen home values gain 20.4% over the last 12 months. Also noteworthy is that Atlanta, Georgia reversed 26 consecutive months of home value declines in September, posting a +0.1% annual growth rate.
Average U.S. home prices have climbed back to mid-2003 levels.
On a month-over-month basis, value change by city varied. San Diego, California and Las Vegas, Nevada both posted gains of 1.4 percent from August, leading the Case-Shiller Index’s 20 tracked cities. Minneapolis, Minnesota and Phoenix showed gains of 1.1 percent.
Los Angeles, California rounded out the Top Five, posting a 1% gain month-over-month.
Despite the index’s strong findings, however, we should remember to temper our expectations. The Case-Shiller Index — like most home value trackers — is wildly flawed. Buyers in South Orange County should follow its gospel with caution.
First, the Case-Shiller Index tracks values for single-family homes only. As a result, it doesn’t account for multi-unit homes or for condos and co-ops. This is a big deal in cities such as Chicago and New York where high-rise units are common.
Another flaw in the Case-Shiller Index is that it’s 60 days delayed. It’s nearly December yet we’re still reviewing data from September. In housing market terms, September was a different market. Real-time data trumps data from last season.
That said, the long-term trends as shown by the Case-Shiller Index, are overwhelmingly positive. As a Case-Shiller Index spokesperson remarked, “It is safe to say we are now in the midst of a recovery in the housing market.”
As a home buyer or refinancing household in South Orange County , you have choices with respect to your mortgage.
You can choose a loan with accompanying discount points in exchange for lower mortgage rates; you can choose adjustable-rate loans over fixed rate ones; and, you can choose loans with principal + interest repayment schedules or repayments which are interest only, as examples.
For borrowers using fixed rate loans, there’s also the choice between the 30-year and 15-year fixed rate mortgage. Each has its positives and negatives and neither is “better” than the other.
Choosing your most appropriate fixed-rate term is a matter of preference and, sometimes, of budget.
The 15-Year Mortgage
With a 15-year fixed rate mortgage, mortgage rates are often lower as compared to a comparable 30-year fixed rate mortgage. However, because loan repayment is compressed into half as many years, the monthly payment will necessarily be higher, all things equal. On the other side, though, homeowners using a 15-year fixed rate mortgage will build equity faster, and will pay less mortgage interest over time.
The 30-Year Mortgage
With a 30-year fixed rate mortgage, mortgage rates tend to be higher as compared to a 15-year fixed rate loan, but payments are much lower — sometimes by as much as 50%. Lower payments come at a cost, however, as mortgage interest costs add up over 30 years. Regardless, 30-year fixed rate mortgages remain the most common mortgage product for their simplicity and low relative payment.
Which One Is Right For You?
There is no “best” choice between the 15-year fixed rate mortgage and the 30-year fixed rate mortgage. Choose a product based on your short- and long-term financial goals, and your personal feelings regarding debt. Mortgage applicants choosing the 30-year fixed rate mortgage can qualify to purchase homes at higher price points, but those using the 15-year fixed rate product will stop making payments a decade-and-a-half sooner.
There are benefits with both product types so, if you’re unsure of which path works best for you, speak with your loan officer for guidance and advice.
From today’s HousingWire.com, by Kerry Panchuk:
While a full housing recovery has yet to be reached, Paul Ashworth, an economist with Capital Economics, notes that HARP 2.0 – launched in 2012 – opened up more refinancing opportunities for underwater borrowers, delivering a stimulus that was much needed.
Such a bold step ended up pushing the average number of mortgage refinancings through HARP from 30,000 each month to more than 100,000 per month in the June through August period of 2012.
“We were originally skeptical, but we have to admit it has made a significant difference,” Ashworth wrote in his latest report.
HARP 2.0’s success revolves around its expansion of qualified borrowers since the program opened refinancing opportunities to borrowers with loan-to-value ratios in excess of 125%.
When breaking out the numbers, about half of the 100,000 loans modified through HARP each month had LTVs above 105%, a quarter had LTVs above 125%.
Refinancing these loans into lower rates is a step towards stability for borrowers and a lift for the housing economy.
Still, Ashworth’s report says the negative-equity problem will continue to be a headwind for the overall housing economy. Yet, his report says that headwind also is “finally beginning to fade.”
It’s fading not only through new HARP refi options, but home prices rose 5% over the past 12 months—a move that could help push upside down borrowers away from their current negative equity positions.
“Almost half of mortgage borrowers still don’t have the 80% in home equity required to qualify for a standard refinancing that would allow them to take advantage of record low mortgage rates,” Ashworth wrote. “But that picture will change rapidly if house prices were growing at as much as 10% per year. Almost 3.5 million borrowers could exit negative equity over the next 12 months.”
When South Orange County homeowners get ready to list, advice will often come from all corners of their personal and social network — what within the home to upgrade; what to repair; what to replace.
And, although some advice remains valuable, much of it can be ignored.
The costs of an expensive upgrade are rarely recouped at the time of sale and studies show that smaller, simpler actions can yield a bigger return on your investment of time and money.
Here are four inexpensive, yet highly effective, ways to prepare your home for sale.
Improve the curb appeal
It’s not just the inside of your home which should be inviting to buyers — the outside of your home should be, too. Trim hedges, maintain the lawn, power wash the walls and try to inject some color, where possible. Your yard is your home’s first impression on buyers. Make it a great one.
Lighten up the place
Extra sunlight lends an airy feeling to your home, and interior lights provide cozy glow. Therefore, wash your windows, pullback your drapes, replace burnt-out bulbs, and add outdoor lighting to your landscaping, if possible. Also, keep your home lit in the evenings in the event that potential buyers drive by after-hours. With the lights on, your home will look cheery instead of dark and gloomy.
Store unnecessary furniture and personal objects
Less can be more when it comes to showing your home so put your knick-knacks, your stacks of books and your fridge-covering artwork in storage. Be sure to avoid stashing personal items in closets because buyers expect closets to be clutter-free as well.
Paint a pretty home
A new coat of paint will freshen up any room so paint where needed. However, stick to neutrals such as grays and tans. Also, consider repainting rooms bathed in bright, fun colors — this can divert a buyer’s attention away from the home and toward money-costing “projects” that would come with buying the home.
With the help of your REALTOR® and a little hard work, these tips should help you increase your home’s appeal to a wide variety of buyers without breaking the bank. It may even help you sell your home more quickly.
According 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.
After a small decline in September, Existing Home Sales rebounded in October, increasing a modest 2.1%.
The housing market’s slow, steady recovery continues as sales volume in all four regions expanded last month with the exception of the Hurricane Sandy-affected Northeast.
The National Association of REALTORS® monthly Existing Home Sales Report comprises completed sales of single-family homes, townhomes, condominiums, and co-ops. The Existing Home Sales report is compiled on a seasonally-adjusted, annualized basis. It shows a 10.9 percent sales increase as compared last year.
Sales volume might otherwise be higher, however, if not for a lack of homes for sale.
Total housing inventory fell 1.4 percent to 2.14 million homes last month which, at the current sales pace, represents a 5.4-month national supply — the lowest in more than 6 years.
The lack of supply amid burgeoning demand has led home prices higher nationwide. October’s median existing home sale price was $178,600 — an 11.1% increase from October 2011 and the eighth consecutive month during which the median sales price rose.
The last time that occurred was during the eight months ending May 2006.
In addition, the Existing Home Sales report showed that the median time on market in October rose to 71 days, up 1 day from September 2012. As compared to October 2011, however, median time on market is down 26% from 96 days.
Other noteworthy statistics from the October Existing Home Sales report include :
- Foreclosures and short sales accounted for 24% of sales
- Foreclosures sold for an average discount of 20% to market
- Short sales sold for an average discount of 14% to market
Furthermore, thirty-two percent of homes sold in October were on the market for less than one month. 20% were on the market for six months or longer.
Record-low mortgage interest rates continue to spur housing, as do low prices. Neither will last indefinitely. If you plan to purchase a home in South Orange County in 2013, therefore, consider moving up your time frame. Home ownership will likely increase in cost as the year moves on.
The National Association of Home Builders (NAHB) released its Housing Market Index (HMI) Tuesday, which showed sharp, 5-point increase to 46 for November 2012, marking the seventh consecutive monthly gain for the HMI, and lifting the index to its highest point since May 2006.
Readings under 50 indicate unfavorable housing conditions for builders. Readings over 50 signal “good” conditions.
The Housing Market Index is a measure of builder confidence, published monthly, based on a survey sent to NAHB members which asks them to rate housing market conditions.
In November, home builders reported gains in two of the three areas surveyed:
- Current Single-Family Sales: 49 (+8 from October 2012)
- Projected Single-Family Sales: 53 (+2 from October 2012)
- Buyer Foot Traffic: 35 (unchanged from October 2012)
Builders report growing demand for new homes as inventories for alternative properties — distressed and foreclosed homes, for example — shrink nationwide.
Even Hurricane Sandy did little to suppress builder confidence.
The NAHB survey was conducted in the two weeks immediately following Hurricane Sandy so the Housing Market Index does reflect builder sentiment during that period. All regions of the country posted confidence gains in November.
The South Region showed a 4-point gain to 43; the West Region showed a 3-point gain to 47; the Midwest Region showed a 3-point gain to 45; and the Northeast Region showed a 2-point gain to 31.
Despite the gains, builders in South Orange County and nationwide still report challenges with home appraisals and tight credit conditions. In addition, a shortage of buildable lots in some areas is limiting the ability for home builders to put more single-family homes on the market.
As builder confidence grows, today’s buyers throughout California should prepare for the possibility of higher home prices. Confident sellers are less likely to make price concessions or to offer free upgrades.
If you are in the market for a new home, therefore, the time between now and the New Year may be the best opportunity to make a bid on a home. Starting next year, low prices may be gone.
The Federal Reserve released its October Federal Open Market Committee (FOMC) meeting minutes last week, revealing a Fed in disagreement about the future of the U.S. economy and about what, if any, stimulus may be warranted in the next 12 months.
The “Fed Minutes” recaps the conversations and debates that transpire during an FOMC meeting, and is published 3 weeks after the meeting adjourns.
According to the October minutes, FOMC members “generally agreed” that a housing recovery is under way nationwide, citing increased housing prices, higher sales volume, and rising construction in many parts of the country.
FOMC members made no major policy changes at their last meeting, but agreed that a continuation of additional asset purchases would likely be necessary in 2013, in order to achieve a substantial improvement in the labor market.
Other notes from within the Fed Minutes included:
- On housing: Signs of improvement are “encouraging”, and mortgage rates are at historic lows
- On inflation: Essentially “unchanged”, notwithstanding recent increases in energy prices
- On Europe: Production indicators signal contraction in business activity and expansion
- On employment: Employment is rising, and unemployment remains high
The economic forecast prepared by the FOMC staff shows an uptick in consumer spending, residential construction, and labor market conditions which more than offset recent downgrades in the business fixed investment and the industrial production outlooks.
Through 2013, economic activity is projected to accelerate gradually, supported by a lessening in fiscal policy restraints. The Fed also anticipates that South Orange County home buyers will benefit from looser credit standards.
Low mortgage rates are helping home buyers, too.
According to Freddie Mac, the average 30-year fixed rate mortgage rate was 3.34% last week, down from 3.55% in September. This has given a boost to buyer purchasing power nationwide and the year-end housing market may reflect it. Demand for homes remains strong.
The next FOMC meeting is scheduled for December 11-12, 2012.