Dec 29, 2011 | Housing Analysis
The government confirms what the private-sector Case-Shiller Index reported yesterday. Nationwide, average home values slipped in October.
The Federal Home Finance Agency’s Home Price Index shows home values down 0.2% on a monthly, seasonally-adjusted basis. October marks just the second time since April that home values fell month-over-month.
The Case-Shiller Index 20-City Composite showed values down 0.7 percent from September to October.
As a home buyer in Fitchburg , it’s easy to look at these numbers and think housing markets are down. Ultimately, that may prove true. However, before we take the FHFA’s October Home Price Index at face value, we have to consider the report’s flaws.
There are three of them — and they’re glaring. As we address them, it becomes clear that the Home Price Index — like the Case-Shiller Index — is of little use to everyday buyers and sellers.
First, the FHFA Home Price Index only tracks home values for homes backed by Fannie Mae or Freddie Mac mortgages. This means that homes backed by the FHA, for example, are specifically not computed in the monthly Home Price Index.
In 2007, this was not as big of an issue as it is today. in 2007, the FHA insured just 4 percent of the housing market. Today, the FHA is estimated to have more than one-third of the overall housing market.
This means that one-third of all home sales are excluded from the HPI — a huge exclusion.
Second, the FHFA Home Price Index excludes new home sales and cash purchases, accounting for home resales backed by mortgages only. New home sales is a growing part of the market, and cash sales topped 29 percent in October 2011.
Third, the Home Price Index is on a 60-day delay. The above report is for homes that closed in October. It’s nearly January now. Market momentum is different now. Existing Home Sales and New Home Sales have been rising; homebuilder confidence is up; Housing Starts are showing strength. In addition, the Pending Home Sales Index points to a strong year-end.
The Home Price Index doesn’t capture this news. It’s reporting on expired market conditions instead.
For local, up-to-the-minute housing market data, skip past the national data. You’ll get better, more relevant facts from a local real estate agent.
Since peaking in April 2007, the FHFA’s Home Price Index is off 18.3 percent.
Dec 28, 2011 | Housing Analysis
New home inventory is approaching bull market territory.
According to the Census Bureau, the number of new homes sold rose 2 percent in November. On a seasonally-adjusted, annualized basis, home buyers bought 315,000 newly-built homes last month.
November’s New Home Sales data marks the 4th straight month of rising sales volume, lifting the housing-market metric to a 7-month high, and adding to the housing market’s recent show of strength.
Last week, we learned that Existing Home Sales also climbed in November.
The big story in the New Home Sales report, though, is the remaining new home supply nationwide.
With just 158,000 homes “on the market” and the pace of home sales hastening, the complete, national inventory of “new homes” would now be sold in just 6.0 months, a 0.2-month improvement from October. This is the quickest home sales pace in (more…)
Dec 22, 2011 | Housing Analysis
Home resales moved to a 10-month high in November, the latest in a series of strong showings from the housing sector.
According to the National Association of REALTORS®, November’s Existing Home Sales rose to a seasonally-adjusted, annualized 4.42 million units nationwide — a 4 percent climb from October 2011.
An “existing home” is a home that has been previously occupied and cannot be categorized as new construction.
Home buyers and sellers throughout Massachusetts should take note of November’s numbers because — behind the headlines — there’s a series of statistics that foretell higher home prices ahead.
First, the total number of homes for sale nationwide dipped to 2.58 million, an 18% reduction from November 2010 and represents the fewest number of homes for sale since February 2007.
At the current sales pace, the complete home resale inventory would be sold in 7.0 months.
And, second, the real estate trade group reports that 33% of all homes under contract “failed” for some reason last month.
Contract failures can occur because of mortgage denials in underwriting; home inspection issues; and homes appraising for less than their respective purchase prices.
In other words, despite a reduction in the number of homes for sale, and a rash of failed contracts, Existing Home Sales volume is still on the rise.
Broken-down by buyer-type, here’s to whom home sellers were selling in November :
- First-time buyers : 35% of home resales, up from 34% in October 2011
- Repeat buyers : 46% of home resales, down from 48% in October 2011
- Investor buyers : 19% of home resales, up from 18% in October 2011
Given high demand for home resales and shrinking home supplies, we should expect that home prices will rise through December 2011 and into early-2012, at least. Recent Housing Starts data supports this notion.
Thankfully, mortgage rates remain low. Low mortgage rates help keep homes affordable.
Dec 21, 2011 | Housing Analysis
The new construction housing market continues to show strength across the country.
According to the U.S. Census Bureau, Single-Family Housing Starts rose to 447,000 units on a seasonally-adjusted, annualized basis in November — a 2 percent increase from October.
A “Housing Start” is defined as breaking ground on new home construction.
November’s figures mark the third straight month of Single-Family Housing Starts gains. The new construction metric is now 15 percent above its all-time low, set in February of this year.
None of this should be a surprise to new home buyers in Fitchburg.
Housing data has been trending better since September with sales volumes rising and home inventories falling. Basic economics tells us that home prices should soon rise.
The good news is that low mortgage rates should keep homes affordable.
Since mid-November, the average, conventional 30-year fixed rate mortgage has hovered near 4.000% nationwide with an accompanying 0.7 discount points plus closing costs. 1 discount point equals one percent of your loan size. This is down from near 4.500% six months ago, and the drop has made a big impact on home affordability.
- June 2011 : $200,000 mortgage costs $1,013.37 per month
- December 2011 : $200,000 mortgage costs $954.83 per month
This represents $700 in savings per year. It’s no wonder home builders report the highest buyer foot traffic in 3 years.
Meanwhile, the market shows little signs of slowing down. Building Permits are on the rise, too.
Permits for single-family homes rose to their highest levels of year in November and 89 percent of those homes will start construction within 60 days. This means that Single-Family Housing Starts should stay strong through the early part of 2012, and into the spring.
If you’re planning to buy new construction in Massachusetts , therefore, talk to your real estate agent soon and consider moving up your time frame. With mortgage rates low and next year’s buying season approaching, you may find that the best “deals” will come within the next few weeks only.
Dec 20, 2011 | Housing Analysis
In another good sign for the housing market, today’s home builders believe that the housing market has turned a corner.
For the third straight month, the Housing Market Index — a home builder confidence survey from the National Association of Homebuilders — reported strong monthly gains.
December’s Housing Market Index climbed 2 points to 21 in December after a downward revision to last month’s results. The index is now up seven points since September 2011, and sits at a 19-month high.
When home builder confidence reads 50 or better, it reflects favorable conditions in the single-family new home market. Readings below 50 reflect unfavorable conditions.
The Housing Market Index has not crossed 50 since April 2006.
The HMI itself is actually a composite reading; the result of three related home builder surveys. The National Association of Homebuilders asks its members about their current single-family home sales volume; their projected single-family home sales volume for the next (more…)
Dec 15, 2011 | Housing Analysis
Foreclosure activity continues to concentrate over just a few states.
According to foreclosure-tracker RealtyTrac, November’s foreclosure filings fell 3 percent as compared to October, and 14 percent from November 2010.
“Foreclosure filing” is a catch-all term for the various “action steps” throughout the foreclosure process. The grouping comprises default notices, scheduled home auctions, and bank repossessions.
As in most months, though, foreclosure activity remains concentrated by state. More than half of last month’s bank repossessions can be traced to just 6 states.
- California : 14.8% of all bank repossessions
- Florida : 12.7% of all bank repossessions
- Texas : 7.0% of all bank repossessions
- Georgia : 6.9% of all bank repossessions
- Arizona : 6.7% of all bank repossessions
- Michigan : 6.3% of all bank repossessions
Meanwhile, with just 5 repossessions, South Dakota topped the list of states with the fewest bank repossessions in November. The Mount Rushmore State accounted for just 0.009% of REO nationwide in a month in which bank repossessions dropped to a 44-month low point across the United States.
The drop in REO is coming at a tough time for today’s Worcester home buyers. Distressed properties are in (more…)
