Home Prices Rise For The 2nd Straight Month

A strong spring season helped home values recover, says the government.

According to the Federal Home Finance Agency's Home Price Index, home prices rose a seasonally-adjusted 0.4 percent from April to May.

It's the HPI's second straight increase, and puts the monthly index at its highest point since January 2011.

As a home seller in Minneapolis , you may appreciate news such as "rising home prices", but it's important to remember that the Home Price Index has a several built-in flaws -- the biggest of which its age.

Today, the calendar nearly reads August, yet, we're still discussing May's housing data. A 2-month delay does little to help buyers and sellers wanting to know the "right now" of housing.

Unfortunately, the Home Price Index data is even more aged than that.

Because the FHFA's Home Price Index measures home prices as recorded at closing, the actual sales prices included in the index are from real estate contracts written 30-60 days prior.

In other words, when we look at the Home Price Index report for May, what we're really seeing is a snapshot of the housing market as it existed in March. March's housing market has little to do with the forces driving home prices today.

Today's real estate market is driven by today's economics.

The Home Price Index is a useful gauge for economists and law-makers; it shows long-term national trends in the housing market which can be used to allocate resources to a project, or to form new policy. For home buyers across the state of Minnesota , though, it's less helpful.

For today's real estate buyers and sellers, there's no substitute for real-time data. For that, talk to a real estate professional.

Existing Home Sales Fall To 8-Month Low

Home resales slipped for the 3rd straight month, according to data from the National Association of REALTORS®.

The Existing Home Sales posted a 1 percent drop from May as the number of homes sold fell to a seasonally-adjusted, annualized 4.77 million units. It's the monthly report's lowest reading since November 2010.

The report also showed the national supply of homes for sales rising to 9.5 months -- also its highest reading since November 2010.

Home Supply is the amount of time it would take to exhaust the complete home inventory at the current pace of sales.

June's Existing Home Sales data would have been stronger if not for a high contract cancellation rate. As compared to May's 4 percent rate, June's cancellation rate was 16 percent; an elevated figure that "stands out in contrast" to what's typical, according to the REALTOR® trade group.

By region, home resale activity varied:

• Northeast : -5.2% from May 
• South :+0.5% from May
• Midwest : +1.0% from May
• West : -1.7% from May

This disparity from region-to-region highlights an important housing market concept. Namely, that all real estate is local. Because just as the Existing Home Sales varies on a regional level, it varies on a state-wide level, too.

What's true for California housing is not necessarily what's true for Florida housing, for example. Each of the 50 states has its own trends, and within those 50 states, there are thousands of cities and neighborhoods, each with their own trends, too.

The "national housing market" doesn't exist, so national data is rendered somewhat useless.

For data in Minneapolis or your local market, talk to your real estate agent.

Housing Starts Surge 9 Percent; Signal A Strong Fall Season

Builders are busy once again.

According to the Census Bureau, Single-Family Housing Starts rose to 453,000 on a seasonally-adjusted, annualized basis in June -- a 9 percent spike from the month prior and the highest reading in 3 seasons.

A "Housing Start" is defined as a home breaking ground on new construction.

June's reading is largest one-month jump since June 2009. The reading surprised Wall Street despite that the Homebuilder Confidence survey may have foreshadowed the results.

Monday, the National Association of Homebuilders reported that builders are more confident about the future of the new home sales market, and forecast a large increase in sales over the next 6 months.

For buyers of new construction, the news is mixed. Rising confidence may mean that builders in Plymouth are less willing to negotiate on upgrades and/or price, but rising construction levels add inventory to an already fragile market.

Adding to the nation's home supply without a corresponding increase in buyer demand shifts negotiation leverage away from builders. 

The Census Bureau also reported on Building Permits.

In June, permits for single-family homes rose by 1,000 units nationwide on a seasonally-adjusted, annualized basis. This, too, bodes well for housing because 89 percent of homes with permits start construction within 60 days.

Momentum should carry forward into fall.

If you're buying new construction in Minnesota , ask your real estate agent about local home supply, and how the market is trending. With mortgage rates low and the fall buying season approaching, you may find some of your best deals in the next few weeks.

Led By Expectations Of A Strong Fall Season, Homebuilder Confidence Bounces Back

Homebuilder confidence is bouncing back.

One month after an unceremonious dip highlighted by poor sales figures and dim prospects for the future, the National Association of Homebuilder's Housing Market Index rebounded two points to 15 in July.

The monthly Housing Market Index is scored on a 1-100 scale. Readings above 50 indicate favorable conditions for homebuilders and the "new home" market. Readings below 50 indicate unfavorable conditions.

The Housing Market Index has not read higher than 50 in more than 5 years.

As a housing metric, the HMI is actually a composite of three separate surveys, self-reported by builders. The surveys ask about current single-family home sales volume; projected single-family home sales volume; and current buyer foot traffic levels.

In July, the responses read as follows : 

• Current single-family sales : 15 (+2 from June)
• Projected single-family sales : 22 (+7 from June)
• Buyer foot traffic : 12 (Unchanged from June)

The most noteworthy reading is the rapid rise in Projected single-family home sales. Although builders aren't experiencing more foot traffic, they think sales will spike between now and the New Year. 

That could spell bad news for Plymouth home buyers.

When builders harbor higher expectations for the future, they're less willing to make concessions for upgrades and/or price. Your likelihood of getting "a great deal" as a buyer diminishes.

That's why it's good that mortgage rates are still so low. Low mortgage rates help with home affordability and can offset slight jumps in sale price.

Mortgage rates remain just above their lowest levels of 2011, and of all-time. 

What's Ahead For Mortgage Rates This Week : July 18, 2011

Mortgage markets worsened last week as concerns for the global economy drove new rounds of "safe haven" buying. Fear continues to dominate mortgage bond market movement and Minnesota rate shoppers are benefiting.

Conforming and FHA mortgage rates fell for the second straight week last week, and closed out Friday with favorable momentum to the downside. 

There were three main mortgage market drivers last week.

The first is tied to the Eurozone.

Although the Greek Parliament reached agreement on austerity measures for the nation-state two weeks ago, concerns that a debt crisis could spill into Italy, Portugal, Ireland, and/or Spain resurfaced last week. The debt of both Ireland and Portugal was downgraded to Junk status, and Italy and Spain may follow soon.

U.S. bond markets gained on the news.

The second story was the just-released Fed Minutes. Notes from the FOMC meeting showed that Ben Bernanke & Co. debated a slowing U.S. economy, the weakening domestic jobs market, and whether a third round of economic stimulus would be necessary. This, too, dragged mortgage rates lower.

The third story is one that's still forming -- the U.S. Debt Ceiling Debate. For now, the issue remains on the market periphery, but as the August 2 debt limit deadline nears, expect more influence over day-to-day mortgage rates. 

Other factors in mortgage rates this week include the Existing Home Sales report; Housing Starts data; Homebuilder Confidence Survey; and, Jobless Claims.

Mortgage rates are low but remain volatile. If you're wondering whether now is a good time to lock your rate, consider that it's better to be safe than sorry. If mortgage rates rise this week, the rise may be permanent.

Rates can only stay low for so long.