Pending Home Sales Index Leaps To Multi-Year High

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 Plymouth is poised to end 2012 with strength. 2013 is expected to begin the same way.

New Home Sales Remain Elevated Into Q4 2012

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 Plymouth 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.

Case-Shiller Index Verifies Home Value Gains Through Q3 2012

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 Plymouth should follow its gospel with caution.

Here's why.

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."

Which Is Better : 15-Year Fixed Rate Mortgage Or 30-Year Fixed Rate Mortgage?

As a home buyer or refinancing household in Plymouth , 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.

Simple, Inexpensive Ways To Prep Your Home For Sale

When Maple Grove 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.