Housing Reports: What the Real Estate and Mortgage Numbers Mean for You

for sale sign outside brick homeMany a savvy real estate consumer has had their head spun by the dizzying array of sometimes-contradictory housing market reports that come out on a seemingly constant basis. Sales are up, then down, and so are prices (both up and down) -- same for interest rates. Often, these data reports are published within days of each other, but to be fair, they are published by different entities using different data metrics and often reporting on different time frames.You would think that last week would have been a slow time for housing data, what with Thanksgiving and all, but a mind-boggling seven different sets of real estate data came out during the week! Fortunately for our tryptophan-laden brains, for once, all the data points pretty much jive with each other.
  1. The National Association of Realtors® (NAR) reported on Tuesday that existing home sales dropped 2.2% from September to October, to a level 25.9% below the same period last year. Sounds terrible, but the fact is that this time last year, buyers were gobbling homes up greedily to try to meet the first tax credit deadline of November 30, 2009 (which, you might recall, was extended to April 30, 2010). The trade group cited widespread troubles with properties appraising below their sales prices and what it considers to be overly-restrictive lending guidelines as contributing to the delays in the housing market's recovery.

  2. The Federal Housing Finance Agency (FHFA) reported that the average purchase contract interest rate on resale homes dropped .06% from October to November, to 4.49%. When home-buying activity slows down, rates usually declinetoo.

  3. The FHFA also published another report this week revealing that home prices declined 1.6% when comparing the prices of homes sold nationwide during the second quarter of this year to those sold in the third quarter. This is unsurprising, given the post-tax credit "hangover" in diminished buyer urgency and slowdown in sales that many other reports have noted. Fewer qualified buyers making offers makes for more motivated sellers and enhanced power for buyers to negotiate lower prices.

  4. The federal Bureau of Labor Statistics announced this week that regional and state unemployment rates remained flat from September to October. OK, so this isn't a housing market index, strictly speaking, but the housing and job markets are so inextricably intertwined at this point that it might as well be. Even with bargain-basement interest rates and home prices, buyers can't buy without jobs. And apparently, that dynamic didn't change last month, which is consistent with the decline in sales.

  5. Speaking of the sales decline, the NAR report we just discussed reported on existing home sales. But the Census Bureau also issued some home sales data this week, but for new home sales. And if you thought a 2.2% decline was sobering, the Census data will really burst your bubble: New home sales declined 8% from September to October. The one thing that may render both these sales reports somewhat less tragic than they seem is that with the change from fall to the holiday season, home sales generally decline every year. This is what real estate data reports mean when they talk about "seasonality;" during the holidays, people shift from buying homes to buying $3 toasters and Elmo dolls, and all but the most motivated sellers pull their homes off the market to keep prospective buyers' muddy shoes and scheduling issues from spoiling their vacations from work and holiday hosting duties. So, the year-over-year comparisons you see are misleading, because the home-buyer credit changed the seasonal real estate dynamic this time last year. The fact is, we would expect to see declining home sales from about September or October through the end of the year, in a "normal" year.

  6. The Mortgage Bankers Association (MBA) released its weekly survey of the number of mortgage applications that were made the preceding week. The volume of applications overall was up 1.1% -- 2.2% taking into account adjustments for the expected seasonal dip in activity. Though refinance applications were down 1%, the MBA's Purchase Index showed the volume of home loan applications made in the course of a purchase rose 14.4% week-over-week, to the highest levels seen since May. This may indicate that consumer confidence is coming back and that the seasonal decline we would normally see starting now won't be as deep as we would normally expect, because low interest rates will offset bad weather, activating buyers.

  7. And, finally, one last look at interest rates. Freddie Mac took its regular weekly look at mortgage rates, and found that this week's average 30-year-fixed rate mortgage clocked in at 4.40%, while 15-year-fixed rate mortgages came in at 3.77%, on average.

All together now: Combined, these reports paint a unified picture of a continued strong buyers' market. As prices and mortgage interest rates stay low or continue to decline, the housing market climate will remain somewhat frightening for some sellers, but quite favorable for buyers -- probably throughout the holiday season.
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