Latest Numbers on Health of Existing Home Sales

For news yesterday, Existing Home Sales rose to 4.89 million in May from an upward-revised 4.66 million in April, up 5% on a sequential basis but down 5% on an annual basis. Total inventory rose 2.2% to 2.28 million homes which represents a 5.6 month inventory (6 months is considered a "balanced" level). The median home price rose to 213,400 which is up 5.1% on an annual basis. Distressed sales were 11%, down from 18% a year ago. The first time homebuyer continues to be MIA, with only 27% of sales going to first-time buyers. All cash sales were 33%, and median time on market was 47 days. On a regional basis, the West continues to be soft, with sales only up 0.9% m-o-m and still down 11.4% y-o-y. This likely reflects the diminished inventory of distressed properties in the region and stretched affordability given the sharp gain in prices in much of the U.S.

Sluggish Housing Market A Product Of Millions Of 'Missing Households'

There are 2 million "missing households" in the US - which represents pent up demand for new residences in the US. These are Millennials who are living with their parents or rooming together in an apartment. That represents 2 years of housing starts at the current pace. Rents are increasing, jobs are tough to get, and student debt is high. Fun fact - we haven't been building this few homes since World War II, according to the NAHB.

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Interest Rates Fractionally Lower this Week

Data Provided by Freddie Mac's Primary Mortgage Market Survey® Rates listed are for conforming mortgages up to $417,000  Week ending on 05/15/14 Interest Rate Fees & Points Margin  30 Year Fixed Rate 4.20% 0.6 N/A  15 Year Fixed Rate 3.29% 0.6 N/A  5/1-Year Adjustable Rate 3.01% 0.4 2.72  1 Year Adjustable Rate 2.43% 0.5 2.72 For up-to-the-minute local mortgage interest rate information, contact:  Tom Drasler at Direct (714) 478-3153  Week ending on 05/08/14 Interest Rate Fees & Points Margin  30 Year Fixed Rate 4.21% 0.6 N/A  15 Year Fixed Rate 3.32% 0.6 N/A  5/1-Year Adjustable Rate 3.05% 0.5 2.74  1 Year Adjustable Rate 2.43% 0.4 2.71

This is not intended as an advertisement of interest rates as defined by Regulation Z, Section 226.24. Data is provided by Freddie Mac's Primary Mortgage Market Survey (PMMS) and is provided for informational purposes only. The financial and other information contained herein speaks only as of the date posted herein. Freddie Mac, and/or the sender of this information, is not responsible for business decisions made based on the reported results of the PMMS. In general, the data presented were calculated from information collected Monday through Wednesday of the same week that the PMMS is released and may not reflect mortgage rates, fees or points currently available. Average fees and points are provided to reflect the total upfront cost of obtaining a mortgage. Borrowers may still pay closing costs which are not included in the survey.

Weekly Commentary

by Frank Nothaft, vice president and chief economist, Freddie Mac

"Mortgage rates were little changed amid a week of light economic reports. These lower than expected rates are welcome news with the spring home buying season underway and may even provide those who haven't already refinanced possibly a reason to take another look. Of the few releases, advanced retail sales rose 0.1 percent in April, but below the market forecast consensus of a 0.4 percent increase. Also, the Producer Price Index for final demand rose 0.6 percent in April which followed a 0.5 percent boost from the prior month."

Mortgage Rates Fell Back to 2014 Lowest Levels

Mortgage rates fell back to their lowest levels of 2014, with most lenders in similar territory to last Friday.  Market movement was moderate, but grew increasingly positive for MBS (the mortgage-backed-securities that dictate lenders' rates) as the day progressed.  As such, some lenders released positive mid-day reprices.  Before those, rates were just slightly higher on average.  The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains at 4.25%, and is currently closer to 4.125% than the previous rate of 4.375%. Today's improvement was seen in the form of slightly lower closing costs.  That change in costs equates to an effective rate change of 0.02%.

Where Will Mortgage Interest Rates be in 2015?

Many people ask me where I believe mortgage interest rates will be in the next year or so. Unfortunately, there is no way of knowing, other than we know as the economy improves, and the Fed’s stop manipulating the monetary system, mortgage interest rates will continue to  rise. The folks at the Mortgage Bankers Association, just published a forecast on April 8^th, 2014. Here is the link to our mortgage market forecast and historical quarterly origination's, posted on the MBA website.The forecast provides quarterly data on historical and forecast ed housing starts, interest rates for 30 and 10 year fixed mortgages, and loan origination's.

Clearly, mortgage origination's have significantly dropped, primarily due to interest rates rising 1% in the last year. For example loan origination's for Q1 of 2013 was $524 billion versus Q1 of 2014 at $226 billion. However, both purchase of new and existing home sales has dropped, likely due to investors leaving the market and the recent run up in home valuations.

For people who are looking to purchase or refinance residential real estate, evaluate the cost of waiting, as interest rates WILL rise over the next year.

If you or someone you know, is looking to purchase or refinance residential property, send them my way for a complimentary analysis. 

National Home Values Expected to Increase by 3.3% in 2014

Zillow's first quarter Real Estate Market Reports show home values increased 0.5 percent from the fourth quarter of 2013 to $169,800. The Zillow Home Value Index (ZHVF) climbed 5.7% from March 2013 levels. On a monthly basis, home values are up 0.2% nationally. Zillow writes, "According to the Zillow Home Value Forecast (ZHVF), we expect national home values to increase 3.3 percent over the next year (March 2014 to March 2015). Of the 301 markets covered by the Zillow Home Value Forecast, 282 markets are expected to see increases in home values over the next year, with the largest increases expected in the Riverside metro (12.0 percent) and the Orlando metro (8.2 percent)." Nationally, the number of homes listed for sale on Zillow was down 0.5% annually in March (seasonally adjusted), after having increased on a monthly basis late last year for several months in a row. Inventory rose on an annual basis in 337 out of 648 metros Zillow covers with inventory data.

Top 10 Areas in U.S. Experiencing Highest Price Increases

This is a very interesting article illustrating how California home values have increased compared to other states in the U.S. Feel free to call me if you have any questions with regard to loan program qualification.

Tom

Home Prices Continue Higher, Some States Above Pre-Crisis Peaks

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Apr 28 2014, 12:06PM

Home prices nationwide have now recovered to within 13.5 percent of the peak they reached in June 2006.  The national Home Price Index (HPI) provided by Black Knight Financial Services' Data and Analytics Division is $233,000, inching closer to the $270,000 HPI that was the pre-crisis peak. This presents an increase of 7.6 percent from an HPI of $217,000 in March 2014 and a 0.7 percent increase from February. 

Ten states had increases in their HPI's greater than that 0.7 national monthly average.  Oregon and Washington posted monthly gains of 1.4 percent followed by California Nevada, and Hawaii at 1.3, 1.2, and 1.1 percent respectively.  Other states with larger averages were Colorado, Missouri, the District of Columbia, Texas, and Illinois.  The smallest improvements were in Ohio and Vermont which were unchanged from February, Arkansas, up 0.1 percent, and Connecticut, Maryland, Kentucky, New Jersey, and Massachusetts each of which had a 0.2 percent increase in their respective HPIs.