Blog - Jeff Cost

Supply Of New Homes At 6.1 Months Nationwide

January 31, 2012 by Jeff Cost

New Home Supply 2010-2011

New Home Sales slowed into the New Year but the market for newly-built homes remains strong. For home buyers in Ohio and nationwide, December’s New Home Sales report is yet one more signal that the housing market recovery may be underway.

According to the Census Bureau, the number of new homes sold in December 2011 slipped 2 percent to 307,000 units on a seasonally-adjusted, annualized basis nationwide.

A “new home” is a home that is considered new construction; a home for which the buyer will be the first owner and tenant.

As compared to December 2010, last months’ sales volume fell seven percent. It’s a statistic that suggests housing market weakness. However, in looking at a different component of the New Home Sales report — the supply of homes for sale — we’re forced to reconsider.

At the current pace of sales, every new home for sale nationwide would be “sold” in a matter of 6.1 months.

Economists believe that a 6.0-month supply defines a market in balance — anything quicker is termed a “seller’s market”. Statistics like that are enough to create urgency among today’s Cincinnati home buyers.

Unfortunately, the Census Bureau’s data may be wrong.

Although December’s New Home Sales report shows sales down 2 percent, the government’s data was published with a ±13.2% margin of error. This means that the actual New Home Sales figure may have been as low as -15.2 percent, or as high as +11.2 percent. And, because the range of possible values includes both positive and negative numbers, the Census Bureau had no choice but to assign its December data “Zero Confidence”.

It will be a few months before final revisions are made to December New Home Sales data. Until then, therefore, buyers should take cues from the market-at-large and the market-at-large hints at recovery. One example of this is homebuilders showing more confidence in their product than at any time in the last 5 years.

If your plans for 2012 call for buying new construction, therefore, consider using this lull to “make a deal”. As the year progresses, the great values in housing may be gone.

What’s Ahead For Mortgage Rates This Week : January 30, 2012

January 30, 2012 by Jeff Cost

Net New Jobs, 2010-2011 Mortgage markets improved last week as news from the Federal Reserve, the U.S. economy, and Europe combined to spur new demand for mortgage-backed bonds.

Conforming mortgage rates rallied from Wednesday through Friday’s close, ending the week near all-time lows set earlier this year.

Last week’s rally was sparked by the Federal Open Market Committee.

After its first meeting of the year, Chairman Ben Bernanke & Co. changed its projection for “exceptionally low rates” to at least late-2014. Previously, the Fed had said its benchmark Fed Funds Rate would remain low until 2013.

This, in conjunction with the Fed’s message that further economic stimulus may be coming, led Wall Street investors to increase their bets on mortgage bonds, pushing up prices and pushing down yields.

Lower yields means lower rates.

Mortgage rates were also helped lower by mixed data on the U.S. economy including weaker-than-expected housing reports, and another setback in the Greece sovereign debt negotiations.

Each time that Eurozone leaders have failed to reach an expected accord with Greece since 2010, mortgage rates have dropped. Last week was no different.

This week, with a large amount of U.S. economic data due for release and a high-profile summit among European Union leaders, mortgage rates are poised to move. Unfortunately, we can’t know in which direction.

Some of the news that will move markets include :

Monday : Personal Consumption Expenditures
Tuesday : Consumer Confidence; Case-Shiller Index
Wednesday : Construction Spending
Thursday : Weekly Jobless Claims
Friday : Non-Farm Payrolls;Factory Orders

Of all of the economic releases, Friday’s Non-Farm Payrolls has the most potential to move markets. More commonly called “the jobs report”, Non-Farm Payrolls details the monthly change in national employment and the national Unemployment Rate.

Jobs are believed to be the key to U.S. economic recovery so strength in jobs should result in higher mortgage rates throughout OH and the country.

Mortgage rates remain very low. If you’re nervous about mortgage rates rising this week or next, it’s as good of a time as any to lock your rate with a lender, and start moving toward closing.

Pending Home Sales Index Posts Second Best Month Since April 2010

January 27, 2012 by Jeff Cost

Pending Home Sales 2011

After 3 consecutive months of growth, the housing market appears to have eased a bit in December.

According to the National Association of REALTORS®, December’s Pending Home Sales Index slipped 4 percent from the month prior. The index measures the number of homes under contract to sell nationwide, but not yet sold.

Despite falling below its benchmark “100 value”, December’s Pending Home Sales Index is the reading’s second-highest value since April 2010 — the last month of last year’s home buyer tax credit program.

In other words, the housing market continues to show signs of improvement, propelled by low home prices and the cheapest mortgage rates of all-time.

Freddie Mac’s mortgage rate survey put the 30-year fixed rate mortgage at an average of 3.96% in December — a 75-basis point improvement from December 2010. This helps to make homes more affordable nationwide.

On a regional basis, December’s Pending Home Sales Index varied :

Northeast Region: -3.1 percent from November 2011
Midwest Region : +4.0 percent from November 2011
South Region : -2.6 percent from November 2011
West Region : -11.0 percent from November 2011

But even regional data is only so helpful. Like everything in real estate, data must be local to be relevant.

Throughout the West Region, for example, the U.S. region in which pending home sales fell the most, several states must have performed better than the regional average. And, undoubtedly, there were cities, towns, and neighborhoods that experienced marked market growth.

Unfortunately, the Pending Home Sales Index can’t capture that data. Nor can it identify the markets in which home sales suffered.

For today’s Columbus home buyers and sellers, therefore, it’s important to understand your local market and the drivers of local activity. Reports like the Pending Home Sales Index can paint a broad picture U.S. housing but for data that matters to you, you’ll want to look local.

For local real estate data, talk to an experienced real estate professional.

Supply Of New Homes At 6.1 Months Nationwide

What’s Ahead For Mortgage Rates This Week : January 30, 2012

Pending Home Sales Index Posts Second Best Month Since April 2010

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