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Homebuilder Confidence is on the rise once again.
After a brief dip in April, the National Association of Homebuilders reports that the Housing Market Index rose 5 points in May to 29. The increase marks the sharpest climb in homebuilder confidence on a month-to-month basis in 10 years, and raises the index to a 5-year high.
The Housing Market Index is scored from 1-100. Readings above 50 indicate favorable conditions in the single-family new home market overall. Readings below 50 indicate poor conditions.
The HMI has not been above 50 since April 2006.
The Housing Market Index itself is a composite reading as opposed to a straight-up homebuilder survey. The published HMI figure is a compilation of the results of three specific questionnaires sent to NAHB members monthly.
The survey questions are basic :
This month, builders are reporting strong improvement across all three surveyed areas. Current home sales are up 5 points; sales expectations for the next six months are up 3 points; and buyer foot traffic is up 5 points to its highest point since 2007.
With mortgage rates low and home prices suppressed, the market for new homes is gaining momentum, a conclusion supported by the New Home Sales report which shows rising sales volume and a shrinking new home inventory nationwide.
The basics of supply-and-demand portend higher new home prices later this year — a potentially bad development for buyers of new homes in Utah and nationwide. With demand for new homes rising, builders may be less likely to make sale price concessions or to offer “upgrade packages” to buyers of new homes.
If you’re shopping for new construction in or around Salt Lake City , therefore, consider moving up your time frame. Home affordability is high today. It may not be tomorrow.
Mortgage markets worsened slightly last week as positive U.S. economic news overshadowed growing concerns for the Eurozone’s future. Political and economic issues continue to weigh on Greece and Spain, and it’s still unknown how France’s new President will change that nation’s fiscal direction.
Conforming mortgage rates in Utah edged higher on the week overall.
Last week was light on economic data, but the figures released suggest an improving U.S. economy.
For example, the Bureau of Labor Statistics reported 3.7 million job openings nationwide this past March, marking the highest amount since July 2008. Voluntary separations (i.e. “quit jobs”) increased, too — also at levels not seen since 2008.
Voluntary separations may hint at labor market improvement because employees rarely leave a steady-paying job without the prospect of a new job ahead. Furthermore, the four-week moving average of first-time unemployment claims fell for the first time in a month.
The jobs market is one of two key sectors expected to lead the economy forward this year.
The other is housing and, this week, there will be two key housing reports for Wall Street to review. The first is Tuesday’s homebuilder confidence survey from the National Association of Homebuilders. The second is Wednesday’s Housing Starts data for April.
Mortgage rates may also be affected by the Tuesday release of the Retail Sales report and Consumer Price Index report; and, by the Federal Reserve’s Wednesday release of the FOMC Minutes from its last meeting.
For home buyers and mortgage rate shoppers, mortgage rates remain at all-time lows. According to Freddie Mac, the average 30-year fixed rate mortgage rate nationwide is 3.83% for borrowers willing to pay 0.7 discount points and a full set of closing costs — the lowest rate-and-fee combination in Freddie Mac’s recorded history.
However, low mortgage rates may not last much longer — especially if the Eurozone can reverse course on its ailing economies.
Mortgage rates remain volatile and sensitive to changes in market conditions. If today’s mortgage rates fit your budget, consider locking in.
After two weeks of no change, mortgage markets improved last week, pushing mortgage rates lower throughout Utah.
The majority of the improvements occurred Friday after the April jobs report failed to impress Wall Street, and after it became clear that the Eurozone’s struggles with sovereign debt would continue.
According to Freddie Mac, conforming 30-year fixed rate mortgage rates fell to 3.84% nationwide, on average, for borrowers willing to pay 0.8 discount points at closing plus a full set of closing costs.
1 discount point is equal to 1 percent of your loan size such that one discount point on a $200,000 loan would require $2,000 to be paid at-closing.
Freddie Mac’s reported rates for the benchmark 30-year fixed rate mortgage are the lowest in recorded history.
The 15-year fixed rate mortgage is also at its lowest point in history. According to Freddie Mac’s survey, the 15-year fixed averaged 3.07% with 0.7 discount points last week. One year ago, the rate was 3.89%.
This week, with a data-sparse economic calendar, mortgage markets will likely take cues from events in Europe. Notably, France has elected a new leader, one that prefers growth over austerity; and voters in Greece have “punished” austerity-backing leaders, in the process creating a split parliament.
Each event adds uncertainty to an already unstable economic environment and uncertainty favors U.S. rate shoppers.
Doubt spurs investors to seek “safe” assets and U.S. government-backed bonds — including mortgage backed bonds — meet that criteria. As demand for mortgage bonds rise, mortgage rates tend to fall.
This week, rates are starting the week improved. Whether it’s a knee-jerk reaction to Eurozone news from the weekend, or low rates are here to stay is tough to know. Therefore, if today’s mortgage rates look good to you, consider locking something in. There’s more room for rates to rise than to fall.
Home prices started the year on an upswing.
According to the Federal Home Finance Agency’s Home Price Index, home prices rose by a seasonally-adjusted 0.3 percent between January and February 2012. The index is up 0.4% over the past year, offering a counter-story to the Case-Shiller Index’s assertion that home values are sinking.
Last week, Standard & Poor’s Case-Shiller Index said home values had dropped more than 3 percent in the prior 12 months.
As a home buyer or seller in Salt Lake City , data showing “rising home values” or “falling home values” may be of interest to you, but we can’t forget that most home valuation trackers — including both the government’s Home Price Index and the private sector Case-Shiller Index — have a severe, built-in flaw.
Both used “aged” data. Today, the calendar reads May. Yet, we’re still discussing February’s housing data.
Data that is two-plus months old is of little value to everyday buyers and sellers wanting to know the “right now” of housing. And, even then, characterizing the data as “two-plus months old” may be a stretch. This is because the home values used in the Home Price index and the Case-Shiller Index are collected from actual transactions, but at the time of closing.
Considering that most purchases require 45-60 days to close, we can know that when we look at the Home Price Index and Case-Shiller Index reports for February, what we’re really seeing is a snapshot of the housing market as it existed two-plus month plus 60 days ago.
Data that’s 5 months old is of little relevance to today’s buyers and sellers. Today’s market is driven by today’s economics.
The Home Price Index is a useful gauge for economists and law-makers. It highlights long-term trends in housing which can be helpful in allocating resources to a particular project or policy. For home buyers and seller throughout Utah , though, it’s much less useful. Real-time data is what matters to you.
For that, talk to a real estate professional.
