What Home Buyers Need to Know for the Week of Sept 2, 2014
Last week’s economic news effecting housing included numerous reports. Case-Shiller and FHFA reports for June showed us further slowing in home price growth. New home sales for July fell short of the expected reading, while Pending Home Sales exceeded expectations.
Case-Shiller’s 10 and 20-City Home Price Index for June moved from May’s year-over-year reading of 9.40 percent growth to 8.10 percent. Home prices grew by 1.00 percent on a month-to-month basis in June as compared to May’s reading of 1.20 percent. Demand shrank due to increasing inventories of available homes. It was the first time since 2008 that each of the 20 cities tracked showed slowing growth in home prices. Home prices currently are about 17 percent lower than their pre-recession peak beginning back in 2006. Case-Shiller also reported that the national median home price rose by 2.90 percent year-over-year to $269,800. Analysts said that slower gains in home prices coupled with increasing confidence among home builders’ signals a return to more normal housing market conditions.
FHFA reported that home prices for purchase transactions grew by 0.20 percent less than May’s year-over-year reading of 5.40 percent. FHFA reports on properties mortgaged by Fannie Mae and Freddie Mac.
The Department of Commerce reported that New Home Sales missed their expectations for July with a reading with 412,000 new homes sold on seasonally adjusted annual basis. June’s revised reading was 422,000 new homes sold and analysts expected new home sales at a rate of 430,000 for July. Out of the four national regions only the South posted gains in new home sales, however new home starts were up sharply for July.
Pending Home Sales last month was the shining star, exceeding expectations for July and an 11 month high. Consequently this could ease concerns over July’s dip in new home sales. The National Association of REALTORS® Pending Home Sales Index rose to 105.9 in July, as compared to June’s index reading of 102.5. Additionally, homes under contract increased from a negative reading of -1.30 percent in June to July’s reading of +3.30 percent. Pending Home Sales are considered a strong indicator of future home sales.
Freddie Mac reported that average mortgage rates changes little last week. The rate for a 30-year fixed rate mortgage was unchanged at 4.12 percent, with discount points at 0.50 percent. 15-year mortgages had an average rate of 3.25 percent, which was an increase of two basis points from last week’s reading and discount points at 0.60 percent. The average rate for a 5/1 adjustable rate mortgage increased from 2.95 percent to 2.97 percent, with discount points at 0.50 percent.
The Consumer Confidence Index rose to 92.4 in August from July’s reading of 91.9, which exceeded lower expectation of 88.5. The University of Michigan’s Consumer Sentiment Index rose to 82.5 against July’s reading of 79.2, while the expectation was a reading of 80.1. Increasing consumer confidence suggests that as consumers become comfortable with present economic conditions; they may be more confident about buying homes.
What’s Ahead for the Week
This week we’ll see reports on Construction Spending and the Fed’s Beige Book Report. The Bureau of Labor Statistics will also release its Non-farm Payrolls and the National Unemployment Rate for August.