The Home Buyer's Korner

Information presented should be used for educational purposes only.

October 20th, 2014

What Home Buyers Need to Know for the Week of October 20th, 2014

The Home Buyer's Korner LogoLast week’s real estate highlights included the National Association of Home Builders (NAHB) Housing Market Index for October; The Commerce Department released Housing Starts for September and Freddie Mac reported that the average rate for a 30-year fixed rate mortgage dropped below four percent. The Fed also released its Beige Book report and Weekly Jobless Claims came in lower than expected.

The National Association of Home Builders reported on Thursday that its Housing Market Index fell five points in October from September to 54, and below the 59.0 that was expected. The unexpected decline comes after four consecutive monthly gains. The three main components of the index, which includes current sales conditions, expectations for future sales and a gauge to traffic prospective buyers, all declined.  Home Builders are concerned over strict mortgage credit guidelines, but the NAHB’s chief economist noted that pent-up demand, lower mortgage rates and improved labor markets are expected to drive builder confidence in over the coming months.  A readings of 50 and above indicate that more builders are more confident about market conditions than not.

The big news came from Freddie Mac who reported lower average mortgage rates across the board with the rate for a 30-year fixed rate mortgage at 3.97 percent.  That’s a drop of 15 basis points from the prior reading. The 15-year fixed rate mortgages also improved and had an average rate of 3.18 percent from the prior week’s reading of 3.30 percent. The average rate for a 5/1 adjustable rate mortgage fell by 13 basis points to 2.92 percent. Average discount points remained at 0.50 for all three mortgage types.  With the recent drop in mortgage rates, it could raise sales for both new and existing homes.

Concerns over the job market and stability has been an on-going concern for home buyers after living though the deepest recession for most American in a lifetime. However, last week’s Jobless Claims brought more encouraging news with only 264,000 new claims filed against predictions of 289,000.  The prior week’s reading was 287,000 claims. The striking news was it was the lowest number of new jobless claims filed in more than 14 years. Analysts said that lower numbers of weekly jobless claims indicate fewer layoffs and could build confidence in job stability.

The Federal Reserve just released its latest Beige Book report of economic anecdotes. The report showed that in all 12 Fed districts, economic activity was described as experiencing modest to moderate growth. Consumer spending in most districts saw overall growth ranging from slight to moderate, a pace similar to prior Beige Books.

September’s housing starts were above expectations.  The August’s reading. 1.02 million starts were reported with the majority being multi-family homes. The expected reading was 1.015 million housing starts and based on the August’s reading of 956,000 starts.

The University of Michigan/Thompson-Reuters Consumer Sentiment Index for October rose to 86.4 against an expected reading of 83.5. The September’s reading was the highest consumer sentiment reading in seven years.

What’s Ahead for the Week?

The week we will get reports from the National Association of REALTORS® on Existing Home Sales, the FHFA’s Home Price Index Freddie Mac’s weekly report on mortgage rates and New Home Sales.