Category Archives: home purchases

New Home Sales Drop 7.1% in March

Posted on April 24, 2012 by admin

This morning the Department of Commerce released the numbers for new home sales in March.  The consensus is: the economy is still struggling to pick up.  With an annualized number of 328,000, March saw a decrease of over 7% in new home sales from those in February.  This comes at a bad time for sales since spring and summer are the seasons that provide the largest increase in sales in the real estate market.  The sales for homes in February were originally reported at 313,000, but were adjusted up to 353,000.  Without the adjustment the March numbers would have shown an increase instead of a decline. With mortgage rates remaining at near all-time lows there is no reason that the housing market should not be moving much more rapidly than it is.  The only explanation is that consumers are still worried about the future of the economy, so they are hesitant to make the commitment to purchase a house.  Another factor could include the fact that there have been unseasonably mild temperatures throughout the past winter, and many more people decided to purchase their homes earlier in the year. In order to see the economy start to move back in the right direction, home sales need to post a steady incline, rather than the volatility seen over the past several months.  This incline was seen at the end of 2011, however renewed worries, many of which were driven by an increase in fuel costs, have pushed the numbers back down.  Many professionals agree that in order to have a strong and healthy economy, the new home sales numbers need to reach an annualized 700,000.  Currently the U.S. is around half of that goal. Investors and economists pay close attention to the home sales in order to determine the overall direction of the economy.  When there are orders for new homes, construction activity increases, providing jobs.  This spurs on many manufacturing companies to produce the supplies, and many retailers will see increased business from people furnishing their new homes.  If home sales remain stagnant or drop, all of these industries will be hurt. The U.S. Bureau of Census, Department of Commerce, and Department of Housing and Urban Development all work together in order to bring the new home sales report.  This report is issued toward the end of every month, with the numbers from the previous month being revised at that time.  The report can be misleading with the number of homes being sold, and the reader should keep in mind they are annualized numbers, not the numbers for one month.  This report also only includes sales of new homes; it does not include sales of existing homes. Continue reading →

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National Association of Realtors’ Data on Existing Home Sales Provides Mixed Signals About Growth in the Housing Market

Posted on April 20, 2012 by admin

The National Association of Realtors provides monthly data on home sales across the United States. This data is intended to provide insight into the state of the housing market. In recent years since the collapse of the real estate bubble, these figures have been monitored by investors and economists looking for a sign that the housing market is on the mend. In its April 19 th report , the National Association of Realtors provided mixed signals as to whether growth in the housing market was gaining traction. While the April release indicated that existing home sales had declined in March, a revision to February’s numbers indicated that the prior months sales were higher than previously reported. This means that even with the March decline, first quarter sales in 2012 were the strongest since 2007. The slip in existing home sales in March was a small one, as home sales fell approximately 2.6 percent. This brought the numbers on sales to an annual rate of 4.48 million homes in the prior month, which is significantly higher than the 4.26 million-unit pace that was reported in March of 2011.   February’s numbers were also revised upward to 4.60 million from the previously reported 4.59 million figure. The March slip in sales occurred in a market that is showing signs of inventory tightening and home prices stabilizing or even increasing.  Inventories fell to 2.37 million and the median home price for a resale rose to $164,800, which is 2.5 percent higher than it was a year ago. The National Association of Realtors also indicated that some real estate agents were reporting housing shortages in certain areas. The number of distress sales is also on the decline. In February, 34 percent of sales were distress sales, but the new report indicates only 29 percent of homes sold in March were owned by homeowners in trouble on their mortgages.  Eighteen percent of these were foreclosures, which sold for a discount of 19 percent below market price, and 11 percent were short sales, which sold for a discount of approximately 16 percent. Overall, the positive news reported led the chief economist for the National Association of Realtors (NAR), Lawrence Yun, to indicate that the recovery is happening- just not at a breakout pace.  NAR President Moe Veissi also indicated that buyer traffic was up and that stabilizing home prices – along with record low mortgage rates- are increasing buyer confidence and prompting home purchases. Continue reading →

Posted in Economic News, February, Foreclosure, home purchases, home sales, housing, housing market, Mortgage, Mortgage Rates, real estate, Recovery, short sale | Tagged , , , , , , , , | Leave a comment

Home Builder Confidence Increases in January

Posted on February 16, 2012 by admin

The National Association of Home Builders (NAHB) and Wells Fargo today released their monthly Housing Market Index (HMI) results that demonstrate that builder confidence in the market went from 24 points to 29.  The four-point increase represents the fifth month in a row that the HMI has increased.  This is the highest level the index has reached since 2007. Despite the increase, home builder confidence is low by historical measures.  A score of 50 or above means that more builders see the market as good rather than poor.  Nevertheless, the index has doubled since September 2011, when it was as low as 14.  It hit its all-time low of 8 in January 2009.  So this month’s score is an indicator that builders see the housing market’s growth as sustainable. What the Index Measures: For more than 20 years, the HMI has been generated by a monthly survey that the NAHB conducts by researching home builders’ confidence in the housing market.  Builders are asked to evaluate current single-family home sales and upcoming sales for the next six months as “good,” “fair,” or “poor.” The builders also rate the number of prospective buyers as “high,” “average,” or “low.” The scores are compiled to arrive at the HMI figure. The HMI consists of three components, which all increased for the February report.  The rate of prospective buyers increased from 21 to 22 while the measure of sales expectations for the next six months went from 29 to 34. Current sales increased from 25 to 30.  Home builders in the western U.S. had the most positive views, with an index of 44, the highest since 2006.  Positive sentiment declined in the Northeast and South, but rose to a rate of 30 in the Midwest. Why Consumers Care: The house building sector of the economy was one of the hardest hit by the recession and has been one of the slowest to recover; however, its health can be an indicator of the state of the economy as a whole. Since the HMI measures builders’ sentiments about the housing market, it is a good measure of the present state of the real estate market as well as a predictor of the future. Home sales are an important sector of the economy and a gauge of consumers’ confidence – since only economically secure people decide to purchase homes.  When consumers purchase homes, they generate income for realtors and sellers – and usually acquire goods and services, such as large appliances and cleaning services, which have a ripple effect on the economy. Investors also use such indices as a means of making investment decisions and the information often has a direct impact on the prices of stocks, bonds, and commodities. Continue reading →

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Financing Options for Home Purchases in 2012

Posted on January 24, 2012 by admin

Keywords: Mortgage, Fixed-Rate, Variable-Rate, Interest-Only, Balloon Payments One of the most important decisions you will make when you buy a new home is how to structure your mortgage.  It is vitally important to make sure that the amount you pay in principle, interest, taxes and insurance- referred to as PITI- is within your comfort zone so you don’t find yourself struggling to make house payments or facing foreclosure.  In order to make sure your payments are affordable not only today, but also in the future, understand how the different mortgage options for home purchases are structured and choose the one that is right for you. The Fixed-Rate Mortgage The fixed-rate mortgage has long been the staple of the mortgage industry and is the safest option you have for taking a mortgage on your home.  When you take on a fixed-rate mortgage, your interest rate is set for the life of the loan.  This means that your principle and interest payment will never change.  Although your taxes may go up if your county changes the rules, you can be reasonably assured that your payments will not increase dramatically.  You can be confident that you’ll always be able to afford the house as long as your income remains stable or goes up. When you opt for a fixed-rate mortgage, you have several different choices as far as the mortgage term.  The two most common options are 15-year mortgages and 30-year mortgages.  A 15-year mortgage carries a lower interest rate, but the payments are higher because you are paying off the entire loan balance in half the time.  A 30-year mortgage has a slightly higher rate but is still an excellent option for most homeowners and was long considered the standard. In some cases, mortgages may be extended for terms as long as 40 years.  While this can allow you to have lower payments and buy a more expensive home, it results in you paying more in interest charges. The Adjustable Rate Mortgage Adjustable rate mortgages are an alternative to fixed rate mortgages that became popular during the housing boom leading up to the 2008 crash.  Adjustable rate mortgages offer an introductory “teaser” interest rate that is locked in for a period of time and that is very low.  With the low interest rate, payments become correspondingly low and many people are able to buy a lot more house than they otherwise would be able to afford. The problem with adjustable rate mortgages is that eventually, the introductory teaser interest rate period ends and the mortgage begins to adjust.  This almost always means it adjusts upward- and sometimes by a lot.  When the interest rate on an adjustable rate mortgage starts to go up, sometimes the payments can become too much to afford, putting you at risk of losing your house. If you are 100 percent sure you’ll be moving within the time before the teaser interest rate ends, or if you are confident you can refinance the mortgage into a lower rate mortgage when the time comes, adjustable rate mortgages can work.  Before choosing this option, however, be sure you understand the risk.  You also cannot assume that your income will always go up or that property values will always go up, so be aware that refinancing may be at trickier proposition than you’d hope. Other Financing Options – Trouble By Another Name While adjustable and fixed-rate mortgages are the two primary options available in the mortgage market, there are a whole host of other creative means of structuring a mortgage.  Most of these are used to help people who can’t quite afford to buy a house stretch their budgets in order to get into one.  This often makes them dangerous products that can get you in financial trouble. One example, for instance, is the balloon mortgage.  A balloon mortgage allows you to make payments for a period of time after which the entire balance of the mortgage will be do in one lump sum.  The idea is that when the balloon payment is due, you will be able to refinance.  Unfortunately, this isn’t always possible and many people are left unable to pay the large payment and struggling not to lose their houses.  Balloon payments may also be structured as interest-only mortgages during the period before the lump sum payment is due, which means you won’t be paying anything down on the principle at all and will just be paying the interest. Before you choose any type of financing option- whether creative or conventional- it is essential to understand exactly what you are getting into so you don’t get in over your head. Continue reading →

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