The Mortgage Corner
We can’t yet count on Pending Home Sales, a predictor of closings in 60 to 90 days, to predict a boost to this year’s sales. They have been falling since last July, and the last spike in mortgage rates.
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, dipped 0.8 percent to 93.9 from a downwardly revised 94.7 in January, and is 10.5 percent below February 2013 when it was 104.9. The February reading was the lowest since October 2011, when it was 92.2.
Graph: Econoday
It could be the weather as NAR chief economist Lawrence Yun says, but there are still fewer homes on the market, and fewer being bought by all cash investors. Yun believes the recent slowdown in home sales may be behind us, while home prices continue to rise. “Contract signings for the past three months have been little changed, implying the market appears to be stabilizing,” he said. “Moreover, buyer traffic information from our monthly Realtor® survey shows a modest turnaround, and some weather delayed transactions should close in the spring.”
Inventories are rising in the western states, however, which will help boost sales. It will show down the price increases, for one. Inventory is up 88 percent in Sacramento, up 57 percent in Phoenix, up 40 percent in Riverside, and up 33 percent in Orange County. However inventory is only up 3 percent in San Francisco and 9 percent in San Diego, according to Housing Tracker. Pending sales increased most in the Midwest and Western regions.
We can only say that rising interest rates do make a difference, but we may have a reprieve on interest rates this year with the new Fed Chairperson Janet Yellen. She has been telling everyone who will listen that the Fed plans to hold down rates for a considerable period even after the end of the QE3 securities’ purchase program. Why? Because the economy feels like it is still in recession for many people.
Dr. Yellen in her first major speech since becoming Fed Chair said, “By keeping interest rates low, we are trying to make homes more affordable and revive the housing market. We are trying to make it cheaper for businesses to build, expand, and hire. We are trying to lower the costs of buying a car that can carry a worker to a new job and kids to school, and our policies are also spurring the revival of the auto industry. We are trying to help families afford things they need so that greater spending can drive job creation and even more spending, thereby strengthening the recovery…There is little doubt that without these actions, the recession and slow recovery would have been far worse.”
This should hearten home buyers as well as sellers that property sales in particular will remain strong this year.
Harlan Green © 2014
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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