The Mortgage Corner
Pending home sales picked up in December as solid increases in the South and West offset weakening activity in the Northeast and Midwest, according to the National Association of Realtors®. And the S&P Case-Shiller Home Price Index of same existing-home prices continued to rise more than inflation, signaling a housing shortage still exists.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 1.6 percent to 109.0 in December from 107.3 in November. With last month's uptick in activity, the index is now 0.3 percent above last December (108.7). Pending sales have been this active since 2015, really, which in turn has stimulated housing construction, mostly on the high end.
Lawrence Yun, NAR chief economist, says contract activity was mixed throughout the country in December but ultimately ended on a high note to close out 2016. "Pending sales rebounded last month as enough buyers fended off rising mortgage rates and alarmingly low inventory levels to sign a contract," he said. "The main storyline in the early months of 2017 will be if supply can meaningfully increase to keep price growth at a moderate enough level for households to absorb higher borrowing costs. Sales will struggle to build on last year's strong pace if inventory conditions don't improve."And national home price gains maintained momentum in November, two months after retaking the high last seen at the height of the housing bubble, according to Case-Shiller.
The S&P/CoreLogic Case-Shiller 20-city index rose 5.3 percent compared to a year ago for the three month period ending in November, an acceleration from the 5.1 percent increase notched in October. The national price index rose 5.6 percent for the year, up from 5.5 percent in October, and a yuge seasonally adjusted 0.8 percent for the month. Among the 20 cities, Seattle, Portland and Denver continued to see the strongest price gains.
According to Yun, a large portion of overall supply right now is at the upper end of the market, as we said. This is evident by looking at December data on the year-over-year change in single-family sales by price range. Last month, sales were up around 10 percent compared to December 2015 for homes sold at or above $250,000, while homes sold between $100,000 and $250,000 only increased 2.3 percent. Meanwhile, sales of homes under $100,000 were down 11.6 percent compared to a year ago.
This could be because mortgage rates have risen, though a 30-year fixed conforming rate is still 4.0 percent for one origination point in California. This is approximately 0.75 percent higher that the record lows of last yar.
"The dismal number of listings in the affordable price range is squeezing prospective first-time buyers the most," said Yun. "As a result, young households are missing out on the wealth gains most homeowners have accrued from the 41 percent cumulative rise in existing home prices since 2011."
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