Housing got battered again last week. In this week’s article we discuss Existing Home Sales Report from the Realtors as well New Home Sales from the Census Bureau and our usual coverage of interest rates and mortgage applications.
Existing Home Sales Disappoint
The National Association of Realtors reported that existing home sales fell to a seasonally adjusted annual rate of 4.88 million. This is a 9.6% decline over January’s 5.4 million pace and nearly 3% below last February’s 5.02 million pace. Worse because of a slower pace, the current supply jumped to 8.6 months. This is up from 7.5 months in January.
Many analysts were calling for a decline, but not a 10% decline. Housing was ravaged by cold weather which reduced showings and contracts in January. This directly affected February home sales. The supply is concerning though the pace is likely to pick up in March (at least over February 2011) . We are heading into the spring season which means more homes will be coming on the market. Many people who’ve been holding off on selling over the last 2 years are sure to try and test the market this year. Supply could swell causing another round of price declines where excess capacity exists.
Rates Rise Modestly
Freddie Mac reported interest rates increased for the week ending March 24th. The 30-year fixed mortgage rate rose from 4.76% to 4.81% and the 15-year fixed rose from 3.97% to 4.04%. Rates have been in a short term downtrend in March giving relief to those looking to refinance who missed the cyclical low in November.
Rates are still favorable keeping housing highly affordable in many markets throughout the US. International turmoil means favorable rates as investors take flight to US Treasuries. New issues are flaring up in the Middle East as well as the issues in Libya ensuring that in the short term rates remain favorable. Also we haven’t seen the end to sovereign debt issues with Portugal being the latest country to seek a bailout. I anticipate we’ll be readdressing Greece soon too.
Mortgage Applications Rise
We saw a glimmer of good news from the Mortgage Bankers Association this week; mortgage application activity rose 2.7% for the week ending March 18th. Both the Refinance Index and the Purchase Index increased 2.7%. The 4-week moving average for refinances is up 3.3% and 1% for purchases.
This increase follows lower rates from the prior couple weeks. I’m definitely keeping my eyes on the 4-week moving average for purchase applications. Being up just 1% isn’t much but it is certainly better than declines. March home sales should be up as a result and I think we’ll see the activity increase more once the bulk of the country is experiencing better weather.
New Homes Crushed (in a bad way)
The Census Bureau reported on new home sales this week. Sales of new homes fell an astounding 16.9% to a seasonally adjusted annual pace of 250,000. This is 28% below February 2010’s pace of 347,000. This is the LOWEST on record for new home sales. It is important to note the 19%+/- margin of error. Regardless of the margin of error, they do revise the numbers as they validate the data in the following month.
Builders are getting hammered lately. February was bad for new home sales, housing starts, building permits, and builder confidence. Builders are still reeling from not having financing. Throw in bad weather and you have one of the worst months on record for the homebuilders. The home builders are introducing legislation to restore the flow of credit to the homebuilding industry.
This will be a busy week for the housing industry; the Realtors will report on pending home sales and Case-Shiller will report its January Home Price Index. We’ll also get a weekly update on mortgage applications and interest rates. Housing got hammered in February so any improvements we see at this point will be welcome. Also I’m seeing a lot of competition in the markets I’m investing in. This is a good sign that activity exists in the marketplace despite the weak reports. Activity is a leading indicator of things to come.
What’s going on in your local market? Your insight is appreciated.