Market Recap: New Home Sales and Existing Home Sales Decline, FHFA House Price Index Up
Mortgage rates trended downward this week. New home sales are down month-over-month, but up year-over-year as buyer demand continues to outpace supply. The Federal Housing Finance Agency (FHFA) house price index ticked slightly upward. Existing home sales declined.
New home sales or the sales of newly constructed homes fell in April, but the drop was less than expected. Month-over-month sales declined 1.5% to a seasonally adjusted annual rate of 662,000. Annually, however, new home sales are up 11.6%. Although new home sales for the past three months were revised lower, suggesting sales slowdown. Currently, it would take 5.4 months to sell off all new home inventory. Housing activity has been stifled from low for-sale inventory, and new home construction is needed to replenish inventory. But, with materials costs 4.2% higher than one year ago, construction activity has slowed.
The FHFA house price index tracks changes in the value of homes financed through conventional financing and securitized by Fannie Mae and Freddie Mac. Like the Case-Shiller home price index, this data lags by one month. In March, the FHFA house price index increased a marginal 0.1% month-over-month. Annually, the index is up a significant 6.7%. Home prices have been on the rise due to lack of inventory and surplus of home buyers. After steadily climbing for much of the past two years, home price appreciation may start to lose some steam and level out.
Existing home sales or resales make up the majority of real estate transactions. In April, existing home sales dropped 2.5% month-over-month to a seasonally adjusted annual rate of 5.46 million units. Annually, sales are also down 1.4% from April of last year. Three out of four regions saw declines, led by the Northeast, down 4,4%. The Midwest was unchanged. At this pace, it would take 4.0 months to exhaust all existing home inventory.
As home values rise, new opportunities emerge for homeowners looking to withdraw home equity. Through a cash-out refinance or home equity line of credit (HELOC), homeowners can refinance their current mortgage to use equity toward home repair or remodel or to pay down other debts. Professionals agree, homeowners should have at least 20% equity in the home before withdrawing any home equity. Before starting a home refinance, it’s best to consult a mortgage loan officer.
Sources: Bloomberg, CNBC, Forex Live, MarketWatch, MarketWatch, Mortgage News Daily