Market Forecast: Case-Shiller Home Price Index, Mortgage Apps, and Pending Home Sales

• March 26, 2018

Mortgage rates continued to trend upward last week, but buyer demand remains strong.  Homes are selling increasingly faster, according to the National Association of Realtors (NAR) in last week’s existing home sales report.  This week, the S&P CoreLogic Case-Shiller home price index will review home price appreciation trends, and the pending home sales index will show what to expect in terms of sales in the coming months.  Additionally, the Mortgage Bankers Association (MBA) weekly mortgage application survey comes out on Wednesday.

The Case-Shiller home price index tracks changes in the cost of homes involved in two or more sales transactions across twenty major metropolitan areas throughout the United States.  Though the data lags by one month, it is used to judge home price appreciation trends and see which regions are leading the charge.  In December, the 20-city index increased 0.6% month-over-month and 6.3% year-over-year.  Home price appreciation was driven by gains in Western cities, including Seattle, Las Vegas, and San Francisco. 

The MBA releases a weekly mortgage application survey to track changes in new purchase and refinance applications from week to week.  For the week ending 3/16, new purchase applications were up 1.0% and refinance applications were down 5.0%, for a composite decrease of 1.1%.  Based on this data, some homeowners are holding off on refinance activity, while potential home buyers are jumping off the fence and purchasing a home before rates continue to rise.

The pending home sales index measures homes that are under contract but not yet closed.  Typically, it takes four-to-six weeks for a contract to close.  In January, the pending home sales index declined 4.7% month-over-month to a level of 104.6.  Pending home sales saw declines nationwide as cold winter weather slowed sales and construction activity.  NAR chief economist, Lawrence Yun, explained, “the economy is in great shape, most local job markets are very strong, and incomes are slowly rising, but there's little doubt last month's retreat in contract signings occurred because of woefully low supply levels and the sudden increase in mortgage rates.” 

The Federal Open Market Committee (FOMC) voted to raise the benchmark interest rate .25 bps last week to a range of 1.5% to 1.75%.  In his press conference following the meeting, FOMC Chair Jerome Powell upgraded the Fed’s economic outlook and growth expectations.  Mortgage rates will likely react to the Fed announcement but remain low by historic standards. 

Sources: Bloomberg, MarketWatch, Mortgage News Daily, USA Today