Market Forecast: New Home Sales, FHFA House Price Index, and Existing Home Sales
This week will be packed with housing reports including new home sales, existing home sales, and the Federal Housing Finance Agency (FHFA) house price index. New home sales surged last month and are expected to continue to strengthen with sustained buyer demand. Existing home sales increased less significantly last month, as home buyers are vying over many of the same house prices. The FHFA house price index is expected to continue to appreciate, at a more moderate pace.
New home sales track the sales of newly constructed homes and makes up a significantly smaller share of real estate transactions than existing home sales. A lack of available homes for sale has spurred construction in recent months, as buyer demand continues to outpace supply. In March, new home sales increased 4.0% month-over-month to a seasonally adjusted annual rate of 694,000, exceeding expectations. New home sales are 10.3% higher year-over-year supporting the need for home builders to replenish housing inventory.
The FHFA house price index tracks changes in the value of homes financed through conventional conforming loans securitized by Fannie Mae or Freddie Mac. Though this data subset is smaller than that of the Case-Shiller home price index, it is still used to gauge home price appreciation trends. In February, the FHFA house price index appreciated 0.6% month-over-month and 7.2% year-over-year. Home values have steadily climbed over the past few years, however, as interest rates start to rise. Also, home price appreciation will likely see some moderation.
Existing home sales, or resales, make up the majority of real estate transactions. In March, existing home sales increased 0.4% month-over-month and fell 3% year-over-year. This data was indicative of the housing inventory crunch. The National Association of Realtors’ (NAR) chief economist, Lawrence Yun, explained, “steady price growth and the swift pace of listings coming off the market are proof that more supply is needed to fully satisfy demand.”
As mortgage rates continue to rise, home price appreciation is expected to settle. Home buyers have faced a competitive housing market this spring. Buyers who are preapproved before they start shopping for a home are usually a better candidate than buyers who are not yet preapproved for financing. If you are considering buying a home any time soon, it’s best to consult a trusted mortgage professional to find out what your buying options are ahead of time.
Sources: Bloomberg, CNBC, HousingWire, MarketWatch, MarketWatch, Mortgage News Daily