Market Recap: Case-Shiller Home Price Index Up, Mortgage Apps Strong, Pending Home Sales Rebound
Mortgage rates trended slightly downward this week, following strong economic gains. Home prices continue to appreciate, due to low housing inventory. Both new purchase and refinance mortgage application submissions increased. The pending home sales index turned around after last month’s decline.
The S&P CoreLogic Case-Shiller home price index is based on the changes in the value of homes involved in two or more sales transactions across twenty major metropolitan areas throughout the country. In January, the index exceeded expectations and increased 0.8% month-over-month and a significant 6.4% year-over-year. Seattle, Las Vegas, and San Francisco each saw double-digit annual gains. David Blitzer, chairman of the index committee at S&P Dow Jones Indices, explained, “Currently, the homeowner vacancy rate is 1.6% compared to an average of 2.1% since 2000; it peaked in 2010 at 2.7%. Despite limited supplies, rising prices and higher mortgage rates, affordability is not a concern.”
The Mortgage Bankers Association (MBA) weekly mortgage application survey surged, with a composite increase of 4.8% for the week ending 3/23. New purchase applications are up 3.0% and refinance applications are up 7.0%. Despite last week’s rate hike, MBA economist Joel Kan attributed the increase in mortgage activity to the “positive economic outlook from the Fed” and remains “cautiously optimistic that purchase activity will continue to pick up as we enter the spring home buying season.”
The pending home sales index reports on homes that are under contract but not yet sold. Typically, it takes four-to-six weeks for a contract to close. In February, the pending home sales index increased 3.1% month-over-month to a level of 107.5. Every region saw increases, led by the Northeast, up 10.3%. Based on this data, the National Association of Realtors suggests that the biggest challenge the housing market will face in 2018 is low housing inventory.
Most economists agree the biggest challenge home buyers will face this year is a competitive market. With limited homes for sale, many sellers are seeing multiple offers. Fast timing and financing preapproval are crucial for home buyers looking to purchase a home this spring.
Sources: Bloomberg, CNBC, MarketWatch, MarketWatch, Mortgage News Daily