Blog posted On August 20, 2018
Mortgage rates trended slightly downward last week. There are several important housing reports scheduled for this week, including existing home sales and new home sales. The Federal Housing Finance Agency (FHFA) house price index is also slated for release.
Existing home sales or resales make up the majority of real estate transactions. Existing home sales declined 0.6% month-over-month and 2.2% year-over-year in June to a seasonally-adjusted annual rate of 5.38 million homes. Regionally, the Northeast increased 5.9% and the Midwest increased 0.8%. The South declined 2.2% and the West declined 2.6%. At June’s pace, it would take 4.3 months to sell off all available inventory. Homes were on the market for an average of 26 days.
The FHFA house price index is based on data from homes financed through conventional mortgages securitized by Fannie Mae and Freddie Mac. Though the data is a smaller subset than the Case-Shiller home price index, it is still used to gauge home price appreciation. The FHFA house price index increased 0.2% month-over-month and 6.4% year-over-year.
New home sales count the sales of newly constructed homes and make up a smaller segment of real estate transactions. New home sales declined 5.3% month-over-month and increased 2.4% year-over-year in June to a seasonally adjusted annual rate of 631,000. At June’s pace it would take 5.7 months to sell off all available inventory, up from May’s 5.3 months. Home construction has started to pick up, but buyers are largely focused on more expensive homes. Aaron Terrazas, a senior economist for Zillow, noted, “Builders are focused largely at the top of the market, and buyers at the highest price points may find things slowly shifting in their favor over the next few months. But the market remains very competitive for entry-level homes.”
Tariff concerns have impacted construction activity as builders cope with rising materials costs. Corporate tax cuts, however, have buoyed the National Association of Home Builders’ (NAHB) housing market index and kept it relatively positive. When searching for a home in today’s crowded market, serious buyers should get preapproved for a mortgage before they’ve chosen a property. Mortgage preapproval shows the seller you’ve already started the mortgage financing process and ensure a faster transaction.