Market Forecast: Existing Home Sales, FHFA House Price Index, and New Home Sales

Blog posted On January 23, 2017

Mortgage rates went up last week and the Department of Housing and Urban Development suspended their plan to cut mortage insurance premiums on Federal Housing Administration Loans.  This week, there will be important housing reports including existing home sales, the Federal Housing Finance Agency’s House Price Index, and new home sales.

Existing home sales make up the majority of home sales, accounting for a larger market share than new home sales.  Thus, existing home sales provide a more complete look at housing market demand and where it is headed.  Last month, existing home sales posted a slight month-over-month gain, but a significant year-over-year gain. 

The Federal Housing Finance Agency’s House Price Index (FHFA HPI) is compiled with data from Fannie Mae and Freddie Mac, and limited to the ceiling amount for conforming loans purchased by the government-sponsored enterprises.  Since Fannie and Freddie-backed loans contribute a significant amount of the mortgage market, this index is a good indicator of home values and their impact on housing and the consumer economy.  The FHFA HPI does not measure FHA, VA, or mortgages insured by other federal entities.

New home sales also provide a gauge on housing market demand.  This report measures the committed sales of newly constructed homes.  This metric is an important economic indicator, because new home sales drive other purchases like appliances, furniture, and other post construction furnishings to make the home move-in ready.

Last week, the National Association of Homebuilders’ confidence index posted strong numbers and housing starts surged.  Even with recent increases, mortgage rates remain low and recent housing reports are strong. 

Sources: Reuters, Mortgage News Daily, Bloomberg, MarketWatch