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

Blog posted On October 22, 2018

Average mortgage rates have started to plateau, after climbing earlier this month.  Although rates have started to trend upward, they are still near the lowest levels in the past decade.  This week, the Federal Housing Finance Agency (FHFA) will release its house price index and the National Association of Realtors (NAR) will release the new home sales report and the pending home sales index. 

The FHFA house price index tracks changes in the values of homes financed through conventional financing securitized by Fannie Mae and Freddie Mac.  Although this data subset is smaller than the data reviewed in the Case-Shiller home price index, it is still used to gauge home price appreciation trends.  In July, the FHFA house price index appreciated 0.2% month-over-month and 6.4% year-over-year, signaling that appreciation has started to slow.  As the market replenishes for sale inventory, buyers have more choices when shopping for a home.

New home sales, or the sale of newly constructed homes, make up about 10% of all residential real estate transactions.  In August, new home sales rebounded, after two months of declines, up 3.5% month-over-month to a seasonally adjusted annual rate of 629,000 units.  Each region was gainful, except the South, down 1.7%.  The West surged 9.1% and the Midwest increased 2.7%, while the Northeast jumped an unprecedented 47.8%.  Sustained buyer demand has kept builders busy, especially in today’s competitive market.

The pending home sales index tracks changes in the number of homes that are under contract but not yet closed.  Typically, it takes four to six weeks for a contract to close.  In August, the pending home sales index declined 1.8% month-over-month.  NAR chief economist Lawrence Yun explained, “affordability is hindering buyers and those affordability issues come from lack of inventory, particularly in moderate price points.”

Heading into the slower season, some sellers have started to drop prices.  With less shoppers on the market, some buyers prefer making an offer in the fall and winter months.  If you plan on making a home purchase before the end of the year, start by getting preapproved for mortgage financing.  Even when the market becomes less competitive, mortgage preapproval shows the seller you can complete the transaction quickly, especially if they are on a timeline to move. 

Sources: CNBC, CNBC, Econoday, MarketWatch, Mortgage News Daily