The great opportunity now is for home buyers to get a mortgage at an historically low rate. Freddie Mac reported national average mortgage rates set new record lows last week. But according to most observers, buyers shouldn't expect further rate dips. Lenders are seeing plenty of loan volume, so they don't have to lower pricing to get more activity.
Major progress has yet to be made in the housing recovery, but we can keep believing in it, since the data isn't all negative. For example, Pending Homes Sales (contracts on existing homes) were down 1.3% in July, but were UP 2.4% in June, so Existing Home Sales should be up for August. In addition, July's reading was UP 14.4% over last year. The National Association of Realtors chief economist said, "rising rents, record high affordability conditions and investors buying real estate as a future inflation hedge" bode well for real estate.
Last week's "difficulty" for the housing market came from the news that New Home Sales dropped 0.7% for July, to a 298,000 annual rate. They've been in this low range since May of last year, competing with existing homes selling at discounts. But there is opportunity. The inventory of new homes dropped to its lowest level on record. Equally encouraging, the new home median price is up 4.7% over a year ago and the average price is up 8.0%.
Ms. Schucman was the Columbia University clinical psychologist who "scripted" A Course in Miracles. Many are hoping for a miracle to send the housing market into recovery, but Ms. Schucman says we only need to look at a situation properly to find an opportunity. A proper look at the housing market shows there's plenty of opportunity, in the form of unbelievable affordability, tremendous values and historic mortgage rates. These opportunities are there for those who take a long view and close their ears to the naysayers, who have been noisy of late.
It certainly was a volatile week for stocks (see below), but mortgage rates just calmly headed lower. This of course was directly related to the turbulent stock market, which sent investors to the relative safety of bonds, pushing mortgage bond prices up and interest rates down. Last week, rates on 30-year fixed-rate mortgages hit a new low for the year, while rates on 15-year fixed-rate mortgages, 5-year adjustable-rate mortgages (ARMs) and 1-year ARMs all registered new all-time lows. Small wonder purchase loan demand was up a bit over a year ago.
Last week's silver lining for housing came in the form of mortgage rates, pushed lower by the cloud of financial market turmoil. The average 30-year fixed rate stayed near historic lows, while the average 15-year fixed rate hit a new low for records back to 1991. The average rate for 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) also made a new low for records since 2005. The Mortgage Bankers Association (MBA) reported purchase loan applications UP 5.1% over the week before and UP 5.9% over a year ago.
Maybe the famous actress liked the slow approach, but it sure would be nice if our housing recovery were moving faster than a snail's pace. Last week's most positive note came with Pending Sales of Existing Homes, UP 2.4% for June. This was especially gratifying coming on the heels of the 8.2% gain for May. These figures bode well for Existing Home Sales a few months out.
Last week included both problems and progress in the housing market. Getting the probs out of the way, June Existing Home Sales came in down 0.8% versus May, to an annual rate still below 5 million units, lifting the months' supply to 9.5. But all the sales decline was from condos and coops, single-family sales staying the same. We appear to be bouncing along a bottom, as the median price of an existing home rose for the month and is now up 0.8% from last year. Average prices are up 2.7% versus a year ago.
Increasingly, the wrong thing for consumers to do is to stay out of the housing market. In many locales, owning a home is now less expensive than renting. Rents are rising and vacancies falling, according to a report that tracked leasing data across the country. For the second quarter, rents rose in all but two of 82 markets, while vacancies dropped in 72 of them, sending the vacancy rate to 6%, its lowest level since 2008. Another report showed rental listing prices up 6.7% nationally in June versus a year ago.
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