Average 30-year fixed mortgage rate by the end of 2009: 5.6%
What does today's data mean for REALTORS® and consumers?
The housing market has clearly turned for the better. The buyer psychology is evidently shifting from "why buy now when I can buy later" to "do not miss out on a once-in-a-lifetime drop in home prices." The releasing of the pent-up demand should help continue to carry the momentum forward.
Even with historically low mortgage rates, some buyers are bypassing that stage and going with all-cash offers, in light of heated competition for foreclosed homes in some markets.
A better housing data lifts the GDP, but raises the prospect higher mortgage rates later. A very nice jump in durable goods orders also lifts the GDP.
Today's Data on New Home Sales
A huge gain in new home sales in July according to the Commerce Department. The latest annualized sales pace of 433,000 is the highest in nearly a year. It is much higher than the trough of 329,000 in January of this year.
New home sales are not closings but really contract signings. (Existing home sales are closings with exchange of keys). How many will not get closed because of last minute financing troubles or from an appraisal issue remains a questions.
Rising new home sales and from builders having drastically pulled back production, the inventory is nicely getting trimmed. The months supply of new homes on the market is now at 7.5 months, the lowest in two years, and getting very close to the normal healthy levels of around 6 months. It had been at 10 to 12 months last year.
The median transaction price was $210,100, which is 11.5 percent lower from one year ago. But prices look to stabilize by year end if the inventory continues to shrink. Also note that most of the price declines would have occurred more than 6 months ago and prices have been largely unchanged in the past few months.
Today's Data on Mortgage Applications
More people applied for mortgages in the past week to buy a home and to refinance. The total application rose 7.5 percent from the week before. The purchase component increased again - its 6th rise in the past 7 weeks.
FHA and VA loan applications rose, while that for conventional loans fell modestly.
Mortgage purchase applications are still down from one year before. However, home sales have been higher from one year ago, and the part of the reason is due to a greater number of all-cash purchases without taking out a mortgage (from a separate NAR data). Also the data reliability is not at its best when mortgage lenders have undergone major consolidation and disruptions in the past year.
This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >