The housing market cooled off a little in January after finishing with strength at the end of last year.
Pending Home Sales Index
By taking a seasonally-adjusted basis the PHSI (Pending Home Sales Index) fell by 3 percent last month. Along with that the National Association of REALTORS® revised December pending sales down as well.
When a purchase agreement is accepted on a property it is considered “pending” though it is not yet closed.
The forward-looking index is presently at a 3-month low nationally while being ahead over a 6-month rolling average.
While the data isn’t necessarily helpful to buyers and sellers of real estate, The National Association of REALTORS® makes an effort to get more granular, supplementing the Pending Home Sales Index report with a region-by-region breakdown. Over the months of December 2010 and January 2011, only region in the South experienced an increase.
Pending Home Sales Index By Region
Unfortunately for Minnesota, the Midwest dropped the most:
- Northeast Region: -2.4%
- Midwest Region : -7.3%
- South Region : +1.4%
- West Region : -5.2%
Even still, however, regional data remains too broad to be practical.
The South Region, for example, is comprised of multiple states with thousands of cities and town. The housing market dynamics of a specific neighborhood in a specific regional city will differ from that of another neighborhood in another regional city.
Real estate data must be local to be relevant. Overall, then, what may be most telling from January's Pending Home Sales Index is how our tough winter weather impacted the results. After all, who wants to go out to open houses in a 12” snow storm?
Most of the country faced drastic weather conditions in January, ranging from raging snowstorms to bitter cold. Events like that tend to put a damper on home sales, a contributing factor in why the number of new purchase agreements fell.
Minnesota Mortgage Rates Rise
Another reason is rising mortgage rates. Rates for conforming and fha loans in Minnesota rose week-by-week in January 2011, robbing home buyers of 10% of their purchasing power. This, too, can slow down purchase activity as buyers adjust their expectations. As we go into the spring I expect the Pending Home Sales Index to improve.
Bad weather doesn't entirely stop demand; it just delays it. Mortgage rates are still incredibly low. These two factors should help release pent-up demand just as the Spring Home buying season gets underway. As more buyers enter the market, negotiation leverage will shift to home sellers, pressuring Saint Paul, Minnesota home prices higher.
The lowest prices of the year -- and the lowest rates -- could be what we are experiencing today.
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