Low home prices and mortgage rates have combined to push home affordability to record levels nationwide. Home buyers are taking advantage.
The Pending Home Sales Index rose 7 percent in November to rise to its highest level since April 2010, the last month of last year's home buyer tax credit program.
The Pending Home Sales Index is published monthly by the National Association of REALTORS®. It measures homes under contract nationwide, but not yet "sold".
In this way, the Pending Home Sales Index is different from other housing market indicators. It's a "forward-looking" figure; a predictor of future home sales. According to the National Association of REALTORS®, more than 80% of homes under contract close within 60 days.
By contrast, housing data such as the Existing Home Sales report and the New Home Sales report "look back".
November marks the second straight month of Pending Home Sales Index improvement. The housing market metric made big gains of 10 percent in October 2011, as well.
On a regional basis, each part of the country showed an increase in homes under contract.
- Northeast Region: +8.1 percent from October 2011
- Midwest Region : +3.3 percent from October 2011
- South Region : +4.3 percent from October 2011
- West Region : +14.9 percent from October 2011
However, here in Renton, we must discount the value of even the regional data, somewhat. Like else in real estate, the volume of homes going under contract vary by locality.
Throughout the West Region, for example, the region in which pending home sales increased the most from October, there are nearly a dozen states. Undoubtedly, some of those states performed better than others in terms of "homes under contract", but we don't have an indication of which states those were.
In addition, within each state, every city, town, and neighborhood realized its own unique market in November, and produced its own sales statistics.
For buyers and sellers throughout WA and the country, therefore, it's more important to watch data on a local level than on a national one. Reports like the Pending Home Sales Index are helpful in showing national trends, but as an individual, what you need are local trends.
For local real estate data, be sure to ask your agent.
Labels: Existing Home Sales, National Association of REALTORS®, Pending Home Sales Index
The government confirms what the private-sector Case-Shiller Index reported yesterday. Nationwide, average home values slipped in October.
The Federal Home Finance Agency's Home Price Index shows home values down 0.2% on a monthly, seasonally-adjusted basis. October marks just the second time since April that home values fell month-over-month.
The Case-Shiller Index 20-City Composite showed values down 0.7 percent from September to October.
As a home buyer in Renton , it's easy to look at these numbers and think housing markets are down. Ultimately, that may prove true. However, before we take the FHFA's October Home Price Index at face value, we have to consider the report's flaws.
There are three of them -- and they're glaring. As we address them, it becomes clear that the Home Price Index -- like the Case-Shiller Index -- is of little use to everyday buyers and sellers in places like Fairwood.
First, the FHFA Home Price Index only tracks home values for homes backed by Fannie Mae or Freddie Mac mortgages. This means that homes backed by the FHA, for example, are specifically not computed in the monthly Home Price Index.
In 2007, this was not as big of an issue as it is today. in 2007, the FHA insured just 4 percent of the housing market. Today, the FHA is estimated to have more than one-third of the overall housing market.
This means that one-third of all home sales are excluded from the HPI -- a huge exclusion.
Second, the FHFA Home Price Index excludes new home sales and cash purchases, accounting for home resales backed by mortgages only. New home sales is a growing part of the market, and cash sales topped 29 percent in October 2011.
Third, the Home Price Index is on a 60-day delay. The above report is for homes that closed in October. It's nearly January now. Market momentum is different now. Existing Home Sales and New Home Sales have been rising; homebuilder confidence is up; Housing Starts are showing strength. In addition, the Pending Home Sales Index points to a strong year-end.
The Home Price Index doesn't capture this news. It's reporting on expired market conditions instead.
For local, up-to-the-minute housing market data, skip past the national data. You'll get better, more relevant facts from a local real estate agent.
Since peaking in April 2007, the FHFA's Home Price Index is off 18.3 percent.
Labels: Case-Shiller Index, FHFA, Home Price Index
