Existing Home Sales rebounded and the data sort of makes sense.

In new homes, the current pace of sales would deplete the inventory in 8.6 months.  So, while there are less buyers of new homes, there are also less new homes coming on the market and we’ve been forecasting this all year.

For example:

1. Building Permits dropped between March and June
2. Housing Starts dropped between April and July
3. Homebuilder confidence continues to sag

If you line this data up, it forecasts lower numbers of new homes, thus the lower number of new homes being sold.

This could be a great time to look at new construction.  With the colder months near, builders are motivated to turn over inventory.  That, in turn, helps drive prices lower.

Aside from builder incentives and the naturally stronger negotiating position for today’s buyer, the fact that mortgage rates are down 0.75% since the beginning of the year.   Homes were already more affordable just with the dip in prices, but coupled with mortgage rates we’re now we’re nearly off the chart.

Builder pessimism may be incorrect.  They are in a position to soon run very low on inventory and build at today’s less expensive costs.   It might be the right time to take advantage of that pessimism, by spring it is unlikely that home affordability will any more attractive.

Americans bought just 276,000 newly-built homes in July. That marks the fewest units sold since the government started keeping records in 1963.

None of this was particularly surprising news as we’d been forecasting a significant drop in sales activity.

Home Supply is a measurement of the total inventory divided by the current rate of sales.  So, while the new home inventory dropped in total, the slowing pace of sales pushed the home supply figure up by just over one month, up to about nine months.

The bigger story may be the underlying construction figures.  While construction is great for stimulating the economy, when the job is done we end up with another new home entering that supply.  Single-family housing starts have dropped every month since April, building permits are down 23% since March, and home builder confidence figures are at 18-month lows.  These aren’t the storylines that trigger widespread building to begin.

For now, this is great news for home buyers.  With almost no new inventory being added to the supply side, it will be interesting to watch the Home Supply going forward.  Even a small increase in sales would trigger a very rapid reduction to the Home Supply stat.  That would reverse the current short-term negotiating advantage that is going to buyers.

Coupled with the lowest rates in history, the monthly cost of owning a newly built home is looking very attractive.

Perhaps the bigger news is that we finally moved higher than the 500k level that started last June.

Normally, this would have been great news, pushing stocks higher and bonds lower.   The issue is one of statistics.  The survey has a margin of error that is higher than 10%.  That all but negates the 10% gain.  The logical spot to check is Building Permits.  This is the bad part.

April’s permits show a drop of 11%.  The margin of error is less than 2%.  This isn’t good news and is a sign of low housing market confidence.

Housing is always a game of supply and demand.  If these numbers hold true, housing starts in June and July should ease as the April loss of building permits cycles through.   Odd as it sounds, if builder confidence was higher and we saw the corresponding surge in both the Housing Starts and Building Permits reports would almost bad for home prices.  An increase in supply would put downward pressure on prices.

The best times to buy a home may be soon.  As the summer months come to close, we may find that buyers vastly outweigh sellers.

We’re still in a Greece- & Euro-driven pattern of safe haven trading.  It was a wild, crazy, volatile week that ultimately saw rates close at their best levels on the year.

We are now right back to the levels that have triggered big sell-offs and quick rate increases the last few times.  It happened once in February 2010, and again, 4 weeks later in March.

Mortgage Rate Predictions – This Week

We could see another one of those “quick rate increase” weeks.    The economic reports have been almost non-existent for the past 10 days.  That trend ends this week.

Monday is the National Association of Home Builder’s Housing Market Index.    This report is useful for one important thing:  gauging the outlook of home builders.   A strong report will put pressure on mortgage rates going forward.   Tuesday has Housing Starts and Building Permits.  If the actions echo the home builder sentiments, it means they are growing bullish on the housing market.

Tuesday is the Producer Price Index as well.   It’s similar to a “cost of living” report for businesses.  It measures changes in operating costs month-over-month and year-over-year.  The PPI is viewed as a precursor to inflation.  A higher-than-expected number will put pressure on rates going forward.

Then Wednesday we get the Consumer Price Index.  Again, a higher-than-expected number will put pressure on rates.

If that wasn’t enough, we get the Fed minutes from the April meeting and the jobs figures.   This is beyond a full week’s worth of data coming up.

There are a lot of factors that could force mortgage rates higher, very few that could force mortgage rates lower.

Mortgage rates have NEVER stayed this low for an extended period of time.   This week doesn’t look to be any different.

The Greece & European mess continues to push money into America for safer investments.  With more money coming in, it’s helping push mortgage rates lower…for now.

We’re back at the lowest mortgage rates of the year.  Levels that we have seen twice this year and immediately jumped higher.

This week’s mortgage rates will be influenced by an absolutely loaded economic calendar.  There is home builder sentiment, building permits and housing stocks to gauge housing.  We’ll see the price index for both producers and consumers this week.  The we’ll get the always-influential jobs reports and Fed minutes from last month’s meeting.  Volatile.  All week.

We’ve seen mortgage rates get this low in 2010, twice.  Once in February, once in March.

Interest rates immediately reversed and jumped higher.

If you haven’t guessed already, our predictions this week are for volatility that ultimately could end with higher rates.   If you’re considering whether or not to lock a loan, you stand to lose very little by locking today.   Rates have NEVER stayed this low and, worse, when they have moved away from these levels, it’s been to the order of 0.5%, not just a 0.125% increase.

Rates ticked higher last week for the first time in five weeks.  The uncertainty over Greece had caused mortgage bonds to get better for a few weeks.  Because of it, almost all of the most common loans for first time home buyers had improved.

Mortgage rates looked for a minute like they were ready to have the “.5% single day jump” that we’ve been concerned about, but they pulled it back together and settled .125% higher on the week.

This Week’s Mortgage Rate Predictions

Last week was all about Europe.  This week is all about us.  The biggest news hits Wednesday through Friday.  We’ll see Housing Starts, Housing Permits, FOMC Minutes, and then inflation data to close the week.

For the FHA vs. Conventional comparisons, they remain relatively similar to what we’ve seen for the past few months.  For standard FHA mortgages vs some of the state programs, the math has changed in the past few weeks.

If you need a custom comparison, drop us a line or get the specifics to us via chat and we’ll send a spreadsheet back to you.