Home price and sales data show weaker housing markets

February 28th, 2011

If you've been thinking 2011 is the year for you to purchase a new home you may be weighing whether to purchase before rates climb higher or wait to see if prices go lower. Economic news released this week may assist you with your decision. Mortgage calculators help you plan your new home loan or refinance mortgage transaction; staying abreast of current information impacting the mortgage and real estate industries helps you determine when to enact that plan.

Rates dip again

The Weekly Application Survey from the Mortgage Bankers Association released on Wednesday Feb. 23 for applications taken the week ending Feb. 18 reported a 13.2 percent jump in mortgage applications from the prior week. With lower mortgage rates as a result of the turmoil in the Middle East and North Africa the refinance application index climbed 17.8 percent and purchase application index was 5.1 percent higher than the prior week.

Freddie Mac reported another drop in its benchmark 30-year fixed-rate mortgage on Thursday Feb. 24 when it released its Weekly Primary Mortgage Market Survey. Dropping below five percent to 4.95 percent at a cost of 0.6 origination points, the PMMS rate reflects the downward pressure on interest rates as a result of events abroad and economic activity at home.

Home prices and sales

On Feb. 23, the National Association of Realtors released January 2011 sales data. For the month sales of existing homes increased 2.7 percent from December 2010. For the month distressed sales composed 37 percent of the market. Total sales of existing homes in 2010 were 4.9 million, the lowest total since 1997. According to NAR the national median home price in January 2011 was $158,800. This price reflects a 3.7 percent drop from January 2010's median price of $164,900 and a significant decline from the prior month's median price of $168,800 in December 2010.

With home prices declining through the end of 2010 and into 2011 housing markets that appeared to be recovering now appear to be in danger of more weakness. The burst of the housing bubble was a primary factor in the recession that started in 2007. A recovery from the collapse of the housing market will have to follow a recovery of the national economy.

If you are using a prequalification calculator or closing costs calculator to determine your purchasing power with a new home loan housing data for your hometown and region and mortgage rate data will impact your decision as to when to purchase your new home.

If you are using a refinance calculator to determine your savings from a refinance mortgage if home prices are declining in your area you will want to consider waiting for lower rates that may or may not occur in the future versus an appraisal that could jeopardize your refinance.

Economic growth in 2010

On Friday Feb. 25 the Commerce Department reported that Gross Domestic Production (GDP) in the fourth quarter (Q4) of 2010 increased 2.8 percent. The report was a disappointment as earlier in the year the initial estimate of Q4 GDP released by the government was 3.2 percent growth and the consensus was for 3.2 to 3.3 percent growth in the economy for Q4.

With the GDP release the Commerce Department also released data on Personal Consumption Expenditure (PCE). The PCE index is the preferred inflation measure for the Federal Reserve as it determines whether to raise, lower or leave interest rates unchanged. For the fourth quarter of 2010 PCE increased only 0.5 percent on an annualized basis, well below the Fed's target rate of 2 percent inflation.

Slow economic growth, slow housing sales and declining home prices are all factors that typically support low interest rates. As you use the mortgage calculators for your financial planning, use available economic information to assist you with your plans.

Dennis C. Smith is co-owner and broker of record for Stratis Financial in southern California. He has over twenty years' experience in the mortgage industry.


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