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The Latest Housing Data: Bad News on the Rise?

Phil Hall
Jun 29, 2016
In what could be considered a gloomy trifecta, three data reports released this morning point to declines in pending home sales, mortgage applications and interest rates

In what could be considered a gloomy trifecta, three data reports released this morning point to declines in pending home sales, mortgage applications and interest rates.

The National Association of Realtors’ (NAR) Pending Home Sales Index (PHSI) dropped 3.7 percent to 110.8 in May from a downwardly revised 115.0 in April. Last month’s PHSI is 0.2 percent below the 111.0 level from May 2015, which is the first time since August 2014 that it experienced a year-over-year decline.

Across the country, each regional PHSI slid: The Northeast dropped 5.3 percent to 93.0 in May, the Midwest slipped 4.2 percent to 108.0, the South fell 3.1 percent to 126.6 and the West stumbled 3.4 percent to 102.6.

Lawrence Yun, NAR chief economist, blamed a combination of low inventory and high demand for creating this disruption. Yun also took a glance across the Atlantic to theorize the positive and negative impact that last week’s Brexit vote might have on the U.S. housing market.

“In the short term, volatility in the financial markets could very likely lead to even lower mortgage rates and increased demand from foreign buyers looking for a safer place to invest their cash,” he said. “On the other hand, any prolonged market angst and further economic uncertainty overseas could negatively impact our economy and end up tempering the overall appetite for home buying.”

Another round of less-than-stellar numbers was reported in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending June 24, 2016. The Market Composite Index fell 2.6 percent on a seasonally adjusted basis and fell three percent on an unadjusted basis from one week earlier. The seasonally adjusted Purchase Index was down three percent from one week earlier while the unadjusted index slid four percent—although it was still 13 percent higher than the same week one year ago. The Refinance Index dipped two percent from the previous week, but the refinance share of mortgage activity increased to 58.1 percent of total applications from 57.7 percent the previous week.

However, the government home loan programs were mostly vibrant: The VA share of total applications increased to 12.2 percent from 11.1 percent the week prior, while the USDA share of total applications increased to 0.7 percent from 0.6 percent. The FHA market share shrank to 10.6 percent from 11.7 percent the week prior.  

Separately, the Federal Housing Finance Agency (FHFA) reported that interest rates on conventional purchase-money mortgages decreased from April to May. The average interest rate on all mortgage loans was 3.70 percent, down five basis points (bps) from 3.75 in April, while the average interest rate on conventional, 30-year, fixed-rate mortgages of $417,000 or less was 3.89 percent, a five bps drop from 3.94 in April. The effective interest rate on all mortgage loans was 3.83 percent in May, six bps below the 3.89 percent level in April, while the loan amount for all loans was $329,500 in May, up $7,100 from $322,400 one month earlier.

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