Two important pieces of news came out today indicating some changes in the housing market. Pending sales of existing homes were reported to have increased an impressive 10.4% in October. Pending homes sales represent contracts on homes that are made in October with plans for the deal to close later, typically in 30 to 60 days. The results, reported by the National Association of Realtors (NAR), were a marked improvement over the 1.8% decline that was reported in September and better than analysts expected.
In fact, of the 40 analysts surveyed prior to the release by Bloomberg, not one of them predicted results that high. The most rosy analyst anticipated an increase of just 3% and the overall consensus estimate was for a decline of 1%, so the 10.4% increase is an extremely positive sign that the housing portion of our economy is finding stability.
At the same time, Freddie Mac reported that their weekly survey of mortgage rates saw an increase for the week ending today (Thursday). The 30-year fixed-rate mortgage, the most commonly used mortgage product, averaged 4.46% for the week ended Thursday, up from the prior week’s 4.4% average. After rates hovered at historically low levels, recent weeks have seen an uptick in the rates for products across the board. 15-year fixed-rate mortgages were 3.81%, compared with 3.77% a week ago.
As rates increase, mortgage companies such as Mission Mortgage anticipate a decrease in the number of refinance opportunities. Most professionals believe that the vast majority of people who could benefit from a home mortgage refinance have already done so. While there will continue to be a small stream of refinancing activity, the rate increase will gradually reduce the benefits for people to adjust their mortgages going forward. At the same time, the increase in rates will most likely spur tentative homebuyers to move into contracts for purchases, at least in the short term. Many potential homebuyers have been sitting on the sidelines watching rates drop over the year and have put off purchases in hopes of seeing a continued decrease. However, with the recent upturn in rates, sustained over the last few weeks, those homebuyers will begin to move into the market to make sure they complete their purchases prior to further increases.
Of course, no one can say for sure which direction home mortgage rates will move in the future. But buyer behavior is more predictable. In the short term, increased rates will spur activity but may slow sales if rates continue upward. Remember, housing sales do not move the economy. Home sales are a result of the economy. If economic news continues to become more and more positive, we would anticipate home sales to increase as a result.
For more information about rates, sales figures, and how we can help you with your next home purchase, please feel free to contact us at firstname.lastname@example.org.