Housing Market Snapshot

Housing Market Snapshot

According to the National Association of Realtors, pending home sales bounced back after two months of decline. This forward-looking indicator, based on signed contracts, rose 5.2% in July after a 2.8% decrease in June and a 30% decline in May.

New home sales on a seasonally adjusted annual rate are averaging approximately 300,000 units a month. That’s down approximately 70% from the peak levels in mid-2005. Existing home sales, which make up more than 90% of the market, are down approximately 30% from peak levels in mid-2005. Annual sales are expected to reach 5 million in 2010 because of strong activity in the first half of the year.

According to the Standard & Poor’s/Case-Shiller housing price index, home prices are 6% above the April 2009 bottom but 28% below their peak in July 2006.

The Housing Affordability Index showed that 72.3% of all homes sold in the second quarter of 2010 were affordable to families earning the median income of $64,000.

Interest rates have been falling since April as investors sought safety in Treasury bonds. That has lowered their yields, which mortgage rates tend to track. The low rates have fueled a wave of refinancing. In late August, refinancing made up 82.9% of total loan applications, the highest level since January 2009.

The low interest rates have not provided a boost in home sales. Home sales are being held back by unemployment. There were 8.4 million jobs lost in 2008 and 2009, approximately 7% of all jobs at the start of the recession. That compares to a loss of 3.1% of jobs during the 2001 recession and 1.9% of jobs lost during the 1990-1991 recession.

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